longweekend58 wrote on Oct 31
st, 2014 at 5:32pm:
you wont get much of a job as a CEo or especially CFO if deficits (ie losses) are nothing to worry about or increases in debt.
Already one of them, but that's beside the point
1. somewhat doubtful considering your laissez-faire attitude to making a loss. Businesses make profits and if not, are in trouble.
Good companies borrow to expand and to cover difficult times.
No ! They borrow in good times and expand. Companies aren't governments.
But companies and governments share a great deal in common, one if which is having to run a budget and service debt.
but in the end, if they aren't in surplus most fo the time they are headed for bankruptcy.
Of course. As governments are the issuers of currency rather than the consumers there is not much use comparing a national economy to a company.
2. Of course there is. You seem to imply that govts can spend, spend, spend and it doesn't really matter. And the vast majority of people seem to recognise that ALL BORROWINGS bei it person business of govt have to be repaid or serviced.
Why is it whenever you mention government the idea of it running to budget just evaporates?
I don't believe I've ever said that. Running to budget does not mean must have continuous surpluses forever. Neutrality or even a small deficit is what should occur over the long term.
3. But we don't have that, do we? we have large deficits and the occasional surplus. and the surpluses howard ran were to put towards a pot of money for hard times - just as savvy businesses do. See the rather strong comparison?
Ultimately, all debt has to be paid for or at least services.
Of course but it doesn't need to paid out the national budget.
4. I am sure I must have misunderstood you. If t a govt debt is to be serviced at all it must of course be serviced by the national budget. Where exactly do YOU service the national debt from?
Ask the Greeks how that works out in the end!
That's plain silly. The Greeks didn't have their debt denominated in their own currency. As a sovereign nation in control of it's own floating fiat currency and with debt denominated it's own currency we don't have a "Greek" problem
5. Well that's just plain silly. The greek currency IS the Euro and debt was denominated thus. Or are you really silly enough to think the Greek problem would have been solved by converting to the drachma? they ha dreached the position of being unable to service their debts ie bankruptcy. Pure and simple.
It's getting a bit hard reading all the coloured writing.
1. Like I said, it's beside the point. Without disclosure of anonymity I can't prove it and you can't disprove it and I don't care.
2. I didn't imply that they can spend and it doesn't matter. However, as long as the accrued deficits and surpluses over the cycle does not grow ahead of trend growth, the deficits are of little importance. Not so for a private company. They do not have the same circumstances as a currency issuing sovereign nation.
3. According to the treasury documents, the net debt as of EOFY 2008 was -44 billion dollars.
http://www.budget.gov.au/2012-13/content/myefo/html/13_appendix_d.htmThe projected net debt is expected to climb to around 500 billion. The idea that the surpluses are used like a piggy bank for a rainy day is just nonsense.
4. You haven't misunderstood. Rather than answer it straight away, I'll ask you a question. If you can work it out you will have the answer. Take a few minutes to observe the two charts below. The first one is a chart of the Australian budget balance since the early '50s. The second is the government debt history since federation. I'll pick on the years after the war up to the early '70s because this period represented the longest run of deficits since the war and by far, the largest debt.
How do you suppose that a debt of 110% of GDP ( massively higher than todays ) was fully repaid by 1973 without a single budget surplus. I'll leave you to ponder on that.
5. The Greeks have zero control over the euro. You seem to be genuinely interested in this stuff. Without being flippant, a good macro textbook would be a good read.