It is Obvious

Chris Rick has got altogether too much to say

Got any spare change?

Posted by chrisrick13 on May 23, 2017

It is obvious: never a borrower or a lender be

It is a long time since I heard anyone say that they had paid into their state pension for 40 years and deserved their pension.  I don’t disagree that they have a good claim that they have put in for a long time and now they can take some out.  However their money (mine and yours as well) just paid for current pensioners.  There was no fund created as happens when you create your own pension…if you are foolish enough to do so.  There is nothing there to be taken.

Pretty well everyone has worked that out.  There is a fiction in place: as long as you have children who work then they will pay for your pension.  It is the same for government debt.  Borrow now and let your children pay for it.  Another alternative is to borrow then create inflation to make the money that you return to the lenders worthless.  A more helpful scenario is to borrow now and then increase the earning power of the country as a whole then it is easy to pay the interest on the debt with the increased income.

Yet another scenario is to borrow and spend and hope nobody will notice until you are long gone.  This is very much the Labour view.  Borrow and spend and someone else will have to solve the problem some long time into the future when you don’t care.  You might well borrow and ‘invest’ in infrastructure but it is a long and very uncertain road to some increase in income that will somehow be made available to repay the loans.  Borrow to build a hospital and keep people alive today but you will kill many more in twenty years.  However you don’t know them and they don’t vote for you…though one of them might be you.

Borrowing money is also an uncertain game.  Today you might borrow without interest.  If you have money to repay the loan when it comes due then all is well.  Suppose that all you do is roll-over the debt as the UK has done for a very long time.  Then the money is re-borrowed at the current interest rate.  Suppose that has gone to 5% from 0%.  Then you have a problem.  All the solutions are ugly.

Suppose those people who lend can see where this is going, and they can, then they might charge you (the UK) 20% to borrow as they know that inflation and currency devaluation are likely events.  It becomes more than ugly.

But we all know this or we jolly well should.  It is inevitable.  High levels of inflation.  Very low value of the pound.  Rioting on the streets.  Because of the Euro they only have one of those in Greece.

At least the crash will be short if painful.  Then we will recover and quite quickly but the people who will suffer most are those who thought about what they might do for the future – saving and lending the money to be used until they needed it.

It is obvious: never a borrower or a lender be…as if we ever had any say in it

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