Making sense of the National Debt (and associated ideas)

(Based on http://labourlist.org/2011/04/to-whom-do-we-owe-this-money-exactly/)

I have just been looking at the BBC piece Who owns the UKs debt by Anthony Reuben (http://news.BBC.co.UK/1/hi/business/8530150.stm). Reuben explains: In the case of the country as a whole, the way it borrows money is by issuing gilts, which are IOUs, promising to repay an amount of money on a particular date and a specified interest rate until then. These gilts are issued and auctioned by the ODM (Office of Debt Management at the Treasury). So tracing who buys them, should reveal who owns our debt. Here you are:

So, the majority are owned by financial institutions. And more particularly, there is a huge spike in the purchase of gilts by Banks around the time when the country was putting itself in more debt by the single, highest amount in living memory. In order to underwrite the Banks liabilities and bail-out and stabilise the sector. So, the UK was borrowing money, in the name of ordinary taxpayers, FROM THE BANKS in order to stabilise THE BANKS.

But surely, surely- surely not the actual banks that we were bailing out

Lloyds Banking Groups Report and Accounts for 2010, state that the company has been buying government gilts increasingly, to cover its pension and benefit obligations. Their Liquidity and Funding Risk statement from the same year states clearly that Primary liquidity assets are FSA eligible liquid assets including UK Gilts, US Treasuries, Euro AAA government debt and unencumbered cash balances held at central banks.

The RBS Report and Accounts for 2010 states that their figures include an £18.0 billion increase in the gilt liquidity portfolio. On page 291 of the same document they confirm that this includes UK gilts.

THIS REALLY TAKES SOME ABSORBING – ARE WE REALLY THIS STUPID? YOU HAD BETTER BELIEVE IT.

This ridiculous situation is bleeding us dry and the only winners are the financiers!!

The answers, although never simple, can include some staggeringly straightforward tried-and tested ideas.

Over to my favourite Green economist, Molly Scott Cato:

“Repudiating Odious Debt (http://www.greenconduct.com/articles/2011/07/14/repudiating-odious-debt/)

The frustrating reality of the situation we face in this unwarranted Age of Austerity is the difficulty of turning the anger against the banks and the unwillingness to pay for their corporate corruption into meaningful political action. While it seems unglamorous the answer may be to establish a national Audit Committee.
This idea comes from Ecuador, where President Correa was elected in 2005 to preside over an economy which was oil-rich but whose wealth was being drained whose people were left in poverty because 50% of national income was being spent on servicing foreign debt. The Audit Committee was established to investigate who were the creditors and how they had persuaded the former politicians to take on the debt. Eventually, it found that some 70% of the debt was illegitimate and the creditors were forced to sell at reductions of around 90%.

The story is told in a film called Debtocracy, whose main focus of attention is the debt situation in Greece, where a national Audit Committee has been established. The idea has now spread to Ireland. Exploring the sources of and responsibility for national debt can help to shift the violence in the streets towards a quasi-judicial process and may help to focus political anger, but as London-based economist Costas Lapavitsas makes clear in the film, these are political rather than economic or legal decisions.

The film also helpfully resuscitates the concept of odious debt, created by the US in the 19th century to enable it to repudiate the debts it inherited from Spain when it conquered Cuba. It used a similar legal wheeze to renege on Iraqs debts after the 2003 invasion, although it kept this quiet for obvious reasons.”

Another element of the way forward is eliminate the massive Ponzi scheme that is Fractional Reserve banking. https://bridgendgreens.wordpress.com/2011/11/05/food-for-thought-on-the-debt-crisis/

This will all be painful to some extent, but we need to manage the pain and protect the vulnerable during the transitional period; as opposed to the current policies that simply slash and burn their way through the quality of life of the poorer segments of society, and decimate the dreams and aspirations of the younger generations.

This is why this is all the more unacceptable (Courtesy of Michael Meacher http://www.michaelmeacher.info/weblog/2012/04/britains-1000-richest-persons-made-gains-of-155bn-in-last-3-years/):

“The Sunday Times Rich List, published today and compulsory reading for anybody who wants to understand Britains power structure today, holds three extremely significant conclusions. One is that the 1,000 richest persons in the UK have increased their wealth by so much in the last 3 years £155bn that they themselves alone could pay off the entire UK budget deficit and still leave themselves with £30bn to spare which should be enough to keep the wolf from the door.

The second, even more staggering, is that whilst the rest of the country is being crippled by the biggest public expenditure and benefits squeeze for a century, these 1,000 persons, containing many of the bankers and hedge fund and private equity operators who caused the financial crash in the first place, have not been made subject to any tax payback whatever commensurate to their gains. This is truly a government of the rich, by the rich, and for the rich.

The third is that despite the biggest slump for nearly a century, the slowest and most anaemic recovery, and prolonged austerity stretching to a decade or more, this ultra-rich clique are now sitting on wealth even greater than what they had amassed at the height of the boom just before the crash. Their combined wealth is now estimated at more than £414bn, equivalent to more than a third of Britains entire GDP. They include 77 billionaires and 23 others whose wealth exceeds £750m.

Despite these massive repositories of wealth, these are some of the very people to whom Osborne gifted £3bn in his recent budget by cutting the 50p tax rate. That measure alone gave 40,000 UK millionaires an extra average £14,000 a week, at the same time as those on very low incomes in receipt of working tax credits who couldnt find an employer to increase their hours of work from 16 to 24 a week were being deprived in the same budget of £77 a week, around a third of their income, through their tax credits being withdrawn.

In 1997 the wealth of the richest 1,000 amounted to £99bn. The increase in their wealth over the last 15 years has therefore been £315bn. If this increase in wealth were subject to capital gains tax at the current 28% rate, it would yield £88bn, and that alone would pay off more than 70% of the total budget deficit. However Osborne seems to share the notorious view of the New York heiress, Leonora Helmsley: taxes are only for the little people.”

This obscene scenario is not going to be tackled by the parties of the establishment. Even Michael Meacher himself will concede that, I am sure. This is why he increasingly shares platforms with true socialists – ecosocialists – that recognise an unsustainable situation when they see one and will endeavour to make sure that the consequences fall fairly at the feet of those that can and should pay.

3 thoughts on “Making sense of the National Debt (and associated ideas)

  1. Pingback: Roseanne Barr Wants Green Party Presidential Nomination - new google trends : new google trends

  2. Pingback: People’s Petition Against Austerity -– Sign now « Bridgend Green Party

  3. Pingback: Most of this ultra rich clique made their wealth under Labour’s time in office. |

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