Greek Britain?

It really is completely different. Greece does not have its own currency so has to borrow or earn everything it spends. It is more like a county council than a sovereign country in this respect. Greece can default but can't devalue.

On the other hand, the UK can't default on its sterling obligations - the BoE can always print more money. But the currency can devalue.

A better comparison would be the UK vs the whole eurozone.

For over 12 months many bloggers have said that a 20% reduction in public spending is required not only to stop the national debt rising but actually start paying the debt down.

Don't expect the Euro countries to bail us out , it just won't happen. Its time all the political parties woke up and started telling the public the truth.

Like an individual with a bad credit history seeking more credit . One day soon the UK government will wake up and find they can't borrow any more. At this point it will be weeks before pensions , tax credits ,salaries will simply not paid.

Its not news it's simply cause and effect.....

very good article here takes a look at how much each country needs to cut back by to pay down the debt

https://www.zerohedge.com/article/just-how-ugly-sovereign-default-truth-how-self-delusions-prevent-recognition-reality

We appear to have a totally daft economic system that is really geared to the middle ages when economics was pretty much only about trading the things, and to a certain extent services, that your fellow humans needed, wanted or desired. Nowadays we need all kinds of sophisticated infrastructure (think energy grids, rail, roads, education) whose return on investment is extremely difficult to quantify in hard financial terms, especially. We also fail to ascribe economic value to many services that humans provide to each other. The debt-driven, fiat currency system also means that moderate inflation is actually necessary as an engine of wealth creation. Gold (or other items dug out of the ground, or grown from the ground) no longer underpins our monetary system. And why should it? Here's the problematic question for the world today: What is it that actually underpins our monetary wealth, and how is it created without being equally easily destroyed? As was alluded to by some posts to yesterday's blog, the value of all assets created are balanced by the debt that was used to finance them. So recall the debt, ergo the assets have to reduce in value. We need to remember that economics is a human-invented system.... why can't those clever people to whom we pay buckets of money in taxes come up wih a better economics that is geared to the demands of the modern world?

Stephanie~

How far is Britain from Greece?

I am honestly thinking that Great Britain is pretty much on the same course, and, not on the same quick time frame, like the Greece situation is in currently.

(Dennis Junior)

As the governments only have one solution: print more money, it seems something else will need to happen and no one seems to know what that is.
Governments have never done a very good job governing their own countries so these global processes of the banks are like them taking candy from a child. The contiuation of the problems will only worsen everything and it is beiginng to look like a slow death. For the poor in this world they will simply reply: What crisis?
Note: money really has no value. If everyone agreed that a Eruo was worth a certain amount and accepted that, that is what the currency would be worth. Everyone complains that the Chinese Yuan is not properly valued but the Chinese do not change the value and everyone accepts that. If you let the banks and money-changers decide the value,this is where that has gotten you.
When printed money was introduced in China by the first Emperor, the people called it "Flying Money."

2 martin. A 20% reduction in public services, like Georgie and Dave
wanted until last week? Nice, in theory, as long as you're
with Bupa and your kids go to private schools. Then you can
sit back and watch those proles squeal. Edifying stuff.

So it seems we may have 14 years to sort ourselves out? Sounds doable.

What I don't understand is though is how come Greece can potentially infect the Euro on a massive scale and yet, California can go essentially bankrupt but with no mention of the similar consequences on the dollar?

Remember the 'J' curve? That described what happens to exports when there's a devaluation: initial values of exports register a fall because we're getting less in cash for what we'd already to contracted to sell and we're having to pay more for long-standing orders. Then the new order volumes start to get fulfilled and register export growths.
In a normal vibrant world economy export orders would respond much faster than they're doing now. Only just now are new customers wanting more of our stuff, making the initial down slope of our trade 'j' curve more prolonged than usual.
An indicator of a government deficit is a persistent balance of payments problem as that borrowing draws in foreign loans that hold up currency values and the discouraging price of exports. We're NOT in that trap. Greece would like a way out, but it's not available to them because they're in the Euro!
So far, UK Bond yields are 0.8% above Germany's and compares with +0.7% about a year ago. That 0.8% extra interest co-incides with the expected higher UK inflation (compared with Germany's expected inflation) on 20-year inflation linked Bonds. So we could conclude that there's no evidence of any anticipated down-grade on our Bonds. At least not yet.
We escaped a massive debt burden in 1997-98 when the UK was paying over 5% of national income on our government debts. That's down to 2.45% of predicted national income for 2010 because both inflation and interest rates are much lower now than in the ninties.
Greece pleaded to be allowed to join the Euro and should have been refused for their own good. Still, the others didn't do their due diligence and let Greece join for sentimental reasons. Bad mistake that they're all paying for. Just like the silly lending by some Banks.

Thanks Stephanie. I wonder how we compare when special banking support measures and exposures come into the equation. UK now stand behind : £200 billions liquidity support from BoE to banks ; guarantee £250 billions wholesale UK bank borrowings ; £280 billions insuring bank loans ; £117 billions cash outlay at risk in bank shares/loans - NAO. UK rescued HBOS and RBS with combined balance sheets worth over twice UK's annual GDP. What's the Greek story with their banks?

But, you will be relieved to hear, the government - any government - will really have to work hard to turn us into Greece.

and the QED wouldn't be 'Vote Labour' by any chance?

Blair's Broadcasting Corporation seems to have transformed into Brown's Broadcasting Corporation.

Yes - it's a good question Stephanie and since we've been quoting relativeness I see over the past 48 hours I think its appropriate here.

So I thought I'd just expand a bit on the figures you provided with main source being the Economist (EIU).

Population
Greece: 11.0m
UK: 62.2m

GDP (PPP)
Greece: $372bn (334bn)
UK: $2255bn (2160bn)

GDP (PPP) per head
Greece: $33,860 (30,390)
UK: $36,250 (34,730)

So at GDP per head pretty similar.

Latest trade balance (last 12 months in dollars) (spot the highest)
Britain: -126.0bn
France: -59.1bn
Germany: +191.2bn
Italy: -5.8bn
Greece: -43.2bn
Spain: -73.3bn

Budget balance %GDP 2009 (F) - Spot the highest (i.e. worst)
Britain: -14.2
France: -7.9
Germany: -3.2
Italy: -5.0
Greece: -13.0
Spain: -11.4

Inflation latest over year % spot the highest (i.e. worst)
Britain: +3.1
France: +1.0
Germany: +0.9
Italy: +1.6
Greece: +1.8
Spain: +0.8

Everybody's unemployment rate is poor as is the lastest GDP growth.

Yes as you mention the UK has got some things going for it but also remember UK and Spain real estate have suffered the highest inflation over the past decade.

Finally, current bond interest rates
Britain: 4.02
France: 3.43
Germany: 3.20
Italy: 4.01
Greece: 6.02
Spain: 3.91

So UK bond yields put us with Spain, Italy and of course Greece rather than with France and Germany who are our nearest comparables.

Don't forget we've also 'done' £200 billion of QE as well (and no doubt more coming). Greece has a plan (if they stick to it) of getting budget down to 3% GDP - we haven't. It's also worth mentioning that UK holds c. 23% of Greek government bonds (cost to us of default?).

Looking at those cold stark figures, I don't think there is any rooom for complacency and particularly if you read the article above provided by romeplebian #3 which adds another perspective.

How close again?

Re 20% reduction in public services.

It is very very simple.

The significant cost in the public sector is the staffing cost.

There is no need to make swingeing job cuts, however there is a need to significantly reduce the unfunded public sector pensions. Their cost runs to trillions over the next 20 years.

The shocking stat this week was that those on private sector defined contribution pensions are worse off by 72% !!! than those drawing the equivalent private pensions ten years ago.

That is an incredible mind blowing stat and anecdotally I know of many who would vouch for the impact of the last ten years on private sector pensions.

A private sector person would have to now contribute 3.5 times more than the same person ten years ago to get to the same level of private sector pension. And even then, it will still be significantly below the average public sector pension.

These are enormous differences.

So the largest element of our current and future debt is public sector pension liabilities.

Follow Ireland's example, cut salaries modestly, maybe not at all for those below a certain salary.

But do something about the pensions, there are more private sector voters and workers than public sector.

The gap between the two sectors pension provison is staggering and the public sector can either contribute significantly more via their own salaries, or the better way is to just reduce the amount of guaranteed pensions that are paid out. Even reducing it by 10-20% would produce billions of savings, far more than any other political tinkerings.

Of course, the politicians and the civil servants who advise them on this subject must take the lead and others in the larger private sector must make more and more noise about this.

Stephanie

Interesting read as always and some very good points. However, one thing I would point out is that when making comparisons with other countries, you always quote the net debt to GDP ratio for the UK but the gross debt to GDP ratio (i.e. the Maastricht basis) for other countries. This paints an undeservedly flattering picture for the UK. Comparing like for like (i.e. gross to gross), our debt is not really lower than that of Germany or France, and it is certainly increasing at a much faster pace. The labour government has often made this mistake when trying to claim that the UK's debt is lower, but it is somewhat dishonest (or negligent) of them to do so.

Also, while I agree that the fall in the pound makes a UK default here very unlikely, let's please be honest with ourselves .... currency debasement is really just stealth default via the back door and doesn't come without a cost. Our purchasing power and standard of living will be lower as a result.

But if all EU countries are net debtors then that means they are all beholden to the sovereign debt markets. If a panic were to spread because of a failure to prevent Greece defaulting, either by the EU or IMF, the contagion could spread quickly. How many times have I heard before a crisis that we are safe for this reason or that, but when the storm hits we are all in the same leaky boat. This is starting to feel a bit like 1997 when Russia defaulted and the bond markets plummeted causing the imploding of LTCM and the $4 billion hole in the financial markets. With most EU countries having nationalised their banks bad debts I fear that a crisis in the sovereign debt markets is very close at hand.

Hi Stephanie

Thanks for your analysis.However as a reader of notayesmanseconomics I can add one thing. His update of today feels that it will take quite some time for the end of Quantitative Easing to be fully felt on our government bond yields because last year we bought all our issued debt off ourselves.Even at the rate we have to issue it may take some time. So to quote a number of 3% of GDP as the cost of debt interest is potentially misleading as it is backwards and not forwards looking. Once a bit of indigestion sets in we will get a better answer I think.
I know that you have written before on here that you feel we will sell our government bonds easily this year but I prefer to listen to someone with experience in that market.

"How far is Britain from Greece?"

Greece's enormous advantage over Great Britain is that it is not the home of major international banks - half of which are now owned or controlled by the state.

If we were being honest our National Debt should include our 'investments'(!) in RBS and Lloyds and we should be considering the need to be servicing this debt too. To say noting of the far smaller 200 bn of QE! Great Britain's taxpayers are bailing out a quarter of the World - and of course we cannot afford to do so. These 'investments' are almost totally illiquid - that is we cannot palm them off for any value at all onto some other mug. It is only the Treasury's slight of hand that keeps the figures off of the Nation's books - this cannot last for ever, or indeed very long.

We all know this as does the Bank of England and the Treasury but for as long as they can maintain the fictions that the National Debt should not include these figures they we are OK - this is the "road-runner syndrome". Progressively over time when the debts of RBS and Lloyds turn sour and vest in the Nation we will become increasing vulnerable. We are also seeking to pursue monetary policies that are designed to maximise our risk through fiddling the interest rates and maintaining them at zero to a real negative - this has to stop at some time.

I can only think that the Greeks must be so pleased that they are not us!

#7. U14313657 wrote:

"#2 martin. A 20% reduction in public services,..."

Don't we actually mean a 20% pay cut for all public sector employees (and that can't of course be implemented unless the same applies to private sector employees - and of course that is a zero sum game) - we are still in deep do-do up to our necks! ('Happy Days' (I think) by Samuel Beckett comes to mind!)

Although, Ms Flanders, you deliver an easy to understand analysis of debt and deficits, you do so without any reference to assets which have been built up as a result (investment). Do you think every pound the Govt spends is spent on bingo and fags ? You could, if willing, join the majority of the mass media in this regard.

Nor does today's blog make any reference to National Stock of Capital and Human Capital contrasted with State Debts (National Debt). Different countries, different profiles. Surely that makes a difference ? In both the short term and the long term.

Why such an apparently partial analysis ?

What is true of an individual household - viewing debt in context of net equity levels AND income streams - is also a reasonable approach at Company and National levels too.


And further, UK QE means that some debt doesn't have to be sold to 'outsiders', either in the UK or Abroad -

- making the DMO's job 'easier'. Another blogger, goodthinkingeorge has pointed this out already....I think.

Happy Valentine's to you and all the 'posters'.

It is interesting to live through multiple countries attempting to devalue their currencies simultaneously.

Is it not true that Germany welcomes a devaluation of the Euro ? And we're playing a similar game.

I don't grasp quite how the Chinese (nor Indian) currencies roll their dice, but the Chinese are pegged to a devaluing dollar ?

Is this the race to the bottom ? The lowest standards of living are the ones that survive all this ?

'You'll be relieved to hear the answer: however bad things might be here, we really are a long way from being Greece.'

Really! (?)

According to the article this week in the Independent the UK's exposure to the 'Club med' is:

'UK banks have a near-£100 billion exposure to the struggling European economies currently sending shockwaves through global markets.'

https://www.independent.co.uk/news/business/news/uk-banks-exposed-to-struggling-european-economies-1890514.html

There really is little distinction between bank debt and sovereign debt in terms of cause and effect if there is a debt 'contagion ripple or domino effect' over the next year or so - remember this is not an issue that is likely to pass over in a few days or weeks - the sums of money involved are vast and the effects could take years and years to work out of the Eurozone financial system.

The other issue is that if Greece 'defaults', then the euro will fall and the effect of Euro currency depreciation on UK sterling debt can be exacerbated and with a Labour government willing and able to buckle to any demand to assist paying off Greek debts - the ongoing risk to the finances of the UK is massive.

The other issue is that if the GB £ sterling depreciates further - all this talk of the UK being better outside of the Euro (and the fact the UK is outside of the Euro is an accident of City of London taxation and not by good past economic management) will have to be balanced by the UK government borrowing more to pay higher debts and paying off interest at a higher price with a weaker GB £ sterling.

There is a lot happening here - we don't need to have nightmares in then UK over Greece as the Euroland will try and prop them but the likelihood is that the Club med debt whcih has arisen because of weak ECB regulation, will affect the UK and somewhere along the line the UK taxpayer is likely to pick up more costs as being a member of the EU.

'But, you will be relieved to hear, the government - any government - will really have to work hard to turn us into Greece.'

Yes - I can agree with that - but the UK taxpayer will I think end up footing some of the bill for Club Med, somewhere along the line - while the UK remains financially integrated with the EU.

Just being realistic - I know that it doesn't pay to be pay to be honest these days - but for some of us - old habits die hard!

Stephanie,

"Britain started out with much smaller stock of debt as a share of GDP than Greece - it's now about 55% of GDP."

Are you sure about that? In October last year the BBC was reporting UK debt at 59% of GDP, and with an annual deficit over 12% of GDP we would expect the total now to be more like 62%. Checking the ONS website, net debt is reported at 61.7% of GDP at the end of last year, suggesting nearer 63% now.

"We could face an uphill struggle exporting our way out of recession, especially when most of the rest of the world is trying to do the same thing. But a 25% devaluation is a good way to start."

Would we expect an export led recovery fuelled by a currency devaluation to lead to a widening trade gap?

"But, you will be relieved to hear, the government - any government - will really have to work hard to turn us into Greece."

Indeed - but they do seem to be rising to the challenge.

There really is little distinction between bank debt and sovereign debt in terms of cause and effect if there is a debt 'contagion ripple or domino effect' over the next year or so - remember this is not an issue that is likely to pass over in a few days or weeks - the sums of money involved are vast and the effects could take years and years to work out of the Eurozone financial system.

The other issue is that if Greece 'defaults', then the euro will fall and the effect of Euro currency depreciation on UK sterling debt can be exacerbated and with a Labour government willing and able to buckle to any demand to assist paying off Greek debts - the ongoing risk to the finances of the UK is massive.

The other issue is that if the GB £ sterling depreciates further - all this talk of the UK being better outside of the Euro (and the fact the UK is outside of the Euro is an accident of City of London taxation and not by good past economic management) will have to be balanced by the UK government borrowing more to pay higher debts and paying off interest at a higher price with a weaker GB £ sterling.

There is a lot happening here - we don't need to have nightmares in then UK over Greece as the Euroland will try and prop them but the likelihood is that the Club med debt whcih has arisen because of weak ECB regulation, will affect the UK and somewhere along the line the UK taxpayer is likely to pick up more costs as being a member of the EU.

'But, you will be relieved to hear, the government - any government - will really have to work hard to turn us into Greece.'

Yes - I can agree with that - but the UK taxpayer will I think end up footing some of the bill for Club Med, somewhere along the line - while the UK remains financially integrated with the EU.

Just being realistic - I know that it doesn't pay to be pay to be honest these days - but for some of us - old habits die hard!


#21 Nautonier

I wonder though, have you considered the fact that with regards to sovereign debt v bank debt, one of the members of that club are currently threatening to move off-shore (so to speak). What happens if, and at this point it's not being done, but if I was a bank I would certainly consider it, the move to Switzerland/Hong-Kong,blah. would not be a worthwhile move ? Let's be frank, a Country cannot move, Banks can.

Until banks are restrained from moving to tax-free environments as a way of moving this capital away from forthcoming (hopefully) regulation then the circle remains unsquared, so to speak ?

Britain started out with much smaller stock of debt as a share of GDP than Greece - it's now about 55% of GDP. In Greece, it's well over 110% (no point getting too precise, given the rate both of those figures are going up.)

Public sector pensions liability of about 1,100 billion and Private Finance Initiative costs of 200 billion added to public sector debt of 900 billion makes about 142% of annual GDP, which is more than Greece at 110%. Private debt is about 1500 billion so total UK debt is approaching a massive 250% annual GDP. Inflation, devaluation and some defaulting seems likely.

Stephanie, you say

'According to the Debt Management Office, the average maturity of UK sovereign debt is 14 years. In the US, it's about four years. In France and Germany it's six or seven. In Greece, it's even lower - as I mentioned yesterday, they have about 10% of their debt coming due in the next few months.'

Ok, our debt has a longtermism that dampens shorterm fluctuations (which is the problem that Greece has, nearterm debt will be expensive for them), how about a graph showing the foreshortening of global debt.

I'm thinking along the lines of our wartime debt lasting 40 odd years, why is the US now at 4 years and is this decreasing all the time ?

Will we all be on daily debt rollover before long ?

#25. At 01:53am on 13 Feb 2010, BobRocket wrote:
"wartime debt lasting 40 odd years"
the reason that the wartime debt lasted so long was because it was a fixed interest loan and the percentage was less than the Govt (several Governments in fact) could borrow money on the open market. It therefore made no sense to pay it off earlier.
With respect to Greece, I see they are still signing contracts for major arms deals with the French and buying more Eurofighters (what the H*** for)
so they are saying you, the Plebs, must pay more whilst we, the Patricians will carry on spending money that we haven't got on armaments that we don't need and will never use in anger. Shades of UK here?

#SHD

If you were running a corrupt government with a history of military coups wouldn't you be keeping the Generals happy by buying them plenty of toys and ensuring that MOD pensions were both protected and enhanced.

Greece is a sideshow.

Sovereign debt crisis is not the issue yet, we still have to get to the bottom of private (public) debt.
How big is it ?
What are the pressures on it ?
What is the likelihood of repayment (don't forget that each time the figures are looked at the fees increase)

46,000 Repos in a year in the UK when mortgage companies were subsidising huge amounts of personal mortgages due to trackers of -.75%BoE rate

What's going to happen if/when interest rates rise and these mortgages start to rise ?

A 4% shrinkage across EU GDP will result in a 16% shrinkage in Euro Spend.

So where will that leave the UK as Exporters to the EU ?

Australia is booming, as a supplier of raw materials into the commodities market, their production is in demand by the manufacturing countries.
Manufacturing countires supply demand for finished goods in consumer countries.
Consuming countries are restricting demand through currency debasement to improve their own weakened exports.

Race to the bottom, who will win and what do we do when the race is finished ?

We (the UK and the global economy) are only just entering the thickets, we have not got to the trees, it is going to be a long time and the world is going to be a very different place before we are out of the woods.

The young will inherit the earth, let us hope they make a better fist of it than we did.

Stephanie, you said

'The low rate of national savings tells you that Britain '

Well if we had a National Bank, with one non-transferrable share each, that provided normal retail banking facilities, I would bank with it.
I would allow them the use of my monthly balance at a stupidly small rate of return
In fact if they offered the same facilities that my Spanish bank does, why would I bank with the Spanish one ?

Of course I would save and spend with my own National Bank, why would I go anywhere else ?

This comment was removed because the moderators found it broke the house rules. Explain.

"According to the Debt Management Office, the average maturity of UK sovereign debt is 14 years. In the US, it's about four years."

Another example of GB mortgaging our future to sustain the economic 'miracle'. Perhaps he should bring Peter Ridsdale in as a special economic advisor.

I know I asked when the comparison with Greece was coming and thanks. However, even if we are better off than the economic powerhouse Greece, this hasn't managed to make me feel any better than a comparison with any third world country.

Dear Stephanie,

Re: "... 25% devaluation is a good way to start."

First of all - 25% devaluation relative to what? Euro? USD? Most major currencies I guess.

Secondly, as the UK is a net importer, a currency devaluation leads to imported goods and services becoming more expensive in GBP. Great from a macroeconomic perspective. Not so great from an individual's perspective, as it means a fall in purchasing power. I certainly feel poorer now when I travel to Europe or the USA compared to a couple of years ago...

It's all nice and well to say how much our current account deficit is AT THE MOMENT, but one piece of data not reported here is the size of the external liabilities of this country, ie, the cumulative sum of all the current account deficits we have had in the past. I hear it is a staggering 4x GDP and it dwarfs every other country. No reason to panic just yet but that suggests we should have a little more caution and perspective before discarding that we may end up like Greece.

Of course we are keeping the pound so we are not locked in a fixed exchange rate system like Greece. But we should also consider that it is more out of inability to stop spending money that we don't have (which makes us different from the thrifty Germans) rather than pride that we keep it (although the governments and the press will persuade us otherwise). We had better understand it if we want things to improve in the long term.

Comforting stuff from Stephanie.
Thanks for the clarity.
But if we get another lame-duck credit-chasing bonus-frenzied idiotic "boom", we will indeed be Greece.
Regulation, control, moderation, and CONSIDERATION for the population in "big finance", please.

Rugbyprof's figures say it all, the UK is a basket (or is it a Greek urn?) case and no amount of Schadenfreude at the current difficulties in the eurozone will disguise this. The UK has in recent times had very benign conditions (exchange rate, interest rate and the traditional contibutions of invisible earnings and energy products), none of which have been enjoyed to the same degree by the eurozone, and we have still managed to excel ourselves at economic incompetence. I stand by my earlier comments that the eurozone as a whole will benefit significantly in the short to medium term from the necessary and long overdue revaluation of the Euro and the consequent dramatic improvement in external competitiveness and that the inevitable strenthening of Sterling against the Euro will have futher very damaging effects for the UK economy. Greece is a lot closer than you think Stephanie, get the olives out....

And whoever came up with this "pigs" rubbish should go back to bed.
The countries to the North of the Mediterranean have some of the most beautiful places, and nicest people on earth.
What would Mediterranean people call us?....rats?

Stephanie

I'm afraid you've been at the BBC too long and therefore too accepting of the spin...

Forget the 14yr avg maturity - we need another £200bn loaned to the UK in the year to March 2011....£200bn of the £201bn raised in FY2010 was by the BoE. LOOK AT WHAT PIMCO ARE SAYING. they are the largest bond investor and are stayinig well clear.

HOW LONG BEFOROE THE FIRST GILT AUCTION FAILS.... NOT LONG
GILT YIELDS SPIKE
MORTGAGE RATES RISE ON BACK OF HIGHER GILTS (IRRESEPCTIVE OF BASE RATES)
HOUSE PRICES COLLAPSE
FINANCIALS HIT

well done Gordon..this is what happens when you spend spend spend like a
WAG


https://www.ft.com/cms/s/0/f90bca10-1679-11df-bf44-00144feab49a.html

23. At 00:20am on 13 Feb 2010, Nick wrote:

There really is little distinction between bank debt and sovereign debt in terms of cause and effect if there is a debt 'contagion ripple or domino effect' over the next year or so - remember this is not an issue that is likely to pass over in a few days or weeks - the sums of money involved are vast and the effects could take years and years to work out of the Eurozone financial system.

The other issue is that if Greece 'defaults', then the euro will fall and the effect of Euro currency depreciation on UK sterling debt can be exacerbated and with a Labour government willing and able to buckle to any demand to assist paying off Greek debts - the ongoing risk to the finances of the UK is massive.

The other issue is that if the GB £ sterling depreciates further - all this talk of the UK being better outside of the Euro (and the fact the UK is outside of the Euro is an accident of City of London taxation and not by good past economic management) will have to be balanced by the UK government borrowing more to pay higher debts and paying off interest at a higher price with a weaker GB £ sterling.

There is a lot happening here - we don't need to have nightmares in then UK over Greece as the Euroland will try and prop them but the likelihood is that the Club med debt whcih has arisen because of weak ECB regulation, will affect the UK and somewhere along the line the UK taxpayer is likely to pick up more costs as being a member of the EU.

'But, you will be relieved to hear, the government - any government - will really have to work hard to turn us into Greece.'

Yes - I can agree with that - but the UK taxpayer will I think end up footing some of the bill for Club Med, somewhere along the line - while the UK remains financially integrated with the EU.

Just being realistic - I know that it doesn't pay to be pay to be honest these days - but for some of us - old habits die hard!


#21 Nautonier

I wonder though, have you considered the fact that with regards to sovereign debt v bank debt, one of the members of that club are currently threatening to move off-shore (so to speak). What happens if, and at this point it's not being done, but if I was a bank I would certainly consider it, the move to Switzerland/Hong-Kong,blah. would not be a worthwhile move ? Let's be frank, a Country cannot move, Banks can.

Until banks are restrained from moving to tax-free environments as a way of moving this capital away from forthcoming (hopefully) regulation then the circle remains unsquared, so to speak ?

>>>>>>>>>>>>>>>>>>>>>>>>>>>>

My comments are general really regarding the UK position relative to Greece positions - so I have not considered the individual position of an single bank moving to a tax haven.

If a bank or banks try and move to tax havens - Where in Europe? then I think France and Germany will take action through the EU to bring regulation on such tax evasion, into effect much faster and the banks will disrupt their operations to such an extent that they well not only find themselves worse off but replaced with new competitors in the UK.

I am sceptical about UK based banks moving to tax havens or e.g. the Far East - isn't this just the 'golden ladder club' winging the teddy bears about?

If a bank moves - their debt position stays the same and some of the UK based banks have already received tax payer monies in support of stability/liquidity - in fact all of the UK banking system have had the benefit of this - so to rush overseas and hide from the 'HMRC' would probably and inevitably upset an lot of taxpayers in the UK. Under these conditions even Gordon Brown would have to learn yet another major financial lesson and support France and Germany with taxes against tax haven banks doing business in the Eurozone - instead of just talking about it and doing nothing.

I have lived in Greece for several years. The problem is two fold

Greece has relied on her currency depreciating 5-10% a year up until 2000. Since she joined the euro this has obviously not happened. Interest rates fell from 15% to 3% within 18 months creating inflation that was never dealt with and figures were fudged.

However the core of the problem is corruption. The people of Greece do not believe that their money will go to schools, hospitals and infrastructure. Therefore rich and poor alike avoid paying taxes. Indeed the tax system is set up to catch business out. The Greek tax system assumes that everybody is fiddling taxes so they will charge people a bit more through a variety of measures.

Until a Greek government recognise the situation and tame the trade Unions, reform the tax system making it fair greece I am afraid is finished.

As the for the Eurozone, they have 2 choices

1. Create a federalist state with one tax system, (that allows individual states to set thresholds) and one police force.

2. Forget the euro and go back to individual currencies

Would commentators accept that it might be time for the UK to consider renewing membership of the Exchange Rate Mechanism along with the Euro and the Danish Krone? Would this not afford some measure of exchange rate stability for the UK, while maintaining it's own currency?

Denmark isn't doing too badly at this time.

Stephanie,
Do I detect a tendancy towards fact instead of rhetoric. So now, how do we sit in the queue for loans, given that our GDP is at least 7 x that of Greece. I would have thought there is only so much loan cake to be divided, and that will be based on amounts rather then % of GDP.

But if you have a quiet spot, you could discus the method to calculate GDP, and it's validity.

27. At 03:47am on 13 Feb 2010, BobRocket wrote:
'Sovereign debt crisis is not the issue yet, we still have to get to the bottom of private (public) debt.
How big is it ?
What are the pressures on it ?'

Well B.R. I reckon the amount of private debt that has to be written off, and therefore paid for by those still paying is enormous.

Couple of examples:
Base rate: 0.5%----------------- Credit card rate 30% +
Why because those who can pay are having to pay for those who can’t.

Value of an average flat in the Northwest was £125,000, now its struggling to hit £75,000



As regards the comparison between the UK and Greece, identical in some respects, but with one big difference, we can print our own money, they can’t.


I’ve posted this before, but still: Individuals can be allowed to fail, companies to, but not nations.

The ECB and possibly the BOE will have to print more money and give it Greece, and then print some more and give it Spain and Portugal. The Irish might not be happy though having already bit the austerity bullet.

It ceases to be a European Union if they let member states fail, it just becomes a European nonsense.

Sorry for multiple posts.

Would commentators also accept that the current fixation with issues in Euroland are a sideshow? It looks to me like the Chinese Government may have finally lost control over the running of their economy, and that we should all be running for cover?

Odd use of the phrase that the olypics made a "non-neglible" impact on the Greek financial position. What kind of word is that? In other words the UK can look forward to more hardship that we cannot neglect, because of the Olympics.

This situation has some similarities to the '97 Asian Financial Crisis though there are also many distinct differences. The real question is whether affected European countries and citizens within are willing to swallow the bitter pill, instead of looking for the easy way out. From the Greek protests, it does not seem likely.
You just can't earn 1000 euros and spend 10000 euros... It's just simply the road to disaster... It's really down to fiscal discipline or the lack of it.
Whether the EU is truly an union or disunion, may soon be answered.

The estimate for France is 454 billion. Whereas the UK will be issuing a "mere" 279 billion.

Surely this is completely misleading. Debt that is maturing and needs to be re-raised is completely normal. For example if a pension fund is holding the gilt, and it matures, they would just purchase another one as they want to continue holding this type of investment.

But needing to raise hundreds of billions from NEW sources is the main challenge. So those with the largest deficits like the UK have their work cut out. And because it is likely that the UK needs to tempt current holders of other gilts to buy new UK gilts instead of refreshed French ones, there will be an inevitable raising of UK interest rates.

Also the 'Domino Debt' effect, depends in what currecies the 'euro debts' are written in?

I don't see the 'Domino Default Debt Effect' as a Tsunami 'equal pressure' effect - more as a chaotic ripple - a private default here - a public default in another country and a series of deafults in several countries relating to a particular bank, and so on.

I'm not wishing for the Euro to crash and the EU to disintegrate - but if did and all ex EU members had to both recreate and issue their own currencies - that could be very interesting indeed and disastrous for the EU creditors?

I cannot find anything in the Treaties regarding an orderly break up of the EU only the removal of individual countries from the Euro currency- my understanding is that the Eurocrats never contemplated the possibility of default 'en masse'.

So how many countries/ what level of debt would have to default to make the Euro currency unworkable as the debt level would be too great for a EU rescue?

My point is this, the financial correction of multiple asset and credit bubbles is global and has destabilised the new global order economy and defaults on a large scale are inevitable as the world's finances adjust and correct from national and regional economies into new world order regional economies.

Interesting times! - Daniel Hannan! - Where are you when you're needed?

Firstly thanks to Francesca's comment above which reminded me to check what notayesmanseconomics updates are saying. Also thank you for your update Stephanie however there are issues with your post.
To quote one example the Office of National Statistics states that as a % of GDP the UK is presently at 61.7%. I notice that you say 55%. Can you give us your reasons for disagreeing with them please as this is a significant difference.

I've just had a White Flanders moment.

I have become a finanicial market secptic/contrarian after many years of following the writings of the likes of Bill Bonner in Money Week and Marc Faber in the GloomBoomDoom. Perhaps I have become too negative on the UK. This article has highlighted what maybe the true position behind the UK bond situation v the Rest of Europe and suggests we may not become the basketcase I was thinking we were becoming.

Maybe, as a contrarian, I have been looking for Black Swans and neglected the other birds. I'll be following Stephanomics more closely in future.

In Robert's blog

"Greece's liquidity problem needs to be sorted first"


8. At 2:07pm on 12 Feb 2010, onward-ho wrote:

A similar argument.

Glad someone else agrees with me too!

Onward-UK!

We are not as in the deep as the Club Med, though we are not looking good. Fortunately, we have a couple of financial degrees of freedom in our favour: time and an independent currency.

So let's stop discussing how bad things are and how worse they might be. Isn't it time that we start figuring how simulataneously to build ourselves a strong and robust economy (as good as Germany) and pay of our debts?

Given a little effort and some change of values and priorities, we could have a great country and a great economy before the average maturity of our existing sovereign debt.

12RUGBYPROF,

YOUR FIGURES ARE NOWHERE NEAR THE SCRUM!

GDP (PPP) per head
Greece: $33,860 (30,390)
UK: $36,250 (34,730

According to World Bank
UK GNI per capita: US $45,390 (World Bank, 2008)

SOURCE COUNTRY PROFILES, UK BBC
OUR ECONOMY IS 30% BIGGER PER HEAD THAN GREECE'S

4MARTIN GEORGE

why can't those clever people to whom we pay buckets of money in taxes come up wih a better economics that is geared to the demands of the modern world?


IT'S CALLED HEAVEN ,BUT YOU HAVE TO DIE FIRST TO GO THERE.

Are there similarities between the UK and Greece? Who knows, but does looking for similarities and differences constitute anything but establishment misdirection.

https://www.zerohedge.com/article/albert-edwards-500-net-liabilities-gdp-it-too-late-prevent-collapse-g-7-greece-irrelevant-we

It is a long article, but the conclusion is very short: "The take home is very, very simple: we can delude ourselves that the game can be won (it can't), or we can prepare for the imminent collapse when delusion finally fails"

56
OH NO NOT THOSE ZERO HEDGE NUTTERS AGAIN!

Well all of the usuual doom merchants have been out in force and making their usual cut public jobs and pensions claims. So, I'm going to make my usual pro public comments.

Sure you can cut public jobs and that is a typical response. Any of you done any research upon the private sector effects of so doing? To date, the best estimate is that it will be almost a 1 for 1 increase in private sector unemployment.

I was interested to read post #13 Upthebarns. Now, look at the history of private sector pensions. Look at the underfunding that employers have participated in. Look at the 'pension holidays' that employers have allowed themselves. Look at the underperformance of the financial services sector in their investment strategies. If you have been shafted by your 'brother' private sector organisations then how can you complain? No, as usual you like to moan about other sectors when you have made a mess for yourselves.

Having got that off my cheat and returning to the theme of the thread: I was very interested to read Stephanie's expectations of the rises in French and German debt. No wonder Merkle and Sarkosy are refusing to make any other than verbal support. The whole future of the Euro now appears to be in the hands of the scalpers!

A Sovereign Debt is very different to a corporate debt... short of going to war, how can you stop a country completely defaulting and reinventing itself a few years later ? Or just printing as much money as it wants to pay the debt off ? I know there are lots of economic reasons why this shouldn't happen, but ultimately a country can absolve itself of responsibilities and know that within a short-ish period of time the world will move on. I cite Russia and Argentina - not the best of economies for sure, but not long after defaults their economies started growing again. Russia in particular achieved a massive recovery - even though it's basically a gangster economy it does pretty well considering it was bankrupt 10 years ago.

hmmm, your third paragraph says it all. wait until you have the Olympics, and PIIGS will become BIG PIS(s), B for Britain.

Growth next year, bubbles the one after courtesy of the London property market. Unemployment, crime (from the immigrant workers necessary to prepare for the olympics), and a lovely long post-Olympics recession afterwards

#57 onward-ho You don´t like Zero Hedge, try Barton Biggs a hedge fund manager and former Chief Global Strategist for Morgan Stanley. The words are different, but the message is the same.

https://www.marketwatch.com/story/how-to-invest-for-the-debt-bomb-explosion-2010-02-09?pagenumber=1

57. At 2:29pm on 13 Feb 2010, onward-ho wrote:

56
OH NO NOT THOSE ZERO HEDGE NUTTERS AGAIN!

Posting in capital letters does not impress anyone, it only makes you seem like a dimwit-a view only reinforced by the puerile content.

This article on China putting up their bank rates to slow growth & a national housing bubble may be of interest to some of you.

https://money.ninemsn.com.au/article.aspx?id=1011927

Additionally I know there is much debate in Canada (after the Olympics & Ice Hockey taht is) regarding are prices increasing sensibly or are they starting to create a bubble too.

Personally I'm hoping prices in the UK will drop so I can get back on the ladder, but I fear that will mean a lot of negative equity for people - have any bloggers remortgaged recently?

The pound has been devalued/fallen by 20-30% across the board against most other currencies for reasons that are well-known. So outside the UK, sterling holders are now 20-30% poorer than they were in 2007. 

People holding cash in sterling were not protected from the market crash at all. They may as well have had their money in risky assets like stocks.

On top of this, they are now faced with the highest rate of inflation in Europe, and negative returns on their saving.

Furthermore, they are faced with the constant worry that there will be a currency crisis and a run on sterling, which will compound the situation even further.

It is widely known that amongst city bankers and economists, that due to the debt levels in the UK, both personal and national, currency devaluation and inflation, is precisely what the authorities want and need to happen.

They are not particularly concerned for the savers who are "mostly old and will be dead soon anyway" (the very blunt but pragmatic words of one banker I had the pleasure of speaking to!). They are concerned for the million of so who would be plunged into negative equity were interest rates to increase and the many more millions who who be unable to pay the debt on their credit cards.

They are bent on maintaining current asset prices, to help the banks' balance sheets and mortgage payers. They know that if quantitative easing were completely abandoned and asset prices allowed to fall to their "realistic", non-bubble value, the banks would collapse as people would be unable to pay their mortgages, their balance sheets would deteriorate further and they would become insolvent.

Politically, it is far easier for a government to devalue its currency and allow their debt to be gradually inflated away, than make spending cuts.

So apart from the economic reasons for devaluation and encouraging inflation, there are also political reasons. The government is far more concerned about civil unrest, the consequence of public spending cuts and welfare cuts, than they are about savers. They are also concerned about maintaining power. They know that most of the UK population, and therefore most of their voters, are mostly up to their eyeballs in debt.

So currently we have a situation where the government and BOE are privately delighted that the pound is weak and inflation is rising and not falling.

In the Eurozone, despite its current problems, devaluation of currency will not being permitted by Germany, who essentially dominates the ECB. Despite that a weaker Euro would aid Germany's exporters, the German people have a fundamental terror of inflation, given what happened in the 1920s and 30s and the consequences that had with the rise of Hitler. They also have a savings base of 20% of their gross domestic product, as compared to the UK's 11%. The ratio of savings to GDP in France is much the same as Germany. Therefore, savers in Germany have much greater power and political clout than the savers in the UK.

The truth of the matter is, savers with cash in sterling are rather like prisoners of their own currency. If they choose to "safeguard" it by changing it into Swiss Francs, Yen, Canadian Dollars, Euros, Norwegian Krone or any other such currency that is not depreciating and does not have a debt-ridden economy standing behind it, they will have to accept an immediate 20-30% loss of their wealth (abroad) compared to what they would have had pre-2007.

The question one has to ask oneself is this. Should one cut ones loses and convert one's cash into another currency now, before the situation possibly deteriorates further (which is of course a highly speculative move, as is buying Gold), or should one hang onto it in the hope that inflation will fall (as predicted by the Bank of England), interest rates will increase, and the world economy recovers, thereby driving up the pound and recovering one's international wealth?

Of course labour supporters already Knew all this. Which is why we smile when we see the likes of Osborne ranting on about a load of old nonesense.

57. onward-ho wrote: 56
OH NO NOT THOSE ZERO HEDGE NUTTERS AGAIN!

Instead of your Pollyanna one-liner optimistic comments, how about commenting on how you think that a debt (on & off balance sheet) of 500% of GDP for the Eurozone countries can lead to anything other than a destruction of wealth.

Have you not noticed that empires rise and fall? Just having a positive outlook on life unfortunately does not undo the ramifications of years of excessive debt throughout the West.

Stephanie, you say :-

"And then there's the final reason to feel a bit more cheerful: the pound. We may be talking about a currency crisis in the eurozone. But, arguably, a big part of the problem for Greece - at least from the standpoint of international investors - is that it can't have one. Its currency can't devalue independent of the rest of the eurozone."

It is also arguable that Greece's membership of the eurozone is an advantage. If it were not a member, it could be facing hyperinflation caused by a complete collapse of its currency.

The possiblity of staving off a debt crisis by allowing the currency to decline in value is over rated, as we in the UK are beginning to rediscover. We should have already known this, after our experiences in the post WW2 period.

The chances of increasing exports when world trade is declining are negligible and the UK is already facing inflation due to increased import prices. We are also missing out on the beneficial effect of deflation, which naturally occurs in a recession, and creates bargain prices for some items and thus encourages spending.

It is discouraging that there is so much talk of austerity as a way out of public debt problems. Surely, when the problem is low demand, austerity can only make things worse. The answer must be to use taxation to tap into private funds which are not being spent.

The Greek government has taxation problems. It needs to introduce taxes which are difficult to avoid. I suggest a tax on fixed assets such as land. These are difficult to move off shore and a forced sale can be made if the owner cannot be traced or is refusing to pay. Land purchase is also the traditional way in which the rich store wealth that they do not need or intend to spend immediately. Therefore such a tax is not likely to impede productive investment too seriously.

The fact that so few countries have effective land taxes, reflects the powerful position that large scale land owners still have in many political systems.

I'm from America and we could also call ourselves Greek America.

https://communislam.com/?p=86

#6 >>When printed money was introduced in China by the first Emperor, the people called it "Flying Money."

Actually, when the First Emperor conquered all of China in 221 BC, paper had not been invented. A tad difficult to print money on paper that had not been invented !!

'...will really have to work hard to turn us into Greece' ain't the point, surely? You seem to be working hard to help Gordon Brown avoid any blame for the mess in the UK! We may well not become another 'Greece' because our refinancing is well spread, and because we can always devalue.
But the scandalous growth in the 'noughties' of a credit/asset bubble by Brown (presumably the easiest way to give an illusion of prosperity, so that he could justify his taking over the PM's job, after T Blair made such a good job of it ...) combined with a transfer of prosperity to the BRICs, has left us with the choice of inflating our debts away (disastrous for those on fixed incomes) or accepting a 'Japanese' decade or two (but without their trade surplus and inventiveness) or, more likely, both.
Nice try though...

All this mention about maturing debts but there is *NO* mention about the interest that these debts carry !! I strongly suspect that because they are/were medium to long Gilts, they bear very little interest !! However, to replace them now, the new Gilts will bear a much higher interest and may even be sold at a discount in the open market unless this government starts to print more paper in order to buy up all those new Gilts !!

If the government prints much more paper, the quid will go down the pan !! So, what price our Gilts ??

67. At 4:44pm on 13 Feb 2010, stanblogger wrote:

"The fact that so few countries have effective land taxes, reflects the powerful position that large scale land owners still have in many political systems."

Amen! With a single stoke, this proposal would have burst the speculative property bubbles in Spain and Ireland.

`..you will be relieved to hear, the government - any government - will really have to work hard to turn us into Greece.'

The trouble is, Stephanie as I watch the openning thrusts of the election campaign I am convinced that all hues in the political class are intent on that ancient ruse of bribing the electorate with their own money.

So they are all hard at work trying to turn us into Greece. I wonder if they expect to get a bonus for this nonsense as well.

We are all looking for a moderate strategy to address the structural imbalances in the UK economy over a period of the next five to ten years. This is not an unreasonable expectation on our part but its prospect remains as distant now as it did this time last year.

Despite having to sell my mother's house to pay for her nursing home fees I know that there is a snowball's chance in hell of the taxpayer being able to pick up the tab for free care of the elderly infirm. So why are the political class inflicting a bogus row on us all for what is nothing more than obfuscation to frighten the guiless into paying even more taxes?

The political class in the UK seem devoted to catching up with the progressive lead set by the Greek nation. I beg to differ with them.

58. At 2:33pm on 13 Feb 2010, foredeckdave wrote:

I was interested to read post #13 Upthebarns. Now, look at the history of private sector pensions. Look at the underfunding that employers have participated in. Look at the 'pension holidays' that employers have allowed themselves.
===========
I believe some of the 'Pensions Holidays' are enforced by Government legislation, particulary the case in the 'good times'. You get penalised if you 'overfund' a pension scheme - the tax man likes to have his hand on the tiller as well as the Chancellor having his hand in the till!

61 Baton Fink in your quoted article puts the chance of non-collapse of the financial system at 90%.

Also I note that Morgan Stanley have done exceptionally well since he left them or did they leave him?
Haufdeed.... sorry for the capitals , but if you are haufdeed
YOU NEED TO WAKE UP AND OPEN THE CURTAINS....IT IS GETTING SUNNIER BY THE DAY!

#59 >>A Sovereign Debt is very different to a corporate debt... short of going to war, how can you stop a country completely defaulting and reinventing itself a few years later ?

Hate to disappoint you but the method is very simple !! Other countries just simply refuse any transactions denominated in that country's currency !! Therefore, if that country wishes to buy anything from other countries, it will have to get other currencies to pay for its purchases !! A good and recent example is Zimbabwe !!

>>I cite Russia and Argentina

Neither Russia not Argentina totally defaulted on their debts. Much of their debts were deferred or re-negotiated !! In addition, both those countries are net *EXPORTERS*, so they have the wherewithal to pay off their debts once the IMF stepped in and forced austerity programs on them !! Net *IMPORTERS* don't have that luxuary !!

Russia, in particular, went through a period of "cleaning up" during the early Putin years and they had and still have masses of oil, gas, gold, diamonds, etc. to sell !! The main cause of their economic collapse was that the "State" assets were sold off to the "gangsters" (as you call them) cheaply(??) by the Yeltsin government !! Those assets were then looted and the funds were parked off-shore !! Hence the current Russian eagerness to seek out and extradite various Russian millionaires/billionaires to "assist with inquiries" about their previous conduct !! Some, like Khodorkovsky, have already "assisted in the inquiries" and are "guest of the Russian government" !!

Perhaps we should look at the British economy and get a few people to "assist with inquiries" over the recent crash !!

#62 >>Posting in capital letters does not impress anyone

Alternatively, and more charitably, his Caps-Lock key got stuck !! :-)

That should teach him not to eat crisps while typing !! Not good for the continued health of keyboards !! :-)

#74

Exactly so. Legislation is used to force distribution of profits rather than to build up company pension schemes.

The results are obvious; increased tax take and fragility of pensions.

Coupled with removing full exempt tax status, allowing underfunding and changing existing schemes, that is how thieving Brown has increased his tax take and impoverished private pensions.

I'm sorry it just doesn't work for me. My mum always told me to the think of all those people worse off than me (usually the starving in Africa when trying to get me to eat my greens) but early on I got quite immune to it.

What I care about is the health of the UK and the (probable) pain that I will experience, together with the rest of the country, to get out of this mess caused by the banks and reckless government borrowing. To me spending less on the state and state-control of our lives will be a good rather than bad thing but I suspect that they will opt to retain the (exzcessive) controls and chop useful things like education, transport and health...

79. At 10:52am on 14 Feb 2010, Bill H wrote:
I suspect that they will opt to retain the (exzcessive) controls and chop useful things like education, transport and health...

=============
If you had ever worked in the State Education System (or had in depth experience of the NHS, particularly with Old people) you would realise that BOTH of these are vast money pits, riddled with incompetence and political correctness, in very many cases they are detrimental to their stated aims, i.e. Education and Health, BUT, because they are the so called products of Socialism, then they are sacred cows and are to be worshipped and funded no matter what the cost to those suffering in them.
(Great wodges of that cash are not for either service, rather it is for the 'propagandising' of the service, to make Government look good!)

Their failures are also masked by their successes (there are some!), the Good State schools are good, but you generally have to be well off to afford a house in their Catchment areas - I know, I couldn't, despite being a teacher! (No longer however, the General Teaching Council was the last straw for me, I quit for good when that came in) It will survive because Tories can go private or afford houses in the good school areas, and Socialists, well, they can go private afford houses in the good school areas, or as in the case of a well know Socialist, presumably use influence to get their children into a good school.

As for transport, if you were to watch me driving along the B road I travel most days, you would think me drunk or my steering faulty as I fail to maintain straight line for even about 20 yards - look closer and you will notice I'm weaving to avoid the rather large potholes in the road that have suddenly multiplied 10 fold this winter - and the A road leading to it isn't much better!

Sometimes I wish a Government Auditor could arraign the Prime Minister and Chancellor on the grounds of Misappropriation of funds, but then I think of the local Council, where a Councillor was banned by Council Officers from taken part in debates 'because he had an interest in them' - of course he did, that was why I voted for him in the first place you morons!!!!

Your article helps me to understand what is happening in the economy. Thank you.
What does it mean to individuals if the UK loses the triple A credit status?
What countries in Europe have triple A status?
What do the countries that don't have triple A status have?

#79 >>(usually the starving in Africa when trying to get me to eat my greens)

Oh, but I always do !! I tell my mum to send those greens to Africa so they wouldn't starve any more. Didn't go down too well, I'm afraid !! :-)

#81 >>What countries in Europe have triple A status?

Well, tiny Norway has triple A ans will do so far into the foreseeable future !! Then again, they have loads of oil and hydroelectric energy and a small population !! Britain is well on the way to a double A status.

>>What do the countries that don't have triple A status have?

Double A status or less. Unless it's Zimbabwe; in which case, it's probably triple Z !! 100 trillion Zimbabwean dollars to buy a loaf of bread rather underscores this status !!

While the gloomy gang of economists harp on ......


Let's call them the nil-nil score............


Thankfully there is still Wiliam Keegan ,the usual weekly voice of reason ........


https://www.guardian.co.uk/business/2010/feb/14/mervyn-king-economic-recovery-william-keegan

look ma, no capitals!

75. At 01:39am on 14 Feb 2010, onward-ho wrote:
61 Baton Fink in your quoted article puts the chance of non-collapse of the financial system at 90%.
----------------------------------
In that case it must suggest a 10% chance of collapse. I would have thought that even optimism at your level would be concerned with this. A 1% chance is bad enough if it is looked at simplistically as a once in 100 year collapse.

#64. RichardUK wrote:

"The pound has been devalued/fallen by 20-30% across the board against most other currencies for reasons that are well-known. So outside the UK, sterling holders are now 20-30% poorer than they were in 2007...

On top of this, they are now faced with the highest rate of inflation in Europe..."

That is extremely selective reporting.

Yes, Sterling has fallen by around 20%, but that is from a level that was historically high and extremely unusual. The pound is currently at a level against both the euro and US dollar that is more in line with its average value over the past 25 years. (In the mid-1990s I was getting about AUD 1.75 to a pound, just as I would today). The greatest risk is the currency's fragility and volatility, not its level.

And it is widely recognised that the inflation rate is undergoing a temporary blip for technical reasons, and will quickly fall back to below 1%.

I'm not for a moment suggesting that all is rosy in the UK garden, because it most certainly is not, but there is a great deal to be worried about without distorting the facts in the way that you did.

#74 Devils Advicate,

You also forgot the great degree of fraud by employers.

To Richard UK @ 64 and rbs_temp @ 87

I can assure anyone that for someone who has moved house several times between different countries, ‘currency fluctuations’ can be very painful to the individual. You move your savings for buying a house, while you’re searching a big fraction (measured in the original currency) evaporates. And the boats are certainly burned. The only solace is the hope that at some other point, you might have gained, but don’t remember the occasion. Certainly, the fact that some banks made a fortune on forex in the process is no comfort.

Apart from that kind of pain, the fluctuations in the value of the pound make running an export oriented, UK based company hard work. And if you are in manufacturing with plant and permanent employees, it must be close to impossible. Though UK banks are very fair with private customers, they often have no idea about dealing with a manufacturing business. One might argue that the recent 20 % devaluation will help the exporter. Momentarily, it does, but the cost of imported materials and expertise eliminate much of the advantage almost immediately. If the UK inflation rate goes down again, some advantage remains. However, for a nation so dependent on imported goods and BoE printing cash, many would claim that to be unlikely before the whole of the 20 % is absorbed. It leaves the UK exporter, at best, back where he started.

This, for me, is the fragility of the UK economy. We have little manufacturing industry left and without major changes we cannot grow one. If we do not produce, we have no solid basis for our economy. We are heavily dependent on banking and finance. As basically a service activity, B&F will ultimately move away from the UK to where the service is required. In the short-term, B&F makes its biggest money by trading paper and promises which are not always the most useful commodities in difficult times.

If there is doom and gloom, it shouldn’t be so much about where we are, but where we seem to be going. The UK has made some big changes over the last 50 years, some for the better. I would suggest that we need to plan where we want to be in 10 to 20 years time and make some more changes in order to get there.

#89. WolfiePeters wrote:

"To rbs_temp @ 87

I can assure anyone that for someone who has moved house several times between different countries, ‘currency fluctuations’ can be very painful to the individual..."

I'm not sure why you're addressing this to me... perhaps you could point out where I said that they were not?

In fact, you seem to be agreeing with me in that it is not necessarily the level of a currency that is the problem but its volatility.

90 rbs

Richard @ 64 had raised the topic of the sterling holder abroad. Although I do not believe that was his intent, ‘sterling holder’ may sound like a large investor. I was giving an example of how the same problem hits individuals who would hardly be classed as investors or even savers. Overall, my comments were following lines that you and Richard had started and I was acknowledging that. Arguably, I might have better written ‘Following’ rather than ‘To’.

I cannot say that I agree with you on every point. A fall in inflation is one example. However, it is acceptable for people to agree with you on these pages.

Is this another example of what I call "Pestonilism" rather than reporting the BBC and the media in general are actually trying to create a scenario that will result in a feeding frenzy of journalism, hype & hysteria, e.g double dip recession.

The media are experts in doing this these days, Peston with Northern Rock(a piece of reporting equal to treason in my opinion) and the Swine Flu Epidemic - the media whips the nation into a panic and then has the nerve to criticise the government for taking steps to calm the panic created by the media.

Free speech is a right, however with rights come responsibilities of which journalists and reporters seem not to let get in the way of a sensationalistic reporting.

Perhaps the media needs to be tempered by being billed for clearing up the market forces it creates

Why do journalists always express government interest costs as debt to GDP? The whole economy (GDP) does not pay the interest, the government does so why not express the relevant figure as debt interest to government income (ie the tax take). On that basis the UK's figure is about 7% ie 7% of tax taken by the government goes straight into servicing the national debt. And its steadily rising. Assuming Greek government is about half the size of the economy that would mean about 24% of Greek tax goes to service its debt interest. Pretty serious i'd say.

88. At 2:14pm on 14 Feb 2010, foredeckdave wrote:
#74 Devils Advicate,

You also forgot the great degree of fraud by employers
=============
I didn't forget, I never heard, unless of course you are referring to Maxwell and Equitable Life?

With Germany having already decided to increase retirement age from 65 to 67, and the Greeks only having just announced they will increase theirs from 61 to 63 by 2015, I wonder what level of support the German government will get from its people if it pledges any real financial support.

Also, apparently only half the Greeks declare earning more than the tax free 12000 Euro of income.

How can anyone expect a neighbour to bail it out while there are fundamental differences in how they are being run?

Some posters seem to be on some sort of loop and are repeatedly posting the same guff regardless of the issue under discussion.

I see Rugbyprof (#12), Nautoiner (#21), Simondav (#24), nilihist, and molieres (#70) et al are still peddling the same political line, which combines running down Stephanie's blog, the BBC and the UK’s economy. The postings seem to go something like this.

"UK is a total basket case. [].. like Greece []….or identical to Greece []..and if it isn’t identical to Greece now, it will be shortly…[ ]..and the only way out is to put the Etonians in power…and the BBC and Stephanie would explain this if only they weren't so biased..” [Repeat often on all blogs].

Nobody except those with such a crass political agenda would try to argue that the UK is in the same position as Greece. Rugbyprof’s varied statistics (#12) are largely irrelevant to the point of this discussion. (Trade deficit?). Clearly chosen to put the UK in a poor light regardless of the issue under discussion or any context.

Far more relevant statistics are those mentioned by Stephanie about the amount of maturing debt and crucially the amount of public debt as a ratio of GDP (national income).

Stephanie’s figure of 55% looks like public sector net debt (excluding financial interventions) as a percentage of GDP, (others measures would give a higher figure).

Now because the usual suspects like to see high "bad" numbers for the UK, let me take the higher figure of all public debt to GDP ratio. For the UK this is about 68% (2009) and for Greece 108%. Clearly not the same.

But interestingly, the UK figure makes the UK the 22nd highest, that is even lower than such sensible countries as Belgium, Israel, France, Germany and Canada to name a few.

I know this better UK statistic will disappoint some, but it is obvious that the UK is not in the same or close to the position that Greece finds itself.

95
Germany are not going to bail out anyone !


https://uk.biz.yahoo.com/14022010/325/germans-say-euro-zone-expel-greece.html

#92, Mackem_Man

"Perhaps the media needs to be tempered by being billed for clearing up the market forces it creates"

Now now the "market' does not need the public media to create messes all by itself - and then expect the public to pay the bill

#94 Devils Advocate,

Those 2 are far from being the only ones who left their former employees in the proverbial. A Google search may help inform you.

#98 so foredeckdave are you in denial that if Peston did not create the Northern Rock situation he at the very least put a tanker load of fuel over the infant embers and turned into a blaze that cost the country billions?

And just who hyped up the Swine Flu, the public? the government?

Now we are being compared to Greece when I suggest there could other countries we are better aligned with, but that would be letting the truth get in the way of a good story, something the media never does these days.