More crassness from Nick Clegg’s LibDem conference speech:
We could have decided to go more slowly but it would have worsened not eased the pain. Because every day you ignore a deficit, it gets harder to fix. The debts mount up and you have to pay interest on them. Already we are spending £44bn a year on interest alone. Under Labour’s plans, that would have risen to nearly £70bn. A criminal waste of money that shouldn’t be lining the pockets of bond traders. It should be paying for police, care workers, hospitals and schools.
The man really should not be let near his own pension, let alone the state’s finances because if he knew anything at all he’d know that most of UK gilts are owned in this country. The profile looks like this:
Most think that overseas bit overstated: a lot think 90% of UK debt is domestically owned.
But the reality is that the biggest holders are pension funds. Gilts underpin private sector pensions, repay them and the pension system will collapse. And banks must hold gilts as part of their required capital funding. Repay them and the banking system will collapse. And so on, and on. And the demand for gilts is rising. Because banks need more capital. That’s what new regulations are saying. But Clegg wants to deny them the assets they need.
And the real rate of interest on government gilts right now? Under 1%. A lot of it being taxed on receipt in the UK (not all, I admit — but a lot).
So this is not money paid to bond traders. this is interest paid at incredibly low cost to institutions that underpin our economy and pensions. And Clegg does not understand that. Heaven help us.
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Dont forget that a lot of our debt is actually on a pretty long date – 13/14 years or more. Again thats totally different to most other countryies debt. Plus the household analogy makes the debt sound like an overdraft – its not.
Richard,
This is ridiculous: “repay them and the pension system will collapse”, and “Repay them and the banking system will collapse”
Nobody is suggesting to repay these Bonds, only to stop adding $225 billion worth of them to the system every year.
And with the central bank sitting on over $300 billion of them, there is no risk of a shortage of these securities for banks to hold as part of their reserve requirement.
Even more staggering is the fact that you can write in the same post that “Gilts underpin private sector pensions” and “And the real rate of interest on government gilts right now? Under 1%” (and taxable!) Without realizing how unsustainable the funding of the entire retirment has become.
For the well-being of your own family, stay away from from your own 401K!
@Jason
Ridiculous? No way
1%? It’s a real return
But as I will be showing very soon – private pensions simply don’t work anyway
And what do you want? High real rates so there is no work, no jobs, no investment and crippling mortgages?
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