The UK isn’t Greece, it’s Iceland

Green Politics

Alex Hern presents a picture which says everything needed about the sources and problems of British debt

 

Sometimes, a picture really is worth a thousand words:

Whether you look at international comparisons such as this one, or historical comparisons, it is clear that our government debt, though large, is not unsustainably so. Greece’s government debt is 145 per cent of its GDP; ours is 80 per cent (Eurostat).

Our financial sector, however, holds over 600 per cent of Britain’s GDP in debt, and as we reported earlier today, the Vickers report is doing nothing to stop that proportion growing. Icelandic financial debt hit 1000 per cent of its GDP before reality caught up with them.

We do have a debt crisis, but it’s not government debt, it’s banking.

(Chart from Business Insider via The Automatic Earth)

See also:

• Implementing Vickers won’t stop the next crisis – Josh Ryan Collins, December 20th 2011

• Cameron’s excuses don’t add up – Cormac Hollingsworth, December 13th 2011

• Trouble ahead for Cameron: Majority of Euro rebels were from class of 2010 – Shamik Das, October 25th 2011

• A damp squib or quiet radicalism from the Vickers Commission? – Ben Fox, September 13th 2011

• The Vickers report lacked ambition and lacks bite – Joe Cox, September 12th 2011

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42 Responses to “The UK isn’t Greece, it’s Iceland”

  1. Jamie

    The UK isn’t #Greece, it’s #Iceland http://t.co/NZa6XQRe #EU #Eurozone #economy #Osborne

  2. Noxi

    RT @leftfootfwd: The UK isn't Greece, it's Iceland: http://t.co/nIWnTFUe by @alexhern

  3. Anonymous

    Really. Why is it 80%?

    Ah yes. The government isn’t going to pay any of those pesky civil service pensions. That’s spending, so its optional. No contract is there.

    Omitted from the Books. Current cost, 1.3 tn on top of the 1.05 tn ‘official debt’.

    Then there is that little thing called PFI. Again, thanks to Bernie Maddoff’s accountant, that’s off the books too.

    State pension? All those low paid civil servants, say 5 million, only manage to run up 1.3 tn of debts. There are lots of people with state pension entitlements. Ok, its small at 5K pa, but what shall we say, a tad under double the cost of the civil service pension? 2.4 tn (an accurate figure by the way). All thanks to those nice folks who used to work at Enron, we don’t have those on the books.

    State second pension?

    Guarantees for ex state enterprise pensions schemes such as BT. Current deficits 100 bn

    Nuclear decommissioning. Money taken up front – its a debt. 100 bn

    …

    Yep, all the debts have been hidden off the books bar Gilts.

    Now for that AAA rating. That is just the rating for the holders of Gilts getting their money back. It says nothing about the government’s ability to pay its other debts. Those debts are to the likes of you and me, and the ratings agencies view is that we get cut first, because governments will want to carry on spending, and they will need to borrow. Citizens are expendable.

    Now for your figures.

    1. Banks hold assets against liabilities, and they have to have an excess of assets. Otherwise they are bust.

    2. Most individuals again have more assets than liabilities – property against mortgages. Some have negative equity, but the vast majority are in positive territory.

    3. Corporates – again have assets greater than liabilities, or they are operating fraudulently.

    That leaves government. Governments have vast debts, mostly off the books. 7 tn present value (ie rising with inflation), against an “income” of 0.55 tn. Of that most of the money is earmarked not for paying debt, but for providing services. The government doesn’t have assets it can sell to raise cash. e.g Sell off a hospital. Ah but people need hospitals. So they rent it back. It’s either debt payments, or rent. Same effect on cashflow.

    They could try and say, look if we book people as slaves/serfs, we can give them a book value, their future tax income. However, people have this little pesky problem that they don’t like being treated as cash cows. They want something for their taxes – services.

    So the UK government is bust. Pure and simple.

  4. Joe Andrews

    RT @leftfootfwd: The UK isn't Greece, it's Iceland http://t.co/DzWAZ0Yh

  5. Katie

    A rare case where #iceland is not a good thing > RT @leftfootfwd: The UK isn't Greece, it's Iceland: http://t.co/vazYLELH by @alexhern

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