Why Bankers and Bolsheviks are two of a kind

realitykeeper

Over the years, I have heard socialists assert that every country should have a national debt. The same people say that a national debt is a necessity and to repay the principle on the national debt would be a mistake.

These are interesting ideas which raise several important questions. For example, is the hard work, frugality and discipline required to save before one spends a folly? If socialists believe in borrowing to invest, then are they essentially the same as the Anglo Irish bankers and Wall Street traders who borrowed others peoples money to gamble in what they thought would bring a return?

When a government borrows money to invest, the tax payer will ultimately have to pay for that gamble. Is this similar to the taxpayer having to pay to bailout the cry baby capitalists at Anglo and Irish Nationwide?

To be fair, it is not just socialist politicians who believe in the concept of maintaining a national debt. Many ordinary voters think this way also. So what is it that unites all those who believe in borrowing? Do they all believe it will ultimately be a problem for others and not themselves?

One thing is certain, should the Irish economy collapse under a burden of debt, the people who will be worst affected will be those who believe in debt and the people least affected will be the frugal. It is the wealthy borrowers who will fall from the greatest height.

johnnyskeleton

realitykeeper wrote: »

Over the years, I have heard socialists assert that every country should have a national debt. The same people say that a national debt is a necessity and to repay the principle on the national debt would be a mistake.

Do you have a link? Government involvement in the economy is a socialist position. Spending money for social purposes is a social democratic view. Keynsians believe in borrowing to spend during a recession to increase economic activity. All these things require increasing national debt or at least not paying it down, but none of them to my knowledge suggest that government indebtedness in itself is a good thing. Quite the contrary, they would all view it as a necessary evil ie the only way to fund extra spending in the absence of government reserves or a magic money tree.

The answer to your other questions is no - it's not the same thing and, unless you can point to an actual socialist who believes borrowing for borrowings sake is good then I think this is something of a non issue. To expand on the borrow to invest - the ultimate goal of such borrowing is that the loan repays itself either through direct means eg toll roads or else by indirect means eg the new road increases economic activity and so the tax take rises

To be fair, it is not just socialist politicians who believe in the concept of maintaining a national debt. Many ordinary voters think this way also. So what is it that unites all those who believe in borrowing? Do they all believe it will ultimately be a problem for others and not themselves?

To say that such voters want to increase the national debt now, or not to pay it down during good times, has nothing to do with ideology or even any realistic plan. It's just that there are many demands for spending and not enough money to pay for it.

One thing is certain, should the Irish economy collapse under a burden of debt, the people who will be worst affected will be those who believe in debt and the people least affected will be the frugal. It is the wealthy borrowers who will fall from the greatest height.

That's not certain at all, and sounds almost prophetic in tone. An equally likely scenario is that those who incur massive borrowings to obtain a lot of assets will fare better than those with no assets nor loans. Sorry to say it but I suspect that is how it will ultimately pan out.

Victor

Debt, assuming you have a corresponding asset and the ability to repay, isn't a bad thing in itself.

Uncontrolled spending, excess spending on current expenditure and non-productive items and spending beyond your ability to repay are bad things. That goes for governments, banks, businesses and individuals.

SupaNova2

johnnyskeleton wrote: »

To expand on the borrow to invest - the ultimate goal of such borrowing is that the loan repays itself either through direct means eg toll roads or else by indirect means eg the new road increases economic activity and so the tax take rises

There are two main problems as i see it. One, governments are not borrowing to invest but to sustain high social welfare rates and a bloated public sector, two, even if they were borrowing to invest government don't make good investors.

golfwallah

realitykeeper wrote: »

Over the years, I have heard socialists assert that every country should have a national debt. The same people say that a national debt is a necessity and to repay the principle on the national debt would be a mistake.

These are interesting ideas which raise several important questions. For example, is the hard work, frugality and discipline required to save before one spends a folly? If socialists believe in borrowing to invest, then are they essentially the same as the Anglo Irish bankers and Wall Street traders who borrowed others peoples money to gamble in what they thought would bring a return?

When a government borrows money to invest, the tax payer will ultimately have to pay for that gamble. Is this similar to the taxpayer having to pay to bailout the cry baby capitalists at Anglo and Irish Nationwide?

To be fair, it is not just socialist politicians who believe in the concept of maintaining a national debt. Many ordinary voters think this way also. So what is it that unites all those who believe in borrowing? Do they all believe it will ultimately be a problem for others and not themselves?

One thing is certain, should the Irish economy collapse under a burden of debt, the people who will be worst affected will be those who believe in debt and the people least affected will be the frugal. It is the wealthy borrowers who will fall from the greatest height.

There is a subtle difference between Bolsheviks and Bankers, when it comes to loan repayment.

For example, Bolsheviks have a record, not only of defaulting on their international debt obligations, but also of repudiation (i.e. denying any responsibility for ever repaying it).

Russia in 1917, China in 1949, and Cuba in 1960 all repudiated debt incurred by previous political regimes. Note, however, that this is a unilateral act and has little weight in the international community and the debt does not disappear from the records.

http://notesfromthebartender.wordpress.com/2010/02/13/the-dangers-of-sovereign-debt-default/

Bankers, on the other hand, have a record of looking to government for bailout, thereby dumping their debt on the taxpayer for servicing and eventual repayment. The biggest problem here is that most of those responsible for incurring the debt are left in their jobs (or retired out on massive pensions) – thus rewarding this form of bad behaviour and opening up the possibility that it will happen again.

There really needs to be unpalatable consequences for business screw ups – starting with a clean out of the boards of these companies and their top executives. Otherwise how will we ever learn from our mistakes?

johnnyskeleton

SupaNova2 wrote: »

There are two main problems as i see it. One, governments are not borrowing to invest but to sustain high social welfare rates and a bloated public sector, two, even if they were borrowing to invest government don't make good investors.

I don't think you even read my post to be honest.

SupaNova2

johnnyskeleton wrote: »

I don't think you even read my post to be honest.

Why? I read your post and felt like adding discussion on the notion of governments borrowing to invest.

johnnyskeleton

SupaNova2 wrote: »

Why? I read your post and felt like adding discussion on the notion of governments borrowing to invest.

The OP's question was:

If socialists believe in borrowing to invest, then are they essentially the same as the Anglo Irish bankers and Wall Street traders who borrowed others peoples money to gamble in what they thought would bring a return?

My response was no, because:

the ultimate goal of such borrowing is that the loan repays itself either through direct means eg toll roads or else by indirect means eg the new road increases economic activity and so the tax take rises

Nothing to do with the current policy which seems to be to continue to borrow to fund deficit spending on current spending (which includes welfare and public sector pay). There are hundreds of threads on welfare, public sector pay and the fact that the government is (contrary to some commentator's beliefs) running a deficit stimulus which is disproportionately focussed on maintaining current spending rather than capital spending.

As regards the assertion that governments don't make good investors, this too is not relevant to the OP's question unless of course you are suggesting that government investment in the economy is similar to investing in the stock market, either in methodology or in terms of the desired outcome.

So before a mod complains, perhaps you can explain to me how your comment is in any way relevant to what I said in response to the OP's question?

SupaNova2

johnnyskeleton wrote: »

So before a mod complains, perhaps you can explain to me how your comment is in any way relevant to what I said in response to the OP's question?

It was relevant to the text I quoted, which you thought was relevant to the OP's question.