Friday, 21 December 2007

Debt matters

I see that the true level of problem DEBT is coming to the fore. The Telegraph reports that "The pound has slumped to its lowest level in 20 months, after a "shocking" raft of figures revealed how deeply reliant the UK has become on debt."

Not a shock to anyone who has been reading this blog or similar.

"Britain's current account has recorded its worst deficit since the late 1980s, making Britain's national balance sheet worse than the United States' for the first time since Nigel Lawson was Chancellor of the Exchequer."

And going to get much worse.

"Figures published by the Office for National Statistics caused a major sell-off of the pound, as experts warned that the UK currency would have to fall in value to bring the current account back into line. Sterling dropped to 98.9 on the Bank of England's comprehensive trade-weighted index, which measures it against a basket of other currencies. This is the lowest level since April 2006."

What do you think the bottoming out value of the £ will be? $1.75, $1.50, $1.25, $1.00? Against the Euro? €1.50, €1.25, €1.00, €0.75?

"The pound's weakness followed ONS figures showing:

• The current account deficit almost doubled in the third quarter to £20bn. As well as being the biggest deficit ever in cash terms, at 5.7pc of gross domestic product it is now comparatively even bigger than the deficit in the US, and equals the worst-ever shortfalls in the past half-century, recorded in the 1980s."

Why aren't the BBC publicising this?

"• The domestic saving ratio, which measures how much of their incomes people are setting aside for the future, excluding pension contributions, remained deep in negative territory. At minus 1pc, it means families are borrowing in order to fund their everyday lifestyles - a highly unusual situation replicated in the late 1980s, before the last property crash."

I wonder why? Maybe the example of the current government's manic borrowing, much of it hidden via PFI schemes.

"• The amount families and businesses are having to set aside for mortgage and debt payments hit the highest level since the early 1990s, in the latest sign that the record mountain of UK lending is causing serious pain. The household debt service burden rose to 13.6pc of income - the highest level since 1991, while the equivalent measure for non-financial businesses hit 28.8pc of their profits - the highest since 1992."

A "mountain of debt", absolutely the case and a bloody big mountain.

"• The Government's finances dipped even deeper into the red, as the Chancellor suffered a record shortfall on his budget in November. The ONS said public-sector net borrowing was £11.2bn - the biggest since comparable records began in 1993. It brings the total lending so far this financial year to £36.2bn, and raising the likelihood that Chancellor Alistair Darling will overshoot his £38bn forecast this year."

This is all without the PFI debt, with that the situation would look a whole lot scarier. This Labour government have mortgaged the whole country and rescuing the situation may not even be possible - we may be totally screwed.

"Diana Choyleva, director at Lombard Street Research, said the drop in the currency's value indicated investor's collapse in confidence in sterling.

"I have been in this business for ten years and this is the most uncertain I've felt about the prospects for the UK economy. Things could get much worse.""

Much worse Diana, very much worse.

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