Best of the Week
Most Popular
1.Gold Price Target of USD 2,300 - GoldCore
2.Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - Nadeem_Walayat
3.Why British Muslims Are Leaving Elysium Paradise for Syrian Hell - Nadeem_Walayat
4.Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - Nadeem_Walayat
5.Extreme Gold/Silver Shorting - Zeal_LLC
6.European Empire Strikes Back Against Greek Debt Fantasy, Counting Down to GREXIT - Nadeem_Walayat
7.Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - Michael_Noonan
8.Gold and Silver Price Headed for Breakdown - Jordan_Roy_Byrne
9.Greece Crisis OXI - Raul_I_Meijer
10.Flatline Investing and Dead End Debt Schemes - Doug_Wakefield
Last 5 days
The U.S. Dollar's 2014-2015 Rally: Wave 3 in Action - 3rd July 15
Stock Market Where are we? And where are we Going? - 3rd July 15
Xi’s Anti-Corruption Campaign Is Key to China’s Prospects - 3rd July 15
How the New Iranian Nuclear Deal Will Impact Crude Oil - 3rd July 15
China's Stock Market Rollercoaster Ride Continues - 3rd July 15
Gold Stocks Cheap to Buy but Not for Long - 3rd July 15
Capital Controls and a Bank Holiday in Greece… Here’s How You Can Profit - 3rd July 15
Greece's Varoufakis: I will Resign if there's a 'Yes' Vote - 2nd July 15
The Student Loan Bubble: Gambling with America’s Future - 2nd July 15
Inflation Is Lurking, but This Asset Can Protect You - 2nd July 15
Three Total Wealth Stock Investor Tactics You’ll Need Because Greece Isn’t Over - 2nd July 15
Why This $5.6 Trillion Investor Profit Boom Is Set To Take Off - 2nd July 15
Greek Debt Crisis: "Too late to prepare now" - Video - 2nd July 15
Guaranteed US Dollar Death Dynamics - 2nd July 15
The Greek Stress Test & The Reality Of Incremental Changes - 2nd July 15
Forget Drachmas Greece Syriza Government Could Instruct Central Bank to Print Euros! - 2nd July 15
Greece Debt Crisis Trigger for Stock Market Crash or Bull Rally? Video - 1st July 15
Gold Stocks Break Below 2008 Low - 1st July 15
SPX Stock Market Retracement May be Over - 1st July 15
Silver Tunnel Vision 'Experts' - 1st July 15
Gold And Silver - Monthly, Quarterly Ending Analysis - 1st July 15
Europe’s Controlled Demolition - 1st July 15
The End of Dow 18,000; Bailouts No Longer Extended  - 1st July 15
Athens Mayor: Greek Government Should Resign - 1st July 15
China Stocks - This Is What a Bubble Looks Like - 30th June 15
Stocks Plunge on Greece Euro-Zone Financial Armageddon Blackmail - 30th June 15
Greece Crisis Shows Importance of Gold as Europeans Buy Coins and Bars - 30th June 15
Stock Investors Express Route to Profits in the Healthcare Sector - 30th June 15
Beyond the Greek Impasse - 30th June 15
Gold GDXJ : Impulse Move Pending - 30th June 15
Fed Interest Rate Increase Could Be Best Thing to Happen to Gold - 30th June 15
Marc Faber - Greece is Basically Bankrupt - 30th June 15
Greece - Shoot the Dog and Sell the Farm - 29th June 15
Grexit?, BIS Warning, Chinese Market Crash & Systemic Risk Shake the Global Economy - 29th June 15
The New "Sharing Economy" May Not Be the Profit Bonanza Everyone's Expecting - 29th June 15
Gold and Silver Greece and Short Positions - 29th June 15
Volatility and Sleep-Walking Markets - 29th June 15
Greece BANKRUPT! Financial and Economic Collapse to Follow IMF Debt Default - 29th June 15
Stock Market More Decline Ahead? - 29th June 15
China Stock Market Crackup - The Final Trap Looms... - 29th June 15
Greece Banking System Collapse Monday as ECB Pulls the Plug, Capital Controls Ahead of GrExit - 28th June 15
Investor Stock Play for Two Growing Missile Threats - 28th June 15
Stock Market Uptrend/downtrend Inflection Point - 27th June 15
Greece Crisis OXI - 27th June 15
Gold And Silver – Three Choices: Sell, Hold, Hold and Add. A Trading Treatise - 27th June 15
It’s Time to Change the Way You Look at Disney Forever - 27th June 15
Flatline Investing and Dead End Debt Schemes - 27th June 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

China Stocks - Where are they going?

Public Sector Pensions Deficit of £1.2 trillion Adds to Britains Debt Crisis

Economics / UK Debt Jun 29, 2009 - 02:20 AM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleThe mainstream press is widely reporting that the public sector pensions deficit has now grown to £1.2 trillion, standing at 85% of GDP which is more than triple that of the United States as stated in a report by the British-North American Committee :


The Governments of the UK, US and Canada are understating significantly the true cost of their employees’ pension costs in terms of both the liabilities already incurred and the annual cost of running their public sector schemes. In the UK, where unfunded schemes predominate, public sector pension liabilities are £1,177 billion, about £20,000 for every person in the UK, equivalent to 85% of GDP, a percentage three times as high as in North America.

These findings are in a study The need for transparency in public sector pensions, published today by the influential British- North American Committee (BNAC)1. In the US and Canada, where the majority of public sector schemes are now funded (i.e. a ‘real’ fund is being built up to meet all or some of the cost of anticipated future pension liabilities), the position is somewhat better. In the US, whilst the net liabilities of public sector schemes are higher at around £2,700 billion2, this equates to ‘just’ 28% of GDP. In Canada, liabilities are under £250 billion, equating to around 27% of GDP.

Leaving aside that there is an apparent error in the figures in that £1,177 billion is now nearer to 95% of GDP than the stated 85%, given the fact that the UK Economy has by now contracted by more than 5%. The public sector pensions deficit of £1,177 billion for 2009 is considerably higher than my own estimate of £810 billion as of November 2008, which adds nearly £400 billion to Britains debt mountain that threatens a decade of economic stagnation as a consequence of high inflation and interest rates under the weight of servicing a huge growing debt mountain.

If the data presented by the British-North American Committee turns out to be accurate, this will therefore increase Britians exploding debt burden by more than 10% as illustrated by the existing estimate of end 2009 debt and liabilities of £3,555 billion which now projects to £3,916 billion.

The huge annual budget deficit of more than 12% ensures that the debt burden will continue increasing into 2015, which demands extreme measures in the form of deep public sector spending cuts in an attempt to bring Britains finances back under control as the consequences of not doing so could result in a lost economic decade much as Britain experienced during the 1970's.

At this point in time I just cannot see any way out for Britain from a severe period of economic stagnation, as the country is hit by the double whammy of losing both of its cash-cows of the past 30 years, namely North Sea Oil and the Banking Sector profits. As regardless of the Conservative party hype of Thatcherism saving the country during the 1980's, the fact of the matter is that it was huge revenues from North Sea oil of more than $25 billion per year, a squandered windfall that financed the Thatcherite revolution during the 1980's, that coupled with the Big Bang in the City which ignited the mother of all credit booms which we have witnessed the deleveraging of during the past 2 years.

North Sea oil production passed its peak in 2001/2002 with each subsequent year set to result in diminishing tax revenues despite the temporary blip of 2008 due to the speculative boom that took crude oil to $150. That coupled with the loss of tax revenues from the the banking sector's ponzi profits leaves a huge hole in the countries budget due to the Labour governments lack of control on public spending that has seen spending departments such as the NHS more than triple their budgets with barely 1/10th of the extra spending filtering through to increased output.

The UK economy is set for a recovery into 2010, as we are starting to see in several economic indicators such as the housing market, however the economic recovery which is built on debt for election purposes will not be sustainable, if anything today's news of another £400 billion of extra public sector pensions liabilities just puts another nail in the economic coffin that is suggestive of a second more severe recession that will soon follow the next general election forecast for May 2010. The only real solution to Britians debt crisis is to spend within its means which means severe public spending cuts, far more that which any politician is willing to admit to at this point in time. We are perhaps talking a cut of £100 billion a year or 14%. That coupled with reform of the public sector pensions to bring them inline with the private sector rather than the current disparity that threatens bankruptcy of the country.

For More on Britains Path to Bankruptcy see recent analysis -

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-09 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on the housing market and interest rates. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 250 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Biggest Debt Bomb in History