UK Plc; Apocalypse Scenario

[Martial Arts Man]

OK, sorry if this seems like a stupid question:

There is a lot of talk of Britain becoming a "Third World" country if we default on our national debt, or if our credit rating is downgraded etc.

Can anyone tell me how this would play out and what might happen?

What stages does a country go through and how does this impact present itself?


Am I right in thinking that:

Currency tanks, interest rates skyrocket as a result of being downgraded, public sector gets destroyed leaving massive unemployment. House prices sink due to rates and unemployment. What else happens on this road to ruin?


So what steps can an individual take to protect themselves as far as possible from the effects?

And what, if any, are the possible upsides to such a scenario?

[NoelWatson]

Martial Arts Man said:

OK, sorry if this seems like a stupid question:

There is a lot of talk of Britain becoming a "Third World" country if we default on our national debt,

I can't see how this is possible

[Digga]

Martial said:

So what steps can an individual take to protect themselves as far as possible from the effects?

<air stewardess>Take note of the emergency exits; familiarise yourself with them, in case of a crash.</air stewardess>



That and brace for impact.

[Martial Arts Man]

NoelWatson said:

Martial Arts Man said:

OK, sorry if this seems like a stupid question:

There is a lot of talk of Britain becoming a "Third World" country if we default on our national debt,

I can't see how this is possible

Can you explain?

I'm no economist, more into political machination myself. Sorry if I am displaying idiocy this morning; this phrase "Third World" keeps on popping up right now.

[NoelWatson]

Martial Arts Man said:

NoelWatson said:

Martial Arts Man said:

OK, sorry if this seems like a stupid question:

There is a lot of talk of Britain becoming a "Third World" country if we default on our national debt,

I can't see how this is possible

Can you explain?

I'm no economist, more into political machination myself. Sorry if I am displaying idiocy this morning; this phrase "Third World" keeps on popping up right now.

As far as I am aware (I did some investigation a while back), all out debt is issued in domestic currency (GBP), so all we need to do is print more.
Unlike somewhere like Ecuador

http://www.portfolio.com/views/blogs/market-movers...

We have history when it comes to defaulting

http://www.noelwatson.com/blog/PermaLink,guid,780a...

[Fittster]

anonymous said:

[redacted]

In fairness the dollar does appear to be losing its status as a reserve currency and you can make the argument about the government spending more than it receives for most countires.

From a individual point of view you either want to be rich so you can avoid any problems or poor as you have nothing much to lose. From a government view if the debt is in sterling and you have a printing press repaying debt isn't that hard.

My limited very of history seems to suggest that a system needs to collapse before a new, improved model takes its place. However there's little sign of an Apocalypse, look at the gilt market, they seem to have faith in the UK. Life generally isn't that exciting, a Japanese slump for a long time is far more likely than a quick violent crash IMHO.

[Fittster]

The example of Argentina isn't that horrible, although they had a peg to the dollar which doesn't help with any comparisions to the UK situation today.

http://en.wikipedia.org/wiki/Argentine_economic_cr...

[JakeR]

Anyone care to add any timescales into this?

I have to say, it's all a bit terrifying really!

[RichardD]

anonymous said:

[redacted]

But why can't in this country, the Bank of England keep buying government debt?

Of course it just seems wrong and phony at a common sense level, but if the exporting nations of the world want to sell us their goods, then we can just give them freshly printed bits of paper in return.

Anyway, isn't the profecy of Marx when capitalism fails to deliver (ie the point at which there cannot be any more expansion (maybe due to the limits of a spherical planet?)) after it has laid the foundation of an efficient society for a transition to socialism and communism?

[RichardD]

JakeR said:

Anyone care to add any timescales into this?

I have to say, it's all a bit terrifying really!

This is the best I've seen as to answering that question!

http://www.independent.co.uk/news/business/comment...

independant said:

Britain seems doomed to be relegated from the "premier league" of international economies over the next few years - with serious implications for its diplomatic status and international "clout". Stagnation at home and rapid economic growth in developing economies will push the UK as low as 11th in the global pecking order by 2015, according to analysis by the Centre for Economics and Business Research (CEBR).

Having clawed up to fourth place by the start of this decade, the recession has already seen Britain overtaken by China, Italy and France, and it seems likely that the slide will get worse.

[turbobloke]

RichardD said:

anonymous said:

[redacted]

But why can't in this country, the Bank of England keep buying government debt?

Of course it just seems wrong and phony at a common sense level, but if the exporting nations of the world want to sell us their goods, then we can just give them freshly printed bits of paper in return.

Anyway, isn't the profecy of Marx when capitalism fails to deliver (ie the point at which there cannot be any more expansion (maybe due to the limits of a spherical planet?)) after it has laid the foundation of an efficient society for a transition to socialism and communism?

As per other elements of wishful thinking in such mantras. Not that there aren't forces willing to push that way.

[Fittster]

anonymous said:

[redacted]

But isn't that like predicting the end of the world? You do it long enough and eventually you'll be correct. Although predicting the future is for suckers and charlatans the bond market is happy to take very low yields in return for government (practically in major government) debt which suggests they don't see a risk of default, high inflation or a lack of appetite for more debt. However maybe the insight of the bond traders is no better than their colleagues in the shares area who failed to see the credit crunch coming.

[Fittster]

JakeR said:

I have to say, it's all a bit terrifying really!

If it happens it won't be that scary, Argentina and Russia both default and the population weren't reduced to cannibalism.

When Harold Wilson devalued the pound society had a moan but kept ticking over pretty much the same as it had.

Edited by Fittster on Wednesday 9th December 10:05

[Jazzer77]

Fittster said:

The example of Argentina isn't that horrible, although they had a peg to the dollar which doesn't help with any comparisions to the UK situation today.

http://en.wikipedia.org/wiki/Argentine_economic_cr...

This guy seems to think Argentina was a bit worse than that ^^

http://ferfal.blogspot.com/

[B Oeuf]

RichardD said:

JakeR said:

Anyone care to add any timescales into this?

I have to say, it's all a bit terrifying really!

This is the best I've seen as to answering that question!

http://www.independent.co.uk/news/business/comment...

independant said:

Britain seems doomed to be relegated from the "premier league" of international economies over the next few years - with serious implications for its diplomatic status and international "clout". Stagnation at home and rapid economic growth in developing economies will push the UK as low as 11th in the global pecking order by 2015, according to analysis by the Centre for Economics and Business Research (CEBR).

Having clawed up to fourth place by the start of this decade, the recession has already seen Britain overtaken by China, Italy and France, and it seems likely that the slide will get worse.

We're level with Portugal at the mo apparently

[RichardD]

turbobloke said:

...
As per other elements of wishful thinking in such mantras. Not that there aren't forces willing to push that way.

There is always the worry of the critical mass of the freely breeding underclass within society dragging the rest down with them.

But I do wonder about where does "expansion" actually come from? Can we keep increasing the population forever? Can we get more than 24 hours in a day Can make drugs so we don't need to sleep, so we can work more and spend the early hours of the mornings buying tat in Tescos? You get the point

[RichardD]

B Oeuf said:

...We're level with Portugal at the mo apparently

Before closing the page with that Independant article I clicked on another...

Darling under fire as UK edges nearer to credit downgrade

http://www.independent.co.uk/news/business/news/da...

Independant said:

Alistair Darling's pre-Budget report today is apparently the only thing that can prevent Britain from losing her historic and cherished AAA credit rating. Moody's, the leading ratings agency, dropped this bombshell yesterday as the Chancellor prepared to deliver his statement to Parliament.
...
The fear must now be that nervous investors will begin to demand ever-higher risk premia from Britain, Greece, Ireland, Portugal and Spain, and a full-scale panic could contaminate stock markets.

We have seen PIIGS previously, although sometimes one I was missed off so just PIGS.

Here however we have BGIPS. No Italy, but Britian lumped in with the rest of them.

Rearranging - I think PIGBS is better, sums everything up really!

[NoelWatson]

"The 10 Countries Most Likely To Default"

http://www.businessinsider.com/the-worlds-greatest...

[IainT]

I've been saving, as tax efficiently as possible, for he last 18 months (on top of the ususal). Not to gain huge interest but to provide a cusion in case things get really bad for us - job loss, etc.

First step was reduction and elimination of debts.

Then saving/investing at low risk.


Why on earth, during the good times, didn't Winky McClown follow a similar policy? If he had and our national debts had started out lower, how much better off would the country be now?

Would we be worse off or better of if we'd been part of the Euro prior to the collapse?

[AndrewW-G]

B Oeuf said:

We're level with Portugal at the mo apparently

Which makes me wonder, if Portugal receive 250% of their EU contributions back, why are we still a net investor in the EU?