Reply to: Budget 2015 thread

[Contreras]

Are you sure?

Debt is the value we're interested in
The rate of change of debt (1st derivative) is the deficit, which is positive
The rate of change of deficit (2nd derivative) i.e how fast the deficit grows/shrinks, which is negative, is the debt acceleration

Hence it's perfectly normal for the debt to be increasing but at a slower rate and this is a good sign.

aghh.

Thanks. So they could have saved the spin and simply said that the 2nd derivative had turned negative.

[alphadog]

The tax-free personal allowance to rise from £10,600 in 2014-5

I think you are one year out? My understanding is that it will be £10,600 in 2015-16, etc...

[VectraMan]

Also, it depends on the levels of inflation vs interest. If you owe £10, which could buy you 10 pebbles, then in 5 years you find inflation means that the £10 only buys you 1 pebble then inflation has reduced the debt. If the interest on that loan had accumulated so that you now owe £110, however (11 pebbles worth) then you're still worse off.

And nobody is going to lend money at less than inflation, as that's how the lenders make their money.

[d000hg]

Well "in real terms" is really all that matters. It doesn't matter if you're a millionaire, if a packet of crisps costs 500k.

[Ticktock]

I think also that if you get the debt to a stable value it by definition is shrinking both due to inflation and because (hopefully) the GDP/economy is growing so it is smaller by proportion.

Depends on what you mean - it may be shrinking in real terms, but would not be shrinking in absolute terms - £10 is £10, whether it buys you a new car or a packet of crisps. If you don't have that tenner in your wallet then you still owe the same amount.

Also, it depends on the levels of inflation vs interest. If you owe £10, which could buy you 10 pebbles, then in 5 years you find inflation means that the £10 only buys you 1 pebble then inflation has reduced the debt. If the interest on that loan had accumulated so that you now owe £110, however (11 pebbles worth) then you're still worse off.

[d000hg]

I think the Tory manifesto does predict (guess) a surplus by the end of the next government. I think also that if you get the debt to a stable value it by definition is shrinking both due to inflation and because (hopefully) the GDP/economy is growing so it is smaller by proportion.

But yeah, I agree.

[barrydidit]

Are you sure?

Debt is the value we're interested in
The rate of change of debt (1st derivative) is the deficit, which is positive
The rate of change of deficit (2nd derivative) i.e how fast the deficit grows/shrinks, which is negative, is the debt acceleration

Hence it's perfectly normal for the debt to be increasing but at a slower rate and this is a good sign.

I think we are saying the same thing. Total amount owed is going up, but the rate of increase is slowing. The depressing thing about it all is that getting your first derivative to be neutral appears to the political endgame, never mind actually working out how to make it consistently negative to try and undo the damage.

[d000hg]

Any opportunity to use pure maths in real life is nice

[minestrone]

Are you sure?

Debt is the value we're interested in
The rate of change of debt (1st derivative) is the deficit, which is positive
The rate of change of deficit (2nd derivative) i.e how fast the deficit grows/shrinks, which is negative, is the debt acceleration

Hence it's perfectly normal for the debt to be increasing but at a slower rate and this is a good sign.

Check you out using all these mathematical concepts in a post.

Reminiscent of the "Putting on the Ritz" scene in Young Frankenstein.

[d000hg]

That's more like it.

Are you sure?

Debt is the value we're interested in
The rate of change of debt (1st derivative) is the deficit, which is positive
The rate of change of deficit (2nd derivative) i.e how fast the deficit grows/shrinks, which is negative, is the debt acceleration

Hence it's perfectly normal for the debt to be increasing but at a slower rate and this is a good sign.

[PerfectStorm]

Nixon Williams have put a little book together, worth a read:

http://www.nixonwilliams.com/assets/budget%202015.pdf

[barrydidit]

Debt accumulation is decelerating, is surely the easiest way to put this?

That's more like it.

[tractor]

...

Debt is decelerating, is surely the easiest way to put this?

Far too simple, the first thing you know, journalists will begin to understand it and the next thing you know, the voting population will factor it in when deciding which way to vote.

We can't have that now, can we?

[d000hg]

His point is that he doesn't understand that the deficit can be reduced, but that debt will still rise, that the national debt will continue to grow until a surplus is being run that is in excess of the interest level on those debts.

Debt is decelerating, is surely the easiest way to put this?

[Zero Liability]

A 1929 test case? OK, I'll run with it



Think it very much depends on your definition of honesty there.

Or Hector's. You can guess how much they esteem it from their approach to IR35 and other cases.