Leading financial historian says UK next in sovereign debt crisis, then US

Kohoutek

An opinion piece in the Financial Times by Niall Ferguson, Professor of History at Harvard University, a specialist in financial history and author of many books on financial history and the British Empire. I've read a couple of his books, he's got pretty conservative political views, he's certainly not a radical or someone that makes ridiculous calls, which makes a prediction of someone his standing even more alarming:

"It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate...

Yet the idiosyncrasies of the eurozone should not distract us from the general nature of the fiscal crisis that is now afflicting most western economies. Call it the fractal geometry of debt: the problem is essentially the same from Iceland to Ireland to Britain to the US. It just comes in widely differing sizes...

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy – zero interest rates plus quantitative easing – did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect...

On reflection, it is appropriate that the fiscal crisis of the west has begun in Greece, the birthplace of western civilization. Soon it will cross the channel to Britain. But the key question is when that crisis will reach the last bastion of western power, on the other side of the Atlantic."

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

chucky

has Greece defaulted yet?

JP45

The International Monetary Fund recently published estimates of the fiscal adjustments developed economies would need to make to restore fiscal stability over the decade ahead. Worst were Japan and the UK (a fiscal tightening of 13 per cent of GDP). Then came Ireland, Spain and Greece (9 per cent). And in sixth place? Step forward America, which would need to tighten fiscal policy by 8.8 per cent of GDP to satisfy the IMF.

So according to the IMF we are, on this measure at least, in a worse predicament than Ireland, Spain or Greece. Terrific.

This just adds to my increasingly pessimistic view of the UK economy - it seems to me we're destined for many, many years of sluggish growth at best.

HAMISH_MCTAVISH

The current structural deficit is around 180 billion pounds a year.

The loss of tax revenue from the recession is around 80 billion pounds a year.

The fastest way, by far, to reduce the structural deficit is adapt whatever policies are required to get growth in GDP and therefore tax take.

You can't just cut your way to balance. The gap is too big. There has to be growth as well.

Kohoutek

"Last night European officials were involved in furious efforts to try and complete a €20 billion rescue package, designed to halt the looming crisis in Greece before it spreads to other countries. France and Germany were at the forefront of the eurozone negotiations.

However, Mr Brown - when challenged in the Commons over Britain’s position - was unable to rule out Britain's involvement in a a Greek rescue package.

But the issue of other countries needing urgent help, as well as Greece, is also pressing. The economies of both Spain and Portugal are in serious trouble and their deficits spiral.

It means a total rescue package for the so-called PIGS – Portugal, Ireland, Greece and Spain – could be as high as €60 billion [for the UK]

Britain contributes 20 per cent of the EU budget and any EU-wide bail out of either Greece - or the other threatened economies - could, as a result, fall heavily on British shoulders."

http://www.zerohedge.com/article/eve-greek-bailout-cluter!!!!-reigns-threating-tentative-market-stabilization-collapse

Laughing_man

Well, if we can hang on for another few years of HPI prices will be so high that the government will only need to sell a couple of council flats to cover the deficit.

Kohoutek

If Britain adds another €60 billion (£53 billion) to its budget deficit of £178 billion, we clearly haven't got 'a few years left'. The cracks are going to start emerging very soon unless the government take immediate action to set out a credible plan to reduce the deficit. With Gordon Brown in charge, that's very unlikely.

black_taxi_2

chancelor---UK---NO PLANS to help bailout greece

in other words--UK tax payer will have to contribute to EU bailout

bendipa

Kohoutek wrote: »

An opinion piece in the Financial Times by Niall Ferguson, Professor of History at Harvard University, a specialist in financial history and author of many books on financial history and the British Empire. I've read a couple of his books, he's got pretty conservative political views, he's certainly not a radical or someone that makes ridiculous calls, which makes a prediction of someone his standing even more alarming:

"It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world. Its ramifications are far more profound than most investors currently appreciate...

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

Oh really? And in May last year the same guy, Niall Ferguson wrote a piece saying Ireland would be the first Eurozone country to go bust. Changed his mind quickly enough it would seem.:D He has also warned that in Britain he expects "more riots in major cities this year" (2009)

Wrong!!!

Read this piece.by him 29/05/09

aelitaman

bendipa wrote: »

Oh really? And in May last year the same guy, Niall Ferguson wrote a piece saying Ireland would be the first Eurozone country to go bust. Changed his mind quickly enough it would seem.:D He has also warned that in Britain he expects "more riots in major cities this year" (2009)

Wrong!!!

Read this piece.

And in all but dotting the 'i's and crossing the t's Ireland did go bust. It had to introduce an austerity budget,cut spending buy slashing public sector employment and reducing wages and it is still on life support from the ECB now.

ses6jwg

Read some of his works on WW1, plenty of inherent bias.