Economics • Increased concern among investors about nations' debt levels, their ability to finance themselves and prop up their banks. As seen in Ireland, which received a £72bn bailout from the European Union and the International Monetrary Fund, and Greece, which has also been given financial aid by the EU and IMF. If investor unwillingness to lend to nations spreads further across Europe, it would pose a risk to Britain's banks. • Because of the low interest rates available in developed economies, investors are looking for better returns than they get leaving their money in the bank. High-growth emerging markets such as China and Turkey are seen as attractive, but too much capital flowing into those economies could lead to unsustainable bubbles in, for example, property prices. UK banks with large exposure to emerging markets are at risk from this scenario. • If government bond yields suddenly rise from their low levels, then bond prices, which move in the opposite direction to yields, would tumble. That would leave banks with large holdings of government bonds nursing substantial losses. • UK banks could suffer if commerical and residential property prices fall further on weaker-than-expected growth. If interest rates increase substantially, that would also pose a risk to mortgage-issuing banks, because over-extended borrowers would be unable to pay back their loans at higher rates. • Failures of risk management causing disruptively large moves in share or bond prices, and investor concern spreading to other banks. Here's how to profit from Euro's upcoming collapse. Free report.Bank of England: Key risks to the UK financial system
The Bank of England has highlighted five keys risks facing the British economy in its latest bi-annual Financial Stability Report. We list them.
Sunday, 19 December 2010
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- High and rapidly rising unemployment driving down high street demand so higher burden on the treasury
- A diminishing tax rake so a further hit on the exchequer
- Strong deflationary pressures (no one spending anything) made worse by high levels of *personal* debt etc etc
- Reduced economic output as a result of the above so even greater deflationary pressure.
You get the picture.
China's inflation rate would seem to be the last of our worries.....
1 person
You can ignore OBR forecasts as they are not allowed to get their own numbers - they are fed data by the treasury. It is just an expensive quango (effin politicians, its not their money).
And that assumes the euro holds some spending power to buy british goods/services (50% of our exports), which is not looking good.
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Jeez, talk about honour - as for the yanks, they're a bunch of bloody paranoids over this Wikileaks business.
1 person
it goes to show you can't be too careful
14 people
1). A squandering government which is totally incapable of running balanced budgets decade after decade.
2). Unbacked fiat currency which is being printed to death destroying savings.
3). Sovietization of the UK where many area are > 50% government. There should be no area over 20% to avoid systemic risks.
4). Eye-watering tax rates which obliterate private enterprise.
5). Minimal investment in green science and partnership between entrepreneurs and universities.
UK govt debt pre-crisis - 40% GDP
France/Germany pre-crisis - near 70% GDP
Italy pre-crisis - 100% GDP
Japan - near 200% GDP.
- Osbourne is barely altering labour's borrowing plans for this parliament. He's going to borrow £400billion and a bit. Labour were planned for borrowing $400billion and a bit more.
- He can do this because Brown\Darling left our debt low in %GDP terms and bond rates at 4%. Ken clarke handed over bond rates at 7% in 1997 after a nightmare recession and extreme public spending.
UK debt is long term (again because of last govt) - in the next 2 years $10trillion required globally. Uk requires less than most countries in %GDP, less even than Germany. Australia and some scandi countries are better off than UK in %GDP terms but noone else.
That's why we're not having a problem.
Brown left us with a growing economy and benign bond rates. Osbourne intends to drive that into the ground next year or 3.
Unemployment is going to be ugly but the tories want it to hold down wage claims and so interest rates.
Meanwhile rpi of 6% is raping savers, pensioners - mortgage holders are getting a massive subsidy to offset inflation for now. BTl landlords and very rich large mortgage holders get the biggest subsidies which is near £10billion/month (14 million mortgages x ave. £600/month subsidy).
Its not about govt debt, its about private debt and specifically about bank liabilities. If assets fall, their derivatives mountain (bets on those loans leveraged up to 60 times) comes crashing down and sends us into the dark ages.
That's why the policy of inflating away the debt by Osbourne and BofE.
Wake up.
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