I got this commentary in from my Dad, in the UK. It makes interesting reading:
All the Western major powers are trying to devalue their currencies as quickly as they can. This makes them more “competitive” in terms of exports. It really does and perhaps not more vividly illustrated than in the car market. So, the UK Government is busily devaluing by pumping £375bn of paper/electronic money into the markets. This is estimated to have devalued the £ by some 25% (coincidentally, my imported Assam tea has gone up by 25% to £2 a quarter!). This also has the side-effect of making undesirable imports more expensive. This should deter people from buying imports. Not always..but that’s another story. The US is also busily pumping QE. The $US is down 12% since the crash and down 31% since 2002. Of course, for the people who have “bought your debt” this is all bad news- the Chinese are not happy!. Their profits are being wiped out. But, as always, its the man in the middle who gets hurt. Prices go up, savings are worth less. Ultimately, there is the threat of the issue of a “new currency”. That’s a crisis. The New£, the New$. imagine, the Bank says that your $10 is now only worth one $new.
We all have to learn to “embrace poverty”! Ha, my little joke. But, politically, there’s a grain of truth in my joke. We are not rich, we were never rich, we were “on debt” and devaluation/inflation is a long , politically soft option to get us back to reality.
On 31 Dec the US hit its legal debt ceiling of $16,400bn. The US Government will run out of cash Feb/Mar.
In the 80s US debt was c$900bn, in 1996 it was $10,000bn. Five years ago US debt was 70% of GDP and it is now 102% of GDP.
Emerging markets have debt levels of c30% but across the G7 its 124%.
It is alleged that the US is borrowing in order to pay its debts. If that’s true then that’s a cycle of despair!
In the UK, Cameron talks about “driving down the deficit”. But, what he is not telling people is that while he nibbles away at the difference between expenditure and income (the deficit) he’s borrowing great slabs of money to sustain a standard of living that we just cannot afford. If you see the attached pie chart it shows that this year they plan to borrow £91bn. This will probably be an under-estimate as last year it was £120bn. Last year we paid £48.6bn in interest so I cannot see that they will get away with “only” £46bn this year. Oh yes, that’s more than the defence budget. Our national debt is already £1,065 bn as at Sep 12 and is being added to at about £100bn pa. Unless a stop is put to public sector expenditure then we too could soon be borrowing to pay our debts?
The UK needs to cut Government expenditure by c£100bn pa. Look at the attached pie. We need to cut “social protection” and “health”. In a worse situation, Obama is going the other way!!
And, there’s worse. In this parlous situation we are “exploding” the UK population to 77.7m by 2035 (when your children will be young adults). Just looking at England and Wales where the population will be c70m by 2035; the “ethnic minority” population will double to 20m. while the “white British” will gain about 5m to about 50m.
Next year, under EU law, there will be unlimited access to the dirt-poor populations of Romania and Bulgaria. Madness!
It may be shallow, but its worth remarking that the Roman armies were not defeated. They fell apart when they were not paid. They sought work elsewhere! When Rome “fell” (Alaric 408?) it was because the grain supply was cut off and the “migrants” within the walls just opened the gates. There was no army. Armies run on money. The UK Army is shedding one in five soldiers. 20%.
The crisis of the West;debt and population. Both can be solved but our politicians are in denial….they know they’ll never be reelected…