We are well and truly screwed

Alex Masterley reports that:

"The ONS has announced that both RBS and Lloyds Banking Group will be reclassified as public sector from October 13 2008, when Government recapitalisation was agreed. Public sector finance statistics for January 2009 show that public debt currently stands at £703billion, which includes £50 billion from the bailout of Bradford and Bingley last year. According to some press reports, when the impact of Lloyds Banking Group and RBS are taken into account, the ONS predicts that the impact to public sector net debt could be between £1 trillion and £1.5trillion, which could bring the UK's total debt to more than £2 trillion.

This isn’t half of the story. The £700 billion of national debt excludes PFI, say £100 billion and about the same again in various other off-balance sheet wheezes such as Network Rail's debt and private sector pension protection. There are also about £1 trillion of public sector pension liabilities which are shown as liabilities elsewhere. For example in America, the government issues notional securities to a Federal pension fund, so that pensions are fully funded (albeit by a claim on the government), but the net effect is that the liability ends up being properly recorded as part of the National Debt. In the UK, the government hides its head in the sand.

Add to that that IAS accounting changes to RBS which means that their liabilities are no longer the trillion or so in RBS's 2007 accounts that the ONS probably considered but probably closer to £1.9 trillion.

So instead of the £2.2 trillion or so that the ONS is talking about, the real scale of true liabilities is actually around £4.3 trillion, or 300% of GDP."

This really is it, isn't it? The UK economy is about to collapse and it is not going to be pretty. Have you bought your generators? Are you stockpiling your fuel, your food, your bottled water? Have you taken your money out of the bank?