Last week we briefly mentioned how Britain was now “actually insolvent” compared to being “technically insolvent” when it went begging to the International Monetary Fund (IMF) in 1976.
As we explained:
“In 1976, the UK government went begging to the International Monetary Fund (IMF) for £2.3 billion. In today’s money that’s the equivalent of around £12.4 billion. At the time it was labeled as an embarrassment for the UK, with claims it made the UK technically insolvent. Well, in practical terms apart from the much bigger number, there is little difference between the £2.3 billion bailout in 1976 and yesterday’s announcement that the Bank of England will increase its money printing programme to £200 billion.”
You’d think that would be enough to get the financial markets concerned with what’s happening in the UK and global markets.
Wouldn’t you think that if a nation is unable to pay its bills with free cash flow that the alarm bells would start ringing?
I mean, stop and think about it.
When you strip away the fancy terminology the banks like to use – quantitative easing – what you’re left with is money printing. Or to be precise, clicking a mouse and suddenly £200 billion appears.
In other words, the UK government has spent all of its tax receipts, and it has spent all of the money it has from selling government bonds…
The cupboards are bare.
It does not have one single dollar of spare cash left.
And so to remedy that, what does it do? It does exactly what every ‘good’ government should do, it opts for Plan B.
It knows increasing taxes is never a good look, especially when the next election is just round the corner.
And of course it’s worried about increasing the amount of debt on the market. Plus the government wants to ‘inject’ cash into the economy so that it’s spent rather than invested.
So the only option is to do what only a government and central bank can do. It prints money.
If anyone else came up with the same idea it would be called counterfeiting and you’d get hauled off to jail.
But that’s not the case with governments and central bankers. They can get away with almost anything.
And they’re helped by the hopeless analysis of the mainstream press. As evidenced by these comments from BBC economics editor, Stephanie Flanders:
“By voting to inject a further £25bn into the economy, the Bank’s policy makers have signalled that they do not think the economy is out of the woods yet. But they have halved the rate at which that money is being spent. In the first five months of QE, the bank was spending £25bn a month. Since August, the monthly purchases have fallen to about £17bn. Now the MPC plans to spend three months purchasing assets of £25bn – a monthly average of about £8bn. If the economy behaves more or less as the MPC expects, you could say they have put themselves on a path to put an end to QE at their February meeting, or at least put the policy on hold.”
Got that? At least it now only plans to spend £8 billion per month. Which is down from £25 billion per month.
But can we really believe the Bank of England will stop printing money next February?
We wouldn’t have thought so.
The interesting point about all this is that we could be witnessing firsthand the death of an economy.
Seriously. It’s something the UK has come close to experiencing several times in the last hundred years. Each time it’s either been bailed out by another economy or by a group of economies.
The United States helped it out of trouble after the first world war and second world war. The IMF bailed it out during the 1970s.
And then during the 1980s and 1990s, the growth in the global economy and the increase in financial market sophistication helped bail out the UK economy.
But who will bail it out this time?
Well, the US doesn’t have any money left. It can barely take care of itself let alone throw a few bones to the partner in its ‘special relationship.’
The European Union (EU) is hardly likely to bail out an economy that’s scoffed at it from the sidelines for the last twenty years. And besides, the EU is nothing more than an imperialist oligarchy anyway.
There would certainly be nothing to gain by Britain falling further into the clutches of the Europe. The phrase, “out of the frying pan, into the fire” springs to mind.
But then again, things could get so bad for the UK that it has no other choice.
Is there a chance the new superpowers of Asia and the Middle East will come to the rescue? Again, we don’t see this as being very likely either.
The main reason is, why would they want or need to?
You know, we’re struggling on that one. We’re struggling to figure out just what China, Japan, South Korea, Dubai or Bahrain would get out of propping up the UK economy.
Besides, they seem more interested in just buying up the Premier League football teams than anything else.
Quite frankly, it’s very hard to see how Britain can get itself out of the current pickle without causing itself and its citizens a massive amount of pain.
With the billions of pounds of debt and the billions of pounds spent each year on unaffordable and bankruptcy-inducing social programmes (such as the National Health Service) there is absolutely no way it can get itself out of the mire without doing something drastic.
It can’t merely hoped for an economic recovery. After all, where is the economic growth going to come from?
It’s rested on the laurels of growth in the financial sector since the 1980s. Even if global financial markets do recover and even if they do start flogging more fancy products, the odds are London won’t be the centre of the action anymore.
Its natural resources from the North Sea are coming to an end, and thanks to the heavy hand of regulation and social engineering, its manufacturing industry is virtually dead.
That’s why I believe we are potentially seeing the death of an economy.
The only possible solution for Britain is to default on its obligations directly or indirectly. It can do this openly by defaulting on its debt, or it can do it by continuing the programme of quantitative easing.
The second option is of course the coward’s way.
By continuing with this programme, the government and central bank are in the process of unleashing the cruel fate of rampant inflation and the destruction of any wealth its citizens have left.
Until that happens, the hapless economic analysis from mainstream economists and the mainstream press will continue to idolize the efforts of the Bank of England to drag the UK economy out of trouble.
The reality is the Bank of England is dragging it further into trouble.
Cheers.
Kris.
60-Second Market Round Up
by Shae Smith
The S&P/ASX200 closed up by 86 points on Friday, finishing at 4,594. The strong close from the US and positive news regarding growth and inflation from the RBA helped the ASX200.
On Wall Street the Dow Jones Industrial Average ended the trading week at 10,023.42, a small gain of 17 points.
Overall, the Dow posted a 3% increase for the week.
In Europe the FTSE100 finished up by 0.33% to 5,142.72
The Nikkei rose 71 points, or 0.74% to 9,789.35
Gold has again reached a new record high of USD$1,101.42, but it did drop back slightly at the close.
Currently, the price of gold in Australian dollars is trading at $1,194.90, while in US Dollars it is trading at $1,097.00. And the price of silver in Aussie dollars is $18.94 and in US Dollars it is $17.39.
The Aussie dollar has remained well above the 90 cent mark.
The Aussie dollar versus the US dollar is trading at USD$0.9218, and against the Japanese Yen JPY82.85.
Crude oil closed overnight at USD$79.70
For the biggest movers on the market yesterday click here…
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Etch,
It is a truly wretched place when you go through immigration you also leave behind your human rights.
Don’t ever bother with the place France is far nicer.
a dedication…………………………………..to “RUNDOWN”
http://www.youtube.com/watch?v=lotkzHsIuoA
Greetings. A bit of a long bow but here goes (closest of the recent stories that I can find to make the connection). Another way out for Britain is to finally start penalising the UBiquitouS organisations that helped lead the world into this GFC in the first place. Indeed as reported by The Associated Press on 5Nov UBS have received an 8mpound fine for sloppy management that meant that 4 of its employees could apparently carry out unauthorised transactions between 2006 and 2007 involving client money. Another great avenue would be doing what the yanks are doing (with UBS “co-operation”) and cracking down on tax cheats. Fascinating to see that an amnesty offered by the US IRS flushed out some 7,500 owners of foreign accounts. According to Kevin McCoy of USA Today (16Oct09):
” Applications (for amnesty) for accounts that held from just over $10,000 to more than $100 million came from more than 70 countries and every continent except Antarctica, Shulman (IRS Commissioner) said”.
The article goes on to state:
“The agency also plans to open new criminal investigation offices in China, Panama and Australia, Shulman said.”
No doubt the printing presses will burn with this news.
Into the Euro here we go. Another small step to World Government, Which will of course incorporate local democracy. Or not? If yes, how?
When the right to vote ceases to have meaningful consequences, then the right to riot has begun. JFK said “When peaceful revolution becomes impossible, violent revolution becomes inevitable”. The pound is being trashed to force Britain into the Euro. Stand up Scotland. Charter a Scottish Community Bank an’ I’ll show yez how tae run it.
JID
Remember dear readers the populace gets what it deserves! Or in another vein he who does not heed the [historical] past is doomed to repeat it.
When asked recently to get more involved with the political struggle I opined: “Cast not thy pearls before swine”. “Collapse is inevitable so put a goodly portion of ones investible assets in physical Gold and Silver coins and bars [of a reputable brand such as the Perth Mint], stored in vault boxes of your own security in major banks, put down a goodly supply of fine reds and await the coming financial collapse without a care in the world”.
History teaches us the masses will not listen until it is too late, so why waste your time and effort. Look after your family and loved ones and put up the “do not disturb sign”.
You will suffer less heart ache this way and keep a lower blood pressure.
Good luck to you all.
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