Economist help required

Money, its a crime.  Share it fairly but don't take a slice of my pie.The newspaper headlines this week are packed with political tales of which party is promising the biggest tax cuts.  I’m not an economist so you’ll forgive my ignorance I’m sure.  Didn’t the world’s governments just throw trillions of tax payer’s money at the financial markets to prevent them from collapsing?  Did I just dream that or something?

Please correct me if I’m wrong about this but these trillions of dollars have to come from somewhere don’t they?  The £500 billion that my government took to pay the banks so that tey could lend it back to us with interest, that came from the taxes that we pay doesn’t it.  It could be direct taxation from income, taxation on the things we buy or taxation on business that produce things or sell services.  Every time there is a transaction of some kind the state takes a cut. 

They use this money to pay themselves, keep the NHS functioning, pay for the two wars that we’re involved with, give cash to Europe, pay for unemployment and pensions, pay for roads, libraries, policemen and women, pay for social care of all kinds (we can see how well that is funded), education for our children, independent scientific research and a whole host of other things. 

Taking £500 bn of that money away means one of two things to me, as I’m not an expert at all.

  1. They will need to cut spending on all the publically funded things that they could have spent the money on.
  2. They’ve borrowed it and will have to pay it back with interest.  This will mean that there will be less money to spend on publically funded things.

I’m sure I’m going to just go out there nwo and put my ignorance on my sleeve for all to see.  If there is less money in the pot to spend on things because it’s been spent already then doesn’t this mean that the state needs to recoup that loss in order to keep spending by raising taxes?  Or reduce public services.  One of the two.  Surely?

Reducing taxes will reduce the amount of money the government can skim and less money will be coming in to the public’s coffers.  Have I got this wrong somewhere?  OK, people will have more money in their pockets and so might spend more which will lead to more transactions where the state skims a bit off the top but if that is the case then why not cut the tax burden right down to nearly nothing and the country will be rich.  We’ll have wonderful public services because we’ll all have cash falling out of our ears and the state will be there to pick up our scrappings.

Tell me lies, Tell me sweet little liesI suspect that it is a Big Lie to get votes.  Come on politicians, you can be honest with us, we’re not stupid.  We understand that things might be tough and we might be a bit skint for a bit, tell us that and let us bite the bullet now so we get it over with all the quicker.  Honestly, we’ll thank you for it in the end.  A Big Lie just makes us distrust you all the more.  So, stop that.  Stop it at once.

It can’t be that easy?  What have i missed?

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5 Comments

Filed under Bad things happen, Shitbiscuits, You decide

5 responses to “Economist help required

  1. Or they’ll crank up the printing presses and make more money that way. Admittedly increasing the cash in circulation will, eventually, push inflation higher but inflation is going to be higher anyway. Issuing government bonds (which is what they’ve done) is much the same as printing more money.

    Keynes was an advocate of the public sector spending its way out of a recession to enable the private sector to grow (off the back of public sector spending, if you like).

    Where’s the money come from is a good question, but I have better ones. Where does our tax go? Ask for granularity on that answer and sadly our public servants find themselves unable to serve.

  2. Brennig – this is actually what they did in Germany circa. 1930. As any GCSE Historian knows, all the people got so pissed off with how it turned out they voted for a young chap with some radical ideas on how to sort it out. Unfortunately and despite the campaign pledges, Mr Hitler was too radical once in office and it created even more problems. Britain’s huge post-war loan from USA was only paid off last year IIRC.

    Frog – I don’t get it. The numbers don’t add up. Even my Yr 9 maths class could spot that someone in the Treasury has forgotten what happens when you subtract from a negative number.

  3. Perhaps i might add a little light into the darkness of the abyss into which our money is being tossed? ( Australia is doing much the same only with quite smaller sums – so far).

    You are forgetting about the magical mythical Saviour come to save all our collective asses these past two or three decades…

    The Angel of Credit!

    You can spend, spend spend and never have to pay it back as long as you can run up a deficit. Now for you and i of limited budgets it does not take too long for reality to bring us back to earth with a sickening THUDDD!

    But our governments have significantly longer to come to this forced conclusion – as Unca Duck pointed out – the UK only recently cleared it’s WWII deficit from 60 plus years ago.

    We can simply fob this one off to the next generation when all those who took this decision to solve the ‘crisis’ have long since retired on pensions and superannuation.

    Simple! 🙂 of course that was what got us there mostly in the first place (Relying on credit to purchase more than you can afford) but no system is foolproof? true?

    Hover, on another tack, there is an argument at my blog your abilities might find amusing?

    P.S. i’m back from walkabout – mostly! But you might have gathered that by now? 😉

    <B

    http://lovewillbringustogether.wordpress.com/2008/11/26/a-logical-proof/

  4. No change from your usual excellent posts Mr Frog and one that has me shouting “Yes! Exactly!” at the monitor again! 🙂 xxx

  5. Are you the bloke what was releasing Home Office secrets to Tory MPs? It would explain why you’ve vanished for the last 2 weeks.

    Where are you? I need my Frog fix!

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