Is the UK finished?

Discussion in 'Economics' started by MohdSalleh, Jan 28, 2010.

  1. Pal, after doing the dirty on it's commitment to pay back bllions to the British and Dutch Governments who bailed out savers shafter by IceSave's implosion Iceland is going to become an economic and financial pariah.

    Forget about revenge and start praying for mercy asit's the British who have "revenge" on their mind, as you put it.
     
    #31     Jan 30, 2010
  2. The sad thing is if you look at say F1 for instance half the engineers are Brits, but Britain has no car industry to speak of.

    Margaret Thatcher is really the the architect of modern Britain for better or worse. Strategically, she was in the right ballpark, taking on the unions, privatising huge bloated industries and killing off 19th century industrial revolution era factories - she knew the country needed to modernise and get its productivity up.

    Unfortunately rather than replace it with high tech value added manufacturing she instead went with the City. Medium term rational, in that you can ramp up financial services quickly and show incredible returns compared to traditional investments. However, instead of using the bank cash (and North Sea oil) as a platform to start investing in the long-term restructuring of Britain's industrial base, the banks become the end in itself and Britain is where it is today, entirely dependant upon, and at the mercy of the banks. It's essentially their only industry of significance. And who wants to be a slightly bigger version of Iceland?
     
    #32     Jan 30, 2010
  3. zdreg

    zdreg

    http://www.elitetrader.com/vb/showt...434&perpage=10&highlight=iceland&pagenumber=1

    The UK can have revenge on its mind but it won't help when the forthcoming UK economic implosion takes place. Little Iceland is not a pariah with its small population vast hydro resources and other energy resources + it 's natural beauty.

    What does a truly bankrupt UK have to offer the world? people will remember when the UK defaults.
     
    #33     Jan 30, 2010
  4. FredBloggs

    FredBloggs Guest

    again, your stupidity is astounding.

    my stance is simply that i have little wish to waste my time on the ignorant. for example, if you cant be bothered to use correct english, the chances are slim indeed that you will be bothered to collate factual information and present them in a logical and well thought out manner. that is why i respectfully request that you get to first base before trying to stir trouble with your intellectual betters.

    further more, i think moving the goal posts is a little above your intellectual level at your current state of development. your first post suggested ww1 broke the uk economically, now you start to back down (already) and state it was our economic DOMINANCE that was destroyed. these are 2 very different things you fool.

    the difference is subtle, but important never the less.

    it is interesting to observe that even though i have not supplied evidence against your stance, that you are changing your stance already. this tells me i will be wasting my time helping you here, as the the goal keeps moving. your intellect is based on such lose foundations, that there is no constant or stable argument as we have already seen.

    i am not here to furnish you with facts or educate you in anyway. this is your business, and quite a chore it will be i imagine.
     
    #34     Jan 30, 2010
  5. For the impatient, two minutes in...

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    #35     Jan 30, 2010
  6. Logic

    Logic

    For the purposes of our lifespans though, effectively they are finished...
     
    #36     Jan 30, 2010
  7. Depends to the degree of "finishedness" to which you refer. Britian is less finished than it was in the 70 but more finished than it was a decade ago. Germany is less finished than it was a decade ago but more finished than it was 2 decades ago. And of course, it is very much less finished than it was in May 1945.

    Since noone seems willing or able to define being "finished" we can only talk in degrees of "finishedness".

    Personally, I'll be going long Britain sometime in the next year or two anticipating regression to the mean on this scale of "finishedness". Am also preparing short positions for japan (breakout to the downside) and especially China (sell-off from blow-off top). I expect them to become more finished at some point in the coming years. Should either actually be declared "finished" on ET - I'll go long.

    Thx
    D
     
    #37     Jan 30, 2010
  8. FredBloggs

    FredBloggs Guest

    i can define 'almost finished'. will that do?.......


    http://www.moneyweek.com/investments/currencies-us-dollar-debt-burden-94908.aspx


    (not to try and change the subject of course, simply to put things in to the correct perspective :D )


    It's one of those numbers that's so unbelievable you have to actually think about it for a while...

    Within the next 12 months, the US Treasury will have to refinance $2trn in short-term debt. And that's not counting any additional deficit spending, which is estimated to be around $1.5trn.
    Put the two numbers together. Then ask yourself, how in the world can the Treasury borrow $3.5trn in only one year? That's an amount equal to nearly 30% of our entire GDP. And we're the world's biggest economy. Where will the money come from?

    How did we end up with so much short-term debt? Like most entities that have far too much debt – whether subprime borrowers, GM, Fannie, or GE – the US Treasury has tried to minimise its interest burden by borrowing for short durations and then "rolling over" the loans when they come due. As they say on Wall Street, "a rolling debt collects no moss."

    What they mean is, as long as you can extend the debt, you have no problem. Unfortunately, that leads folks to take on ever greater amounts of debt... at ever shorter durations... at ever lower interest rates. Sooner or later, the creditors wake up and ask themselves: What are the chances I will ever actually be repaid? And that's when the trouble starts. Interest rates go up dramatically. Funding costs soar. The party is over. Bankruptcy is next.

    When governments go bankrupt, it's called a "default". Currency speculators figured out how to accurately predict when a country would default. Two well-known economists – Alan Greenspan and Pablo Guidotti – published the secret formula in a 1999 academic paper. The formula is called the Greenspan-Guidotti rule.

    The rule states: To avoid a default, countries should maintain hard currency reserves equal to at least 100% of their short-term foreign debt maturities. The world's largest money-management firm, PIMCO, explains the rule this way: "The minimum benchmark of reserves equal to at least 100% of short-term external debt is known as the Greenspan-Guidotti rule. Greenspan-Guidotti is perhaps the single concept of reserve adequacy that has the most adherents and empirical support."

    The principle behind the rule is simple. If you can't pay off all of your foreign debts in the next 12 months, you're a terrible credit risk. Speculators are going to target your bonds and your currency, making it impossible to refinance your debts. A default is assured.

    So how does America rank on the Greenspan-Guidotti scale?

    It's a guaranteed default.

    The US holds gold, oil, and foreign currency in reserve. It has 8,133.5 tonnes of gold (it is the world's largest holder). At current dollar values, it's worth around $300bn. The US strategic petroleum reserve shows a current total position of 725m barrels. At current dollar prices, that's roughly $58bn worth of oil. And according to the IMF, the US has $136bn in foreign currency reserves. So altogether... that's around $500bn of reserves. Our short-term foreign debts are far bigger.

    According to the US Treasury, $2trn worth of debt will mature in the next 12 months. So looking only at short-term debt, we know the Treasury will have to finance at least $2trn worth of maturing debt in the next 12 months. That might not cause a crisis if we were still funding our national debt internally. But since 1985, we've been a net debtor to the world. Today, foreigners own 44% of all our debts, which means we owe foreign creditors at least $880bn in the next 12 months – an amount far larger than our reserves.

    Keep in mind, this only covers our existing debts. The Office of Management and Budget is predicting a $1.5trn budget deficit over the next year. That puts our total funding requirements on the order of $3.5trn over the next 12 months.

    So... where will the money come from? Total domestic savings in the US are only around $600bn annually. Even if we all put every penny of our savings into US Treasury debt, we're still going to come up nearly $3trn short. That's an annual funding requirement equal to roughly 40% of GDP.

    Where is the money going to come from? From our foreign creditors? Not according to Greenspan-Guidotti. And not according to the Indian or Russian central banks, which have stopped buying Treasury bills and begun to buy enormous amounts of gold. The Indians bought 200 tonnes this month. Sources in Russia say the central bank there will double its gold reserves.

    So where will the money come from? The printing press. The Federal Reserve has already monetised nearly $2trn worth of Treasury debt and mortgage debt. This weakens the value of the dollar and devalues our existing Treasury bonds. Sooner or later, our creditors will face a stark choice: hold our bonds and continue to see the value diminish slowly, or try to escape to gold and see the value of their US bonds plummet.

    One thing they're not going to do is buy more of our debt. Which central banks will abandon the dollar next? Brazil, Korea, and Chile. These are the three largest central banks that own the least amount of gold. None owns even 1% of its total reserves in gold.

    All of this is going to lead to a severe devaluation of the US dollar... Which I expect to happen within 18 months.

    If you haven't taken steps to protect yourself from the coming devaluation – like owning gold and silver bullion, foreign real estate, and farmland – make sure you do it soon. The dollar rout is coming.

    • This article was written by Porter Stansberry for the free daily investment newsletter DailyWealth.
     
    #38     Jan 30, 2010
  9. ammo

    ammo

    i'm not an economist,barely understand it,but the solution after reading your post would be for the U.S. to dump it's huge gold stockpile on the market ,the price of gold would plummet, this part i'm not sure of, but would the dollar rally,at least its backed by farmland, industry, military...more of a question than a statement
     
    #39     Jan 30, 2010
  10. World War III will definately finish everybody.
     
    #40     Jan 30, 2010