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Take
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.
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