Bubblesofearth wrote:. If wealth becomes concentrated within a small fraction of the population and growth no longer supports the associated debt then there will either be mass default or inflationary dilution of the debt. Governments generally seem more worried about default.
There won't. Because for every debt there is an asset. The debt is in Gilts which are largely held by pension funds, which funds pensioners who tend to spend their income, which supports the investment to provide the output to those pensioners, which provides jobs for those of us producing output to be consumed by pensioners - and ourselves. It's just a roundabout way of providing an enhanced state pension.
The interest paid is spent, and the amount of interest that is paid is a policy variable. The interest is in Sterling which means it has to be spent here in the UK.
And despite that, there is no need to issue Gilts at all which would cause the savings to build up in a different instrument (bank deposits) at a lower interest rate.
It doesn't matter how many billions end up in the hands of "the few". There is no less capacity for investment because money is an elastic concept. It just expands dynamically to deal with whatever is required at the current time. And therefore there is no less capacity for everybody to save whatever amount they want to save to feel comfortable against the winds of the future.
The real question is why you are against saving? (which is what 'debt' is when looked at from the other side of the balance sheet). Obviously we can ban it if we want, but why do you want to restrict financial saving when there is no need?
NeilW