Your Questions About Debt Busting

Maria asks…

Could The US Economic Bust Come To A Boom In The Future?

Could there be an economic boom in the US sometime in the future?

John answers:

No. I think those days are over. We are looking at 20 years of retiring boomers. The government had over 60 years to prepare for these millions of additional retirees but failed to do so. Add to that the hopeless debt we are in. My grand children’s future is being frittered away by this president and a few before him although this one takes the cake. He isn’t even trying to bring prosperity back to the US. Not sure what he’s trying to prove. Nothing I’ve ever seen in all my 65 years and I wish I wasn’t seeing it now.

Jenny asks…

When the United States goes bust on October 17th, what should we do?

All hinges on the Republicans and the Democrats talking civilly to one another by then. If they don’t, the US defaults, and there is no German bail-out as there was with Greece.

With Cameron’s drift to the Tea Party in the UK, what say you about his core belief in aspiring to the American Dream?
The Tea Party is a political stance of the right – aiming for no taxes, Government schemes (such as there are) funded by borrowing and cutting support from the poor, who ought to get off the backsides like hardworking people do and aspire and strive better. The riff-raff being paid less than they earn, because profits is not a dirty word. Anyone working in the public sector should not be paid at all – they should be Big Society volunteers rather than hanging about on the sofa during unpaid leave.
The Voice of Reason – both Cameron and Miliband admit in theory that you cannot generate more wealth by cutting and borrowing, but it is how you invest that decides where you get the best return (and therefore the taxes required to balance the books). Using public money to cut overheads for business and productive enterprise seems a good thing to do, but crucially depends on how effectively this money is spent, and the money has to be there in the first place. Right now there seems to be endless capital swilling around in derivative trading, bailing out bad debts, and extravagant and wasteful lifestyles, and precious little going towards helping us all earn a living.

John answers:

We know that small government low tax and free enterprise works. It’s what made the UK and USA world leaders. Wealth gets distributed unevenly but wealth is created.

Since the war this model has been diluted by socialism. The welfare state has resulted in the private sector shrinking and government and the public sector expanding.

Governments have financed socialism with borrowing and this has replaced taxation. So now the west in general is one big public service without the means to pay for itself.

This is the dilemma. On October the 17th I expect America will kick the can down the road and opt to borrow more money to service the debt.

Obama like all western leaders believe the only answer to being in a hole is more digging.

How this will finally be resolved I don’t know. War or slow decline into socialist poverty seem to be the options. The drastic cuts necessary to correct the western economic model are politically unthinkable.

Richard asks…

Who is Liable and to what extent of a UK LTD companys debt?

I am looking to for a Limited company in the UK owning 1000 of 2001 shares issued with each share given a value of 1 GBP each.

How much of the Company´s debt will I be liable for, and to what extent?

I will own just under 50% of the total company shares issued (one less).

Thanks in advance.

John answers:

The idea of a limited company is that it has limited liability, and shareholders are only liable for the amount they paid for their shares. If the company goes bust, shareholders just lose what they paid for their shares but they can’t be asked to pay any more – their liability is limited to what they put in, hence the name. If it owes more than the value of its assets when it goes bust, who it owes gets paid in proportion and the rest they just have to write off as a bad debt.

But presumably you will also be a director, and directors are responsible for running the company. Run it irresponsibly and there can be legal consequences on you. There is a vast amount of law regulating limited companies because of the possibilities for committing fraud with them. One that is well known is “phoenixism” – start a company. Trade, make profits, run up a corporation tax bill, don’t pay the tax, move the assets out of the company so it has no assets and wind it up. Then start another company and do it again. Because the first company has no assets and perhaps by this time no longer even exists, there is nothing and nobody HMRC can pursue to collect the tax. Not surprisingly the law allows courts to “lift the corporate veil” and go after the directors personally if they do something like this, or even ban them from being a director again.

But if you do all the right things and the company still fails, as we’ve seen so many big ones do in recent years, that’s not your fault and you only lose your share investment.

Sandra asks…

What do you think on Osborne’s latest recession busting idea?

Hard-pressed Britons may be asked to bail out the Government and help finance a spending spree to pull the UK out of the economic doldrums, it was claimed today.

Britain’s ‘cash rich’ savers could soon be encouraged by the Chancellor to transfer billions of their own money into the Coalition’s coffers to help force the UK out of recession.

Using a ploy used during the Second World War, George Osborne wants the Treasury to offer new ‘growth bonds’ that will persuade people to move savings out of their bank and building society accounts.

The billions this would raise would be spent on new toll roads, green energy schemes and building new houses, sources say, and help boost Britain’s

John answers:

Osborne wants to borrow this way so it doesn’t show up as pfi debt on the governments books, yet the government will still be liable for the debts and no doubt those that put their money in will be looking at getting back a far bigger return than the 1% that would be payable by just borrowing from the normal sources, it’s therefore false accounting. If Osborne wants to borrow money then why not just borrow it while the interests rates on such borrowing are at rock bottom. You can guarantee one thing, if the wealthy people in this country are going to put money into Osbornes scheme then you can bet your life that they are pretty confident of getting a big fat reward for doing so.

Laura asks…

Obama keeps saying he inherited a debt from previous administration(s).?

At what point should he consider the trillion dollar stimulus package his administrations debt to the U.S.? Will the U.S. ever be able to pay that off? and just what is a balance budget anyway? lol

John answers:

Yeah, he’s been *saying it* because nobody seems to listen.

Really, have you seen the trolls around here? They’re practically in their own little world, ignoring the news, ignoring reality entirely and just blathering on about random nonsense. The President busted his tail to save banks, the auto industry and more from bankruptcy, got a budget through Congress in *record time* in spite of total resistance from the other side, and *nobody* gives him any credit for his work. In the past two months, mind you.

People rant nonsense about him like he’s been screwing up for eight years, when that was your boy G.W. Bush’s racket.

What else can you do? He’s an elected President for pete’s sake, he can’t just go around openly and publicly calling people imbeciles, even when they act that way, you know? So yeah, he’s going to have to remind folks that he’s actually *working* for them.

And, in reply to the poster above me who mentioned debts unpaid since Clinton….yes, there’s that. There’s also a lot of catching up in terms of neglected infrastructure too. Bridges collapsing, Amtrak in bad shape, *rebuilding New Orleans* so folks can go home…that sort of thing.

So yeah. What are you saying exactly? That he shouldn’t spend any money on real stuff and just fight random wars against irrelevant people? That’ll work, sure…. >_<

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