The economic end of Britain?

Discussion in 'Europe and Russia' started by roma, Feb 17, 2014.

  1. roma

    roma NRI in Europe Senior Member

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    So reads the title of an article from Money Week, which claims to be Britain's best-selling financial magazine.

    The article claims " We warned investors to take their money out of Europe in 2009… to avoid buying the euro… to stay away from the big banks in 2008… and steer clear of property investments in 2007.
    We even helped our subscribers find opportunities to profit from the ensuing chaos, by stocking up on gold and a number of other assets unpopular at the time."

    and further warns that :-

    We cite our success and experience with the crises of the past because there is an even bigger crisis looming – something that we believe will destabilise the very foundations of Britain. This looming crisis is related to the financial crisis of 2008... but it will be infinitely more dangerous. As we'll explain, there is an unsolvable problem at the heart of our financial system. One that dates back over a hundred years.

    In that time this problem has eaten away more than £10 trillion in public funds. It has been at the root of practically every major political argument in this country, and it affects every aspect of the way we live our lives. Twenty-five Prime Ministers – from both political parties – have come and gone without ever having come close to solving it.

    We believe the outcome of this problem is inevitable… and the recession, joblessness and instability you see right now is only the first stage of it. Many people think the slump we're in now is as bad as it will get. But the truth is, it's only the start.

    As evidence Money Week quotes the following data:-


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    Then there are those also on the net who disagree .

    Any thoughts from the economists on this forum ?

    Source: http://moneyweek.com/endofbritain/
     
    Last edited: Feb 17, 2014
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  3. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    [​IMG]
    debt/GDP ratio for the world



    1) total debt is not a correct measure to understand what is going on
    2) debt/GDP ratio underlines the payback capacity(which is around 85% for UK). So, if in the future UK govt. does not run huge deficits, it will be ok for them.

    If the country is growing, one can always roll-back the old debt using new debt and stay at the same debt/GDP ratio. If you look at the graph above, all the rich countries have higher debt levels, because investors believe in their payback capability. Unless, the global economy is hit badly by some shock, the problem is not going to aggravate.
     
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  4. roma

    roma NRI in Europe Senior Member

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    Hi SG - great to hear from you !
    I think the exacerbation is the (public ) expenditure (4th graph ) which will put into question the very cure viz. to keep
    a lid on borrowing in relation to income ( or growth ) ?
     
  5. Armand2REP

    Armand2REP CHINI EXPERT Veteran Member

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    Total debt is important to look at, but private debt is also owned by commercial banks which are usually backed with assets, ie housing and corporate holdings. It does measure how truly indebted the average UK citizen and corporation is.
     
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  6. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    Yes, public expenditure is rising all around the developed world due to increased spending on social security. I do not think it is sustainable in the long run with increase in the % of old people. Except France which is fairly young, most other countries have bad demographics.

    So, yes huge surge in public expenditure is bad and unsustainable in the long run. Does it affect UK right now i.e. in the short run? Not so much. But they would really need to keep a balanced budget.
     
  7. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    UK has a big financial industry and this hugely increases their private debt. Also, debt is not bad by default. If the banks have a well diversified portfolio, it is not a big concern.
     
  8. sunny_10

    sunny_10 Tihar Jail Banned

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    except few, most of the European economies are totally messed up, and one among them is UK, among the front liners in fact........

    a developed economy can't grow for more than 2% on long while even 90%+ Debt to GDP ratio is considered the level when you have to make every possible cuts in expenditures, which obviously effects growth again...... and more cuts generally increase unemployment too as less money is put in market this way .....

    thats how UK is placed among the highly indebted European economies as below :ranger:


    and UK look too ugly when you see the picture as below, and we do know that this data would be the worse by 2013 :facepalm:

     
    Last edited: Feb 17, 2014
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  9. sunny_10

    sunny_10 Tihar Jail Banned

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    Argentina opens doors to migrants, but settling elsewhere is harder

    As growing numbers of Europeans leave the continent and its economic woes, how easy is it to go and live in a new country? :ranger:

    [​IMG]
    Ipanema beach in Rio de Janeiro. Some European immigrants work in Brazil illegally by repeatedly renewing 90-day tourist visas. Photograph: Ricardo Moraes/Reuters

    Argentina opens doors to migrants, but settling elsewhere is harder | theguardian.com
     
    Last edited: Feb 17, 2014
  10. sunny_10

    sunny_10 Tihar Jail Banned

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    and yes, settling in the slum of Brazil is easy........ EU looks totally messed up at present :facepalm:
     
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  11. sunny_10

    sunny_10 Tihar Jail Banned

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    i don't know how links of my news posted is broke on time to time.......

    new link of the above news is as below :thumb:

    => Poverty returns to Europe by leaps and bounds - English pravda.ru

     
    Last edited: Feb 17, 2014
  12. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    It is not the best. But not as doomed as you portray.
     
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  13. sunny_10

    sunny_10 Tihar Jail Banned

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    @roma

    roma, is this your picture in your Avatar? hot.......
     
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  14. roma

    roma NRI in Europe Senior Member

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    I think you raised an interesting point about having to keep a balanced budget ( as one should expect ) .
    Good to have your and others' opiions on whther indeed they can do it in Britain, bearing in mind the substantial
    increases in population largely due to immigration and the need for various facilities for the people, the probablitiy that if
    Scotland choses to stay in the Union, then Westminster would have to impress them with greater spending there as
    a "reward" and as part of the devolution maximum terms of understanding .
    So i feel for the next five years, they will not be able to avoid debt financing their increased expenditure, resulting
    obviously in greater problems, and so part of the reason why the magazine Money Week has a strong point.
    Most grateful for your opinions.
     
  15. sunny_10

    sunny_10 Tihar Jail Banned

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    true but the news like discussed as above isn't a secret anymore too :nono:

    one more news from a frontline French Newspaper "FRANCE 24" is as below. we welcome your comment on it too :thumb:


     
    Last edited: Feb 19, 2014
  16. Sakal Gharelu Ustad

    Sakal Gharelu Ustad Detests Jholawalas Moderator

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    Individual interviews are always heart wrenching.
     
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  17. sunny_10

    sunny_10 Tihar Jail Banned

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    thats true but its also true that 2008 recession did have an adequate impact on the social status of European countries, and UK is among the hardest it.......

    first we know that there has been a reduction in social security/Welfare in UK with a good margin since 2008 for unemployed people. and from we have data's of unemployed working age people as below :ranger:

    => Employment to population ratio - 15+ - male (%) in the United States (63.6% to date)

    => Employment to population ratio - 15+ - female (%) in the United Kingdom (51.6% to date)
     
    Last edited: Feb 19, 2014
  18. sunny_10

    sunny_10 Tihar Jail Banned

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    and just to discuss the topic, as we do know that US/West are very modern countries, they dont have commitments for family life to the extent as we have in developing countries. and hence, we don't find females having that type of support from her husband/partner/boy friend, like how social structure of India is maintained, for example. and we do know that majority of the unemployed women, specially Single Mothers, finding life going down below the expected standard for last few years....... we mainly see these things quite open since 2008 recession, which covers the whole Europe to an extent too, in fact :ranger:
     
    Last edited: Feb 19, 2014
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  19. roma

    roma NRI in Europe Senior Member

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    Many thanks to member sunny for the three posts,
    but i would like to clarify for clarity's sake that thread is about the dire state of the "balance sheet of the UK treasury",
    and what sunny wrote about are the EFFECTS of the depleting prosperity in the EU.

    The two are not quite the same nevertheless they are related :-
    the poor national "balance sheet" leads to individual and family poverty, sadly..
    I surely welcome more posts from sunny and others too, on the graphical info in the lead post, whether
    they are indeed accurate and whether indeed the situation is dire or is the interpretation incorrect, are there
    some other factors missing that would make a substantial difference ?
     
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  20. Known_Unknown

    Known_Unknown Devil's Advocate Stars and Ambassadors

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    I find it hard to understand this part. If old debt is continually paid back by adding new debt, the compounding effect of the interest rate will result in the total debt swelling to unmanageable levels. Since the GDP growth in comparison will always be at 2% or less, the net result will be the debt-GDP ratio growing higher and higher and breaching the 100% mark at some point or another unless the government takes steps to devalue the currency, which could lead to a rise in inflation and further constricting the GDP growth.

    This is the same as me borrowing $500 on my credit card, then applying for a new card to make minimum payments on the old card until I max it out, then getting yet another card to make minimum payments on the combined debt of the previous two cards and so on. How can this possibly be sustainable?
     
  21. pmaitra

    pmaitra Moderator Moderator

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    It doesn't make any sense. This is the beauty of Fiat Currency. It is designed to start off a rat race till it collapses like a house of cards. This is an economic theory that was designed to violate the basic principles of mathematics. Obviously, it is going to fail. Historically, Fiat Currency has had a very short life, while gold and silver have a history of several thousand years.

    Don't worry, all these theories are a big scam, and the economists know it. India has been preparing for a crash of the US dollar, and has taken steps in that direction: India Buys 200 Tons of IMF's Gold Allotment - WSJ.com

    India's current gold reserves are at 558 metric tons, not counting gold hoarded by the Indian public. India will do just fine.
     
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