"How quickly could the United Kingdom go bankrupt? Given the speed at which countries and companies have been brought to their knees in recent months, it is no longer hard to envision a scenario in which foreign investors become spooked by the UK's soaring debts and flee.
The hot money, which has propped up the UK economy for the past decade, will seek safety in Switzerland, Japan and the Middle East. And within days, Regent Street will look like downtown Reykjavik.
The bankruptcy scenario goes like this. British output is already falling, and tax revenues along with it. But the government is not merely holding spending steady, but actually increasing it to fund tax cuts and bank bail-outs.
This year the government is expected to borrow at least £70bn to add to the £640bn it already owes its creditors. Throw in the hundreds of billions it has made available in credit to banks, and suddenly the prospect of a £1tr national debt does not seem so distant.
Now, if you were a lender looking at the United Kingdom's credit application, how would you feel? Here is a client who spends around 10 per cent more than he earns every year. His income is now set to fall, while his expenses will rise as he has to support ailing family members and pay a mortgage about to reset to a higher interest rate.
He acquired his main asset, his house, with a 95 per cent mortgage and the house has just fallen 15 per cent in value. The client advises that he is going to solve this blip in his personal finances by running up every available line of credit he can and spending. He is already awash in consumer debt and has the lowest savings rate among his neighbours. "
Read the rest and wonder if this really is the end for the UK economy.
Sterling down tomorrow, obviously, but by how much? $0.10 against the Dollar, €0.05 against the Euro?
This is so depressing, just time for another stiff drink before retiring to bed, perchance to dream of happier days...
Brilliant find, excellent article.
ReplyDeleteI have been talking to friends about the parallels to the 1970's but it's becoming apparent that this is a lot worse.
My concern is that while Dave will be a breath of fresh air there doesn't seem to be the radical policies that will undoubtedly be needed to put things right.
Mrs T had the hard job of putting the chronic mess of the 1970's to right and she has been damned for it ever since.
Whatever solution is found it will be extremely painful for the British population, particularly the taxpayers.
Thanks for making this available.