Paying Off Old Debt

For John, BLUF:  Clearing the books of debt makes money available in the future.  Nothing to see here; just move along.

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From The International New York Times we have an article on Government finance, "That Debt From 1720?  Britain’s Payment Is Coming".  The Reporter is Mr Stephen Castle.

Share prices went through the roof, speculation ran wild and money poured into ill-fated ventures before the boom turned, inevitably and catastrophically, to bust.

After that financial crash in 1720, called the South Sea Bubble, the British government was forced to undertake a bailout that eventually left several million pounds of debt on its books. Almost three centuries later, Britons are still paying interest on a small part of that obligation.

Now, prompted by record low interest rates, the British government is planning to pay off some of the debts it racked up over hundreds of years, dating as far back as the South Sea Bubble.

Once debt is incurred it lasts a long time, like those extra pounds picked up feasting at Christmas.

It is not that the instruments of debt are so old, but that they drain away money in interest.  A bond sold in the early 1700s will have procured interest from the taxpayers for nearly 300 years.  If the interest on a 30 year mortgage is like the same as the original value of the mortgage, give or take, three hundred year old interest has been the original debt paid ten times by the taxpayers, with the debt not yet paid off.  Think how many schools and highways that would have built.

Regards  —  Cliff