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

Graham_Devon

HAMISH_MCTAVISH wrote: »

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.

How would that really help?

The only policies that would get growth, include more debt.

With more debt comes more interest, and trembling knees worldwide.

You may increase the tax take, but you are also increasing the debt, and interest. This does nothing apart from put us in a very precarious position where the higher tax take is literally paying the higher costs of the higher debt, meanwhile the world is looking upon us as very volitile.

dannykos

Cuts also cost money - as to slash 10% of the NHS workforce for instance will lead to a massive initial outlay on redundancy payments.

Unfortunately there's no simple solution, hence why I'd like to see more detailed plans from all parties in the run up to the election.

Thrugelmir

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.by him 29/05/09

Article says prime candidate not first.

Eire has taken immediate steps to address the budget issues. 40% house price falls don't seem to have caused total collapse either.

bendipa

aelitaman wrote: »

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.

But then you can apply that same argument to the US, UK and the PIGS Euurozone countries. AFAIK Ireland is not on any life support from the ECB, although they have been promised assistance should all else fail.Greece's problems might derail anything promised in the past though.

Rochdale_Pioneers

Of course the sovereign debt crisis affects Britain. But not - as the frothers have it - because we're going bust or we'll be unable to sell bonds. Because we and Europe and America and Japan now owe an ocean of cash to a small number of private individuals, to oil emirates and to China. All of us are in hock and thats the problem, not our small chunk of it on its own.

Its blindingly obvious that a country of our size selling government debt in a currency that we both control and print is not the same as a small country owing debt in a currency they neither control nor print. We are not Greece. We cannot go bust. We can sustain both the deficit and our debt to GDP ratio (which even now remains lower than France, Germany, America et al).

What we can do however is get trapped along with everyone else in the storm. Just like energy we are now reliant on the market to supply us with money - and all our friends are as desperate for it as we are. Thats the worry - what happens when the sources of money copy our banks and jack the rate up? We won't go bust - unlike others. But we will be damaged by the fallout from the likes of the PIGS.

davilown

Thrugelmir wrote: »

Article says prime candidate not first.

Eire has taken immediate steps to address the budget issues. 40% house price falls don't seem to have caused total collapse either.

Is this a sign of things to come in the country where HPI are greeted so wel by the media and politicians?

What I'd like to know is when the cuts and hikes are going to be made public. Perhaps the election should be postponed for a year and the parties get together and decide the best course of action. Maybe Hamish could join in and ensure that Aberdeen's house price remain buoyant.

The_White_Horse

its ok, Brown has a plan that eveyone will work for the public sector on 100k a year - that will increase growth.

aelitaman

bendipa wrote: »

But then you can apply that same argument to the US, UK and the PIGS Euurozone countries. AFAIK Ireland is not on any life support from the ECB, although they have been promised assistance should all else fail.Greece's problems might derail anything promised in the past though.

Who lent the money to NAMA at 1% interest rates?
Who is buying the debt the Irish govt is issuing currently?

Ans yes I believe that if we get a Labour Govt or a hung parliment at the next election then we will have to introduce an austerity budget very quick or Merv will have to print another 200 bill to see the UK through the next 12 months. So the UK is very close to technical sovereign bankruptcy.

aelitaman

Rochdale_Pioneers wrote: »

Of course the sovereign debt crisis affects Britain. But not - as the frothers have it - because we're going bust or we'll be unable to sell bonds. Because we and Europe and America and Japan now owe an ocean of cash to a small number of private individuals, to oil emirates and to China. All of us are in hock and thats the problem, not our small chunk of it on its own.

Its blindingly obvious that a country of our size selling government debt in a currency that we both control and print is not the same as a small country owing debt in a currency they neither control nor print. We are not Greece. We cannot go bust. We can sustain both the deficit and our debt to GDP ratio (which even now remains lower than France, Germany, America et al).

What we can do however is get trapped along with everyone else in the storm. Just like energy we are now reliant on the market to supply us with money - and all our friends are as desperate for it as we are. Thats the worry - what happens when the sources of money copy our banks and jack the rate up? We won't go bust - unlike others. But we will be damaged by the fallout from the likes of the PIGS.

We went bakrupt in the 70's with half the deficiet 6% that we have now 12%. If the markets decide we are bust then we are bust and it will be the IMF.

aelitaman

davilown wrote: »

Is this a sign of things to come in the country where HPI are greeted so wel by the media and politicians?

What I'd like to know is when the cuts and hikes are going to be made public. Perhaps the election should be postponed for a year and the parties get together and decide the best course of action. Maybe Hamish could join in and ensure that Aberdeen's house price remain buoyant.

In a perverse way the fact that we have not had a massive house price crash has helped the economy because bank losses have been less than they would have and indebted people have been able to sell thier house at a better price meaning they may not have relaised a loss on the house at all or had much smaller residual debt from thier property than they would have with a 50% fall in price meaning thier repayments on the loss are less meaning they can spend more in the economy or avoid bankruptcy.

Strange how things work out.