What could governments do to encourage a real transition?

[Keela]

Inflationary +1 or not... I'd like to add another +1 to SS's clear thinking! So simple and so fair.

Presumably those who'd paid more than this wouldn't get a refund, but could stop paying?

[RenewableCandy]

Yup and the lass who blew 5 grand at Harrods and got to keep the loot because it was an unsolicited credit-card without a set of instructions !!

Hopefully that's the end of unsolicited credit cards.

[the_lyniezian]

The_Lyn., it appears that a lot of the debt is simply unpayable, and will eventually get written-off somehow anyway. In that case, perhaps we may as well just be honest about it all and wipe it away.

This will be catastrophic for some (most?) banks, and extremely bad for pension-funds and the like. Which is probably why no-one wants to be honest about it all.

A quick furtle round t'internet shows credit cards at 15% and up interest, short term loans up to 4000+%, bank loans 6% and up. All this against a 0.5% base rate.

Thus most of the 1 trillion UK personnal debt is loan interest. Looked at like that it's easy. Recalculate the loans to original value plus say 1.0% interest annually and a flat fee on top for administration say £250 maximum. Take off money already repaid and the result could be very small indeed. Government issues bonds and clears it all.

To prevent an immediate reflation of debt introduce old fashioned debt management and cap the maximum interest rate. Most importantly make everybody aware that growth is over and so don't borrow what you can't afford to repay based on NOW.

A generation ago people tended to have one loan to buy their house, often a second to buy a car and that was it. If you couldn't afford a TV you went to Radio Rentals and borrowed one.

Too right about personal debt being a major issue, and I think the very first step is kill off any notion of the culture of borrowing. (It could be the credit crunch and continuing economic uncertainty has already killed some of the easy credit culture, but even so...) Even more so, get us less dependant upon banks, so it will hit less hard if they go down. (At least on a personal level, it might seem hard to do much without banks though what is their function in a zero- or low-growth economy anyway?)

Never got the whole issuing bonds thing- and isn't clearing it that way basically just the same thing as quantitative easing?

The thing I'm bothered about though is soverign debt. sure, out of the total debt this country owes it's not the biggest problem, but there's all these cuts to (supposedly) reduce the deficit- despite which overall government spending is increasing- and the private sector to grow to replace jobs lost; the need for government borrowing to maintain anything like the services we are used to, and so on. how will we fix that, unless we really go down the small government route?

[Snail]

banks though what is their function in a zero- or low-growth economy anyway

I suppose as a way of storing money and quickly transferring money between accounts. You could have a mixture of full-reserve and investment accounts. Even in a zero-growth economy, growth will occur even if it means shrinkage elsewhere.

The thing I'm bothered about though is soverign debt

A lot of debt is now owned by and is being transferred to the BOE - that's what QE is about. This debt can be quietly canceled out in the future. We do have a lot of foreign debt, but also own a lot too (£200bn or so of US debt for example). Pensions are a problem but this can be solved by simply screwing pensioners : ) (i don't have any sort of pension provision and never expect to).

the need for government borrowing to maintain anything like the services we are used to

Maintaining the services we're used too can only happen if we stop importing so much and start making stuff people in other countries actually want. This will mean import barriers.

how will we fix that, unless we really go down the small government route

I used to think that the small government route would be better. But now believe that the UK Government changing things on a macro-level is the way to go. UK debt doesn't concern me the way it did when I first joined Powerswitch. Countries don't have to manage their finances the same way normal people do. The Debt is being used as an excuse to privatise and reduce Government responsibility.

[SleeperService]

Inflationary +1 or not... I'd like to add another +1 to SS's clear thinking! So simple and so fair.

Presumably those who'd paid more than this wouldn't get a refund, but could stop paying?

Yes, I'd think the refund would just cause too much hassle.

On the bigger government debt problem I'd think that simplifying government and spending less than we pay in taxes would be a good start. That way a transparent and fairly simple taxaton system could emerge and act as a catalyst though big government leaving us with the bits we want locally and a share of the national stuff we use. After all does London have the same needs as Cumbria?

For tax how about the same rate on ALL income of say 25% above a personal tax free limit. Limits avoidance issues as it'll still be 25% including transfers offshore regardless. If some tax has been paid offshore on money coming in the balance will be taxed upto the 25% again.

The aim would be to ramp up the tax free limit to the average wage. Purchase taxes such as VAT etc would remain but be ruthlessly assessed with an aim of abolishment. This may have to wait while we rebuild manufacturing in this country and start making stuff people want to buy.