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Yes, the UK situation is difficult - but not desperate.

Too many poster on HPC have no idea how these figures compare to other European countries.

In the early 90's the Gross Public Debt/GDP ratio in Belgium and Italy was 140% and 120% respectively

OECD is forecasting Italy's GPD/GDP ratio to reach 115% again next year, up from 106% in 2008.

http://www.oecd.org/document/6/0,3343,en_2...1_1_1_1,00.html

too many posters on hpc have no idea just how bad the UK manipulates its figures at every level.

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too many posters on hpc have no idea just how bad the UK manipulates its figures at every level.

Very weak reply GOM, you need to do better than that <_<

But then you are the one who said £ will join the Euro by chrimbo 2009 ... ;)

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Ok leicestersq, your clearly a Nulabour apologist, sallowing everything the government tells you.

Millions of people on the dole are not creating any wealth. The aim of any government is to have as many people economically active as possible.

Nor are public sector non-jobs creating wealth, indeed they hinder it. We have too many middle managers. We need front line nurses, police etc doing their jobs, not filling in forms. And if you want 100% employment just have half the population dig holes the other half fill them.

I think your view is very similar to the Austrian school of economics

Spot on

No, total supply has massively increased, it just appears to be down because its not being spent as fast. All this is inflating away the savings of the prudent to bail out the debt of the feckless."
You are on planet la-la land if you think that the money supply has massively increased. Notes and coins and central bank credit is only a tiny fraction of the money supply. The vast majority of the money supply is credit provided by banks. The more banks lever up their capital, the more money they can create.

Helpfully I see someone on the last page actually posted the graph, go look it your see that I am spot on. It’s the velocity of money that has declined. Not the amount. Your point about bank debt is correct, although debt is not being repaid at that scale.

If government policy is successful, employment will rise, output will rise, and tax returns will be higher.

:lol:

And if the children rode unicorns and the rivers flowed with chocolate.

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Yes, the UK situation is difficult - but not desperate.

Too many poster on HPC have no idea how these figures compare to other European countries.

In the early 90's the Gross Public Debt/GDP ratio in Belgium and Italy was 140% and 120% respectively

OECD is forecasting Italy's GPD/GDP ratio to reach 115% again next year, up from 106% in 2008.

http://www.oecd.org/document/6/0,3343,en_2...1_1_1_1,00.html

Actually, my previous calculation was wrong. It's worse, at £19.9bn pcm, the government will overshoot its borrowing estimate by £64bn.

Presumably they know they need this cash, otherwise they wouldn't be borrowing it.

Or maybe they are making hay while the Sun shines. QE is boosting the bond market. When that's over selling the gilts may be more difficult. Maybe AD is selling now while he can.

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Yes, the UK situation is difficult - but not desperate.

Too many poster on HPC have no idea how these figures compare to other European countries.

In the early 90's the Gross Public Debt/GDP ratio in Belgium and Italy was 140% and 120% respectively

OECD is forecasting Italy's GPD/GDP ratio to reach 115% again next year, up from 106% in 2008.

http://www.oecd.org/document/6/0,3343,en_2...1_1_1_1,00.html

No you miss the point.

Our GDP is increasing at the fastest rate of all, albeit from a lower base.

The reason S&P gave for putting AAA on watch was the RATE of increase of our debt and the lack of a clear plan to stop it growing so fast. things are out of control is the point.

19.9bn per month vs much less in the countries you mention is worse than 54% vs 106% or whatever.

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Very weak reply GOM, you need to do better than that <_<

But then you are the one who said £ will join the Euro by chrimbo 2009 ... ;)

I can't paste the pics due to the image type, check the link though. ;)

I saw this a long time ago

Wednesday, 10th December 2008

The true extent of Britain's debt

Fraser Nelson 6:17pm

How much is Britain’s true national debt? Gordon Brown says 37% of GDP, the ONS says 43% of GDP – but this is just government debt. The reason Britain is in so much trouble is that our corporate and household debts are huge. It is the combination that makes us such a credit liability – but no one has ever put together a combination.

Until now.

Michael Saunders from CitiGroup has calculated ‘external debt’ – ie, what Britain owes the rest of the world. It is not 40% but 400% of GDP, the highest in the G7 by some margin. The next down, France, is 176%. America, flagellating itself for blowing such a debt bubble, is just 100%. Japan is about half America. The below graph shows ‘external debt’ – both in mid-2008, and five years ago.

G7 Countries - external gross debt/GDP ratios, 2003Q2 - 2008 Q2

Narrow it down to short-term debt, ie IOUs that have to be paid back within a year, and the picture grows even bleaker. It adds up to 300% of GDP – six times that of France whose loans are long-term. Saunders says, with some understatement, that this makes “the UK economy and financial system highly vulnerable when, as now, global banking and capital flows dries up.†Here is the picture, narrowed down to short- term debt (ie, due by next Christmas).

G7 Countries - ratios of short-term external gross debt/GDP, 2003Q2 - 2008 Q2

I believe that an IMF bailout is highly unlikely. But the highly unlikely has been happening rather a lot lately. There is a fairly clear apocalypse scenario emerging: that Britain becomes reliant on new borrowing, that the Arabs/Chinese get sick of buying IOU notes in devaluing sterling, and refuse to buy more debt at anything other than loan shark rates. Then Britain has to go to the IMF. For a country with as much short-term debt requirements as Britain, there is nothing fantastical about this.

Financing Britain is an issue. Our creditors will be looking at Britain with its 400% debt/GDP ratio and ask how this island country with its mammoth trade deficit is going to pay the money back, especially if its Prime Minister prescribes more debt as the solution.

But this crisis has taught us to pay heed to the highly unlikely, to watch out for the Black Swans. It could come in the form of UK banks being unable to raise capital from the markets, from liquidity issues in UK gilts, whatever.

Edited by grumpy-old-man-returns

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19.9bn per month vs much less in the countries you mention is worse than 54% vs 106% or whatever.

All wrong.

Italy's GDP in 2008 was $ 1,815 bn.

Their 2008 Gross Public Debt was $ 1,924 bn - that's $ 160 bn per month, or £ 98 bn per month.

That is nearly 5 times the UK figure.

Ever wondered why Italian 10 yrs BTPs yield 78 bps more than 10 yrs Gilts? :rolleyes:

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This is VERY bad! In his budget AD said he needed to borrow £175bn on the year (compared to a budgeted PSBR of less than £50bn last year!)

But if May's £19.9bn net borrowing is scaled up to the whole year you get.... £223bn!

That's a £48bn overspend - assuming no growth on the curve!

It looks like the wheels have come off the budget just two months in!

:(

Of course I'm out of sterling so I don't GAF ;)

yep when he forecast 175bn i thought 200bn plus

now i think circa 275-300bn

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I can't paste the pics due to the image type, check the link though. ;)

I saw this a long time ago

Wednesday, 10th December 2008

The true extent of Britain's debt

Fraser Nelson 6:17pm

How much is Britain’s true national debt? Gordon Brown says 37% of GDP, the ONS says 43% of GDP – but this is just government debt. The reason Britain is in so much trouble is that our corporate and household debts are huge. It is the combination that makes us such a credit liability – but no one has ever put together a combination.

Until now.

Michael Saunders from CitiGroup has calculated ‘external debt’ – ie, what Britain owes the rest of the world. It is not 40% but 400% of GDP, the highest in the G7 by some margin. The next down, France, is 176%. America, flagellating itself for blowing such a debt bubble, is just 100%. Japan is about half America. The below graph shows ‘external debt’ – both in mid-2008, and five years ago.

G7 Countries - external gross debt/GDP ratios, 2003Q2 - 2008 Q2

Narrow it down to short-term debt, ie IOUs that have to be paid back within a year, and the picture grows even bleaker. It adds up to 300% of GDP – six times that of France whose loans are long-term. Saunders says, with some understatement, that this makes “the UK economy and financial system highly vulnerable when, as now, global banking and capital flows dries up.†Here is the picture, narrowed down to short- term debt (ie, due by next Christmas).

G7 Countries - ratios of short-term external gross debt/GDP, 2003Q2 - 2008 Q2

I believe that an IMF bailout is highly unlikely. But the highly unlikely has been happening rather a lot lately. There is a fairly clear apocalypse scenario emerging: that Britain becomes reliant on new borrowing, that the Arabs/Chinese get sick of buying IOU notes in devaluing sterling, and refuse to buy more debt at anything other than loan shark rates. Then Britain has to go to the IMF. For a country with as much short-term debt requirements as Britain, there is nothing fantastical about this.

Financing Britain is an issue. Our creditors will be looking at Britain with its 400% debt/GDP ratio and ask how this island country with its mammoth trade deficit is going to pay the money back, especially if its Prime Minister prescribes more debt as the solution.

But this crisis has taught us to pay heed to the highly unlikely, to watch out for the Black Swans. It could come in the form of UK banks being unable to raise capital from the markets, from liquidity issues in UK gilts, whatever.

Interesting point, but not necessarily on topic here.

I'd rather hold a 10 yr gilt that a 10 yr BTP, see my post above - at any rate, that's what the market thinks.

We are discussing gross public debt, not corporate and household debt.

Also, I don't understand how household debt is part of what "Britain owes the rest of the world"...

Edited by VoteWithYourFeet

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Interesting point, but not necessarily on topic here.

I'd rather hold a 10 yr gilt that a 10 yr BTP, see my post above - at any rate, that's what the market thinks.

We are discussing gross public debt, not corporate and household debt.

Also, I don't understand how household debt is part of what "Britain owes the rest of the world"...

this is exactly the point though.....& you're missing it.

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this is exactly the point though.....& you're missing it.

oh pleeease explain it to me in simple terms !!!!

PLEASE !!!! :P

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All wrong.

Italy's GDP in 2008 was $ 1,815 bn.

Their 2008 Gross Public Debt was $ 1,924 bn - that's $ 160 bn per month, or £ 98 bn per month.

That is nearly 5 times the UK figure.

Ever wondered why Italian 10 yrs BTPs yield 78 bps more than 10 yrs Gilts? :rolleyes:

Are you sure that wasn't accumulated over many years, and the total at the end of 2008 was 1924bn USD?

That would be my understanding of GPD.

the UK GPD is GROWING by 19.9bn ie approx 32bn USD a month. THAT is the problem.

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the UK GPD is GROWING by 19.9bn ie approx 32bn USD a month. THAT is the problem.

Sure, the increase is deeply worrying, I don't deny that.

As I said, the UK situation is serious - I just don't think it is as desperate as most people on HPC seem to think.

The point I'm making is, other countries in Europe have had huge GPD/GDP ratios for years - well before the Euro came into play to distort things.

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I can't paste the pics due to the image type, check the link though. ;)

I saw this a long time ago

Wednesday, 10th December 2008

The true extent of Britain's debt

Fraser Nelson 6:17pm

How much is Britain’s true national debt? Gordon Brown says 37% of GDP, the ONS says 43% of GDP �" but this is just government debt. The reason Britain is in so much trouble is that our corporate and household debts are huge. It is the combination that makes us such a credit liability �" but no one has ever put together a combination.

Until now.

Michael Saunders from CitiGroup has calculated ‘external debt’ �" ie, what Britain owes the rest of the world. It is not 40% but 400% of GDP, the highest in the G7 by some margin. The next down, France, is 176%. America, flagellating itself for blowing such a debt bubble, is just 100%. Japan is about half America. The below graph shows ‘external debt’ �" both in mid-2008, and five years ago.

G7 Countries - external gross debt/GDP ratios, 2003Q2 - 2008 Q2

Narrow it down to short-term debt, ie IOUs that have to be paid back within a year, and the picture grows even bleaker. It adds up to 300% of GDP �" six times that of France whose loans are long-term. Saunders says, with some understatement, that this makes “the UK economy and financial system highly vulnerable when, as now, global banking and capital flows dries up.†Here is the picture, narrowed down to short- term debt (ie, due by next Christmas).

G7 Countries - ratios of short-term external gross debt/GDP, 2003Q2 - 2008 Q2

I believe that an IMF bailout is highly unlikely. But the highly unlikely has been happening rather a lot lately. There is a fairly clear apocalypse scenario emerging: that Britain becomes reliant on new borrowing, that the Arabs/Chinese get sick of buying IOU notes in devaluing sterling, and refuse to buy more debt at anything other than loan shark rates. Then Britain has to go to the IMF. For a country with as much short-term debt requirements as Britain, there is nothing fantastical about this.

Financing Britain is an issue. Our creditors will be looking at Britain with its 400% debt/GDP ratio and ask how this island country with its mammoth trade deficit is going to pay the money back, especially if its Prime Minister prescribes more debt as the solution.

But this crisis has taught us to pay heed to the highly unlikely, to watch out for the Black Swans. It could come in the form of UK banks being unable to raise capital from the markets, from liquidity issues in UK gilts, whatever.

Note the postscript to that article:

P.S To answer CoffeeHousers' query, this is "external debt" by the IMF definition, which is gross. (And does not include contingent liability, just debt). One must take into account that Britain is likely to have proportionately greater foreign assets whose value would be amplified by sterling's plunge. But how much greater? I'll keep hunting. Every crisis is different, and each has its own metrics. It was our concentration on the metrics of the last crisis (inflation) that blinded so many to the causes of this crisis (debt).

It's quite possible that we have assets that broadly match the debts. The problem is these debts and assets are leveraged off a relatively small economy, so if anything goes wrong we don't have much capacity to absorb the losses.

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As I said, the UK situation is serious - I just don't think it is as desperate as most people on HPC seem to think.

We're having to Monetize government debt (via QE) because it is too large to finance using normal channels. This means either more QE to finance it, OR going bump. Not much of a choice!

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U.S debt has been growing at a rate of about $1.4 a day over past few years so for the UK to manage to achieve 1bn (dollars)a day is pretty good going! (considering the fact that their economy and population is at least 5 times larger)

I'm going to do my bit by cutting my hours down to 18 hours a week from the end of this month and paying bugger all tax and NI. Do you think this will help?

I've just been outside digging a 2 foot deep trench and filling it with horse manure. It's both an investment and the right thing to do.

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Holy Crap, that is insane, I thought I had a handle on these figures, that's just blown me away.

Lets look at it again.

£19,900,000,000 Borrowed in the month of May

£641,935,483 a day

£26,747,311 an hour

£445,788 every minute

£7,429 every second.

The governemnt is spending half a million pounds it does'nt have every second.

It is increasing the debt our children will have to pay back at half a million pounds a second.

Christ on a bike, you could by a 3-bed flat in canary wharf for that money!

Nice big letters, KB, but surely you mean 1/2 a mill every minute?

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I can't paste the pics due to the image type, check the link though. ;)

I saw this a long time ago

Wednesday, 10th December 2008

The true extent of Britain's debt

Fraser Nelson 6:17pm

How much is Britain’s true national debt? Gordon Brown says 37% of GDP, the ONS says 43% of GDP – but this is just government debt. The reason Britain is in so much trouble is that our corporate and household debts are huge. It is the combination that makes us such a credit liability – but no one has ever put together a combination.

Until now.

Michael Saunders from CitiGroup has calculated ‘external debt’ – ie, what Britain owes the rest of the world. It is not 40% but 400% of GDP, the highest in the G7 by some margin. The next down, France, is 176%. America, flagellating itself for blowing such a debt bubble, is just 100%. Japan is about half America. The below graph shows ‘external debt’ – both in mid-2008, and five years ago.

G7 Countries - external gross debt/GDP ratios, 2003Q2 - 2008 Q2

Narrow it down to short-term debt, ie IOUs that have to be paid back within a year, and the picture grows even bleaker. It adds up to 300% of GDP – six times that of France whose loans are long-term. Saunders says, with some understatement, that this makes “the UK economy and financial system highly vulnerable when, as now, global banking and capital flows dries up.†Here is the picture, narrowed down to short- term debt (ie, due by next Christmas).

G7 Countries - ratios of short-term external gross debt/GDP, 2003Q2 - 2008 Q2

I believe that an IMF bailout is highly unlikely. But the highly unlikely has been happening rather a lot lately. There is a fairly clear apocalypse scenario emerging: that Britain becomes reliant on new borrowing, that the Arabs/Chinese get sick of buying IOU notes in devaluing sterling, and refuse to buy more debt at anything other than loan shark rates. Then Britain has to go to the IMF. For a country with as much short-term debt requirements as Britain, there is nothing fantastical about this.

Financing Britain is an issue. Our creditors will be looking at Britain with its 400% debt/GDP ratio and ask how this island country with its mammoth trade deficit is going to pay the money back, especially if its Prime Minister prescribes more debt as the solution.

But this crisis has taught us to pay heed to the highly unlikely, to watch out for the Black Swans. It could come in the form of UK banks being unable to raise capital from the markets, from liquidity issues in UK gilts, whatever.

So if this is the external debt how much does the UK consumer owe UK business etc.... or doesn't that matter?

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No you miss the point.

Our GDP is increasing at the fastest rate of all, albeit from a lower base.

The reason S&P gave for putting AAA on watch was the RATE of increase of our debt and the lack of a clear plan to stop it growing so fast. things are out of control is the point.

19.9bn per month vs much less in the countries you mention is worse than 54% vs 106% or whatever.

That just means we can get wealthier faster.

Debt is wealth.

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Uk and US government debt is held to be safer than it really is, in the same way that sub prime mortgages were.

The fact that the state can round us all up and shake us down til our fillings drop out is the security for the debt.

The fact that if they do so they will wind up with 12 tenths of ****** all seems to pass everyone by.

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Note the postscript to that article:

It's quite possible that we have assets that broadly match the debts. The problem is these debts and assets are leveraged off a relatively small economy, so if anything goes wrong we don't have much capacity to absorb the losses.

yeah right.

half the UK's ports are foreign owned...

abudabi united etc...

the UK has sold its soul to the arabs & oligarch's

edited - actually huw, I didn't mean that reply to sound so dismissive, what I mean is that we seem to have a lot of UK assets have been sold to foreign owners. people would be surprised who actually owns what.

Edited by grumpy-old-man-returns

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yeah right.

half the UK's ports are foreign owned...

abudabi united etc...

the UK has sold its soul to the arabs & oligarch's

If I talked about "massive UK exposure to dodgy foreign assets" instead, would that sit better with the tone of the thread? ;)

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yes, that's better.

btw huw, I edited my last post for you. :)

No worries GOM, I took it in the spirit in which it was intended.

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