Uk State Could Go Bankrupt Within A Month

[aa3]

Something to consider; After Iceland put the state behind the liabilities of its banks, it took only 2 weeks until the country went bankrupt. Mr. Brown and Mr. Darling's press conference was on January 19.

Now the British government has effectively stood behind the liabilities of these mega banks. Especially after it became obvious just how bad RBS's balance sheet is. HBOS is a whole different ballgame than Bradford & Bingley, or Northern Rock. And RBS is a whole different ballgame than HBOS.

The national debt of the UK, before taking on bank liabilities: £637,400m

The liabilities the UK state stood behind earlier:

Northern Rock liabilities: £107,000m

Bradford & Bingley liabilities: £50,000m

The liabilities of the mega banks the government is either effectively standing behind or thought it soon will:

Lloyds: £341,200m

HBOS: £661,300m

Barclays: £1,343,360m

RBS: £1,887,108m

Total liabilities for standing behind these 6 banks: £4,390,000m

New liabilities of UK state: £5,027,000m (789% rise)

One bright spot, the liabilities of the Icelandic banks the government of Iceland stood behind were said to be 10 times the GDP of Iceland. The liabilities the UK government appears to be choosing to stand behind I'd estimate at about 3.5 times the GDP of the UK. On the downside the GDP of the UK appears heavily dependent on the financial sector which is now mainly bust, just like Iceland.

My prediction: Although I think the UK 'could' go bust within a month, I expect it will last longer than that. Perhaps into mid-2010.

[_w_]

It feels like we're getting damn close to another bout of panic. If the government's bluff is called then it's curtains for the UK. Right now it's 50-50 IMO.

[deflation]

RBS shares now being quoted in tenths of a penny, it's that low. 10.1 pence!

[Minos]

I was thinking it'll happen by this Friday.

[Saberu]

Hyperinflation here we come! This is actually worse than the US situation.

[DisQ]

Hyperinflation here we come! This is actually worse than the US situation.

It does sound like it, can't see US will be far behind us though.

[thod]

http://www.treas.gov/tic/mfh.txt

As you can see, the UK is the third largest holder of US treasury bonds behind Japan and China. This means it has ample ammunition to prevent it going bust.

Now you may have heard the recent stories of Russia and several other countries using their reserves to buy up their currency on the markets and thus preserve its value. Yet the UK has not done so. Its reserves are sitting there growing bigger. This should tell you that the UK is devaluing the pound as a matter of policy. They can begin to defend the pound at any level they wish.

The problem is they have started to play the game known as 'the race to bottom'. It was something that nobody wanted to start. You can expect other countries to devalue their currencies too, they will sell their currency to lower it whilst buying the other guys currency to raise his. The idea is to have your workers lower paid than the other guy to keep hold of industry and exports. Thats where the name comes from, it doesn't stop until we are all working 14 hours for a bowl of rice.

[Cogs]

http://www.treas.gov/tic/mfh.txt

As you can see, the UK is the third largest holder of US treasury bonds behind Japan and China. This means it has ample ammunition to prevent it going bust.

Prior discussion of this statistic suggested this wasn't "UK holdings" but just purchases executed via London.

[FreeTrader]

http://www.treas.gov/tic/mfh.txt

As you can see, the UK is the third largest holder of US treasury bonds behind Japan and China. This means it has ample ammunition to prevent it going bust.

Now you may have heard the recent stories of Russia and several other countries using their reserves to buy up their currency on the markets and thus preserve its value. Yet the UK has not done so. Its reserves are sitting there growing bigger. This should tell you that the UK is devaluing the pound as a matter of policy. They can begin to defend the pound at any level they wish.

The problem is they have started to play the game known as 'the race to bottom'. It was something that nobody wanted to start. You can expect other countries to devalue their currencies too, they will sell their currency to lower it whilst buying the other guys currency to raise his. The idea is to have your workers lower paid than the other guy to keep hold of industry and exports. Thats where the name comes from, it doesn't stop until we are all working 14 hours for a bowl of rice.

I'm afraid you're totally misinterpreting the document you have linked to.

The UK's official foreign exchange reserves are listed on the BoE's and HM Treasury's websites and bear no relation to the sums you are quoting, which are merely custodial holdings of US Treasuries held in the UK (which can be and are owned by foreign governments and private entities).

UK Official Holdings of International Reserves (pdf)

Edit: Cogs beat me to it

Edited January 20, 2009 by FreeTrader

[Executive Sadman]

It might feel like it, but i doubt it. Those CDS rates, bad though they are, arent anything like as bad as non-euro countries. While they probably dont tell the full story id guess big investors still use them to calculate risk and wont start pulling funds until they get really bad.

Plus wasnt most of icelands debt priced in non local currency, unlike here, which allowed a mass exit from their currency.

There was panic after northern rock, there was panic after lehmans, i just think its been another one of those weeks tbh.

[Orinoco]

It does sound like it, can't see US will be far behind us though.

I thought we were months BEHIND the US, it all started over there, they sneeze - we catch a cold?

I'VE BEEN LIED TO AGAIN HAVEN'T I !! :angry:

[dinsdale]

I really am starting to brick it to be honest. I've spent the last few years deliberately slumming it, foregoing holidays etc to build up my savings. Now the spectre of their worth being decimated is becoming very real indeed. The Government seems to be spinning out of control. I know Ireland is in deep trouble but would it be a safer bet? They can't print and have indicated that public spending will have to be cut.

[BXLONDONMAN]

Something to consider; After Iceland put the state behind the liabilities of its banks, it took only 2 weeks until the country went bankrupt. Mr. Brown and Mr. Darling's press conference was on January 19.

Now the British government has effectively stood behind the liabilities of these mega banks. Especially after it became obvious just how bad RBS's balance sheet is. HBOS is a whole different ballgame than Bradford & Bingley, or Northern Rock. And RBS is a whole different ballgame than HBOS.

The national debt of the UK, before taking on bank liabilities: £637,400m

The liabilities the UK state stood behind earlier:

Northern Rock liabilities: £107,000m

Bradford & Bingley liabilities: £50,000m

The liabilities of the mega banks the government is either effectively standing behind or thought it soon will:

Lloyds: £341,200m

HBOS: £661,300m

Barclays: £1,343,360m

RBS: £1,887,108m

Total liabilities for standing behind these 6 banks: £4,390,000m

New liabilities of UK state: £5,027,000m (789% rise)

One bright spot, the liabilities of the Icelandic banks the government of Iceland stood behind were said to be 10 times the GDP of Iceland. The liabilities the UK government appears to be choosing to stand behind I'd estimate at about 3.5 times the GDP of the UK. On the downside the GDP of the UK appears heavily dependent on the financial sector which is now mainly bust, just like Iceland.

My prediction: Although I think the UK 'could' go bust within a month, I expect it will last longer than that. Perhaps into mid-2010.

we will get a scare in march !!! i hope we get to 2010 but i'm not sure

[InternationalRockSuperstar]

The fact that the Gov't has now had to resort to printing money means it is already bankrupt.

[Peter Hun]

One bright spot, the liabilities of the Icelandic bank the government of Iceland stood behind were said to be 10 times the GDP of Iceland. The liabilities the UK government appears to be choosing to stand behind I'd estimate at about 3.5 times the GDP of the UK. On the downside the GDP of the UK appears heavily dependent on the financial sector which is now mainly bust, just like Iceland.

My prediction: Although I think the UK 'could' go bust within a month, I expect it will last longer than that. Perhaps into mid-2010.

Iceland is a special case, its banks were subject to systematic and massive fraud by the banks and government. Plus, unlike the UK which is one of the top exporting and manufacturing countries in the world, Iceland exports nothing besides fish and aluminium.

[VeryMeanReversion]

This should tell you that the UK is devaluing the pound as a matter of policy. They can begin to defend the pound at any level they wish.

...

The problem is they have started to play the game known as 'the race to bottom'. It was something that nobody wanted to start. You can expect other countries to devalue their currencies too, they will sell their currency to lower it whilst buying the other guys currency to raise his. The idea is to have your workers lower paid than the other guy to keep hold of industry and exports. Thats where the name comes from, it doesn't stop until we are all working 14 hours for a bowl of rice.

I have been thinking the same, it looks like policy to me, as a minimum it was understood by the powers that be as a likely result of very low interest rates and assuming bank liabilities. The "lucky" bit is that we are not in the UK and can get a head start on devaluation.

Interesting times.

VMR.

[VeryMeanReversion]

I really am starting to brick it to be honest. I've spent the last few years deliberately slumming it, foregoing holidays etc to build up my savings. Now the spectre of their worth being decimated is becoming very real indeed. The Government seems to be spinning out of control. I know Ireland is in deep trouble but would it be a safer bet? They can't print and have indicated that public spending will have to be cut.

I think Ireland is in even bigger trouble, the house price boom over there makes our one looks like a blip.

However, even if the economy does an Iceland, your savings will make you better off than your neighbours. Your savings wouldnt buy much imports but would get a nice house

This site is 99% bear and we can easily find ourselves talking ourselves into disaster on our little forum.

VMR.

[Guest mattsta1964]

The fact that the Gov't has now had to resort to printing money means it is already bankrupt.

Nah

That's not true

We've got a little way to go before we end up like Zimbabwe

[bugged bunny]

I'm quite optimistic - I reckon the UK probably won't go bankrupt until 2011 or so.

Involuntary bankrupsy only happens when a critical proportion of one's creditors call in the debts isn't it?

[Y-QUERK]

I thought we were months BEHIND the US, it all started over there, they sneeze - we catch a cold?

They sneezed, and we caught cat AIDS.

[jonpo]

I'm quite optimistic - I reckon the UK probably won't go bankrupt until 2011 or so.

Involuntary bankrupsy only happens when a critical proportion of one's creditors call in the debts isn't it?

well it occurs more specifically when Brown/Darling the treasury cannot pay back the LARGE FOREGIN DENOMINATED DEBTS of our BANKING SECTOR

[libspero]

What I am pondering is this.. We are on the edge of bankruptcy. If ALL the banks default badly and the taxpayer is forced to guarantee the pieces, then we (the UK) will go bust.. I believe there is almost no doubt about that.

However, surely this is the same for nearly all western nations? It seems to be happening here first but surely America, Germany, Switzerland.. could any of these nations support their banks if they turn out to be almost completely insolvent? Sure, we are going down the pan first, but if we drop will that cause a chain reaction? If that is the case can the rest of the world AFFORD to let us go bust?

[Umiapik]

Sure, we are going down the pan first, but if we drop will that cause a chain reaction? If that is the case can the rest of the world AFFORD to let us go bust?

Oh crikey, bailed out by the USA again! They'd really be p*ssed at us if they ended up having to do that. I can see it happening, though. RBS has it's fingers in loads of American pies, it would be in their interest to help us prop it up.

[bugged bunny]

well it occurs more specifically when Brown/Darling the treasury cannot pay back the LARGE FOREGIN DENOMINATED DEBTS of our BANKING SECTOR

Indeed! I recall my parents' disbelief when I informed them that most of the money funding British mortgages was borrowed from Japan or other countries. They honestly believed that all mortgages were funded by British savers' deposits. Ah, bless!

[Minderbinder]

What I am pondering is this.. We are on the edge of bankruptcy. If ALL the banks default badly and the taxpayer is forced to guarantee the pieces, then we (the UK) will go bust.. I believe there is almost no doubt about that.

What does this mean?

What might the sequence of events look like?

The way you've phrased it ... banks default, taxpayer guarantees the pieces, UK goes bust ... doesn't make sense. Would make more sense if: government nationalised banks, then government defaulted on the bank debts it took on. Is that what you mean?

Do you think the UK government would choose to default on its debt, rather than print its way out, if that were the choice it faced?

Then what happens?

Alternatively, the UK government can let the banks default and go into bankruptcy. Then pick up the pieces without taking on liabilities it can't meet.