[DemolitionRed]

Originally Posted by Kizzy

'The latest public borrowing data shows that on a 12-month rolling sum basis, the current budget – which excludes capital investment – actually went into surplus in November 2017.'


'However, the IFS stressed on Friday that this improvement did not mean the pain of the cuts already pencilled in for benefits or public spending could – or were likely to be – cancelled simply due to the recent improvement.

“On current policy, ‘austerity’ is far from over,” said Carl Emmerson, deputy director of the IFS.'



Why?...

http://www.independent.co.uk/news/bu...-a8247226.html

Because the gilt side of government spending (which is huge) can no longer rely on new money. I'm not surprised a few big businesses have already gone under and that the government didn't step in to help Carilion. If the government were beyond full capacity by November they would of had to dip into their surplus to help out because they could no longer issue bonds. This, I suspect, is why there was a mad rush by investors to sell shares and buy bonds.

In normal circumstances the government would simply print new money and turn that new money into gilts/bonds which are purchased by investors looking and needing an asset free risk. Because the interest rates are so low on those bonds its a very attractive way of borrowing and for the government, those bonds are a very low security risk for the treasury. When a government can no longer print new money, new bonds dry up, which will happen if we continue to be in the black and this will create a spiral of chaos. The investors will have to turn to more expensive and unreliable borrowing and will likely default on the government debt they already possess.

This is what happened when Clinton celebrated nearly four years of being in the black. Things like subprime mortgages had continued on high risk borrowing and shortly after Bush came into office, they started defaulting on those debts. The sudden fall of the banks had been an accident waiting to happen and the reason we fell with them is because of the pounds ties to the dollar.

I suspect the government believe that if they can turn enough old money (tax payers money and what has created the surplus) into gilts and bonds which they can then sell to investors, they can survive with an ongoing surplus. The problem here is, its the tax payers that will take all responsibility for the bonds market and the only way they can do that is with less public spending.