Government debt to exceed 60 per cent of GDP

The following analysis is a small part of a very detailed report from The Market Oracle, linked here: ==============================================================

Government Emergency Action, Bank of England Loss of Control

The government, Bank of England and Regulator are in emergency talks aimed towards rescuing the British banking system from collapse. The expectation is that the banks will provide capital injections totaling of as much as £50 billion, that would mean inflating the countries national debt by 10% busting through the 40% debt to GDP rule. This IS an emergency move to prevent an imminent collapse of the UK banking system. This highly inflationary in monetary terms, but deflationary in economic terms i.e. .your money buys less but at the same time you have less money to spend! This is in addition to the estimated losses as a consequence of nationalisation of Northern Rock and Bradford and Bingley of £40 billion, therefore the UK debt has been inflated by £90 billion, with another £150 billion loaned out to the banks with perhaps a default rate of 20% implying another loss of £30 billion. That is a total cost to the UK tax payer to date of some £120 billion with the potential to explode yet higher towards £200 billion plus. The £200 billion figure is not born out of hindsight for in the analysis of 22nd April 2008, I specifically warned that the costs of bailing out the banks by means of nationalisation and exchange of cash for illiquid mortgage back securities would explode to over £200 billion this year . In the analysis of April 08, I voiced the concern that the governments debt ceiling of 40% would soon be busted through onward sand upwards to 60% of GDP by late 2009. Recent events put Britain directly on this path to exceed 60% of GDP with all of the consequences in terms of currency devaluation.

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