Saturday, 26 December 2015

Debt Sustainability

My last post, touched on whether countries can afford the debt they have incurred. At what point does it all become unsustainable.

For the UK, we are struggling to get the deficit down to zero. George Osborne now reckons it will be 2020 before we get the deficit down to zero. Only then we will be able to start paying the national debt down. The debt since 2010 has more than doubled to £1.5 trillion. What will it be in 2020?

Politics has prevented the government from cutting in-work benefits, to help reduce the deficit.

A country's debt becomes unsustainable when no-one wants to continue lending to them, and they cannot pay the loan back. And it is the politics that makes this difficult, with a reluctance put up with higher taxes, and a reluctance to give up social benefits, such as healthcare or inwork benefits etc.

The UK debt currently represents 88% of its GDP, its national output.

From my last post, I recall Jim Mellor saying France and Italy were currently running at 130-140% of their respective GDPs. Separately, I read somewhere that France's national debt was currentlly 99% of GDP

Whatever the level, the higher the percentage, the more difficult it becomes to get it under control, because it becomes political impossible to make the decisions.

France certainly seems incapable to develop the poltical will to rectify these problems.

Some people consider that no country ever lowers the debt after 80% of gdp. It just keeps increasing after that.

The web-site gives more information.

Back soon.....

......the undecided voter!

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