Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Predictive Modeling Suggests US Stock Markets 12% Over Valued - 27th May 20
Why Stocks Bear Market Rallies Are So Tricky - 27th May 20
Precious Metals Hit Resistance - 27th May 20
Crude Oil Cuts Get Another Saudi Boost as Oil Demand Begins to Show Signs of Life - 27th May 20
Where the Markets are heading after COVID-19? - 27th May 20
Silver Springboards Higher – What’s Next? - 26th May 20
Stock Market Key Resistance Breakout Is Where the Rubber Meets the Road - 26th May 20
5 Ways To Amp Up Your CFD Trading Today - 26th May 20
The Anatomy of a Gold Stock Bull Market - 26th May 20
Stock Market Critical Price Level Could Soon Prompt A Big Move - 25th May 20
Will Powell Decouple Gold from the Stock Market? - 25th May 20
How Muslims Celebrated EID in Lockdown Britain 2020 - UK - 25th May 20
Stock Market Topping Behavior - 24th May 20
Fed Action Accelerates Boom-Bust Cycle; Not A Virus Crisis - 23rd May 20
Gold Silver Miners and Stocks (after a quick drop) Ready to Explode - 23rd May 20
3 Ways to Prepare Financially for Retirement - 23rd May 20
4 Essential Car Trade-In Tips To Get The Best Value - 23rd May 20
Budgie Heaven at Bird Land - 23rd May 20
China’s ‘Two Sessions’ herald Rebound of Economy - 22nd May 20
Signs Of Long Term Devaluation US Real Estate - 22nd May 20
Reading the Tea Leaves of Gold’s Upcoming Move - 22nd May 20
Gold, Silver, Mining Stocks Teeter On The Brink Of A Breakout - 21st May 20
Another Bank Bailout Under Cover of a Virus - 21st May 20
Do No Credit Check Loans Online Instant Approval Options Actually Exist? - 21st May 20
An Eye-Opening Perspective: Emerging Markets and Epidemics - 21st May 20
US Housing Market Covid-19 Crisis - 21st May 20
The Coronavirus Just Hit the “Fast-Forward” Button on These Three Industries - 21st May 20
AMD Zen 3 Ryzen 9 4950x Intel Destroying 24 core 48 thread Processor? - 21st May 20
Dow Stock Market Trend Analysis and Forecast - 20th May 20
The Credit Markets Gave Their Nod to the S&P 500 Upswing - 20th May 20
Where to get proper HGH treatment in USA - 20th May 20
Silver Is Ensured A Prosperous 2020 Thanks To The Fed - 20th May 20
It’s Not Only Palladium That You Better Listen To - 20th May 20
DJIA Stock Market Technical Trend Analysis - 19th May 20
US Real Estate Showing Signs Of Covid19 Collateral Damage - 19th May 20
Gold Stocks Fundamental Indicators - 19th May 20
Why This Wave is Usually a Market Downturn's Most Wicked - 19th May 20
Gold Mining Stocks Flip from Losses to 5x Leveraged Gains! - 19th May 20
Silver Price Begins To Accelerate Higher Faster Than Gold - 19th May 20
Gold Will Soar Soon; World Now Faces 'Monetary Armageddon' - 19th May 20
Gold Mining Stocks Fundamentals - 18th May 20
Why the Largest Cyberattack in History Will Happen Within Six Months - 18th May 20
New AMD Ryzen 4900x and 4950x Zen3 4th Gen Processors Clock Speed and Cores Specs - 18th May 20
Learn How to Play the Violin, Kids Activities and Learning During Lockdown - 18th May 20
The Great Economy Reopening Gamble - 17th May 20
Powell Sends a Message With Love for Gold - 17th May 20
An Economic Renaissance Emerges – Stock Market Look Out Below - 17th May 20
Learn more about the UK Casino Self-exclusion - 17th May 20
Will Stocks Lead the Way Lower for Gold Miners? - 15th May 20
Are Small-Cap Stocks (Russell 2k) Headed For A Double Dip? - 15th May 20
Coronavirus Will Wipe Out These Three Industries for Good - 15th May 20
Gold and Silver: As We Go from Deflation to Hyperinflation - 15th May 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

British Economy Faces Economic Storm Clouds of Rising Inflation and Credit Downgrades

Economics / UK Economy Jan 22, 2010 - 02:12 AM GMT

By: John_Browne

Economics

Having been among the economic engines of Europe for much of the past decade, it appears as if the British economy has run out of steam. Inflation is rising while bankruptcies and unemployment continue to swell. It is a problem that would have left Lord Keynes' head spinning. In many ways, the responses of the U.S. and U.K. governments to the financial crisis have been very similar. So far, the American advantages in size and reserve currency status have allowed us to avoid the storm-clouds now descending upon Britain. But these advantages only provide a temporary respite. In the meantime, the slow-motion collapse in Britain offers a glimpse of our own future - and a chance to prevent it.


The history of the United States and the United Kingdom are closely linked in almost every essential manner, from culture to defense to economics. This is hardly surprising because the Founding Fathers were basically British subjects who wished to restore the traditional liberties they were guaranteed in the mother country.

After the Revolution, America went its own way with enhanced freedoms that led to unprecedented prosperity. Most interestingly, the American Constitution was quiet on the subject of central banking. Two early efforts to imitate the British central bank were withdrawn. But in 1913, Congress eventually agreed to establish the Federal Reserve, which persists today as America's central bank.

Many economists trace America's economic decline to the activities of the Fed, in particular to the printing of massive amounts of fiat currency unsupported by the gold and foreign exchange reserves held by the central bank. It is a systemic fraud previously committed in Great Britain. But why would a country's leadership pursue such a dangerous course?

Foreign policy is a prime suspect. The center of a vast empire that covered almost a quarter of the world's land mass and one third of its people, Great Britain accepted the role of 'global policeman' for much of the late 19th and early 20th centuries. As with ancient Rome, this proved vastly expensive both in terms of money and domestic tranquility. Funds diverted from the home nation hurt working people disproportionately, fueling socialist activism. Eventually, the empire rotted from within.

America took over the role of world policeman from the British after the Second World War. Predictably, it has proved hugely expensive, both in terms of money and domestic tranquility. Today, the debts are mounting almost at an exponential rate, such that the U.S. government's current liabilities stand at a staggering $12.3 trillion or some $113,000 per taxpayer. [2009/01/20; usdebtclock.org] And if the recent election of a Republican Senator in Massachusetts is any indication, the people are fed up.

When I was a Member of the U.K. Parliament, under the now legendary Prime Minister Margaret Thatcher, we were successful in dismantling decades-worth of socialism and 'progressive' conservatism. The new freedoms unleashed an explosion of enterprise, investment and wealth creation. Thatcher cut back relentlessly on government waste and reckless spending. Initially, it resulted in an increase in unemployment - unpopular, but it worked. Thanks partly to oil exports, we instituted a public debt repayment schedule. Sterling rose from some $1.12 to $1.80. [1985-1988; miketodd.net/encyc/dollhist-graph2.htm]

Three successive socialist governments in the United Kingdom now have undone most of the good done by Thatcher. Westminster put pressure on the banks to make unaffordable property loans, just as Washington did to America. The British government has run up unprecedented levels of debt to finance the banks and its national debt, by means of quantitative easing, just as the American government has done.

Unlike America, Britain's pound sterling has long since lost the protective shield of being the world's official reserve currency. Therefore, the British are confronted with inflation and a possible credit downgrade now, while America still has time to reverse course.

If it does not, America may soon follow Britain into a lower credit rating, with untold damage to Treasury financing costs and the U.S. dollar.

However, shifting to a sensible economic path will inevitably involve short-term pain, as it did under Prime Minister Thatcher. Correcting the irresponsibility of socialism can be agonizing. Over the short-term, it may have a negative effect on U.S. stocks, even while the shares of the BRIC-CAN countries continue to rise.

Lady Thatcher once said, "The trouble with socialism is that eventually you run out of other peoples' money." Once again, the U.K. is broke, and this time, the U.S. is hardly far behind.

By John Browne
Euro Pacific Capital
http://www.europac.net/

More importantly make sure to protect your wealth and preserve your purchasing power before it's too late. Discover the best way to buy gold at www.goldyoucanfold.com , download my free research report on the powerful case for investing in foreign equities available at www.researchreportone.com , and subscribe to my free, on-line investment newsletter at http://www.europac.net/newsletter/newsletter.asp

John Browne is the Senior Market Strategist for Euro Pacific Capital, Inc.  Mr. Brown is a distinguished former member of Britain's Parliament who served on the Treasury Select Committee, as Chairman of the Conservative Small Business Committee, and as a close associate of then-Prime Minister Margaret Thatcher. Among his many notable assignments, John served as a principal advisor to Mrs. Thatcher's government on issues related to the Soviet Union, and was the first to convince Thatcher of the growing stature of then Agriculture Minister Mikhail Gorbachev. As a partial result of Brown's advocacy, Thatcher famously pronounced that Gorbachev was a man the West "could do business with."  A graduate of the Royal Military Academy Sandhurst, Britain's version of West Point and retired British army major, John served as a pilot, parachutist, and communications specialist in the elite Grenadiers of the Royal Guard.

John_Browne Archive

© 2005-2019 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

6 Critical Money Making Rules