Did you know that when Italy joined the Euro, it failed several of the main criteria set up for countries joining the Euro?
Did you know that “bail outs” of failed economies in the Eurozone are prohibited by EU law?
You may have heard that we (residents of Great Britain – the UK …) are in a bit of financial bother and that for every £4 we spend we have to borrow £1, at around 3.0% from China. This is couched in a wonderful term “the PSBR or Public Sector Borrowing Requirement” which makes it sound quite normal to have to borrow cash to meet our ordinary annually recurring spending needs.
Most of us learned from Mr Micawber in Charles Dickens book David Copperfield, the following simple lesson, “Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds and six pence, result misery.” This statement is simple common sense, obvious to anyone other than a politician or financial journalist.
That does not include the future PFI commitments and public sector and funding conventional old age pension commitments. (Ed: ‘Why not? ‘Answer: “It would make our finances look worse than those of Greece”. Ed: ‘Ah – of course, silly me – thanks.’)
Public sector borrowing is only ever sensible if it is for capital projects like roads, hospitals, railways etc., and then, only if future tax receipts take it into account – even this basic accounts stuff passed by Gordon Brown who criminally borrowed ever more and more without providing control systems to manage what was being spent and why.
The loan interest payments we paid in 2010 were £46 billion and will be worse in 2011. (Same as the 2012 defence budget) … and, NO I’m not making it up!) See here.
So then, let’s give another £9.2 billion to the IMF to help out the Euro-zone, i.e. Greece, Portugal, Spain, Ireland & now Italy shall we?
Yes great idea!
This of course is on top of the £12 billion already committed by our leaders last January.
Sounds like a good plan to me!
We can afford it!
Let’s put Gordon & Tony’s pensions up shall we? (Ed:- er, we already have – so would you like us to put them up again? <embarrassed laugh – Ed was not quite sure if I was joking or not …>) The current lot, Cameron and Osborne, are not even attempting to balance the books this year or next!
I am afraid to say that Great Britain (and many other “developed” (ho ho) countries) are in more or less the same “over- leveraged*” position; the USA, France, Spain, Portugal, Italy, Germany (yes, Germany – but they have a good chance of paying off their debt – or rather did have until Italy went bust last week…).
Don’t check up on public debt positions of countries other than China, Brazil and Arab oil producers if you want to sleep tonight.
Are we being run by idiots?
Yes we are!
The sound of gentle weeping can be heard from my study …
* “Over leveraged” = ‘bust as arseholes’ as a former insolvency accountant acquaintance used to say.