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‘If you really want a fiscal problem, look at the UK’

  
Analysis, Economy, Education
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uk crisisInvestors are asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.…

“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe, the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”

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the government and its citizens have been able to continue to borrow at interest rates that do not reflect their true financial situation.

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As for the British government, it has been able to finance a budget deficit of 12.5 percent of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.

David Rosenberg of Gluskin Sheff also referred to the piece in his morning missive, noting:

Britain is probably one of the few countries in the world where political uncertainty, a renewed round of house price deflation and a sinking currency can manage to elicit a bounce in consumer sentiment (the country has a Greek-like 12.5% deficit-to-GDP ratio, which is double the European average and a household debt-to-GDP ratio that, at 170%, makes the U.S. household sector downright frugal at 130%

America Is On The Verge Of An Economic Catastrophe

  
Analysis, Economy, Education
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 I don’t need to remind you of the frightening economic data Washington doesn’t want you to know — the nearly $13 trillion debt, 90% debt to GDP ratio (that does not even include the off-budget items, such as the $6 trillion owed by Fannie Mae and Freddie Mac, or the $50 trillion of unfunded liabilities for programs like Social Security and Medicare)… And I certainly don’t need to reiterate the urgency of this situation. You know how severe the ramifications will be if we fail to take immediate action

Peter Schiff`s comments on the economy, stock markets, politics and gold. Schiff is the renowned writer of the bestseller Crash Proof: How to Profit from the Coming Economic Collapse.

Another Massively Interactive European Chart

  
Analysis, Economy, Education
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With all chart porn these days focusing on Europe, the Economist may have outdone itself with this combo set of all key financial and economic statistics for European countries.

Here is the caption provided by the Economist:

 
 

EUROPE is damned if it does and damned if it doesn’t, fiscally speaking. Fears that Greece’s debt crisis presage similar episodes elsewhere in the euro zone—notably in Portugal and Spain—have sent sovereign-bond yields for several southern European countries drifting higher, and have fuelled fears about the exposure of Europe’s banks to indebted governments. Attempts to rein in the public finances may calm bond markets but they also risk weakening growth, which makes life more difficult for exporters in places like China and America, and spells trouble of a different kind for the banks.

The interactive graphic above underlines some of the problems that the European economy faces. In 2009 only Poland of the 27 countries in the European Union managed to record positive growth. Although many countries have now returned to growth, it is generally anaemic. In many countries unemployment rates have not risen as much as you might expect given the depth of the crisis—there are times when making it hard to fire people has some advantages. But the flipside of labour-market rigidity is that the unemployment rate may be “sticky”, because firms have less need to hire as recovery takes hold. That will keep demand growth subdued.

Mediocre growth rates are more of a problem for some countries than others. They spell particular trouble for those that have high levels of debt and that do not have the option to devalue their currencies. That explains why Greece was first to lose the confidence of the markets: with a public-debt-to-GDP ratio of 115% and a budget deficit of 13.6% in 2009, it was the euro zone’s outlier country. Other countries are now scrambling to avoid Greece’s fate. Ireland, another heavily indebted euro-zone member, embarked on austerity early; Portugal and Spain, whose problems stem as much from levels of external and private debt as from government borrowing, have had their hands forced. Others still are pruning before the markets exert real pressure: Britain’s debt has the longest maturity of any EU member but it is still aiming to get its finances in order within four savage years.

Full chart after the jump

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