Politics The Politics thread

Jen

Here be dragons.
Contributor
I've been thinking of doing this for many weeks - a thread to cover all things political and how governments throughout the World have varying opinions on how to screw their own nation and as many others as they can in the process - although they wouldn't admit to the theory as it isn't in their mandate.

I have finally been driven to this by the possibility that the USA might default on their debts and that bastion of rectitude, Moody's, has suggested that they may reduce America's credit rating.

If there are any economists in our midst, could they please explain why some of the richest nations in the World persist in 'borrowing' money and, more intriguingly, who on earth do they borrow it from?

And what is it about governments that stops them from living within their means?

This is for starters - I'm sure there will be other topics to cover as they arise.
 

Brogan

🦶 Leg end
Staff member
Governments raise money in a multitude of ways, but one of the most common is government bonds, or T-Bills.

So they sell the bonds or T-Bills to anyone who wants to buy them, with a condition to buy them back later for the initial face value plus interest.
The repurchase date can be short (months) or long (years).
The interest varies depending on the duration and how desperate the government is to raise cash.

If governments can't raise enough taxes to pay for everything, then they need to borrow.
The more social welfare type stuff there is, the more tax money is required.
If the population is particularly young, or old, there is a disparity between how many tax payers there are, and how many need to be supported by tax.
A lot of countries will soon face major problems due to people living well beyond retirement age, which is one of the reasons why the retirement age keeps rising.

When governments are unable to repay those debts on time, they default.
Lots of countries have defaulted over the years, and continue to do so.

The US in particular has been spending rather a lot on overseas conflicts of late, which is why they are in trouble (amongst other things).

In the same way the UK went bankrupt over WWII, and it took us until just a few years ago to finally pay off our 60 year debt to the US. The original debt was repaid many times over once all the interest was piled on.
 

FB

Not my cup of cake
Valued Member
I have to admit to feeling very sorry for Nick Clegg and Vince Cable at the moment. Whe you hear them interviewed you can see that they want to get stuck into Cameron over the whole NOTW/Andy Coulson thing but as junior partners in the coalition can't say a word.
 
If there are any economists in our midst, could they please explain why some of the richest nations in the World persist in 'borrowing' money and, more intriguingly, who on earth do they borrow it from?

And what is it about governments that stops them from living within their means?
A reasonable first port of call if you have a couple of hours; if not watch between 3.00 and 20.00

 

jez101

Bookies drive nice cars because of people like me
Contributor
and, more intriguingly, who on earth do they borrow it from?
It's one big money-go-round as far as I can tell with China and Japan at the hub of it all. We buy lots of stuff made there, so our money ends up in the hands of Chinese & Japanese banks, which then lend it back to us so we can give it back to them again, and again, and again...

Wikipedia has a slightly more detailed view, with some scary looking charts not for the faint-hearted.


As you can see, it looks like the US owes us a truck load of cash too, but I have read that this is also largely financed by China, lending to the UK who then lend to the US.

The funny thing is that even if you are China in this system, you are not necessarily in a good position because you keep having to lend enough to keep the west buying, knowing that the more they owe you, the more likely it is that they will one day turn around and say "sorry old chap, things are a bit tight at the moment".
 

Jen

Here be dragons.
Contributor
FB, I think you've been rumbled!

Edit - FB's tables are now showing properly.
 

Jen

Here be dragons.
Contributor
Essentially, China could bankrupt the US if it ever chose to...
This is what I don't understand - all the richest Nations lend to each other - a ridiculous circle of money/debt and each is paying back huge quantities to keep the cycle going - complete madness.
 

KekeTheKing

Banned
Supporter
I have finally been driven to this by the possibility that the USA might default on their debts
This will never happen. It's hard to explain the political games being played in Washington D.C. right now, but here's a very brief synopsis.

In 2010 there was a large block of Republican Congressman voted into power by a few million Americans calling themselves the "Tea Party". These voters were "outraged" by the escalation of the National Debt (among other things), and sent dozens of politicians to D.C. to tackle this issue. So far, they haven't been able to do a darn thing, because neither Republicans or Democrats have been willing to make any meaningful sacrifices to their pet issues. But, with the US approaching its "Debt Ceiling" (an arbitrary figure) once again, these "Tea Party" Republicans have spotted an opportunity to get concessions from both sides of the aisle. To a degree this has worked. Powerful Republicans have conceded the fact that hundreds of billions of dollars can be cut from the defense budget without affecting National Security in the slightest. Powerful Democrats have recognized the fact that our Social Welfare programs are on an unsustainable trajectory, and that cuts will have to be made in the near future. However, a few key politicians are still standing in the way of a deal that would satisfy most Rep. and Dem. for the time being, and allow them to raise the "Debt Ceiling". In effect, they are grandstanding, playing politics with an issue that both sides simply know cannot be played with.

Never in the history of this "Debt Ceiling" issue (this debate happens every couple years) have any politicians taken it so far as to have rating's agencies publicly float the notion of a downgrade. This is political theater from the so-called "Tea Party" Republicans, and as far as public opinion goes, they're losing. Even the least politically informed Americans (barring Tea Partiers) know that by not raising the "Debt Ceiling", and in turn defaulting on the obligations of the United States, would be an utterly disastrous move, and a completely unnecessary one at that.

It's not as if the US is running out of "money". "Thanks" (term used loosely) to the "Federal" Reserve, we have an essentially unlimited supply of funds. Unless of course some "brilliant" (term used even looser) minds in Washington take us over the edge (not raising the debt limit), in order to appease a few million of the least knowledgeable, most intolerant citizens in the Country. The "Tea Party" is a faction of individuals that think a return to the 1950's status quo is a possibility, and that completely blowing up the current environment is the best (only) way to do it.

Essentially, China could bankrupt the US if it ever chose to...
Possibly. But then you're left with an important question. Why????

You don't kill the goose that laid the golden egg. China is making money hand over fist when it comes to collecting interest payments on our debt and they're also the beneficiaries of a huge trade imbalance. It would serve the Chinese no purpose whatsoever to torpedo the American economy. Unless the absolutely unthinkable happened................and we're back to the "Debt Ceiling" debate.

The political climate here is obviously a shambles, but there is at least one thing that responsible members of both parties recognize, and it's that the debt limit simply MUST be raised in order to avoid the devastating effects of default.
 

RevMaxPower

Banned
I don't actually believe it's the Governments that run things at all. It's the Financiers and Bankers. Governments, especially in the Western World, are mere puppets.
 

Jen

Here be dragons.
Contributor
I'm beginning to think (or possibly just hope) that the days of 'corporate' power are waning and that power might return to the people via their elected government - although that could be fraught with as much danger.

When I say 'corporate' I'm not just referring to financiers and bankers but, also, to the utilities, oil companies, pharmaceutical industry, media conglomerates and all other tossers who think that they should have a controlling say in any particular government merely because they have billions in the bank.

Perhaps we should shoot all shareholders or is that a bit too 'communist'!
 
When I say 'corporate' I'm not just referring to financiers and bankers but, also, to the utilities, oil companies, pharmaceutical industry, media conglomerates and all other tossers who think that they should have a controlling say in any particular government merely because they have billions in the bank.

Perhaps we should shoot all shareholders or is that a bit to 'communist'!
You might want to be selective there Jen
After all taxpayers are all shareholders in a few banks

The fascist approach might be better than communist here

Shoot the ones you dont like instead of all of them
 

TN23

Rookie
I'm beginning to think (or possibly just hope) that the days of 'corporate' power are waning and that power might return to the people via their elected government - although that could be fraught with as much danger.

When I say 'corporate' I'm not just referring to financiers and bankers but, also, to the utilities, oil companies, pharmaceutical industry, media conglomerates and all other tossers who think that they should have a controlling say in any particular government merely because they have billions in the bank.

Perhaps we should shoot all shareholders or is that a bit too 'communist'!
Well, first invite them to share their wealth. But, that's unlikely, so you'd have to take their wealth somehow...
 
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