The end of Britain! We are doomed! You will die in poverty! Unless you buy MoneyWeek!

You may know about this. But in case you don’t, here’s a link to a “documentary” made by the investment magazine MoneyWeek. http://pro.moneyweek.com/myk-eob/EMYKP239/?a=5&o=67020&s=69733&u=113050&l=254012&r=MC&g=0

The aim of this rather over-long supposed “documentary” is to terrify viewers into taking out a subscription to MoneyWeek. So the claims made are probably hugely exaggerated. But it does make some useful points.

In essence MoneyWeek point out that the current situation where no government has the courage to cut public spending will end in a major economic crisis. As you probably are tired of hearing, debt under the Coalition will shoot up from about £750bn in 2010 to close to £1.6trn by the time of the 2015 election. We have been able to sustain this debt because government borrowing costs are at a record low level of about 2%, when the historical average is around 5%.  But at some point, as debt continues to increase by over £120bn a year, financial markets will lose confidence in Britain and will demand a higher rate of interest to lend to our financially incontinent government. And if we reach a point by 2017 where debt is say £1.8trn and interest rates return to the historical average of 5%, then we’ll need to find £90bn a year to service our debt.

At some point there will be a massive crisis because our manufacturing sector is not large enough for us to grow and export our way out of ever-increasing debt. The MoneyWeek film paints a lurid picture of social breakdown, rioting, banks collapsing, savers losing everything, the government confiscating our pension money to pay its debt and so on and so forth. While probably exaggerating, at least the film should push people to think ahead about the inevitable crisis and how it will affect them.

Some things are fairly predictable – we know no government will ever have the cojones to make a real cut in spending as people will always vote for the politicians who promise them something for nothing. So any government will be forced to do some of the following – push up inflation so that they can repay today’s debts with tomorrow’s debased money, trash sterling, massively increase taxes (Osborne’s disastrous 2012 omnishambles budget contained plans to increases taxes by 30%), make a punitive tax raid on our savings (new taxes on dividends, pension funds and even bank deposits), cut the state pension to generate money to pay for a new wave of 2 to 3 million economic immigrants and so on.

I know it’s easy to be alarmist. But at some point, our government cannot continue taking in £600bn in taxes each year and spending £720bn. This has to stop. But no government has the courage to stop it. So it will be the financial markets’ refusal to keep lending us money at low rates of interest that will set off the coming crisis. And each of us needs to think though what’s likely to happen and how we can preserve our wealth when the crisis does hit.

If you’ve got any smart ideas, you’re welcome to add a comment or contact me