The economic end of Britain?

[roma]

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:-

Then there are those also on the net who disagree .

Any thoughts from the economists on this forum ?

Source: http://moneyweek.com/endofbritain/

 

[Sakal Gharelu Ustad]

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.

 

[roma]

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.

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 ) ?

 

[Armand2REP]

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.

 

[Sakal Gharelu Ustad]

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 ) ?

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.

 

[Sakal Gharelu Ustad]

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.

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.

 

[sunny_10]

.
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

 

[sunny_10]

Poverty returns to Europe by leaps and bounds

The news about the economic situation in the EU reminds frontline reports. Head of Unilever in Western Europe, Ian Zeyderveld, from the pages of the Financial Times Deutschland said that poverty is returning to Europe. The main reason for the increasingly lower income of the residents of the Old World is a full-blown crisis in the euro area that is still far from complete.

Ian Zeyderveld has proposed a new strategy to remedy the rapidly declining profits of Unilever in Western Europe. He believes that product packaging should be made smaller to reduce its price. It works both in Asia and now in Europe. The Unilever is not alone in changing its marketing strategy in the crisis-stricken European countries.

Head of the Department on International Financial Issues at the Centre for European Economic Research, Professor Michael Schroeder said that the European crisis affects export-oriented producers more than others. As a result, market conditions weaken, unemployment rises, and living standards lower. According to the expert, this situation may last for three to four years. Numerous examples of the fall of the level of European citizens clearly illustrate his words.

In its study, the British Guardian newspaper found that 83 percent of teachers in the UK every day see hungry students. Over half of teachers say that in the last couple of years the number of hungry school children has increased, as many British families are suffering from reduced benefits, unemployment and recession. Almost half of the teachers admitted to feeding starving scholars, one in five even gives them money for lunch. Why is this happening?

The Center of the Modern Family in the UK conducted a study that demonstrated the effects of the fall of wages and cost of living for the Britons, and increased cost of goods and services related to child care. The crisis also hurts young Britons of 18-32 years old – according to the survey, one in five cannot pay their utility bills, and one in eight young resident of England skips lunch for the opportunity to feed their family.

But Britain is not the poorest country in Western Europe. The situation in not so wealthy economies of the region is much worse. The unemployment rate for people aged 16 to 24 years old in Italy is 28 percent, in Greece – 43 percent, and in Spain – 51 percent.

The Greek economy in the past year fell by 6 percent, the recession in the country has been ongoing for five years, and it is projected that this year the economy will fall by another 5 percent. About 20 percent of retail stores were shut down. The number of suicides in Greece over the last 12 months has increased by 40 percent, and the amount of debt of the Greek government, according to the IMF, is 160 percent of GDP.

In June of this year, the public debt of Italy, according to the local central bank, has reached a record $2 trillion euros, which is 123 percent of its GDP. Italian Prime Minister Mario Monti said that Italy does not need financial help from the EU, but only moral support, which is hard to believe.

The second largest economy in Europe after Germany, France, has also suffered from the crisis. According to the Statistics Bureau of France Insee, this is the third stagnant quarter in a row. Stagnation is, of course, not a recession, but the country's government has a lot to think about.

Perhaps one of a few countries that are more or less stable during the financial storms is Germany. According to the National Bureau of Statistics, the growth of the economy of Germany for the year 2012 was 0.5 percent. It had a positive impact on the growth of domestic consumption and export.

The opinion of the Europeans about the situation is worthy of note. In July of 2012, the results of the survey "Eurobarometer" that tracks the level of anxiety and concern among residents of the Old World were published. It turned out that 71 percent of the EU citizens consider the economic situation in the country poor.

30 percent of the residents of the EU assess their position in the labor market as unsatisfactory. 100 percent of Greek believes that the economy is in trouble. The same opinion on the state of the national economies was expressed by 99 percent of the population of Spain, 96 percent of Irish, 93 percent of Hungarians and 92 percent of Italians.

However, according to the same survey, there are optimistic countries, whose people consider the situation in their countries more than acceptable. Among them are 83 percent of Swedes, 77 percent of Germans, 66 percent of Austrians and 55 percent of Danes.

According to head of the Scientific Research of Mises Center Yaroslav Romanchuk, now there is a situation where we have two Europes – a happy one (mainly Germany and Scandinavia), and the rest – about 20 countries, and the difference between the two Europes is turning into an abyss. The consequence of this situation is growing nationalism, resentment, and envy.

The crisis also affected most affluent segments of the population of Europe. According to a research by Capgemini and Royal Bank of Canada, the wealth of millionaires not only in the EU, but in the entire world in recent years has declined. The exceptions are, perhaps, only the fat cats in the Middle East. Last year, the total wealth of the world's millionaires fell by 1.7 percent – the first such decline since 2008.

The number of the super-rich decreased by 2.5 percent. The report's authors say this is due to the fact that wealthy people abroad often invest their money in low liquidity and high risk assets – such as real estate

However, statistics shows an increase in the number of millionaires in Europe at 1.1 percent due to the fact that the wealthy people of the continent now prefer to invest in foreign assets. The largest number of wealthy people now lives in the Asia-Pacific region.

Chinese business advisor Andy Xie believes that the measures taken by the European leaders to improve the economic situation in the region cannot put an end to the crisis and are not radical and convincing enough. The expert sees the main cause of the crisis in their irresponsibility. The EU countries have broken the rules of their own game in terms of the budget deficits and mired in debt. Endless loans that were handed out in the past, sooner or later, would lead to a crisis.

The European leaders have asked the international community to support their nation, saying that otherwise the global economy will get worse. According to Xie, since Europe is the main trading partner of China, export-oriented Chinese firms are ruined. It is not just China – Europe is the main source of technological and industrial maintenance for Africa, and the crisis in Europe affects the situation in the most negative way.

Germany proposes to introduce austerity measures to cut all kinds of benefits and wages in the troubled areas of Europe, mainly in its south. However, these measures are becoming increasingly more ineffective and unpopular – unemployment is rising, the standard of living is falling, and the positive trend is not visible.

Andy Xie said that the inefficiency of today's economy of Europe is due to its lavish social costs, ineffective trade unions, as well as confusing laws that prevent the development of competition. If the countries of Europe eliminate these obstacles to their development, the situation may markedly improve.

The administration of the U.S. President has sent to Europe the U.S. Treasury representative Lyle Brainard to encourage the governments of several countries in the anti-crisis measures. In particular, it is expected that the Eurozone stabilization funds will be used – about 700 billion euros – to recapitalize banks and provide financial assistance directly to financial companies, not the countries.

Poverty returns to Europe by leaps and bounds � Set You Free News

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:

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

 

[sunny_10]

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.

Hi SG - great to hear from you !

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.

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

 

[sunny_10]

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

Head of the Department on International Financial Issues at the Centre for European Economic Research, Professor Michael Schroeder said that the European crisis affects export-oriented producers more than others. As a result, market conditions weaken, unemployment rises, and living standards lower. According to the expert, this situation may last for three to four years. Numerous examples of the fall of the level of European citizens clearly illustrate his words.

In its study, the British Guardian newspaper found that 83 percent of teachers in the UK every day see hungry students. Over half of teachers say that in the last couple of years the number of hungry school children has increased, as many British families are suffering from reduced benefits, unemployment and recession. Almost half of the teachers admitted to feeding starving scholars, one in five even gives them money for lunch. Why is this happening? :ranger:

The Center of the Modern Family in the UK conducted a study that demonstrated the effects of the fall of wages and cost of living for the Britons, and increased cost of goods and services related to child care. The crisis also hurts young Britons of 18-32 years old – according to the survey, one in five cannot pay their utility bills, and one in eight young resident of England skips lunch for the opportunity to feed their family. :ranger:

But Britain is not the poorest country in Western Europe. The situation in not so wealthy economies of the region is much worse. The unemployment rate for people aged 16 to 24 years old in Italy is 28 percent, in Greece – 43 percent, and in Spain – 51 percent :ranger:.

 

[Sakal Gharelu Ustad]

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

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

 

[sunny_10]

.
@roma

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

 

[roma]

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.

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.

 

[sunny_10]

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

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

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

Eurozone crisis has pushed millions into poverty
10 DECEMBER 2012

Crushed by an austerity squeeze and towering unemployment, millions of Europeans joined the ranks of the newly poor in 2012 in a crisis that showed no mercy for the old, women or children.

An arc of misery spread pitilessly across southern Europe's middle classes, engulfing bailed-out nations Greece and Portugal and tottering heavyweights such as the eurozone's number four economy, Spain, and number three, Italy.

"The black hole is getting bigger and bigger," fretted Mercedes Gonzalez, a 52-year-old Spaniard who has less than 800 euros ($1,000) a month to raise her unemployed family in the Madrid suburb of Fuenlabrada.

In July, she was still pocketing the monthly state aid of 426 euros for the long-term unemployed. But the benefit was slashed to 360 euros last month, she said, and in the meantime a September 1 rise in sales tax lifted the price of food and other regular bills.

"Things are really getting worse, we can't breathe already," said the energetic unemployed saleswoman whose voice betrayed weariness as she contemplated caring for herself, her carpenter husband and two of her three adult sons, all out of work.

Spain is displaying all the signs of a major social crisis, with one in four workers unemployed, an unprecedented austerity squeeze by the state, cuts to education and healthcare, and thousands of indebted families thrown out of their homes and into the streets.

In this country, where two home owners threatened with eviction recently committed suicide, as in other southern European nations such as Greece and Italy, the economic crisis is sowing implacable despair.

In Italy, the fate of an unemployed bricklayer who was being chased for unpaid taxes moved the entire country.

Giuseppe Campaniello set himself ablaze outside a tax office at the end of March and died after nine days of agony.

"You can't expect a self-employed bricklayer to pay taxes even for the months when he is not working. The state beats you up and Giuseppe paid the consequences," his 48-year-old widow said Tiziana Marrone from Bologna in central Italy told AFP. :ranger:

"Giuseppe was not helped out. He felt he had his back to the wall. That morning he had to go to a criminal hearing for his taxes. It should have never got to that. We all make mistakes but he never stole from anybody!" she said.

"His was also a protest. Our laws drove him to it. It wasn't a suicide linked to the crisis, it was state-sanctioned murder," she said.

Marrone herself is now in a desperate situation as she has inherited her husband's massive debts and lives on an allowance of 450 euros a month. She is forced to rely on handouts from her pensioner mother to survive.

In Greece, the crisis delivered another fatal blow.

In April, a 77-year-old chemist shot himself in the head leaving a note that accused the government of stripping him of the resources to live.

In Greece, where the unemployment rate is the highest among industrialised nations at 25.4 percent in August, the crisis has hit people harder than any other nation in southern Europe: 31 percent of its inhabitants were at risk of poverty or social exclusion in 2011 compared to a European Union average of 24.2 percent.

George Tsouvalakis, a 31-year-old jobless carpenter, and his 30-year-old wife, Lia, are among a "lost generation" of thirty-somethings sacrificed by the crisis.

With their two-year-old daughter, Angelina, they are trying to leave the country but cannot afford the plane ticket. Their income fell from 2,500 euros a month before the crisis to between zero and 400 euros.

"We should not remain in the country anymore, that is what I see. But we don't have the financial capability to leave this country. That is our problem or else we would have already left," Lia said.

In Portugal, too, where 24.4 percent of the population is estimated to be at risk of poverty or exclusion, the crisis has mortgaged the futures of many young people.

After completing a master's degree in dramatic arts at the prestigious Coimbra University, 29-year-old Nilce Carvalho could not pick up her diploma because of the debts she had built up since the hard-up government slashed her grant from 400 euros to 98 euros.

To escape her debts, the young woman launched a public appeal on Facebook, overcoming "a kind of shame".

"There are lots of young qualified people in our country but there is just no work for us," Carvalho said.

Across southern Europe, humanitarian groups are confronting rampant poverty in all its guises.

"These are families in which every member of working age is out of work, people who lost their home because they were evicted, who are not used to turning to social protection networks," said Fernando Cuevas, spokesman for the Spanish Red Cross.

"Where is the middle class today in Spain?" asked David Polo, who looks after the homeless for Caritas in Burgos, a northern Spanish town. "It's breaking up. We are starting to see a polarisation of this class."

Humanitarian groups are especially worried about women and children.

The UN children's fund UNICEF estimated there were 2.2 million children living below the poverty line in Spain. In Portugal, the education ministry has sounded the alarm because in the space of just 20 days the number of pupils lacking food leapt from 10,000 to 13,000.

Even pensioners, some of them looking after entire families, are no longer safe: the right-leaning government in Spain has announced that the rise in retirement pensions will be less than had been expected in 2013, breaking an oft-repeated electoral promise.

And on Sunday, thousands of doctors and other health workers took to the streets of Madrid to decry government plans to privatise some health services.

Question Everything "¢ Eurozone crisis has pushed millions into poverty - FRANCE 24

 

[Sakal Gharelu Ustad]

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

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

Individual interviews are always heart wrenching.

 

[sunny_10]

Individual interviews are always heart wrenching.

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)

 

[sunny_10]

Individual interviews are always heart wrenching.

I think you raised an interesting point about having to keep a balanced budget ( as one should expect ).

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.

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:

 

[roma]

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

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

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)

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:

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 ?

 

[Known_Unknown]

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.

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?

 

[pmaitra]

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?

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.