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The Paradox of Deficits

Discussion in 'The Economy' started by Tropo, 25th May, 2009.

  1. Tropo

    Tropo Well-Known Member

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    The Paradox of Deficits
     

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  2. Superman

    Superman Well-Known Member

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    All those billion$ need to be repaid sometime!

    I found this quite interesting, I am not a fan of Ross Greenwood, however I enjoyed this commentary from him:


    Right now the Federal Government is at pains to tell everyone - including us the mug-punters to the International Monetary Fund that it will not exceed its own, self-imposed, borrowing limits. How much? $200 billion. And here's a worry. If you work in a bank's money market operation; or if you are a politician; the millions turn into billions and it rolls off the tip of the tongue a bit too easily.

    But every dollar that is borrowed, some time, has to be repaid. By you, by me and by the rest of the country.

    Just after 5 o'clock tonight I did a bit of maths for Jason Morrison. But it's so staggering its worth repeating now. First though ... here's what Chairman Rudd has been saying about - what he calls - these temporary borrowings. Remember those words ... temporary deficit . but the total Government debt could end up around $200 billion.

    So here's a very basic calculation ... I used a home loan calculator to work it out ... it's that simple.

    $200 billion is $200,000 million. The current 10 year Government bond rate is 4.67 per cent. I worked the loan out over a period of 20 years.

    Now here's where it gets scary ... really scary.

    The repayments on $200 billion come to more than one and a quarter billion dollars - every month - for 20 years. It works out we - as taxpayers - will be repaying $15.4 billion in interest and principal every year ... $733 for every man woman and child - every year.

    The total interest bill over the 20 years is - get this - $108 billion.

    And remember, this is a Government that just 18 months ago had NO debt . NO debt. In fact it had enough money to create the Future Fund to pay the future liabilities of public servants' superannuation ... and it had enough to stick $20 billion into the Building Australia Fund last year ...

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