25 November 2008

Neither a borrower or lender be

One outcome of the apparently endless global financial crisis is it makes everybody very relaxed about unfeasibly large numbers. Last year we gulped at the prospect of a £50 billion guarantee behind Northern Rock, this summer we remained calm despite a £500 billion programme of bank guarantees and underwritten savings. So by the time it came to yesterday's Pre Budget Announcement that government borrowing would rise to £78 billion, we were all fairly blase.

In 2010, this borrowing is set to rise further to £118 billion. Meanwhile, in the USA, it was announced that an additional $800 billion would be injected into the American economy, taking their annualised borrowing to nearly a trillion dollars. As this is all being done in order to save a paralysed global banking system, the question occurs to me: who is Alastair Darling borrowing from?

It's such a simple question, and probably explains why I never studied economics. But if no-one has any money, forcing the government to borrow beyond the realms of the human imagination, then who is doing the lending here? Because if the government has run out of cash, and so have the banks, I wonder who actually has all the money that is keeping everything afloat? Probably a ship of Somali pirates on a floating barge full of cash, somewhere in the Indian Ocean.

1 comment:

PW said...

Yes, this is a very interesting question. I presume the borrowing is arranged via multinational institutions such as the IMF and the World Bank, but their solvency surely only comes from the governments that support them. And if the governments are insolvent... I'll try to find out more about this one.