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Meet the men who could trigger the Chancellor's bad trip

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Paul Mason | 16:46 UK time, Wednesday, 20 January 2010


When it comes to the budget deficit it can feel, at present, like Britain's getting flashbacks from every bad trip we've ever had - Black Wednesday, Harold Wilson's devaluation, Jim Callaghan at the airport...

There is an atmosphere of impending crisis - some fear manufactured - where the City gangs up on Whitehall; where hands are forced; where political reality meets financial reality, and the money wins.

Mervyn King gave the government an extra head-spin on Tuesday when he threw in a quote from his opposite US number, Ben Bernanke.

"Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth. The Chancellor has made clear that the Spring Budget provides the opportunity to do precisely that."

Translated out of Mervynese, this means he wants more clarity about the path to a sustainable budget deficit - he has said before that the government needs to do more. In fact translated even more it simply means: I am on your case.

Who are these agencies?

In the nightmare scenario, the waking up in a sweat screaming moment for any politician is when the credit rating agencies, jointly or severally, downgrade Britain's credit rating.

This is currently AAA and always has been, which means lending to the UK government carries a zero risk of default.

But who are these agencies? What right have they to say to an elected government that it needs to do more? And are their methods sound?

I've been finding out.

It would be wrong to say "three faceless men could plunge Britain into political chaos" - but let me put it this way: Fitch, S&P and Moody's are the authoritative ratings agencies.

At each one there is a sovereign risk team where the top guy will call a committee meeting and there will be a vote (in order of seniority, from junior to senior) on whether the UK meets their published definitions of a AAA economy.

If it goes against, the day after that, whoever is chancellor will not be very happy.

Poachers turned gamekeepers

At Fitch, David Riley is the man who will sit at the head of the table. He is an economist by trade.

Most people in these teams tend to have backgrounds in central banks, country treasuries or places like the IMF. They are, in other words, poachers turned gamekeepers.

Mr Riley's verdict on the UK is that: "Halving the deficit over four years delays debt stabilisation and leaves public finances vulnerable".

Because of this Mr Riley thinks there is a "close-to but lower-than 50%" chance that he will downgrade the UK this year.

He just doesn't think Alistair Darling's PBR plan plots a credible path to a sustainable level of debt.

On the government's own measure debt will peak at just under 80% of GDP; on the Maastricht Treaty measure the City uses, it is closer to 90%.

Either way, for Mr Riley this is the key metric and 90% is unsustainable.

Political role

A few stops along the London Underground, at its Canary Wharf HQ, Moody's sovereign debt chief paints me a different picture:

Pierre Cailletau says there are two key factors: first, and measurable, is the affordability of a country's debt.

Mr Cailletau is confident that, because debt servicing costs are low, and Britain's government borrows in with long-term IOUs, it is manageable.

(Right now Britain's debt servicing costs are set to peak at around 3% of national income according to the Institute for Fiscal Studies, then fall back to 2.5%.

But there is another layer of reasoning - unsettling to many politicians but crucial to both men's view of their role.

They are, essentially, political economists. They have to take a view on whether a country like the UK has social cohesion, whether there is a long-term political consensus over fiscal stability, a stable party system, the rule of law etc.

They have, in other words, to look people like Alistair Darling in the eye and say "I don't believe you're going to do what you say".

This is unusual for private sector economists to have to do. But it is what makes their judgments inevitably nuanced and to an extent subjective: both agencies have pointed me to extensive methodology documents to explain how the decisions are come to.

(Standard & Poor's, for the record, refused to speak on or off camera for this report. It is the only agency that has put the UK on negative credit watch.)

Being watched

So, what we know is that the agencies have the UK - together with France and Spain and of course Ireland and Greece - under surveillance.

But you cannot read off from this the idea that "the City" has "lost faith in Alistair Darling".

Steven Major, HSBC's global strategist on sovereign debt, believes the rating agencies and the markets are systematically under-valuing Britain's debt.

"The chances of Britain defaulting are zero. Yet the only thing a rating measures is that chance. There will not be a downgrade," he says.

He believes the methodologies of the agencies are open to question. Above all with Britain, he believes, a "true sovereign" country can tax, print money or devalue its currency to avoid default.

While this poses risks to some investors, above all the roughly 36% of UK gilt holders who are based abroad, it is not the same risk as that measured by the agencies.

If all this sounds arcane, remember it is political. Even Mr Riley, whose judgements are being brandished around by those who want Britain to cut spending faster, says it would be no tragedy if Britain lost its triple-A status.

It's a choice, he says: Japan lost its AAA and has debt at 200% of GDP but it can still borrow.

Benefit of the doubt

All the ratings bosses are keen to emphasise that they are not trying to dictate to governments: only to explain what will happen if the government fails to spell out a credible fiscal strategy.

In fact, both Mr Riley and Mr Cailletau use the same phrase: we are giving Britain the benefit of the doubt.

What they all worry about is political instability. There is a large wedge of fiscal pain to be borne between 2014 and 2017 that will have to be either tax or cuts - if there was an unresolved political debate about tax versus cuts, and a hung parliament, it is virtually certain the agencies would downgrade.

In that circumstance, says Mr Major, what you are then looking for is a downgrade spiral: markets lose faith, government fails to act, then a further downgrade that significantly hikes the cost of borrowing.

What's certain is that there is pressure on the government to cut faster and more transparently. But even those exerting it are aware it is a double-edged sword.

As one pension fund manager, who holds billions of pounds of UK debt put it to me off camera:

"Right now, to protect my pensioners, I will probably force the government down the path of greater austerity. But further down the line I know those same pensioners will suffer because of health and social care cuts. But I can't help it."

Thinking the unthinkable

There is of course an easy argument to make against the agencies: that they got it wrong over the complex credit products that fuelled the subprime boom and bust, in some cases, as the US SEC has reported, culpably.

But it is an easy hit: sovereign debt metrics are not that complex and to be frank there is less pressure from governments on the teams that will make the decisions than there was from Wall Street.

This is, essentially, about the markets making judgements about politics and the agencies trying their best to embody that in an objective manner.

Right now the option of just doing a Japan and accepting a lower credit rating is treated as equivalent to suggesting we leave the UN Security Council and abandon the nuclear deterrent.

But when people understand the scale of the spending cuts that an incoming government will have to make to maintain AAA, it may not be so unthinkable after all.

Watch Newsnight tonight as I meet the men who have the power to slash Britain's credit score and provoke political chaos. BBC Two - 2230 GMT, then afterwards on the BBC iPlayer or Newsnight website.


  • Comment number 1.

    These being the same rating agencies who saw no problem in the months leading up to the collapse of investment banks, a plunge in financial markets and the collapse of house prices globally save the UK and Hong Kong?

    The same rating agencies that were saying that all the banks, all their debts, all their subprime NINJA mortgages, all their CDOs and other complicated 'house of cards' financial products were triple A.

    Hmm... How much do these guys get paid again?

    Frankly, if I was on one of these rating agency committees I would be very concerned about downgrading certain companies for fear of offending some of their power-mad bosses and shareholders. Not everyone plays cricket - especially when it comes to millions and billions of dollars.

    When it comes to downgrading a country like the UK I would, as Hugh Grant's character pointed out in 'Love Actually', bear in mind that:

    "The SAS are absolutely charming. Ruthless trained killers are just a phone call away.".

    In other words, I would personally be very wary about promoting my own career, and hoping for a nice big fat bonus, as the result of causing serious economic grief for 60 million people.

    Economics is, after all, another branch of modern warfare.

  • Comment number 2.


    For through money, are all things made; and without it is nothing made that could be made. Money is the life and the light of men, shining in the darkness of Barter-Chaos.

    While we attend these financial gurus - are we missing something FUNDAMENTAL?

  • Comment number 3.

    Just a small point: I suspect you mean "Denis Healey at the airport", not Jim Callaghan. In late 1976 whilst Denis Healey was Chancellor of the Exchequer, he left to go an IMF meeting in the United States, but turned back at Heathrow because Britain was suffering a sterling crisis. The UK Government's approach to the IMF for a loan followed (embarrassing but possibly unnecessary as it turned out, because the crisis stemmed from downbeat trade statistics that were later shown to be wrong).

    Jim Callaghan's airport episode wasn't associated with deficits or money men. As Prime Minister in 1978 or '79, he came back from the Caribbean (Commonwealth heads of government meeting? Can't remember) to confront a Britain facing the labour disputes of the "winter of discontent", and he declared at Heathrow "Crisis? What crisis?"

    Except apparently he didn't. That was simply the headline on the front page of one of the tabloids (The Sun?), and nowhere is there any record of his having uttered those words.

    I reported both stories.

  • Comment number 4.

    Enough of the sexist language. They're men are they?

    The people I deal with at each of these three agencies are all women.

    Journalism fail.

  • Comment number 5.

    ''.......... As one pension fund manager, who holds billions of pounds of UK debt put it to me off camera:

    "Right now, to protect my pensioners, I will probably force the government down the path of greater austerity. But further down the line I know those same pensioners will suffer because of health and social care cuts. But I can't help it."..............''

    Somewhat reminiscent of the pension fund managers who used pension pots to fund asset strips and takeovers a few decades ago which lead to the job losses of the very workers who were paying into the same pension pot. 'But I can't help it' Hmm sounds like a Pension Fund Managers Anonomus meeting confessional. Whatever happened to ethics, and whatever happened to the owners of funds - those who pay in - saying hang on a minute its my money I want it managed with that old fashioned word - responsibility.

    This garbage is just a sop to the fund managers conscience, nothing more. Hollow words. Posture.

  • Comment number 6.

    We've already 'unofficially' lost AAA status according to the market - our debt sells closer to AA territory.

    I doubt we'll officially lose it, not unless Brown does something more boneheaded than usual.

  • Comment number 7.

    There is a perfectly functional metric of the subjective expectation of sovereign default - the bond's yield.

    In the absence of rating agencies, a fund manager would have to make the evaluation "in house".

    Rating Agencies ? Shamanisn ? Kabbalah? which would you trust to divine the future ?

  • Comment number 8.

    "But further down the line I know those same pensioners will suffer because of health and social care cuts. But I can't help it."

    Do you think he meant to say "But I won't get the blame for that"?

  • Comment number 9.

    Gilt Edge Market Makers ( Barclays Capital , HSBC, RBS etc.) and Inter Dealer Brokers - dont these guys capture the markets for HM Govt in return for privileges. What power do they exert, I wonder. Look forward to the programme.

  • Comment number 10.

    #1 tawse57

    That sounds like a threat to me!

    You are Damian McBride....are'nt you?

  • Comment number 11.

    Tut tut Paul, seduced by the crisp suits, personable talk and oak panelled offices in the lofty heavans overlooking the city.

    Of course these guys and gals come accross as reasonable, rational charming and methodical beings.

    But dont forget, the ancient greeks who invented reason still preferred to predict the broader future by observing patterns of dust on the wind.

    The ratings agencies are over-rated, perpetuated only by virtue of previous momentum gained, the same momentum that sustains the global economic model itself.

    Yet with each passing moment the past energy sustaining it diminishes.

  • Comment number 12.

    I've always found it quite funny how the United States, who's in just as bad a financial position as the UK (only the numbers are a lot bigger against them, and getting worse) aren't even having their status even being looked at. I wonder why that is...

    Oh, there's the reason! All their offices are located - where else? - in New York City! Downgrading the US rating would obviously have a knock on effect on their "business". And doubtless the Treasury has the agencies' arms twisted behind their backs anyway.

  • Comment number 13.

    #1 tawse57

    I've changed my mind...I think you are Will Hutton on magic mushrooms!!!

  • Comment number 14.

    #10, #13 freemarketanarchy

    No, neither of them...

    Just don't take any long walks in the countryside if you work in the rating agencies and the UK gets downgraded. There be secret squirrels everywhere :-)

  • Comment number 15.

    Yup, they make it up as they go along. Just as long as they don't upset anyone rich.

  • Comment number 16.

    Clumsy threats to companies for pointing out the elephant in the room, what is common knowledge to all but the most benighted: that Brown left the public finances in such a shambles that we can be doubted to pay our national debts back - I can't decide if it's "The Emperor's New Clothes" or "1984". I can imagine Brown's take on the latter: "This is not debt, this is deferred solvency"...

    Sounds like typical short-termist tat to focus on what it means if the parlous state of public finances is revealed, as opposed to what it means if the same state is NOT revealed. Like your house has fallen in but you would rather not tell the neighbours! Have you ever considered that publicising the truth would hurt in the short-term, but in the long-term acceptance of the facts and consequent change of policy is the only way to a better future?

  • Comment number 17.

    It is very easy to say that we have got social cohesion seriously misunderstood just to please the guy with his hand on the chequebook!

    Everybody thinks that they have got to export their values as well as themselves when there is supposed to be one government in the land I can understand competing with other business but basically the idea that we have to accomodate other culture's values when they migrate here seems to be slightly whiffy. Oh well we've had this conversation before.

  • Comment number 18.

    Help me here. The chap from HSBC argues that the Government can never default because it can always print the money, or devalue the currency, so as to cover the debt.

    To my mind that is tantamount to a default - and is surely the risk that the bond-purchasers have to assess.

    Presumably is is the risk that the agencies are trying to rate?

  • Comment number 19.

    18. At 08:29am on 21 Jan 2010, tFoth wrote:
    'Help me here. The chap from HSBC argues that the Government can never default because it can always print the money, or devalue the currency, so as to cover the debt'
    'To my mind that is tantamount to a default - and is surely the risk that the bond-purchasers have to assess'

    I agree

    The UK’s AAA rating:

    I reckon:
    The first is A is because you pay back the capital.
    The second A is because you honour the interest payments
    The third A is because you don’t water down the value of the gilt by printing more money.

    The third ‘A’ is likely long gone but not admitted to.

    In 2009 the only large net buyer of UK fixed interest gilts was the Bank of England. Pimco, the world’s biggest bond house says that it will be a net seller of UK gilts in 2010.

    I don't think that it's the rating agencies we have to worry about too much, it's whether there is demand for £200 billion of gilts this year.

    And what happens if there isn't.

    The projected deficit between tax receipts and Government spending is £200 billion.

    If you can’t raise £200 billion issuing gilts, and the BOE doesn’t print it for you, then;

    The overall tax take has got be increased dramatically, or an awful lot of public sector workers have to go.

    Does any blogger know whether any political party (big or small) has published a methodology of addressing the forthcoming £200 billion deficit?

  • Comment number 20.

    Don't the Ratings Agencies owe us a bit.
    If our and other governments hadn't stepped in when some seriously large companies failed they'd have seriously less things to rate.

    Surely if you move to the Japan situation you have little chance of coming back, you're left with debt repayments being a massive amount of your annual spend for eternity.

  • Comment number 21.

    When addressing this issue one is left wondering which party between the ratings agency and the government is more bankrupt than the other. Neither understood what a CDO was and what danger it represented to us all.

    Now both parties consider themselves qualified to sit down and judge the taxpayer who had the basic decency to bail them all out of trouble in the first place. So not only is their intellectual judgement faulty but also their moral capability.

    From time to time in this last year I ask myself the question as to why did we bail out the banks. The answer always come back that things would be a lot worse if we hadn't. I can accept that but what has been missing is the political and economic reforms that should have followed on immediately after the bail out - a forced split between retail and investment banking, a thorough audit of septic assets and the ruthless reform of remuneration in the financial markets. It is this subsequent failure by the Man in The Bunker which has left us suspended in our current predicament.

    One can only conclude that the best interests of the taxpayer have not been considered by anyone. Well, since this is obviously the case then I think we are going to be in for some distinct political uncertainty.

    Can anyone give me a reason why the British people should remain disciplined in this respect? We are being left with the bill and the cleaning up after someone else has had a wonderful party. Are we just going to quietly accept this situation? I think not: I suggest the paper tigers had better hitch a ride on the running dogs before the smelly stuff hits the fan.

  • Comment number 22.

    I prefer WOTW's explanation of the rating agencies' scoring system...especially the last one ;o)

  • Comment number 23.


    The smart ruler interprets hanging chads as confetti, and says all is well.

    It will be necessary to keep crossing the great water until another bogus threat can be conjured to cow the people.

    The 'Ker Ching'.

  • Comment number 24.

    "At each one there is a sovereign risk team where the top guy will call a committee meeting and there will be a vote (in order of seniority, from junior to senior) on whether the UK meets their published definitions of a AAA economy."



    That bit did amuse me last night during your piece on the ratings agencies...I just had a vision of them all sitting around the table and then asking the tea-boy first for his assessment of the UK economy!

    How very objective!

    My-oh-my! just can't make this stuff up!!!

  • Comment number 25.

    Paul - I watched your report on NN last night and listened with interest to the views from the HSBC chap. There did however seem to be a bit missing from all of the analysis. Granted that AAA status does not necessarily equate to the lowest yields your graph illustrated. However, if UK gilts lost AAA status would this not mean that certain institutions (pension schemes, banks etc) would be restricted in the amounts they are able to purchase and might they have to sell some of their existing holdings? Are there not rules which require these institutions to hold a certain percentage of AAA rated assets? Would this have any impact?

  • Comment number 26.

    #25 - there are. But we're in a world where no AAA is really safe (apart from Germany and maybe Canada). I think the strongest argument in the favour of those who would simply take a downgrade on the chin is that the UK's debt is always going to be desireable, especially if the paper is generating a higher yield. However against that I have heard a lot of unattributable worries about a "failed auction" scenario. HMG is said to be boosting the size and depth of its auctions to avoid the possibility of smaller, shallower ones actually failing to sell all the bonds. And when I say unattributable, I mean from the people who would actually buy the bonds. And we are already talking about this while we are still AAA. This is because there's a fear that the market won't take up where QE leaves off. Cheers, Paul.

  • Comment number 27.


    Obama seems like acomplex character to me and cant be all bad, quote below from BBC news.

    ''Mr Obama' s proposals appear to be a return to the principles underlying the Glass-Steagall Act.

    That law - from the 1930s in the aftermath of the Great Depression - separated commercial and investment banking and was eventually abolished in 1999 under President Bill Clinton.

    Mr Clinton's financial secretary at the time, Robert Rubin, previously worked at Goldman Sachs and went on to be an advisor to Citigroup until last year. ''

    I think most posters here would breath a sigh of relief and say ' about ******* time!'

    This item at least would appear to be the actions of a rational being unmoved by the traditional manipulati based on the Goldman sachs model of ' Power analysis'.

    Its only a year lets give this guy a chance and hope the american people afford him the same courtesy.

  • Comment number 28.

    Paul - The UK will in the years ahead have to generate sufficient wealth to sustain itself and have sufficient surplus left over to repay our ever expanding debt. If those who lend money to us are to be confident of a return, they presumably have to have some grasp of just how the UK will generate that wealth. Historically we were a manufacturing and trading nation and these activities generated the wealth needed. Latterly , as both manufacturing and exports declined we looked to the financial sector to meet the shortfall. However if that source is now itself going to decline, and we are forced to abandon simply printing money, just where will our future wealth likely be generated ? We are no longer in the manufacturing big league, our service industries will come under increasing competition from emerging nations, and our finance base is likely to shrink. Just what will constitute the collateral we can offer to any perspective lenders to give them confidence that we remain a good long term bet ?

  • Comment number 29.


    i cordially invite all fellow bloggers to join me in raising a glass to the re-instatement of GLASS STEAGAL.

    Forgive me, I started already without you all but feel free to join me.

  • Comment number 30.

    BRIEFLY (otherwise this will get too long) #27

    Obama chose law and then took to politics, as did Blair, Straw. Hoon etc.
    Law is not a caring profession. (Possibly armour for the weak?)
    Law and politics are about winning with words.
    Obama is a charismatic orator, as is Blair. Look at Blair.
    Men like to win; charismatic orators find: 'Yes They Can' and 'milk' it.
    Vast money propelled Obama to the Whitehouse. Without it: No he couldn't.

    I loathe Obama-the-Institution. I detest the manipulation of the common man to uplift the Blairs and Obamas. In my impotence, I attack the man.

    MEA Culpa. But what will Obama own up to, when he reads this?

  • Comment number 31.


    Glass-Steagall - Is it a done deal Jericoa? Does that mean Obama's funders (minders) have charted a route round it already?

    Successive British governments have espoused the need to apply controls to tobacco - yet we joined an EU that currently subsidises it cultivation in 9 countries.

    What a government ANNOUNCES, is for our bamboozlement, it rarely has a one-to-one relation to reality.

  • Comment number 32.

    Jericoa and Barriesingleton - just thought I would mention what I said on the Peston page

    "Dont get too exited too soon. The first hurdle the bankers lobby will throw at Obama is the Fraud Enforcement and Recovery Act May 2009 which established a bipartisan Financial Crisis Inquiry Commission to advise the President,Congress and the American people on the whole god-damn shooting match. They report by 15 December 2010. To quote the Chair

    " It is my hope that the findings of this commission can help the President, Congress, market
    participants, and the public reach the best judgments about how to fix our financial system. How
    we conduct our work will say much about the credibility with which our work is viewed."

    Legal vultures will see an immediate delaying tactic. Only when the FCIC establish the facts should fundamental reform be even considered, they will say."

    On Obama as a lawyer, his civil rights,voting reform and constitutional background would at least imbibe him with some compassion and desire to serve, wouldnt it.On his motives today, the cynic would probably be comforted. Nothing like an electoral defeat to galvanise a politician to act.

  • Comment number 33.

    #18 - tFoth: "The chap from HSBC argues that the Government can never default because it can always print the money, or devalue the currency, so as to cover the debt."

    Well yes - that's the trick isn't it? If you lend HMG 1GBP then you can be VERY confident of getting 1GBP back. Whether or not it will be worth anything by then . . . .

    As #19-Dempster wrote: "The third ‘A’ is likely long gone but not admitted to."

    And Paul Mason #26 hints that HMG is not guaranteed to be able to borrow indefinitely. Unfortunatelt this is not news to some contributors to this blog.

    Speaking of which, #29 -Jericoa: who's co-ordinating the party? Whatever happened to your lobby group? It's almost a year now since you spoke of this.

  • Comment number 34.

    optimists are activists, pessimists watch from the sidelines and complain.

    or put another way.

    Sucess is going from one failure to the next with enthusiasm.

    I guess nobody is joining me in raising a glass to glass steagll just yet then..:)

  • Comment number 35.

    Actually, I am - WOW! (weird orange wine). We've been cut off for a month now (track to the village collapsed in the rain) and almost all the other homebrew (grape, fig etc) has gone.

  • Comment number 36.

    I've allowed myself a quick arf - cheers:)

  • Comment number 37.


    I went looking for an answer to why Clinton repealed Glass-Steagall.
    The answer OFFERED was 'It's the money stupid' - it said he was well funded/rewarded by the usual suspects.

    During the campaign, were spun the line that Obama had tapped into the little guy, via internet, to get half the money that BOUGHT (sic) him to the Whitehouse. My immediate response was: "And the other half?"

    If the cute money-guys, who funded the other half, and who are always ahead of the game, have a plan. Then the apparent, delayed, unformed, general idea that Obama is going to repeal GS - some time - is probably part of it, and it will all come out HEAVILY in their favour.

    No. Not raising that glass yet a while Jericoa.

    Follow the money.

  • Comment number 38.

    Jericoa - I tracked down one of the earliest references on Paul Mason's Blog.

  • Comment number 39.

  • Comment number 40.

    Paul - many thanks for your response at 26 to my questions. I take it from this that the rules which apply to institutions on the quality of the assets they hold are flexible enough to cope with the issue. What prompted the question was that I had read that UK banks are likely to buy gilts this year as it is one of the limited classes of assets which they can hold for capital adequacey purposes. I wondered if this would change if UK gilts lose their AAA status.

    On the point made at 39, isn't there a problem with taking the printing money route too far in that it will lead to inflation and a fair amount of gilts are now inflation protected? In addition, much of the UK's off balance sheet debt (particulalry the cost of public sector pensions) is effectively index linked as well.

    My own view is that we will have to get through mess by a number of years of austerity. The trick will be for the politicians to take the measures without creating social and civil unrest.

  • Comment number 41.

    Wow what a few years it has been. If you had told people a few years ago how their money operated in the banking system, they would not have believed you.
    Even my business partner said to me last year "well why cant they just print more money".

    For all the comment in the press on the telly, on a gazillion blogs, in numerous books that have come out(yes I bought Paul's one too :) )there are many opinions and theories.

    But who is right ? well no one I think, some will be partly correct and some will be partly wrong, some will be really wrong, but no one will be 100% correct, forgive me If I sound like Rumsfeld there.

    The rating agencies have lost any credibility they had by participating in the greatest scam that we have witnessed.

    Those who are the economists who explain their views backed up with reams of graphs and tables cannot allow for the big bang that has just happened and happened in the past.

    Now I think we are all agreed that the UK is sitting upon a monumental amount of debt personal and government as well as the insurances to cover the toxic stuff that some of the banks held.

    We are told hard times ahead, austerity, but this will only affect the people who cannot be seen from the Bank of Englands offices, or Westminster, it will be like the roaring twenties all over again, high times for those who have it, marches for the needy who dont, dejavu all over again.

    Many in power will hope for a war so the transfer of wealth could refill the coffers, but that didn't help the UK after WW1 or WW2 did it , not to mention the more important human cost.

    We could hyper inflate our way out of it like Germany did after WW1
    or devalue the currency like France did or Peg to the Gold standard and try and keep the currency at a high exchange rate like the UK did at the cost of jobs and industry.

    But my overwhelming feeling (refer to above rule about opinions )is it will not matter.

    Why because whilst the US could be said to have operated , propped up and led the worlds economy for the past 100 years, it is also going to be the breaking of it.

    Yes the US has huuuuuuuuuuuuuge debts, debts it can't humanly be paid. Sure its the worlds base currency, but everyone knows the game is up. Most of the states in the US are really struggling, everyone that can is picking the carcass, and whilst it could be a reasonable conclusion that the US will actually default, I think an episode will happen that will tip the balance.
    If anyone who watched the US tv series called Jericho will know what I'm alluding too.

    No one expected the "credit crunch" no one will expect what happens next,but I am going to buy a tin hat, just in case.


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