Tuesday, 17 September 2013

It's Official - the End of Britain

Don't bother to vote for any party or expect anything to get better in this country. Moneyweek magazine has issued an unprecedented warning that the downward slide is terminal and that we are facing The End of Britain.
That's right  - the financial crisis we are in has no feasible solution. Blame who you like, it's no use. We are in the quicksand too deep. Britain is, economically, finished. This is not surprising in view of our moral and educational decline, but anyway here is what Moneyweek, roughly, has to say about it. Their video on Youtube is a very candid lesson in economics.

“If the UK had been business or an individual it would have been declared bankrupt long ago. It would have been forced to sell its home or business premises and would have been re-housed in a run-down flat …
We are broke ...very soon it will REALLY hit home.”

Most of our national debt has been run up in the last 30 years. During this period, interest rates have been steadily falling. When Mrs Thatcher came to power in 1979 it was 15%. Currently it is only 2%. This shields us from the true extent of our borrowing and the risks it entails. With low interest rates on their side, UK governments have gone ahead and borrowed more and more money.
But these good times are about to come to an end.
If interest rates rose a few percent, just to 4% we would be unable to pay even the interest on our debts. We would be in deep, deep, trouble, worse than Greece is. And the likelihood is that they will rise to something more like 6% or 7%.
Will the government have to abolish pensions? Sell off the NHS? Raise income tax to 90%?
In 2009, interest across the euro-zone was only 1%, but it was the sudden rise in interest rates that caused the severe crisis in Greece. The government went bust and EU-appointed administrators took over. That is what sort of financial crisis follows from a vast overload of debt.
“You cannot keep running up debts to pay for a lifestyle you did not earn”.

Interest rates now stand at record lows. So things can only get worse. Our record debts have reached £1.4 trillion  - they will be far out of all realistic prospect of repayment. So what can we expect to see happen now?

i) The banking system will be hit again and worse than in the past five years. Banks hold huge amounts of government debt. We owe them money. When governments go bust, banks will be hit badly and they will probably go bust. There may be runs on banks and this time the government will NOT be able to borrow billions in order to bail those banks out. They will crash.
ii) Next the housing markets will be hit. As interest rates rise, people will be hit by rising mortgage payments and towering property prices. But the government will not be able to afford to re-house them. Local authorities will run out of council houses and flats. They will not be able to offer an unlimited amount of housing benefit.
iii) The crisis will therefore cause social calamity and breakdown. There will be severe distress and chaos.

Look at what happened in Argentina in the 1990s. Crippled by debt, it went bust with empty banks, rioting in the streets and hungry people attacking livestock trucks to kill animals for food.
2001 Argentina created the “money prison” so that people could only withdraw £5 per week from their bank account! Furious people besieged the banks and pleaded for their savings  - but they were refused. Bank officials needed police protection from violent attack. Pensions were voided. The whole system imploded.

Look at what happened to Britain in the 1970s  - inflation rose to 28%.
The stock market plummetted in 1974 and interest rates went sky high. There was a General strike in the winter of 1978-79. During the 3-day-week people had to cope with wage CUTS despite the terrifying inflation.
Meanwhile our high taxes deterred foreign investment. There was real discontent, hardship and fear. In 1976 the UK government had to be rescued by the International Monetary Fund. What a humiliation.
Even Jim Callaghan admitted that too much state spending has its dangers.
What has happened in the past thirty years? Have we exercised thrift? Frankly, no. Governments have taken advantage of falling interest rates to carry on spending and do it by borrowing more and more. The Blair government squandered billions on wars, extravagant schemes, bureaucracy, pension promises and buying votes by keeping people on benefits from the cradle to the grave. (It also of course squandered money on EU membership.)

The crisis that is coming will affect all classes, rich or poor. Everybody will suffer. Those who own homes and investments will find that their value goes down dramatically.
Moneyweek (which has accurately predicted most of the major financial ups and downs of the past decade) warns that Britain is entering a long, downward cycle.
"Britain’s fate has already been sealed. The day of financial reckoning approaches."

In recorded economic history, no country has EVER survived having a national debt of the proportions that Britain now has. The outcome has ALWAYS been currency collapse and national breakdown. We are in a worse position than Greece, where all benefits and pensions have already been slashed to a fraction of what they were. Our debt-load today in 2013 is comparable to that of the Weimar Republic in Germany in the 1920s. Yes, we are in as bad trouble as they were. Their national debt was 913% of the economy. Hyper-inflation caused complete economic breakdown. Today if you add up government debt, financial sector debt, corporate debt and personal debt, Britain’s total debt is 900% of our economy already. The debt-bomb ticks ever closer to detonation…
The only thing delaying the crisis is the fact that interest rates are at a historic low. They cannot stay that low and when they rise, we will face the worst crisis in generations.
What will government do? It cannot solve the debt crisis. The hole we have dug for ourselves is just too deep.
What is likely to happen when interest rates rise is that the price of food and fuel will rocket up and shares will fall so fast that trading will be suspended. Politicians will seize at any resources to tide them over. THEY WILL SEIZE PRIVATE ASSETS, that means they will help themselves to savings in banks and building societies, just as happened in Cyprus last year. They will demand that everybody surrenders any gold they happen to possess, as was done in the US to build Fort Knox.
In Japan twenty years ago during the financial slump the government “nationalized” i.e. grabbed, everybody’s pensions. Faced with this sort of severe crisis, UK governments will undoubtedly raise tax levels. Your spending money will be limited. You will not be allowed to take currency out of the country. You will not be allowed to invest abroad. Private pensions will have to be “nationalised” because the government cannot afford to pay anything to those without private pensions. The fact that you worked and saved for your pension will not matter.
Interest rates may creep up or they may rocket. Very soon governments will target you and whatever assets you have got.
   Is there anything you can do?
Well if you are a rich bastard, Moneyweek is offering you a free “wealth preservation report”. They will tell you about bolt-holes to put your money into and secure investments you can make. If you don’t follow their advice, you may be queuing in the street outside a bank that refuses to issue you any cash.
If you are not a rich bastard, you had better just die worrying.


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