03/04/10 Baltimore, Maryland – The Greek story is a universal tale… It will soon be played by the UK…and then it will be the US.
Let us summarize: Innocent fellows are seduced by debt. They fall in love with deficits. Debt proves to be an evil temptress. Our heroes are ruined.
Isn’t the story more or less the same in Britain and America too?
And now the pound is falling. It dropped below $1.50 on Tuesday. Instead of being a refuge against the troubled euro, investors are fleeing the English currency. Why? They figure that what happened to Greece could also happen to England. Britain’s budget deficit – at 12% of GDP – is almost the same as Greece’s, twice as big as the European average.
“If you really want a fiscal problem, look at the UK,” said Mark Schofield, a fixed-income strategist at Citigroup.
Not only does the government owe a lot of money, so do ordinary citizens. The overall level of debt is the second highest in the world, according to a Mckinsey study – right on the heels of Japan.
The falling pound makes it more dangerous to lend money to Britain. Investors have to worry not only about a default…but about a loss due to currency decline. This should push up the cost of financing Britain’s deficits, putting the nation in the same fix as the Greeks. Like Greece, Britain needs foreign lenders to fund its deficits. And like Greece, it will be forced to promise austerity measures, if lenders balk.
“This is a ticking time bomb,” said Nick Hopkinson of Property Portfolio Rescue, a company that assists overleveraged homeowners. “There are over 400,000 people who are in arrears with their mortgage rates the cheapest they have ever been. When rates increase, a lot of people will be tipped over the edge.”
“If rates go up, it will be a very dangerous situation for me… It might lead me to consider bankruptcy,” said Sheridan King, a UK sales manager. “We are just struggling to get by with all this debt,” he added. “It’s time the government got its house in order.”
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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And the UK sold half of it’s gold already…Hi Bill, I am sure you know of this blog here, but if you don’t…it will be right up your street…
http://fofoa.blogspot.com
Cheers!!
Well more great data this morning in the US regarding jobs. Now will people start believing this economy turned last spring and is now clicking on all cylinders?
From the report: the number of people employed rose by 308,000, according to the household survey.
That’s incredible!
Harry, stop being a troll. Or is that just an alter ego of one of DR’s writers? Either way, the White House and the Fed are doing a fine job of avoiding the truth (and reality), we don’t need any additional fairy tales here.
BTW, anyone taking bets on when the Fed will start reporting M3 again? Sometime in 2103, perhaps?
Apparently Sheridan King thinks it’s time the government put its house in order. Unfortunately he doesn’t seem to think putting his own house in order is a priority!
Armando, that’s human nature, unfortunately. Pointing fingers at others. Avoiding personal responsibility.