Thursday, November 27, 2008

Britain on the brink

An interesting post by Ambose Evans-Pritchard on the chances of Britain going tits up.

Some of his key metrics are:

- The budget deficit is climbing to 8% of GDP and the national debt will jump from under 40% of GDP to nearer 60% according to Fitch Ratings

- Credit Default Swaps (the cost of insuring against the bankruptcy of the British state) have reached 86 basis points. Compare Germany (35), USA (43), and France (49)

- Household debt has soared to 165% of personal income

- We can now only afford a 1% economic stimulus plan compared to the 14% projected for China

- The size of the state has gone from 37% to 46% in a decade

- Labour ran a budget deficit of 3% of GDP the top of cycle. Compare this to the 2% surplus at the end of the Lawson bubble, which means we go into this slump 5% of GDP worse off

- But we'll still be in the AAA club, albeit at the lower end...somewhere near Portugal, so it's not all bad.

Evans-Pritcchard states the obvious about New Labour hash-making:

"How could the regulators possibly think this was in the interests of British society? What economic doctrine justifies such stupidity? Why were 120% mortgages ever allowed? Indeed, why were 100% mortgages ever allowed? Debt is as dangerous as heroin."

Perhaps this smug Scottish hedgie called Hugh Hendry should be first against the wall when the revolution comes, but meanwhile we might take note of his bet that all of the key American banks will be in public hands in the very near future.
(Watch the mid-section of the video!)

"I see Dead people..." hehe.

No comments: