National Debt

[les83]

Ok maybe a daft question to some of you but here goes:

So we hear all this talk about the country's national debt and the need to reduce it.

So who did we borrow this money from? the world bank? the International Monetary Fund?
And question 2. Where did they get the money from to lend it to us???

[bighairyfaeleith]

Ok maybe a daft question to some of you but here goes:

So we hear all this talk about the country's national debt and the need to reduce it.

So who did we borrow this money from? the world bank? the International Monetary Fund?
And question 2. Where did they get the money from to lend it to us???

brilliant question:thumbsup:

Who is the person at the top of the triangle that has suddenly stopped lending money?

Some bugger must have the money, :thumbsup:so why is he no lending it?

Seriously, why do the news folks not answer the simple questions that we all ask in our heads but are too scared to look daft to ask in :confused:public

I don't mind appearing stupid so quite often ask the questions and get various responses in return:greengrin but the above post shows I'm not alone. I feel better now:agree:

[Mibbes Aye]

I'm sure there will be people far more qualified than me to comment (and correct me) :greengrin but.....

We spend more than we are earn, which in itself is not necessarily a 'bad' thing - for example, I think we had an even higher absolute and relative level of national debt just after the second world war when the nation was exhausted but needing to reboot to a civilian economy.

The money that allows us to spend more than we earns comes from the government selling bonds to the private sector - these bonds are essentially loans made to the government by whoever buys the bond. The government agrees to pay back this loan to the bearer, at a fixed rate of interest, over a pre-defined period of time (potentially many years). The national debt is the money the government owes in repaying these loans.

The bonds are bought mostly by the likes of pension funds and insurance companies because they are as cast-iron guaranteed a return as is possible - the government has never defaulted on these loans and in theory can avoid it by raising taxes, cutting spending etc.

When a nation is less-trusted to meet its obligations to pay out on bonds then it's less likely to attract buyers, hence the need to go to supranational bodies like the IMF for a loan.

There's a lot more complications to it than just that - I'm sure someone better-versed in economics could maybe expand.

[lyonhibs]

I'm sure there will be people far more qualified than me to comment (and correct me) :greengrin but.....

We spend more than we are earn, which in itself is not necessarily a 'bad' thing - for example, I think we had an even higher absolute and relative level of national debt just after the second world war when the nation was exhausted but needing to reboot to a civilian economy.

The money that allows us to spend more than we earns comes from the government selling bonds to the private sector - these bonds are essentially loans made to the government by whoever buys the bond. The government agrees to pay back this loan to the bearer, at a fixed rate of interest, over a pre-defined period of time (potentially many years). The national debt is the money the government owes in repaying these loans.

The bonds are bought mostly by the likes of pension funds and insurance companies because they are as cast-iron guaranteed a return as is possible - the government has never defaulted on these loans and in theory can avoid it by raising taxes, cutting spending etc.
When a nation is less-trusted to meet its obligations to pay out on bonds then it's less likely to attract buyers, hence the need to go to supranational bodies like the IMF for a loan.

There's a lot more complications to it than just that - I'm sure someone better-versed in economics could maybe expand.

Nah, that's pretty much it. We owe a lot of (£) money to companies/organisations who are neither likely nor morally obliged to "let it slide"

Because of this, the £ as a currency - and all financial instruments held and measured in £ - suddenly become a lot less attractive to potential buyers, meaning that holders wishing to sell need to INCREASE the £'s attractiveness in foreign currecy terms - i.e. taking less $/euro to the pound which is why those of you who travel a fair bit may have found that things have got a tad more pricy in the past few years :agree:

[(((Fergus)))]

Nah, that's pretty much it. We owe a lot of (£) money to companies/organisations who are neither likely nor morally obliged to "let it slide"

Because of this, the £ as a currency - and all financial instruments held and measured in £ - suddenly become a lot less attractive to potential buyers, meaning that holders wishing to sell need to INCREASE the £'s attractiveness in foreign currecy terms - i.e. taking less $/euro to the pound which is why those of you who travel a fair bit may have found that things have got a tad more pricy in the past few years :agree:

These pension funds etc. buying government bonds: are they generally British companies investing British customers' money?