to be frustrated that SO many people don't understand the difference between the national debt and the deficit?

[Prinnie]

Title says it all really - really wish people would get their heads around it before forming thier opinions on the economy/politics.

coolma A variety of people.

A lot of it is "sovereign wealth funds" - ie, other countries. Especially countries like China, and rich Arab oil countries.

But I think most of it is borrowed from pension funds, other investment funds, investment banks, etc. If you want you can even buy UK government debt direcly yourself!

Look at the Debt Management Office website. The interest rates you get aren't very good though, because the government is considered safer to lend to than high street banks.

ninedragons And who exactly do you propose sets this exam? You might think Sun readers are too thick to vote. I happen to think the same about Guardian readers.

can I ask a really stupid question - if money isn't really real- why dont we print more? What would happen if the government just printed itself more money? Would there be inflation? (I am not suggesting we do this but want to understand why we dont)

ninedragons - how are you going to guarantee representation of the interests of this large block of "thick" people then? Or are you just going to assume that those allowed to vote will know what's best for these poor disadvantages souls?.

The best way i have heard the difference explained (just to come back to the OP) is think of yourself as a country:

Deficit is your overdraft
Debt is your mortgage and the mortgage interest

So then you have your expenses, school fees is the education budget etc.

Each month we use the overdraft that is the 'structural deficit' of 4% mentioned earlier.
So, we need to stop using the overdraft - this is what the government is trying to do with all the cuts.

Once the overdraft bit is sorted i.e. living in your means, then we can start dealing with the debt.

Happy to be corrected with any of the above.

"What would happen if the government just printed itself more money? "

We've done that in a limited way with the 'quantitative easing' exercise. But to see what happens when a government takes it to extreme, modern-day Zimbabwe and 1920's German are both good examples. Hyperinflation in both cases.

Maybe we should just use

The Micawber Principle

"Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness.

Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery."

Admit OP, you posted this just because you wanted to boast that you do know the difference. Well done, you're sooooo much cleverer than the rest of us thickos!

Lol, Moorderous, no it's actually because I saw someone post on another thread that why not wait until we have a boom growth period to sort the deficit out. We had one of those and the govt of the time (or the dictator in the treasury depending on how you see it), didn't take the opportunity to deal with it then. I have also encountered lots of people including reporters on TV/radio who have clearly got the basic concept muddled.

Thanks for trying to make out that I'm a complete boasting saddo though.

"I'm a complete boasting saddo though"

If the cap fits

I remember being a bit puzzled at the lack of concern about structural deficits during the boo. Seem to recall seeing some figures about the US deficit that seemed shocking to me - but none of the bankers or economists or assorted experts seemed to think it was worthy of note.

Trouble with experts is that they are sometimes wrong. One cause can be what's known as canteen culture in the police - they are all in the same little world, share the same big worldview, culture and language, and don't think about the outside perspective.

Or that they are so convinced of their own wisdom that they dismiss the any critics as ignorant know-nothings. Much as in the tale of the little boy who pointed out the Emperor had no clothes.

During the boom, I kept thinking of history lessons about the South Sea Bubble or tulip mania. Would probably be helpful if the experts included a few who had studied history as well as those who are into the dismal science.

boom

I think that politicians have been very careful to avoid explaining the difference between the deficit and the national debt. As has been demonstrated, it can be explained in a couple of lines, but I have never heard anyone other than MN explain it.

Prinnie 'Common sense (and our experiences of household budgeting) tells us that when times are good you shouldn't overspend '

Budgeting for a household is completely and utterly different from an economy.With a household when you spend money it is gone out of the coffers.When a govt spends money it becomes someone else's income which they spend and in turn becomes yet another persons income.
At each stage tax is charged and generates more money for the government

longfingers I think the problem is partly that no-one is necessarily "right" as there are so many unpredictable factors. (DP is an economist so I have a little knowledge!) Expert, serious, well meaning economists disagree over the best way to deal with the various issues and they can all make a good case for their plan. I don't think it should or could be up to us to decide who is right. Thats one of the reasons the last gov handed control of the interest rate changes to the bank of England in an attempt to depoliticise it and ensure the best economic decision was taken.

Riven, I totally agree with you. I have recently started applying to do some financial literacy work in schools as a volunteer. I don't know much about schools or teaching (yet), but I really passionately believe it would be a good thing. It's through a charity who promote financial education in schools. Shame it's unpaid work though .

You could argue a case for just about anything to be taught in schools. It is not possible to pile everything in there.

trixie - Bank of England didn't exactly cover themselves in glory over the financial crisis, did they?

'We' certainly should have a say in crucial economic decisions and overall policy. It's our ruddy country.

I know some economists who are a. interesting and b. nice but I don't think it's a terribly good idea to label something 'economics' and say it can be left to the experts. We all have a stake in these decisions.

Longfingers, Guardian readers are the most intelligent as it provides information to inform their readers opinions not provide them ready made based upon predjudice like the Mail.

As for th Sun, might as well read the Beano for news, at least the Beano admits it's a comic

all that knowledge hasn't done your average person in the developing world, India or china much good though has it.

from what I've see in the press, no-one has the slightest clue what's going on or how to get us out of this mess, least of all the 'experts'. It'll all be argued about 20 or 30 years later in economic history class.

Brassband - I was going to post exactly that. All this sanctimonious talk of 'tightening our belts' (not on this particular thread)referring to households AND the nation itself is plain wrong imo.

There is never going to be an economic recovery if everyone is too poor to spend any money as a result of unemployment, slashed benefits and raising VAT. If we all tighten our belts right up tight we squeeze the life right out of the economy.

Just glanced again at the title of this thread - very self-righteously worded. For my part I am frustrated that so many people are thick enough to swallow the rewrite of history that is taking place, casting Labour/Gordon Brown as the cause of the global economice crisis.

newwave

Guardian readers think of the world as they think it ought to be. Sun readers see the world as it is. Sun readers are more perceptive and more in touch with reality than Guardian readers (or Telegraph readers) could ever be.

Longfingernails - have you ever read a copy of the Guardian? What on earth are you on about?

hey Lady BlahBlah I'm with you- what a pompous insufferable lot!