UK: A free nation very deep in debt
Source: , Author: Adrian Ash
Posted: Fri January 20, 2012 11:53 am

INTERNATIONAL. So the U.K. now owes – in total – more than 5 years' entire economic output, writes Adrian Ash at BullionVault.

Quite how much of that Alex Salmond would like Scotland to carry if it secedes from the Union, we can't say. But according to McKinsey & Co.'s new Debt and Deleveraging report, the gross sum of all loans and fixed-income debt of the UK national, corporate, household and financial sectors stood at 507% of GDP in 2011.

That's a hefty burden to service, let alone pay down as McKinsey urges. Amongst major economies, Japan just pips us to #1 at 507%, but it did take 20 years of economic depression, zombie banking and debt-fed "make work" programs to get there.

The Eurozone's heaviest debtors – the ones causing such angst worldwide – are led by Ireland at 663% (that's what comes from nationalizing your entire banking industry at the top of a credit bubble), while Spain, Italy and Portugal all owe some 300% or more. Greece's gross debt is 267% of GDP.

The oddity, of course, is that a vast chunk of the UK's gross debt is money it owes to itself. Or rather, debtors owe creditors in a vast tangle, spread across the world's sixth largest economy. Yes, there are substantial overseas debts, and the proportion of national debt held  by foreigners has crept up from 25% to more than 30% in the last half-decade. But our reliance on overseas funds and money markets to help finance private bank borrowing has shrunk (on our maths at least) to a little over 11% of the total since peaking at 21% in 2008.

Delevering is being attempted, in short. And holding onto its sovereign currency, rather than leaping into the warm embrace of German interest rates via the Eurozone pact, the UK thus remains "a free nation deep in debt" as one London hack (most likely Daniel Defoe) called Great Britain just before – oh! – its first national debt bubble blew up in 1720.

We can borrow as we choose, free from meddling Germans and their calls for austerity oversight. We can then print all the money we like to service (if not settle) those debts, safe in the knowledge that inflation will mostly hurt domestic savers, rather than risking our international credit.


"These record low gilt yields demonstrate the market's continued confidence in the Government’s plans for fiscal consolidation," said a Treasury spokesman this week of the new all-time low hit by 10-year gilt yields, now paying less than at any time since the national debt got started three centuries ago.

Nominal returns of 1.9% per year also demonstrate just how tightly we're squeezing domestic savers, however. Little wonder a growing number are seeking to abandon credit and bank risk – albeit with some small chunk or other of their savings – by embracing price risk instead in rare, indestructible physical gold property.

Adrian Ash runs the research desk at BullionVault, the world's No.1 gold ownership and trading service. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and is now a regular contributor to many leading analysis sites including Forbes and a regular guest on BBC national and international radio and television news.

Adrian's views on the gold market have been sought by the Financial Times and Economist magazine in London; CNBC, Bloomberg and in New York; Germany's Der Stern and FT Deutschland; Italy's Il Sole 24 Ore, and many other respected finance publications.

Get the safest gold at the lowest prices using the UK's No.1 provider – and winner of the Queen's Award for Enterprise Innovation –  BullionVault.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.


Key pillars of gold bull market 'intact'

Gold to gain, copper 'favored' in 2012, says Morgan Stanley

Gold panic in China?

Gold relinquishes relationship with dollar, may regain 'safe haven' status

Gold comment: Chinese buying? Surely it MUST be the PBOC

Jim Rogers: The economy is being juiced up before the election, watch out for 2013

US Gold Corp sees gold price over US$2,000 in 2012

'Bullish macro factors' to drive Gold in 2012 rather than dollar

Gold bear market at US$1,300 signaled by technical analysis

Peter Schiff: Was 2011 the end of the gold rush?

Gold records 11th annual gain, ends 2011 up 11% as world stocks drop 8%

The rebalancing of the Commodity indexes will accelerate gold selling during the first half of January - Emirates NBD Precious Metals report

Jim Rogers isn't too optimistic about stock markets in 2012, sees longer term systemic collapse

Ultra bearish Marc Faber says the whole derivatives market will one day cease to exist, 'will become zero'

Gold to drop in first quarter 2012, far from retesting record high

Marc Faber, Jim Rogers clash over China and commodities, agree on gold




date:Posted: June 18, 2018
UAE. 24% of Middle Eastern entrepreneurs are motivated by social impact and view it as their top priority as a business owner; 66% are undertaking angel investing.
date:Posted: June 16, 2018
UAE. MENA region recorded 93 deals amounting to US$15.4b in Q1 2018; UAE records highest announced Q1 deal value in the region at US$5.1b; Oil & gas deal value reached US$7.2b in Q1 2018; Almost 80% of MENA boards focused on portfolio transformation.
date:Posted: June 14, 2018
UAE. McAfee report sounds industry alarm: Don't start the blockchain revolution without making security a top priority.