Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
This Ultimate Formula Will Help You Avoid Dividend Cutting Stocks - 24th May 19
Benefits of a Lottery Online Account - 24th May 19
Technical Analyst: Gold Price Weakness Should Be Short Term - 24th May 19
Silver Price Looking Weaker than Gold - 24th May 19
Nigel Farage's Brexit Party EU Elections Seats Results Forecast - 24th May 19
Powerful Signal from Gold GDX - 24th May 19
Eye Opening Currency Charts – Why Precious Metals Are Falling - 23rd May 19
Netflix Has 175 Days Left to Pull Off a Miracle… or It’s All Over - 23rd May 19
Capitalism Works, Ravenous Capitalism Doesn’t - 23rd May 19
The Euro Is Bidding Its Time: A Reversal at Hand? - 23rd May 19
Gold Demand Rose 7% in Q1 2019. A Launching Pad Higher for Gold? - 23rd May 19
Global Economic Tensions Translate Into Oil Price Volatility - 22nd May 19
The Coming Pension Crisis Is So Big That It’s a Problem for Everyone - 22nd May 19
Crude Oil, Hot Stocks, and Currencies – Markets III - 22nd May 19
The No.1 Energy Stock for 2019 - 22nd May 19
Brexit Party and Lib-Dems Pull Further Away from Labour and Tories in Latest Opinion Polls - 22nd May 19
The Deep State vs Donald Trump - US vs Them Part 2 - 21st May 19
Deep State & Financial Powers Worry about Alternative Currencies - 21st May 19
Gold’s Exciting Boredom - 21st May 19
Trade War Fears Again, Will Stocks Resume the Downtrend? - 21st May 19
Buffett Mistake Costs Him $4.3 Billion This Year—Here’s What Every Investor Can Learn from It - 21st May 19
Dow Stock Market Trend Forecast 2019 May Update - Video - 20th May 19
A Brief History of Financial Entropy - 20th May 19
Gold, MMT, Fiat Money Inflation In France - 20th May 19
WAR - Us versus Them Narrative - 20th May 19
US - Iran War Safe-haven Reasons to Own Gold - 20th May 19
How long does Google have to reference a website? - 20th May 19
Tory Leadership Contest - Will Michael Gove Stab Boris Johnson in the Back Again? - 19th May 19
Stock Market Counter-trend Rally - 19th May 19
Will Stock Market “Sell in May, Go Away” Lead to a Correction… or a Crash? - 19th May 19
US vs. Global Stocks Sector Rotation – What Next? Part 1 - 19th May 19
BrExit Party EarthQuake Could Win it 150 MP's at Next UK General Election! - 18th May 19
Dow Stock Market Trend Forecast 2019 May Update - 18th May 19
US Economy to Die a Traditional Death… Inflation Is Going to Move Higher - 18th May 19
Trump’s Trade War Is Good for These 3 Dividend Stocks - 18th May 19
GDX Gold Mining Stocks Fundamentals Update - 17th May 19
Stock Markets Rally Hard – Is The Volatility Move Over? - 17th May 19
The Use of Technical Analysis for Forex Traders - 17th May 19
Brexit Party Set to Storm EU Parliament Elections - Seats Forecast - 17th May 19
Is the Trade War a Catalyst for Gold? - 17th May 19
This Is a Recession Indicator No One Is Talking About—and It’s Flashing Red - 17th May 19
War! Good or Bad for Stocks? - 17th May 19
How Many Seats Will Brexit Party Win - EU Parliament Elections Forecast 2019 - 16th May 19

Market Oracle FREE Newsletter

U.S. House Prices Analysis and Trend Forecast 2019 to 2021

UK Gold and Real Interest Rates, A Free Nation Drowining in Debt

Interest-Rates / UK Debt Jan 20, 2012 - 11:57 AM GMT

By: Adrian_Ash

Interest-Rates

Best Financial Markets Analysis ArticleTake record-high debt, add record-low interest rates, and what do you get in gold...?

SECOND ONLY to Japan, the UK now wears the greatest debt burden of any major economy today – in total, more than 5 years' entire economic output.


Japan pips Britannia to world #1 (only just) with the loans and fixed-income debt of its national, corporate, household and financial sectors adding up to 512% of its GDP. But then Japan 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%, with Spain, Italy and Portugal all owing some 300% or more. Greece's gross debt is 267% of GDP. But there she is, floating off the coast of Europe with 507% gross liabilities according to McKinsey & Co.'s new Debt and Deleveraging report. That's a hefty burden to service, let alone pay down as McKinsey urges. 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 the UK's 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.

Deleveraging is being attempted, in short, if not actually achieved. 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 of Robinson Crusoe fame) 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 – no doubt just as bemused in reality as everyone else by the new all-time low hit by 10-year gilt yields. Decade-long UK government now pays less in annual interest, thanks to rising prices, than at any time since the national debt got started three centuries ago.

The impact on bank saving rates you can see above, alongside the impact on UK gold prices. With domestic savers (ie, creditors) at risk of being overwhelmed by the nation's debt, it's little wonder a growing number are seeking to abandon credit and bank risk – albeit with some small chunk or other of their savings – and embracing price risk instead in rare, indestructible physical, tradable property.

By Adrian Ash
BullionVault.com

Gold price chart, no delay   |   Buy gold online at live prices

Formerly City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(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.


© 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