What happens if the UK goes bankrupt (if it isn't already)?

Linton

There is no debt. There is no obligation. There is no agreement.

Generali

Linton wrote: »

There is no debt. There is no obligation. There is no agreement.

The Government seems to think otherwise:

http://www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/DG_183754

The State Pension is a regular payment people can claim when they get to State Pension age. Most people build up some State Pension, but the amount they get varies. It's worth understanding how you build up State Pension and how much income it will give you in later life.

My emphasis

Linton

I could counter with the legal distinction between WILL and SHALL, but wont

Generali

Linton wrote: »

I could counter with the legal distinction between WILL and SHALL, but wont

Ok..........................

chucky

Generali wrote: »

http://www.thefreedictionary.com/default

v. de·fault·ed, de·fault·ing, de·faults
v.intr.1. a. To fail to do what is required.
b. To fail to pay money when it is due.

http://www.investorwords.com/1350/default.html

a debt restructure is also considered as a Default.

tomterm8

Generali wrote: »

There was a kind of default after WW2 when the UK issued very low interest Gilts that did not have maturity dates that I think creditors were obliged to take.

Another example of a UK default is changing the retirement age for Government employees and state pension recipients.

AFAIK, it's been a very long time since the UK missed a coupon payment on a Gilt.

IIRC, the UK government unilaterally changed the indexing methods used in the 70’s on a number of government bonds, as part of joining the EU, and changed the taxation structures, but maybe I am wrong? Either way, I regard default as more complex than simply coupon payments. Refusing to stand by other obligations, such as indexing, pegs to currencies, and taxation on bonds etc can be a default.

Generali

tomterm8 wrote: »

IIRC, the UK government unilaterally changed the indexing methods used in the 70’s on a number of government bonds, as part of joining the EU, and changed the taxation structures, but maybe I am wrong?

I've not heard of that. That neither makes you right or wrong but it possibly makes me ignorant!

tomterm8 wrote: »

Either way, I regard default as more complex than simply coupon payments. Refusing to stand by other obligations, such as indexing, pegs to currencies, and taxation on bonds etc can be a default.

I agree. The reason that British politicians wanted to return to the pre WW1 gold peg was to avoid devaluing foreign owners of British assets. They viewed that as a default.

Radiantsoul

Generali wrote: »

They viewed that as a default.

Is defaulting so bad?

Governments rarely achieve all their manifesto pledges, and you could argue that they have a contract with their electorate that is strong as with bondholders(perhaps stronger as they inherit the bondholders but not the electorate).

I tend to think the idea in finance that government bonds set a risk free rate of interest is emperically wrong. Ultimately all governments will end or default. And in truth you probably only need to hang around for a couple of generations for the real success of capitalism. The governments of Africa, South America, Asia and Eastern probably default at least partially at least once a decade!

marklv

Government debt is not the same as personal debt; this is the fundamental misunderstanding. There are no bailiffs that will knock the door at 10 Downing Street in case Britain goes bust.

Generali

marklv wrote: »

Government debt is not the same as personal debt; this is the fundamental misunderstanding. There are no bailiffs that will knock the door at 10 Downing Street in case Britain goes bust.

Correct. What will happen is that people will be more reluctant to lend to the British Government in future if they default.

They will either demand a higher rate of interest or that the debt is denominated in another currency than Sterling.