Tuesday, 21 June 2011

The Euro as a Farmyard Parable

(also called Mutual Fiscal Destruction)

Each country in the EU agrees to donate their cows to a new joint Euro Herd in a specially ring fenced Euro Field.

Countries like Germany nurture their part of the Euro Herd very well and it prospers and yields high levels of good quality milk. One or two countries, like Britain, decide not to join the Euro Herd and keep their own cows in their own field.

Other countries though, such as Portugal, Ireland, Greece and Spain (the PIGS) only occasionally look in on their part of the Euro Herd and generally neglect them. One day a PIG discovers the dead carcasses of their cows as a horrid flattened mess. They ask for emergency cow loans and, reluctantly, the other Euro Herd members agree on condition that the PIGS take better care of their cows.

For some inexplicable reason Britain, which has to borrow money every year to support its own cows, borrows even more money to buy cows to lend to the PIGS.

A few days later one of the PIGS, who had nothing else better to do, happens to look in on his herd and discovers to his astonishment that his part of the Euro Field is a bloody, mangled mess of squashed cows. The PIGS again demand help from the Euro Herd members. Again they receive help on condition that they improve their cow husbandry.

To the astonishment of impartial observers, Britain, which has absolutely no obligation to do so, borrows even more money to increase its already eye-watering, record breaking debt just so it can buy more cows to lend to the PIGS.

What these Euro Herd owners and Britain refuse to acknowledge however is that every evening one of the PIGS leads a huge elephant into the Euro Field. This elephant usually lives in their front room during the day. Over night, as the elephant tramps around the PIGS part of the field, it accidentally flattens all of their cows.

The big elephant in the PIGS’s room has a name and it is tattooed on its side in huge two foot high red letters, it is called Irresponsible National Debt.

This was posted in response to an excellent rewrite of the Two Cows Capitalism joke by SadButMadLad at Anna Raccoon.

Monday, 20 June 2011

British Government Debt - A Simple Guide

It appears that various people like the trade unions, public sector fat cats, the BBC, most of the senior politicians from Labour, the Conservatives and the Lib Dems, oh and normal people under the age of 12, don't understand what a debt is.

Here is a simple guide for these simple folk:

Case 1.Mr. X (A hypothetical person.)

Annual Income 2010:£25,000

Annual Expenditure 2010:£32,000 (129% of income)

Borrowing for 2010:£6,400 (25% of income)

Existing debt:£215,000 (approx 8 times income)

Does the borrowing buy sellable assets?:NO

Other information:This person gives away £360 to a foreign club that he gains no benefit from. This same club also imposes petty rules on him that prevent him from earning a further £4500 per year.
This man also gives away £350 per year to strangers he doesn't know, to people he knows are crooks or to people who are richer than him.

Verdict:This man is a nutter, for god's sake, someone take him to an accountant or get him sectioned in an asylum.

Case 2.British Public Sector

Annual Income 2010:£549 billion (Taxes etc.)

Annual Expenditure 2010:£710 billion (129% of income)

Borrowing for 2010:£141 billion (25% of income)

Existing debt£4,771 billion (approx 8 times income)

Does the borrowing buy sellable assets?NO

Other information:This government gives away £8 billion to the EU foreign club that it gains no benefit from. This same EU club also imposes petty rules on the British economy that prevent it from earning a further £100 billion per year.
The British government also gives away several billion pounds per year to strange countries that it has nothing in common with, to countries with crooked leaders who stash the money in Swiss bank accounts or to countries who are richer than Britain and have their own space programmes and working aircraft carriers.

Verdict (From a sane person):This government is mad and needs to be replaced immediately with sensible financially-literate people.

Verdict (From the three main parties, trade unions, BBC, etc.):"This is good and sustainable, if you do anything else, like, ooh let's say do some budget cutting, then you are mad or an evil baby killer or both."

The above image © copyright The Tax Payers' Alliance


Government Annual Income
H.M.Treasury - Public finances data bank spreadsheet – `ASheet C1, cell B51 - Receipts 2010/11 = £548.5 billion

Government Annual Spending
H.M.Treasury - Puiblic Finances data Bank Spreadsheet – Sheet B1, cell E50 - Total expenditure 2010/11 = £710.4 billion

Government Annual Borrowing
H.M.Treasury - Public Sector Finances Bulletin, March 2011 – Page 1 - Borrowing for 2010/2011 is £141.1 billion

Existing Government Debt - Median estimate
Institute of Economic Affairs (IEA) - UK's true national debt £4.771 trillion, 14-Jun-2010 - Page 13

Existing Government Debt - Upper estimate
Real national debt is £7,900 billion (£7.873 trillion), according to TaxPayers’ Alliance calculations
Click “Click here to read the full report” which leads to:

Other spending

Government pension liabilities for the next 40 years
Click LT3 which leads to:
D.F.I.D. - DFID Business Plan 2011-2015 - Page 21 - DFID planned expenditure for 2010/2011 is £7.81 billion