to not give a monkeys about the deficit?

[StuckInTheMiddleWithYou]

I genuinely think we should ignore it.

If we don't pay it back to whoever we owe it to, would it be the end of the world?

To carry on with your analogy - if you were near bankruptcy, you wouldn't carry on spending money on the the things you could afford when you were wealthier, would you?

No, you'd cut back to the essentials - what the nation's "essentials" are is a moot point and the subject of political debate, obviously.

Curlymama- private investors and financial institutions.

Government debt is often sold through gilt auctions where investors "buy" it at the best price.

The average price on a gilt auction (expressed as an interest rate)is an indicator of confidence in ability to repay.

The more debt you issue, the higher the price tends to be.

Personnally I'm in the Fight Club school of economics - abolish all debt and start again.

One of the ways the government borrows money is by issuing bonds.
The bonds are basically an IOU saying that if you buy the bond for x amount today, the government promises to pay you back x plus interest in a few years time.

The bonds are bought by all sorts of institutions, pensions companies, individual investors etc. etc. the world over. So sometimes they are borrowing from us (as shareholders/pension holders etc.)

The bonds only have value if the people who purchase them believe that the issuer can be trusted to pay back the amount promised when promised. Once that trust is gone, the ability to raise more money also disappears or can only be bought with enough extra interest to offset the increase perceived risk in lending the money in the first place.

Fine - get rid of all the debt.

You will have to balance your budget on day 1.

No, in fact you will have to suspend all spending until you have collected enough taxes to cover it.

What was that Channel 4 programme? History of Money, or some such. Explained all this stuff really well. Watched while breastfeeding so clearly don't remember a jot.

........and no-one will ever lend to anyone again so investment will be dead as all the provate investors will have been wiped out by the debt cancellations.

It's not as though the UK is being lent to at punitive rates. In fact, it might have focused the minds of the powers that be if they'd been a little bit more punitive.

I give up, I hate finance.

The UK owes Blogs bank £200 billion. We pay them interest every month. If we don't pay them interest, then they tell all the other banks who then decide we are a bad credit risk and won't lend us money. And then we have a double dip recession, tax receipts (the government's income) falls and suddenly we can't give drugs to cancer patients because we don't have the money to buy them and no-one will lend UK plc any money. And then doctors and teachers salaries don't get paid. And then what happens?

And we couldn't import things like petrol and gas. How many people would cope with no heating?

Obviously that's an extreme scenario but that is what has happened in Greece. They've cut civil servant salaries because they simply don't have the money to pay them.

Of course we have to deal with the deficit, the only question is how quickly. Labour want to do it very gradually, the coalition is trying to do it quicker. In simple terms, that's the only difference.

StuckInTheMiddleWithYou - So the answer is we CAN ignore it - but we will end up eating rats in the ruined burnt out shells of skyscrapers in the City if we do.

Probably while hiding from mutated cats or something.

I like cats better than skyscrapers anyway.

Thanks everyone

I'm quite enjoying my little economics lesson!

I never realised they borrowed that much from insurance and pensions companies. Sounds a bit dodgy to me, but hey, what do I know!?

Ah - these are MUTANT cats though. With mutant fleas. And lasers.

Oh I so want one of those!

Actually, it's starting to sound attractive...
Let me just build my bunker first.

What I do not understand is that why are the banks not giving money to the gvt and still paying huge bonuses? I work in the City and life is back to normal however public sector is going to be cut massively with lots of jobs going and they typically are the lower paid workers.

This gvt wants to keep the rich richer and the poor poorer (I agree re overhauling the whole benefits thing as it is ludicrous that people can 'choose' to live on benefits rather than working). If the gvt continues there will not be a middle class you will either be rich or poor with nothing in the middle. We are going to become like Russia.

I also cannot believe that we have not had people protecting about the absurd cuts in the public sector and the numbers of people who are going to lose their jobs.

I reckon that if everyone decided they were prepared to give their time/skills to their communities and countries for free, and too look after people in their communities who don't have the same resources at the start then we could abolish all debt and start again without needing bunkers Stuck

I just don't see that happening (ever)

"What I do not understand is that why are the banks not giving money to the gvt and still paying huge bonuses?"

Why would banks "give" money to the government? Do you mean lend? If so, they are, but at the moment they dont need to. There are still enough private investors prepared to buy UK government debt. Also, how does that help cut the deficit?

Anastasia- yeah, it's called a subsistence/ barter economy. It's what billions worldwide are trying to claw their way out of. It works fine until you need a doctor but you grow cabbages and he doesnt want a cabbage, he wants a carrot.

Sorry, I have nothing to add but this: <a class="break-all" href="http://www.google.com/imgres?imgurl=s-ak.buzzfed.com/static/imagebuzz/terminal01/2009/6/3/16/laser-cat-makes-its-own-cat-door-10296-1244061548-19.jpg&imgrefurl=www.buzzfeed.com/awesomer/laser-cat-makes-its-own-pet-door-cci&h=658&w=494&sz=44&tbnid=Rv7OAa_U-DveEM:&tbnh=138&tbnw=104&prev=/images%3Fq%3Dlaser%2Bcat&zoom=1&usg=__rKbZXC2LVgvAyxIiNSRdtRuLkd0=&sa=X&ei=RMVzTP_8NouRjAeanfThCA&ved=0CDIQ9QEwBA" rel="nofollow" target="_blank">laser cat

Morloth - AHH they're coming!

Anastasia - As Bagged and Tagged says, as soon you are out of a hunter gatherer economy you need ways to store wealth as you need to smooth your income against your expenditure, hedge against times of shortage etc. This leads to currency which is essentially just transferable debt.

HappyStressedMum - Which Banks giving what money to the Gvt? Those that were lent money will be paying it back on the agreed schedule. Those we own we want to be as succesfull as possible, so we can sell them. This (supposedly) requires big bonuses. We get half of all bonuses in income tax so bonuses do actually help cut the deficit already - should we take the other half?

I meant the ones the gvt have given money to - lloyds for example is posting huge profits and paying large bonuses (effectively sticking their fingers up to the gvt who allegedly have given direction to curtail the really large bonuses) and please dont be naive to think that they pay income tax on all of their bonuses. They have clever accountants who are able to 'hide' their money and/or invest their money in offshore accounts.

Many of my friends and friends husbands work in the City and I know how it works.

Essentially some of the banks took huge risks and we had to bail them out and now WE all have to pay but they remain untouched. Go to any City bar/restaurant and the bankers are back to rubbing out noses in their obscene wealth buying their cristal champagne.

I wonder how you will feel in a couple of years time when crime levels have increased ten fold because people have lost their jobs which means crime goes up and the police budget has been slashed by 30 million and you cant get a doctor or nurse to attend to your poorly child or the NHS will no longer be able to afford cancer treatment as the PCT's (primary care trusts) are being slashed and you cant pay your mortgage because interests rates have gone through the roof. The Tory GVT only know one way of cuts and that is low paid public sector workers and the middle classes paying more tax and they ALWAYS put up interest rates. I recall struggling to buy my own one bed flat and then the interest rates went to 15% under the last Tory gvt and I saw many of my friends lose their homes. The Tory's dont want the likes of us trying to better ourselves and to have aspirations. The whole thing stinks and we seem to just be lying down and accepting our fate to the rich Torys!

Sorry rant over!

Most bonuses go straight through PAYE. There are ways around it of course, but still, most of it goes through PAYE.

We will have to wait and see what happens - I hope your scenario doesn't come to pass, I'm sure the Tories don't either.

To be fair, there is only really one way interest rates CAN go at the moment, but still there are people predicting that they will stay low for at least the next 5 years.

The taxpayer will get the money back from bailing out the banks when the share prices are worth enough to sell.

We didn't just "give" the banks money, we bought shares in them to increase their cash flow. Therefore the banks can't simply give us the money back, we have to sell the shares.

Shares in banks are steadily climbing in value so it is in our interests, at the moment, to hang on to them and sell them when they are worth more and make a profit.

Isn't it a bit like you or me paying our mortgage - long term borrowing. There is no need to panic into paying it back immediately. I believe it will do more harm to the economy. It may seem a lot but not in the scheme of things GB plc will thrive once again and organic growth (in private sector) will generate the cash to pay this back. All these cuts spell disaster - I am waitng for a double recession cos folk don't want to commit to spending as they are worried about jobs and motgages and inflation etc.... People will regret electing this coalition Govt

victoriah3 - Yes and no. Our debt is mainly long term - i think about 14 years is the average, but the cuts are not about paying back the debt. They are about convincing lenders that we will be able to pay back the £160 Billion we need to borrow this year, and next year, and the year after that...

So it's more like showing your mortgage lender that you have your finances under control as you need to extend the mortgage by 10%.