Moneyweek article - 'the end of Britain'

MARTYM8MARTYM8 Posts: 44,710
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A nice cheery article in this week's Moneyweek magazine - not perhaps for those of a nervous disposition or those who believe govt funds are limitless and grow on trees:

http://www.moneyweek.com/endofbritain

Admittedly its a nice marketing tool for the mag - but it does make sobering reading! Some key extracts are below.

"This looming crisis is related to the financial crisis of 2008... but it will be infinitely more dangerous. As we'll explain, there is an unsolvable problem at the heart of our financial system. One that dates back over a hundred years.

In that time this problem has eaten away more than £10 trillion in public funds. It has been at the root of practically every major political argument in this country, and it affects every aspect of the way we live our lives.

Twenty-five Prime Ministers – from both political parties – have come and gone without ever having come close to solving it.

We believe the outcome of this problem is inevitable… and the recession, joblessness and instability you see right now is only the first stage of it. Many people think the slump we're in now is as bad as it will get.

But the truth is, it's only the start.

In fact, you will certainly see the consequences of this deep-rooted problem unfold across the cities, towns and villages of Britain. No one will escape the fallout.

In all recorded history, no country has ever recovered from the financial position we find ourselves in today. No government has ever been able to reverse this trend. No emergency action has ever come close to a solution.

This inescapable problem has only ever had one outcome: financial collapse.....

Compared to the size of our economy, Britain is now one of the most heavily indebted countries in the Western world. That's official. Our total debts stand at more than FIVE TIMES what our entire economy is worth.

Proportionally, that's more debt than Italy… Portugal… Spain… and almost twice as much debt as Greece. Those are four countries already in the throes of financial crisis. We're the odd one out because we haven't collapsed – yet. But things can't stay that way for long.

And the worst part is, even THAT isn't the full story…

Because when you add in all of Britain's "unfunded obligations" – promises the Government has made on things like public sector pensions – our debts swell to 900% of our economy.

That's right – when you add everything up, we owe NINE TIMES what our entire economy is worth.

Our political leaders still like to see Britain as a world power. But let's not delude ourselves. It's clear to see: we're totally broke.
."
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Comments

  • LyricalisLyricalis Posts: 57,958
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    It's interesting that they keep talking about the country collapsing and it being the end of Britain. They use Germany as an example. Can I point out that Germany is still there? Yes, it went through many years of trouble, especially the east, but it's still there!

    The whole article just comes across as an apocalypse scenario, but done by money people rather than the religious.
  • MARTYM8MARTYM8 Posts: 44,710
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    Lyricalis wrote: »
    It's interesting that they keep talking about the country collapsing and it being the end of Britain. They use Germany as an example. Can I point out that Germany is still there? Yes, it went through many years of trouble, especially the east, but it's still there!

    The whole article just comes across as an apocalypse scenario, but done by money people rather than the religious.


    They refer to the Weimar republic - whose failure of course led to the Nazis. They caused rather a lot of trouble if I recollect.

    But getting back to the point in hand - in this current parliament we will add more to the national debt than every other govt put together in the last century. Our debt including unfunded liabilities such as public sector pensions is verging on 900% of our national earnings. Many of the biggest banks with the most toxic balance sheets are based here. State spending was less than £200bn a year in 1990 - its now nearly £700bn a mere 20 years later.

    Maybe we can carry on borrowing more for ever and using quantitative easing - but there will have to be a reckoning sooner or later.
  • LyricalisLyricalis Posts: 57,958
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    I'll deal with it when it happens. No point worrying about something I can't do anything about. In these sorts of fantasy money situations it's only a mixture of false confidence and not thinking about it too much that keeps any of it afloat anyway.
  • [Deleted User][Deleted User] Posts: 2,583
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    So, basically....

    A financial crisis is looming....depressing statistics.....alarming references to the past...Nazis.....you could lose everything......BUT, the only way for you not to lose all your money is by subscribing to our magazine.
  • Auld SnodyAuld Snody Posts: 15,171
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    Lyricalis wrote: »
    It's interesting that they keep talking about the country collapsing and it being the end of Britain. They use Germany as an example. Can I point out that Germany is still there? Yes, it went through many years of trouble, especially the east, but it's still there!

    The whole article just comes across as an apocalypse scenario, but done by money people rather than the religious.

    Money is their religion. This is just a " fire and brimstone " sermon from the money Calvinists . " repent you you sinners of your socialist ways and you shall be received into Neo con heaven where taxes are low, the poor are cheap labour, serfs shall look after us , at the big rock candy mountain"
  • [Deleted User][Deleted User] Posts: 14,922
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    This is the bit you need to take in to account:
    moneyweek wrote:
    But that doesn't mean you have to just sit there and accept it. In a moment, we'll show you a special Wealth Preservation Report that outlines investments you can make right now to help keep your money out of the government's grasp.

    How soon do you need to make them? That's up to you, of course. But ask yourself: do you want to risk making them too late? Before the real crisis even hits… before the banks buckle and the stock market hits record lows… the government could have a strangle-hold on your wealth.

    Our advice is simple: don't let that happen. Let our research group show precisely how to respond.

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    To get your hands on this valuable information – click here.

    Scaremongering advice to get their hands on your money. There are problems but the last people anyone should trust are bankers or investment bods when it comes to retaining what you have. They have caused the problems!

    A fool and his money...
  • [Deleted User][Deleted User] Posts: 951
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    Click here now and let MoneyWeek show you some simple, practical ways to defend your wealth against these threats.
    I would do, but I've already clicked on FinanceMonth's offer to defend my wealth against these threats whilst simultaneously guaranteeing more success with the opposite sex :o
  • CharlotteswebCharlottesweb Posts: 18,680
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    Lyricalis wrote: »
    It's interesting that they keep talking about the country collapsing and it being the end of Britain. They use Germany as an example. Can I point out that Germany is still there? Yes, it went through many years of trouble, especially the east, but it's still there!

    The whole article just comes across as an apocalypse scenario, but done by money people rather than the religious.

    When you realise moneyweeks part of a publishing group that sell investment advice, get rich quick schemes and ways to avoid the latest financial apocolypse, its not so much interesting as rather predictable.

    They used to sell the erstwhile Grant Schapps stuff if I'm not mistaken.
  • [Deleted User][Deleted User] Posts: 9,720
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    A number of financial advisers and investors were doing the media rounds in the months before Lehman Brothers warning about things to come, but few were interested in knowing.
  • KNIGTHOUTKNIGTHOUT Posts: 779
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    If our national debt interest payments were around 12% of GDP we might have cause for concern.

    If we were having to print money to fund current expenditure because we were unable to borrow money at affordable rates. We would have cause for serious concern.

    If that money creation was causing spiralling inflation getting too high for comfort and getting out of control. We might have cause for alarm.

    Our national debt interest payments are not skyrocketing they are running at only about 3% of GDP. Less than in the 1980's.
    The UK has a good history of being able to effectively cut spending, raise and collect taxes. Without political or social collapse.
    The structural deficit is not skyrocketing it is falling.
    In the long term we expect to decrease the national debt.

    We have been doing QE to increase money supply in the economy, not because no one would lend us money at affordable rates.
    QE has resulted in us buying £375bn of our own debt, and we have recently decided to stop paying interest on the debt we owe ourselves. We might also in the future write off this debt we owe ourselves.
    Government gilt yields (the interest rate those who lend to us demand) are not soaring they are at a 300 year low.

    CPI inflation is not soaring it is at 2.7%

    The economy is not at full capacity we have not recovered from the recession yet.

    The money the government owes is long dated, owed in £s and mostly fixed interest, not inflation linked. We owe quite a lot of it to ourselves and we are also owed money by other nations.

    Our future spending liabilities are in the future, where we expect to have a running economy generating tax revenues.
    We are also reducing our future liabilities. As it is obligations we have made to ourselves.
  • MARTYM8MARTYM8 Posts: 44,710
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    KNIGTHOUT wrote: »
    Our future spending liabilities are in the future, where we expect to have a running economy generating tax revenues.
    We are also reducing our future liabilities. As it is obligations we have made to ourselves.


    Yes - it doesn't matter that government spending has tripled in 20 years - and tax revenues are well below spending. Our grandkids can pay for it.

    What however isn't factored in to your analysis are the demographic changes - and the growing elderly population needing pensions, social care etc whose life expectancy is increasing. Our need to spend is only going to grow - whereas the number of people working/contributing/putting in is declining. What makes it worse is that so many workers need government subsidies (via tax credits) to survive. Indeed its probably only those earning over £50k or single people earning over £35k that are paying more in than they take out.

    In my opinion - given our battered banking system the deficit is only going to get worse - for these reasons. And there is no real evidence to suggest we are going to return to the good old days of 1995 to 2006 - cos it was all built on borrowed money.
  • MARTYM8MARTYM8 Posts: 44,710
    Forum Member
    Meilie wrote: »
    A number of financial advisers and investors were doing the media rounds in the months before Lehman Brothers warning about things to come, but few were interested in knowing.

    Interesting of course that they quote Argentina - where the government confiscated private pension funds and cash held in banks when the economy collapsed in 2001. And they have still not recovered 11 years later - hence the sabre rattling over the Falklands to distract attention from the masses (well it worked for Mrs T!)

    It couldn't happen here could it?!

    I am not implying any collapse will occur in the next month or the next year - merely that our overspending/future debt is quite scary and everyone keeps going on about things as if govt is a bottomless pit of money.

    Does no one care that we have borrowed more in the last 5 years than the whole of the previous 100 - and that doesn't include private debt built on our only remaining productive industry (intergenerational theft via house price inflation)?
  • jmclaughjmclaugh Posts: 63,988
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    Nothing very new, it has all been said before. The crunch will only come if lenders decide not to lend any more or the rates they charges are unaffordable but if the UK does not get its public spending under control that could at some point happen. However lalaland is still very much the place to be and the markets are looking to the US to yes, guess what, agree to raise their debt ceiling.
  • KNIGTHOUTKNIGTHOUT Posts: 779
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    MARTYM8 wrote: »
    Yes - it doesn't matter that government spending has tripled in 20 years - and tax revenues are well below spending. Our grandkids can pay for it.
    We have a structural deficit problem because we miscalculated the economic cycle and we think our economic capacity has shrunk.
    We have a cyclical deficit problem due to the recession not being at our full economic capacity.
    We are uncertain of what our economic capacity is. How much is cyclical deficit and how much is structural.

    We need to eliminate the structural deficit to have long-term sustainability. The aim is to achieve this as fast as practicable without hindering economic recovery from the recession.

    We have pretty much always had a national debt. It is nothing to panic about. As long as our debt interest payments are easily affordable. Which at about 3% of GDP they are. We also have control over our own currency and inflation at 2.7% is not running high or out of control, so again no cause for panic.
    MARTYM8 wrote: »
    What however isn't factored in to your analysis are the demographic changes - and the growing elderly population needing pensions, social care etc whose life expectancy is increasing. Our need to spend is only going to grow - whereas the number of people working/contributing/putting in is declining.
    The demographic blip is manageable.

    We are a relatively low tax economy in European terms, and the demographic blip effects our competitors as well as us.

    We can expect productivity of those working to continue to increase as technology advances, as it has in the past.

    We can let in more workers via immigration if we so choose.

    We can alter retirement age and the amount of pensions and social care paid by the state, shifting more of the burden off the state and on to the individual if we so choose.
    MARTYM8 wrote: »
    What makes it worse is that so many workers need government subsidies (via tax credits) to survive. Indeed its probably only those earning over £50k or single people earning over £35k that are paying more in than they take out.
    Employees do not just produce value equivalent to their wages. They make a profit for the employer that is why employers employ them.

    What is important is the overall value created by the nation. How we split that value, wealth is up to us.

    As a nation we need to invest in improving infrastructure to education. So we retain and improve our competitiveness. Our added value as a nation.
    MARTYM8 wrote: »
    In my opinion - given our battered banking system the deficit is only going to get worse - for these reasons. And there is no real evidence to suggest we are going to return to the good old days of 1995 to 2006 - cos it was all built on borrowed money.
    We have a cash flow problem in our economy. Rather than increasing money supply by wages, we have increased money supply by debt creation. We need to replace debt with cash. We need to slowly deflate the debt bubble.

    The problem as far as value, is we were buying foreign goods on money borrowed from foreign countries. But that problem is predominately the lenders. They have been keeping our currency strong.

    I expect there will be an adjustment. Our currency will devalue and we will hopefully become more competitive and see a rise in our exports.
  • gummy mummygummy mummy Posts: 26,600
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    Actually if you read the article it appears to be an advertisement asking people to sign up for their magazine/


    You've already seen what a mess Britain's economy is in. And things could be about to get a lot worse… We'll show you what you can do to respond to these threats.

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    Take a no obligation trial of Moneyweek magazine today, and we'll immediately send you our "Wealth Preservation" report, plus the next three issues of Moneyweek magazine – totally free.

    Remember, if you decide MoneyWeek is not for you, simply cancel at any time during your 3-week FREE trial by calling 0207 633 3780.

    And if you wish to continue to receive our work to help guide you through the crisis, you'll enjoy a huge discount on the cover price (normally £3.45 per issue).

    You'll lock in a 62% discount and pay just £17 every 13 weeks if you choose the Direct Debit option. That's just £1.31 per issue. Or, if you prefer to pay by credit card, you can enjoy MoneyWeek for a whole year for just £75 (a saving of 57%).




    https://www.f-s-p-secure.co.uk/fsp/ap_orderform_1.aspx?u=eob&tc=WMYKNB05&ofid=0&PromotionID=2147068514&ol=1
  • jmclaughjmclaugh Posts: 63,988
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    Actually if you read the article it appears to be an advertisement asking people to sign up for their magazine/

    Quite amusing in a doom and gloom article about debt, I can only hope the powers that be have subscribed to guide us all through the crisis.
  • deptfordbakerdeptfordbaker Posts: 22,368
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    I guess a permanent debt ridden economy will make life harder for Labour, as they can't buy votes any more. Labour does better when there's plenty of cash to spend on public services and people. I'm looking forward to their 2015 -2020 term when every one finds out their really just Tory lite.
  • [Deleted User][Deleted User] Posts: 2,554
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    They often have articles with a similar tone, always expecting you to sign up. Even though some of the information is true and does make sense, they blow all credibility away with the begging towards the end.
  • [Deleted User][Deleted User] Posts: 14,922
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    MARTYM8 wrote: »
    Interesting of course that they quote Argentina - where the government confiscated private pension funds and cash held in banks when the economy collapsed in 2001. And they have still not recovered 11 years later - hence the sabre rattling over the Falklands to distract attention from the masses (well it worked for Mrs T!)

    It couldn't happen here could it?!

    I am not implying any collapse will occur in the next month or the next year - merely that our overspending/future debt is quite scary and everyone keeps going on about things as if govt is a bottomless pit of money.

    Does no one care that we have borrowed more in the last 5 years than the whole of the previous 100 - and that doesn't include private debt built on our only remaining productive industry (intergenerational theft via house price inflation)?

    I'm afraid that is what happens with a debt based money system where money is issued by private banks as debt and the fractional reserve banking that goes with it.

    I learnt the other day that every one ounce of gold has 100 options on it. That means that one ounce of gold has been 'sold' 100 times. The problem arises when just 2 of those buyers take up the option for delivery. Now think how many hundreds of thousands of ounces of gold are stored by banks. Now think the same about silver, platinum, copper ect. Now apply that to other areas such as derivatives, oil, grain, and so on. It all makes money for the traders swapping it between themselves until they get an actual buyer at the highest price, and in some cases (gold) hopefully no buyers. Every one pound bank deposit can be multiplied by a factor of 30, that means we have an economy that is pumped up 30 times it's actual size which demands real money to service that debt in the form of interest. You can only do all these things so long before the wheel falls off.
  • gummy mummygummy mummy Posts: 26,600
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    I guess a permanent debt ridden economy will make life harder for Labour, as they can't buy votes any more. Labour does better when there's plenty of cash to spend on public services and people. I'm looking forward to their 2015 -2020 term when every one finds out their really just Tory lite.

    I always considered Tony Blair to be 'Tory lite' but Labour still managed to help 'everyone' without hurting those in need.
  • TeeGeeTeeGee Posts: 5,772
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    Moneyweek is a load of total rubbish and advertises itself with fearful predictions. Whatever it says - do the opposite!
  • Kipper2Kipper2 Posts: 155
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    I agree it is alarmist doom & gloom - but they caught our attention!

    I dont understand who we (UK) owe this money to? Is it to other countries or to future generations? Seems to me the £billions made up as part of QE are adding to the debt, if not to inflation also.
    Whilst I think it is fair to mainly blame Labour remember it was the Tories under Thatcher who deregulated the Financial sector called the 'big bang' at the time that led to the increasingly riskier investments 'casino banking'.
    It was Vince Cable (an Economist) of the Lib Dems who before the recession was a fairly lone voice asking if our debt-driven economy was going to crash.
    Sadly the billions we have collectively had to pay to prop up the financial sector could have been used for so much infrastructure, house building, green investment, poverty reduction etc. What is annoying is the banks will do it again knowing that we mugs will bail them out if necessary. Not a single banker has been jailed for their huge greed and massive incompetence.
    It is worse for us in GB than in most countries because the financial sector is a bigger part of the British economy than in other EU nations.
    Lets hope the Coalition are getting it right. Now where's that matress?..........
  • andyknandykn Posts: 66,849
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    Kipper2 wrote: »
    I agree it is alarmist doom & gloom - but they caught our attention!

    I dont understand who we (UK) owe this money to?

    Mostly we don't owe it at all, there's a lot of future obligations in there, like adding up all the council tax you'll ever pay and calling it a debt today.
  • [Deleted User][Deleted User] Posts: 1,147
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    We always "recover" the economy with more debt and it can't last forever. Politicians will have you believe they can fix it, but they can't.
  • [Deleted User][Deleted User] Posts: 14,922
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    Kipper2 wrote: »
    I agree it is alarmist doom & gloom - but they caught our attention!

    I dont understand who we (UK) owe this money to? Is it to other countries or to future generations? Seems to me the £billions made up as part of QE are adding to the debt, if not to inflation also.
    Whilst I think it is fair to mainly blame Labour remember it was the Tories under Thatcher who deregulated the Financial sector called the 'big bang' at the time that led to the increasingly riskier investments 'casino banking'.
    It was Vince Cable (an Economist) of the Lib Dems who before the recession was a fairly lone voice asking if our debt-driven economy was going to crash.
    Sadly the billions we have collectively had to pay to prop up the financial sector could have been used for so much infrastructure, house building, green investment, poverty reduction etc. What is annoying is the banks will do it again knowing that we mugs will bail them out if necessary. Not a single banker has been jailed for their huge greed and massive incompetence.
    It is worse for us in GB than in most countries because the financial sector is a bigger part of the British economy than in other EU nations.
    Lets hope the Coalition are getting it right. Now where's that matress?..........

    What you have to bear in mind is that the money to prop up banks was borrowed by government from...banks. It didn't exist until it was created and it was created because government were willing to 'sign for' responsibility for the debt. Once a bank, any bank, has a customer prepared to sign up to debt, money is created and enters the system. That is the cause of boom and bust, too much money in the form of debt created and entered in to the economy and the resulting drop when the economy has to spend time paying it back. Boom and bust is nothing to do with capitalism, it's due to the global money supply of money as debt supplied by private banks.
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