Surely the right level of economic activity is one that the economy can sustain at a point in time, having to borrow £500 Billion clearly shows that whatever level the Labour government is hoping for isn't sustainable.

Gavin, London, GB

VAT is one of those taxes not used enough. Rather than make high tax payers pay 45% why not jack the VAT up to 50% on Porsches, Cartier watches and other overpriced luxury imports? That would help the government, the trade balance and the environment.
Nobody minds rich people in UK-built Astras.

Dave, Slough,

The book-keeping is one thing. No-one looks at the figures until confidence falls away. The important thing is to keep things moving and people working. Time to tighten up the benefit system that gives the work-shy money for doing nothing. Most people can contribute if they have to.

David, Bromley,

So presumably the Icelanders should have borrowed more then Mr Kaletsky?

But WHO from is the question? It is the withdrawal of credit (in large part from abroad) that is the problem.

N Reed, London, UK

The government's policy is akin to treating the symptoms rather than the underlying problem which is that the UK economy is too reliant on consumer confidence and consumer debt as the drivers of economic growth. To get a more resilient economy, we need more emphasis on manufacturing and exports.

Christian Rayner, Lancaster,

But what about leverage ... every pound we save is just taking up the big hole left by reduced leverage in bank's balance sheets.

Face it .. there's been a massive misallocation of resource and the whole heep needs to collapse and rebuild. It doesn not need to be reinflated arbitrarily.

Bob Dawes, London,

Another form of savings is taking your money out of the bank and stuffing it under your mattress. If you think that the banks are going to go under, and don't trust the share/property markets because you think they're going to keep going down for a while, it's rather a rational thing to do.

david bell, london,

Something isn't adding up here. Some of the big banks have been releasing figures showing increased lending to businesses. The timesonline ran an article on this on 21 nov. The whole issue is now being clouded by posturing politicians looking for a daily soundbite. Guess who ran the Dome project???

Ian Davidson, Fraserburgh, Scotland

'But that would take political courage, as well as economic understanding'

Buggins is lacking in both and Balls is a Cabinet member, not a Brown trait.
Yes to buying assets, instead of holding 'paper', and just as soon as I can find a suitably priced property.

m collins, Leeds,

David, London - that's because only a couple of months ago Lehman Brother's hadn't yet been allowed to go to the wall by an incompetant US administration.

Paul, London, UK

One key thing not mentioned here is what the borrowed money is spent on. If it's spent on productive capital and infrastructure improvments then the future will be bright, if it's spent on unproductive and overvalued assets (e.g. housing via govt sponsored mortgage borrowing) then we're doomed.

Ted, London, UK

This stuff about the 40% debt ratio is spurious, because it ignores PFI unitary charges, loved by government because it allows people to fund capital projects by a repayment that is 'off balance sheet'. So does anybody even know whether this would add 1-2% or 25-30% to the debt ratio?

Dru Brooke-Taylor, Bristol,

Anatole says that we do not have the “faintest idea” how big the public debt will be at the end of the recession. Part of the problem is that we do not have the “faintest idea” of our present TRUE debt level. This is probably true worldwide as other governments also fabricating figures.

Jim Cavanagh, Chorley, Lancashire

Markets recover only when they look cheap and represent good value. A way to go yet I would suggest

Anatole, I admire your undying faith in our 'dear leader' but nothing alters the fact that Brown drove growth with unsupported debt and the UK is about to go under thanks to Labour yet again.

D Case, Newquay,

The conclusion is, why buy Government Bonds ?

If recession hits other countries, they might just
ask the same question.

Sorry, I can't see any strength in being in debt.

M. Walker., Nr. Bromsgrove., Worcs.

Illogical and wrong. Kaletsky makes it sound like its UK savers lending to uk borowers. It's not. It's UK borrowers (sometimes these are our banks) borrowing from non uk lenders. Thats why we are a debtor nation. derrrrrrr.

julian dodds, london, uk

The only way out of this mess is to print money - which is what the Americans have now done to the tune of $1tr and have just announced a further $800bn. Of course, in time that mess will have to be cleared up but when the kitchen is on fire you use the fire extinguisher and then clean up the foam!

Nigel, Tonbridge,

You say: "for every saver there has to be a borrower." But doesn't this also mean "for every borrower there has to be a saver?" Just who is the "saver?" "Saving" does not mean simply spending less by borrowing less.

David, Philadelphia, USA

This article misses 1 important point. We no longer manufacture much. Therefore every £ borrowed by HMG goes to stimulate a Foriegn economy in the form of imports.Eg cars,steel,tv's,computers,shoes etc thus we go broke. Solution? Keynes only works in a closed economy.

John Taylor, Stortford, UK

As you seem to believe it impossible to predict with any sort of accuracy the future balance sheet of a country,why do you try.Being part of the generation that seems to think the only way to sustain growth is to inflate asset prices,notably housing,why don't you just stick to you zero rate demands

Tony Cox, Chelt,

"If you don't trust my Government with the public finances, why put your precious savings in pieces of paper signed by the Government and the Bank of England?"

I don't, I haven't, I brought Gold instead...

Chris, Wilts,

All our so called wealth and prosperity has been based on consumer spending, which in turn was financed by debt.

The paradox of thrift!

When consumers stop spending and pay down debt, the economy goes down the drain.

Stephen, Sydney, Australia

The Bank's outstanding balance sheets are only about 3 times the size of the GDP, and we are kindly taking them onto the nation's books whilst the bankers who created this keep their bonuses.
Asset prices aren't going to fall further, so what can go wrong?
Just like house prices were sustainable.

David Martin, Bristol, UK

An interesting point raised on the Daily Politics was that the UK government is now having to pay four times as much as Germany for the insurance required to cover any borrowing. In other words the UK is seen as four times riskier to lend to than Germany.
Any comments Mr.Kaletsky?

James, Swindon, uk

Mr Kaletsky, you have been consistently wrong throughout this credit crisis and this article is another example of your lack of understanding - only a couple of months ago you were saying there would be no recession and that inflation was our biggest worry

David, London,

Mr Kaletsky - you have missed one important form of saving in which many people are currently engaged - debt repayment. That is what I am doing - any extra pounds I earn are going straight off my credit card debts. That is the only prudent option given the current lack of job security.

Richard, Worcester, England