In this video, I explain why every pound of government debt is also somebody else’s financial asset.
That’s why it’s a debt that has to be repaid. Because it’s someone else’s financial asset.
In this video, I explain why every pound of government debt is also somebody else’s financial asset.
That’s why it’s a debt that has to be repaid. Because it’s someone else’s financial asset.
So his claim is that the more debt we have the richer we get?
… and the more tax we pay, the richer we get.
Debt is assets. Spending is saving. Punishment is happiness. All Hail The Party.
Debt is assets because they’re the same thing but from the perspective of the person on the other side of it.
Punishment is only happiness by the same measure if it’s being delivered by a sadist. Or I suppose it could be the same person but they’re a masochist.
Double-sided accounting was only invented in 1494 so I guess it’s normal that accountants today don’t know of it!
Accountants have been disavowed by their professional body might be more ignorant of double entry than others.
You do not need double-entry accounting to know that a debt is money that is owed to another “person” who is entitled to want it back. That’s kindergarten-level knowledge.
I am not clear why this concept requires a video to explain it. Presumably Spud wishes to expand on his delusion that the market will buy any quantity of UK bonds at any price for any purpose.
Ok, I bit. Sure it’s someone’s asset. So what? In acquiring that asset they traded something else, cash now, which was similarly an asset, in exchange for an asset which is basically a promise to return nominal cash at a future date and a series of coupon payments meantime…. That is, a series of payments, the last of which is the principal.
…. Does it not occur that the value placed upon that asset swap rather depends on the _real_ value of that series of payments? And that if our putative Investor rather suspects that the debtor will debase the currency meantime, that might, might, just affect their view of how much they wish to bid for this series of payments?
I’d disagree that cash is an asset. It’s a token of value. Part of the value that circulating in commerce at the present time.
But, yes, assets have utility value in the present. That coupon payment or maybe a portion of the redemption value. Since, while holding it, one is one time interval closer to the redemption. The price one may for it is what you pay to benefit from that future utility. It has no other value in the present
‘I’m not sure how many times I have to say this. Government bonds are not debt; they are savings held with the state. This is a simple, straightforward fact that the world needs to understand, and because it doesn’t, we give the City power, and people are suffering. This misunderstanding does then have consequences, and that’s why I’m worried about it.’
Channeling Goebbels again I see. Also the reference to the City, where many leading bankers are of a certain religious bent, also harking back another German statesman of the era.
Calling government bonds ‘debt’ is a category error that distorts the whole debate on this issue. All savings deposits are liabilities of whoever holds them. That is just an accounting fact. Bank deposits on a bank’s balance sheet are, for example, a liability, and that is true for the government as well, but we don’t say a bank is having a crisis because it owes the money back to its depositors. And I don’t understand why we say the government is in crisis then, because it too owes savers’ money back to them.
Yes but if we get a situation where we lose public confidence in a bank’s ability to pay out its deposits that is an issue for sure. I would say the UK government, given its catastrophic mismanagement of the economy (Largely at his urging) is veering dangerously close to that.
In fact, we know it does not need deposits to undertake its business. That is not necessary because banks can lend without ever having a deposit. So that is the fact of life.
Yes – that’s right – banks can exist with zero capital. Not sure its entirely legal or wouldn’t lead to lengthy custodial sentences for those running it But in theory you’re right. However most legitimate operations require substantial amounts of capital. Any systemically important institution requires deposits or other capital to keep its operations going.
There’s more in this vein but to be honest it’s nothing new. Government can fund his various boondoogles -and him – (as Bongo (I think) said – his effective hourly pay rate is £2 per hour or suchlike) with no impact to the economy and anyone who contends otherwise is ‘Far -right’ – it’s tedium is only enhanced by its mantra-like repetition.
“we don’t say a bank is having a crisis because it owes the money back to its depositors”
Completely different situations.
— why is the bank ‘borrowing’ (i.e. taking deposits)? Because that’s its business; it borrows from the depositors, lends to the borrowers, collects interest from the second group, pays it to the first, creaming off a bit on the way to pay for fast cars / hookers / golf.
— why is the government borrowing money? Because it’s spent more than it’s taken in.