Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
#1
The State budget in Britain for one financial year is calculated in hundreds of billions of pounds. The amount of money in circulation, however, is a lot lower than that figure. This means that the same bank-notes and coins are entering the State Treasury (in the figurative sense) many times, over and again.
For example, a person receives a thousand pounds salary for one month's work, and pays five hundred pounds on rent, council tax, rates, light and heating bills. The rest is spent on shopping and travel expenses. Of all this, a percentage goes directly to the State by way of tax, such as VAT.
The water-works, electricity company and gas supplier each pay tax on their respective profits, as do the shops and the factories who supply them, and also the transport services. Therefore, a further amount of the one thousand pounds goes indirectly to the State, in the sense that it contributes to the profits of various companies and businesses who in turn pay tax.
The State, every month, uses this tax to pay civil servants and to finance projects. And also to pay back borrowed money with the interest.
The following month the same repeats itself. The same bank-notes and coins come and go in the course of one year, passing many times into the Treasury and leaving it. The actual sum of money in circulation is a lot lower than the total annual budget. For this reason, a million pounds in cash, although worth a million pounds, accounts for a much larger figure within the national economy, because it covers a proportion of the State budget equal to a sum that goes far beyond a million pounds. It could account for five, ten or twenty million pounds in the annual budget.
The trade deficit which infests our economy may seem low in comparison to the annual budget, but in reality it accounts for a proportion of State budget DEFICIT that is many times larger than the trade deficit itself!
The enormous sums of money which foreign labour sends out of our Country to their own families may seem low in comparison to the State annual budget, but in reality they account for a proportion of State budget DEFICIT many times higher than these sums suggest.
May-be now people can start to realise why the systematic closures of our factories through the e.u. master-plan, with the subsequent import of products that our Country once produced, and the import of masses of unwanted and unwarranted foreign labour, has caused such enormous deficits in our national budget.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
#2
Alexander - Most money these days is in the form of electronic pulses, not recycled notes/coins and not determined by the level of printed notes. Neither is it represented by gold, the gold standard was dropped many years ago.
The deficit in our national budget, lets first define deficit, that is the amount spent by the government over and above what it takes in taxes (not the level of debt), is purely down to Government overspending. There was a 'golden rule' that Brown determined while in opposition but he dropped when it did not suite him. That was, in part, about repaying debt when the economy is on the rise so you can then allow Government debt to increase when, inevitably, the economy slows down. Brown fooled himself into thinking he had changed the rules of the economic cycle and actually claimed he had abolished boom and bust and as a result run the economy on that assumption, carrying on borrowing more and more when he should have repaid it. As a result at the start of the turndown we already had a structural deficit (a deficit thatb will not be corrected by a natural growth cycle). That deficit and debt level has compounded up and up during the longest and deepest recession ever. His poor decisions on tax/spend/red tape helped deepen that recession and to make it longer than it need have been. We have to add to that the banking crisis that was aggrevated because Brown in 1997 changed the regulation of then banks that led them into a elephant trap for the economy. The bail-out from that also deepened the debt crisis though the eventual sale of the shares over a period of time should in part or fully rebalance that part of the problem. Brown's other mistake that also deepened the crisis was his poorly judged inflation brief to the Bank of England in 1997. That led to interest rates being kept too low, encouraged secured and unsecured personal borrowing, pushing up house prices and creating a price/debt bubble that had to burst. The other side of that of course was also that he damaged savings, low interest rates meant low deposit returns combines with reduced tax incentivised savings meant that families did not have a savings cushion to help them at the start of the crisis either, high debt and low saving = disaster.
A complex issue. The EU is a detestable organisation, corrupt, interfering and inefficient, but I do think that you are giving them too much 'credit' in something that is not down to them.
Guest 696- Registered: 31 Mar 2010
- Posts: 8,115
#3
Well, you're right there, Barry, about the e.u., and also your description of the finances cerresponds. But, still, if you think about it, there is a prtinciple in what I wrote, in the fact that ultimately, what defines the running of the economy, and also the national budget, is the bank-notes and coins coming and going. The more money leaves a national economy and the less comes in, does drastically affect the economic outcome of the budget! It is a fact that the same banknotes come and go in the State Treasury (in the virtual sense) many times in the course of a financial year (that covered by the budget). Note, in my terminology, State Treasury doesn't mean physically a coffer with a padlock, but the accounts which the State uses to cash in payments in form of tax. Therefore, a sum of money in cash accounts for a much larger sum in the annual State budget than that sum in cash actally represents. (Ten pounds in cash will account for fifty or a hundred pounds in the annual State budget, the precise figure no-one can actually define).
Likewise, if a million pounds more money came into our national economy through increased exports in a certain period (say, a day), this will have a benevolent effect on the budget, as a part of that money will go in as tax, and the State will have more money to pay civil servants and to finance projects, and that million pounds in general will flow through the economy on a daily basis, involved in many transactions, from shopping in Icelands to paying the light-bill, and will come and go many times in the "State Treasury" too, and will pass through many peoples pockets, however in the home economy. (Our economy)
#4
Alexander, that's a load of tosh. Try re-reading Barry's excellent description of how national finances work, you may learn something.