Thanks for sharing this Greatnan.
I'm afraid that Britain is sitting on a precipice and the outlook is not a good one. I do not believe for one minute that the austerity and hardship many in this country are being subjected to will have any impact on the worsening balance of payments deficit we are facing. Never have we owed so much. The UK's debt as a % of GDP is amongst the highest in the world with only Japan and Ireland higher. Government borrowing is increasing at such a rapid rate that it could reach £1.4 trillion by the next election despite austerity measures. That would be double the £700 billion mess the last administration left. How will that affect us? In my humble opinion very much and in a not very nice way.
Pensions are a prime target and on the agenda and the thinking is logical and substantiated. On 1 January 1909 changes meant that men aged 70 and over could claim between 2 and 5 shillings per week from government. No investment was needed to finance this as life expectancy was 48 and as only half a million men qualified there were 10 men working for every one receiving a 'pension' as we know it today. However at todays values pension age should be around 120 or thereabouts. State spending has spiralled out of control and from around £250 million in 1940 has reached around £800 billion now. The government currently spends around £120 billion more than it collects in taxes (that's direct and indirect taxes). It cannot be sustained or in my humble opinion stopped. Interest rates are hiding the problem in store but once the cat is out of the bag, just look at Ireland, Greece and Cyprus, then the rot will start from within and interests will be forced to rise with the catastrophic consequences that will bring. I am sorry to say (at the risk of being accused a scaremonger) that if interest rates rose to their historic average we could not afford to service our debts and the only course of action would be drastic- such as abolishing state pension, bank failures and with it going any savings, selling off public services including the NHS (the holy grail for carpetbaggers) Millions would lose their homes and become homeless and inevitably anarchy will rule.
Could not happen in Britain? Perhaps not, but there again we did not envisage bank failures (Lehman Bros, Northern Rock, RBS); we did not expect Argentina (one of the wealthiest countries on earth) to go bust, Iceland, did we expect them just to shut down their banks and Cyprus! Did we expect their depositors to lose up to 60% of any savings over €100k and that figure is not limited, it could end up as more. Did we expect them to shut down their largest bank and transfer all debt to the second largest. We would be well informed to understand that our money deposited in a Bank is no longer our property once deposited. It belongs to the bank. The bank issues a promissory note to bay the bearer on demand the sum of (depending on the size of banknote) but this does not have to be in cash! As in the case recently where Bank of Cyprus shares will be issued to the value of cash taken from savings - would you want worthless bank shares instead of hard cash in your hand? neither would I.
Sorry to have gone on so long but I just felt it best that at least an alternative opinion is aired as only time will determine which version comes to pass. Either way interesting if not turbulent times ahead but hey! the sun is shining and the reality is that the best things in life are free anyway - or so I am told.
