Moneyweek - British interest rates & debt....are we all doomed?

Macca37

I have just listened to the latest Moneyweek presentation about UK debt.

The theme was that due to the amount of debt that the UK has accumulated and the fact that we are still continuing to run up even more debt means that we will soon hit a crunch point where interest rates will increase leading to the UK becoming effectively bust.

They mention that this could lead to the abolition of the NHS, State pension etc just to try and cover the interest payments.

They go on to compare our position to Greece to try and emphasise how bad a position we are in. The coming crisis will in turn lead to a run on banks, a housing crisis, stock market collapse which will eventually leading to the complete breakdown of society within the UK.

From my own perspective it all seems very overblown to me but I would be interested to see what other people think?

ColdIron

MoneyWeek are hardly credible, the Daily Express of the financial publishing world if you like

Jegersmart

Well, in a general sense a monetary system based on debt will ultimately fail at some point - that much is inevitable - but of course the system has been in place for many decades and may be possible to carry on for many more. Intellectually one cannot easily understand why we carry on this exercise in futility, but the motivations behind it are not transparent and certainly complex.

In answer to your direct question relating to UK specifically, I would say it is unlikely that anything catastrophic will happen in the next decade but there are many factors that are dynamic and could potentially change things relatively quickly.

In the US, the Federal Reserve now has a $3.3+ trillion balance sheet which it would be difficult to see how they will "get out" of - I guess the BOE also has rather an expanded balance sheet with similar challenges ahead.

In my view, what can be said with some certainty is that this and past excesses will end up costing the taxpayer very dearly indeed - but most people do not know or are not comfortable facing this issue.

J

JohnRo

Jegersmart wrote: »

...Intellectually one cannot easily understand why we carry on this exercise in futility, but the motivations behind it are not transparent and certainly complex.

Incredibly complex to unravel, perhaps impossible, but the motivation is easy enough to understand isn't it? ...and not your every day greed but an unquenchable, rapacious, omnipotent rule the world type of greed.

The debt money monopoly is rigged in favour of those who operate it, where is the motivation for anyone, in a position to actually try, to change anything in a system like that. The people in a position to make systemic changes are already being rewarded handsomely by the system.

Current and mostly unborn future generations, are all being forced to serve various private, for profit debt money monopolies with enforcement provided by dependent and complicit governments.

imho of course.

Ark_Welder

As a percentage of GDP, government debt is lower now than at the end of WWII when the NHS came into being.

Jegersmart

Ark_Welder wrote: »

As a percentage of GDP, government debt is lower now than at the end of WWII when the NHS came into being.

Probably - and thanks for the unrelated post - but it would be good to know your views on the current situation and possible scenarios rather than picking out one fact with no context?

J

innovate

Jegersmart wrote: »

Probably - and thanks for the unrelated post - but it would be good to know your views on the current situation and possible scenarios rather than picking out one fact with no context?

J

unrelated? I thought it very pertinent to the thread subject since both (government) debt and the NHS are mentioned in the OP.

Overall, I agree with ColdIron. It's most likely a pre-cursor to a "therefore invest in xyz" (all of which you can do in some way via Moneyweek)

kidmugsy

Gloomsters like the Moneyweek crowd tend to get the direction of change right but underestimate how long it will take for their expected result to materialise.

If Cameron/Clegg continue to apply Blair/Brown policies we shall end up in terrible trouble. But I doubt that the electorate will allow them to behave more intelligently.

JohnRo

The financial world has changed beyond recognition since the second world war, historic figures might prove useful politically but I question their relevance.

As for the real, actual UK national debt, the truth is no one knows and it's almost impossible to put a number on. The just over a trillion or about 90% of GDP number is hopelessly inaccurate and politically advantageous.

The true debt including pension liabilities is estimated to be anywhere from 2.5 Tn - around 173% of GDP (according to the treasury) up to a worrying 5.5Tn or around 400% of GDP. These aren't numbers just plucked out of thin air, they're calculated from published and estimated liabilities.

None of them include future costs of things like spiralling infrastructure maintenance and nuclear decommissioning costs.

So where does that leave the manipulated debt to GDP figure everyone likes to cling to?

Ark_Welder

Jegersmart wrote: »

Probably - and thanks for the unrelated post - but it would be good to know your views on the current situation and possible scenarios rather than picking out one fact with no context?

J

Initial comments as per innovate. Lots of information around on the subject of historic GDP. Even Wiki has a take: http://en.wikipedia.org/wiki/File:UK_GDP.png

My views now are the same as 18/24 months ago: I expect low to no growth for a number of years, resulting in a similar period of post-WWII austerity. How many years? Haven't got a clue, so I don't worry over that too much. Will we reach the end of civilisation as we know it? No. Can I prove it? No.

The only thing that I am particularly upset about is the fact that there are no new issues of ILSCs on sale. But that would likely make for a far too boring article for the likes of Moneyweek [edit] or many of the threads on here.

Jegersmart

innovate wrote: »

unrelated? I thought it very pertinent to the thread subject since both (government) debt and the NHS are mentioned in the OP.

Overall, I agree with ColdIron. It's most likely a pre-cursor to a "therefore invest in xyz" (all of which you can do in some way via Moneyweek)

Well, it is unrelated imho because of the lack of context - especially also when one considers that national debt has *doubled* in the last 5 years alone.......but hey, if you think it is relevant to the present situation to quote debt to GDP after a major world war 70 years ago then we will have to agree to disagree;) Having said that, debt to GDP was highest in the 1800's - but I would say that the economy and the state of global stability was very different then. That may also change in the medium-term - does the UK have enough funds to participate in a major conflict nowadays - and if they don't what would that do to the ratios?

JohnRo also makes some pertinent points around transparency - banks are not required to release clear and robust reporting around their exposures - I guess that is the only reason why Greece was allowed into the EU courtesy of Goldman Sachs - who later confirmed that the swaps structures they put in place for Greece "were not illegal at the time"......

J