Daily Archives: February 3, 2014

Big Scary Numbers #2: Everyone in the UK owes £34,281.54

This figure comes from a comment made on John Redwoods blog:

http://johnredwoodsdiary.com/2014/01/31/2228300000000-and-falling-the-uks-national-debt/

And is obtained by dividing the National debt by the UK Population. I haven’t checked the arithemetic. We’ll assume it is right. Again that’s not really at issue.

No-one in the UK owes anything to anyone unless they are overdue on their credit card, have a bank loan,  haven’t paid their rent or whatever. There is no personal responsibility for any part of the so-called “National Debt”.

A large part of the National Debt is due to the long standing UK trade imbalance with countries like Japan and China. Everyone is probably responsible for part of that £34,281.54.  If , say, they’ve ever bought a Japanese car, that alone could be £10,000 or so.

But that person would have had their car and the Japanese car company would have been paid in full. There’s no debt there. So what’s the problem? Everyone’s happy. Someday the Japanese holders of £10k worth of treasury bonds will decide to cash them in and spend the proceeds.

They may well decide to spend them with a company the car buyer works for and the car buyer will end up getting back £10k as salary. The UK ‘debt’ will be smaller, and everyone will be even happier than they are now.

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Neo-Liberalism virus infects the UK Labour party! They want a government surplus without a trade surplus!

I suppose it may be naive of me but I’d always expect more intelligent economic thinking from the British Labour party than their Tory counterparts. But there seems to be a neo-liberal virus on the loose which attacks those parts of the human brain which are responsible for rational thought.It has started to attack politicians like Ed Balls who’ve decided they want a government surplus.

Now we have this on Labourlist!

http://labourlist.org/2014/02/labours-challenge-is-to-exhibit-the-behaviours-of-fiscal-conservatism/

I submitted the following comment:
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“Economic competence is vital for Labour in 2015”

Ok yes you’ve got that bit right.

But have you thought through what a promise of a budget surplus means? If you look at the countries who do run budget surpluses Norway, Germany, China etc then what else do they do?

Has anyone noticed that they also run trade surpluses? And that’s not a coincidence. It means that those countries have money coming into their economies from sales of net exports. It means that the Governments of those countries have to tax those receipts away to prevent high inflation. It means that there is still enough spare cash in the economy to enable the private sector to save.

If you try to run a budget surplus, which sucks money out of the economy, and at the same time run a current account trade deficit , which sucks money out of the economy, all you’ll achieve is an economic crash!

So please, British Labour Party learn some basic economics! Don’t talk about the budget deficit in isolation. If you want a budget surplus start thinking about how you are going to achieve a trade surplus!
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If you agree, you might want to click on the up arrow to show approval and/or make your own comment. You might want to say that a trade surplus isn’t necessarily a good idea either.