Sharpe's Opinion
Tuesday, 6th Jan, 2009
Charlotte Gore explains the banking sector problem with characteristic brilliance:
The lesson is this: Don’t Nationalise The Banks. It will not help. We’ve already got partial nationalisation, which is in itself part of the problem – the banks are having to pay back the bailout money quickly, and the cost of borrowing from the emergency fund is more than they can sell it on for. The banks are having to recapitalise and pay back the Taxpayer and are supposed to be able to increasing lending, too – all while having suffered the end of the wholesale credit markets. It’s a complete farce and an impossible situation.
As I have said before: debt is always an expense, it is never an income.
Comments
“it can be an investment which later translates to an income.”
An investment is still an expense. It’s just an expense which you hope will help pay for itself in the long run. You could describe any expense, debt fuelled or not, as an investment. Thus you can describe any investment as an expense.
That doesn’t make investment (or expense) wrong. It doesn’t make it wrong to have debt – there are times when it is useful, such as when an outside investor expresses confidence in a new business by putting their own money on the line to help it start up. But anyone who describes debt as an income is either lying to themselves or fundamentally misunderstanding the nature of debt.
In my opinion. Seeing as the blog is called ‘Sharpe’s Opinion’, my opinion is about all you can expect.
In business terms, maintenance and renewals are expenses whilst new build is an investment (to be written down later in terms of CGT). Debt is something else entirely and is ususally a write-off against taxes, enabling the extra money to be used for investment.
Yes, an investment is a gamble unless you know your business. For example, decking can add value for some homes, or detract from others – you need to know your market.
That’s why DC’s idea to free taxation for savers, at the basic level, is a good one.
My savings are all in tax-free products, which happen to be government ones, such as ISA’s and premium bonds, because there is hardly anything the banks can offer which don’t tie up my money for years on end. Any gains from banks etc are still taxable, assuming you earn more than your personal allowance.
Which brings me to another point: how many people below the tax threshold know they can fill in a form and get gross earnings from a ‘taxable’ saving scheme? The gvt don’t advertise this widely enough.
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On your last line ‘debt is always an expense…’, though I can’t absolutely disagree, it can be an investment which later translates to an income.
ladytizzy
January 7, 2009 at 3:50 pm