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Spoonie

Budget Deficit and the National Debt

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Since this generated a sild amount of debate, I thought I'd add to it, although I do have concerns that the telecommunications infrastructure of the UK is at risk from the impact.

I read yesterday that global debt has risen to 212% of global annual output: http://www.theguardian.com/business/2014/sep/29/record-world-debt-financial-crisis-eurozone-geneva-report

There's a concern that teh lack of growth of the global economy, combined with this high indebtedness, both or nations and individuals, could become a real problem in the near future

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That's the odd nature of things. Individuals owe to lenders (banks, payday lenders, building societies, etc), companies owe to banks, etc and countries owe to one another, to individuals in their own countries and abroad, etc. The concept of debt is a very strange one because the things that people owe are essentially just numbers on a computer screen somewhere in a lot of cases, but there is a concern that people and companies are financing the purchase of debt, through incurring debt of their own.

 

It's long struck me that in so many places, there's no production any more, wealth creation is essentially moving debt around and moving money around. The sub prime disaster that created the global financial crisis was exactly that. Organisations loaned money to people to buy homes they couldnt afford. They didn't care whether they ever paid the loans back because they sold the loans on to other people, transferring the risk, where they were packaged into bonds and sold on again, being passed off as being of a much higher quality than they were. Then in many cases they were packaged and sold on again as CDOs. Then some smart guys came up with credit default swaps which basically let you bet against these CDOs. So people were selling total rubbish for a fortune and also selling the ability to bet against the failure of these securities for a total fortune. And not a single tangible thing had been created in the whole process, except in the case of new build homes where a bricks and mortar house was put up at the start.

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