December 2022
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Are you ready for the great financial crash?

Journalists make a living out of knowingly and cynically exaggerating, sensationalising and doom-mongering. I’m not in that business. But I’m finding it difficult to believe that we’re not heading for a massive financial crash and collapse in the value of the pound. You probably thought that was what happened in 2007/8. But the 2007/8 meltdown may just be foreplay compared to what’s going to happen in the next 2 to 3 years.

The problem is UK government debt. In 2000 this was about £320bn. By the 2010 election this had reached over £700bn. It’s now about £1trn. And by the 2015 election, we will owe close to £1.6trn. At the moment we pay about £50bn (0.5%) in interest each year. But that’s because the Bank of England (BoE) is using our money to buy our own debt. If the BoE wasn’t buying our debt, we’d probably be paying at least 1.5% – £150bn a year – in interest. That would mean having to make another £100bn cuts in public spending.

But at some point, the BoE will no longer be able to buy our debt and we’ll have to start paying real market (rather than BoE artificially-depressed) interest rates. Say we have to pay 1% – that’s £160bn a year by the next election. If rates were to rise to 1.5% – that would be £240bn a year. So a third of the government’s tax revenues would go to paying just the interest on our debt, never mind the capital. If this happens, we’re finished. The government would have to impose such draconian cuts that we would plunge into a massive recession, the value of the pound would collapse and we’d fall into a vicious self-reinforcing downward spiral where a lack of confidence led to higher interest rates, leading to a further lack of confidence and thus further rises in interest rates.

When will this happen? The most likely time is a few months after Labour get into power in 2015. Markets will see that in spite of horrendous levels of debt, Miliband’s and Balls’s only policy is to borrow more money to waste on higher salaries for Labour’s public-sector union paymasters. The interest we pay on our borrowing will start to rise, the value of the pound will go through the floor and we will be forced into asking the IMF to bail us out.

We are sleep-walking into this disaster because none of our politicians has the courage or leadership to tell us how much of a mess we’re in. All our politicians are interested in is keeping their jobs, thieving our money, and finding as many extra jobs as they can to feather their own nests. As Bachman Turner Overdrive sang, “b-b-b-b-baby you ain’t seen nothing yet, here’s something you’ll never forget, you just ain’t been around.”


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