Britain Going Bust?

Eddie Braverman's picture
Rank: The Pro | 21,117

Normally I'm fairly dismissive of rumors about a major 1st world country going bankrupt, but there might actually be something to this one. It's no secret that Britain is in trouble, and has been for some time. But now a few credible sources are stepping forward to suggest that they might actually be toast.

The pound has lost 36% of its value against the greenback, and over 30% against the Euro, since 2007. Jim Rogers of Rogers Holdings came out and said today that, "It's simple. The U.K. has nothing to sell." His advice to young people in Britain? Get out now.

Just last week, Sir John Gieve, Deputy Governor of the Bank of England, indicated that the end of the recession was nowhere in sight, and that worse was likely to come. Not given to flights of fancy, these staid British bankers are dancing around the real issue: it's a good thing the sun never sets on the British empire, because they can't pay the light bill.

The Daily Times of Pakistan is even getting in on the act. They published a pretty scathing (and accurate) assessment of the state of all things British. Check it out here, if you're interested.

So my question is this: if all this chatter becomes a self-fulfilling prophecy and causes a run on the British banks, what will the impact of it be on the world market? Will we see the IMF step in, Argentina-style? A second mortgage on Buckingham Palace, perhaps? Will rival governments like the U.S. and the E.U., recently emboldened by the market's acceptance of their bank nationalization efforts, move to solve the problem with a one-world currency? Or will the Brits go out with a whimper and not a bang?

Comments (16)

Jan 23, 2009

Whimper.

But, frankly, this shit is very scary.

Jan 23, 2009

You'll know Britain is in real trouble when you'll see the Queen shopping in the 99p stores.

Tbh, I seriously doubt Britain will default on it's debt. It might get a loan from the IMF, but a full scale default is far away, yet. Also, low pound is good for the UK exporters (or so the textbook tells us). But we'll see.

Just my 2c.

Just my 2c.

Jan 23, 2009

Yeah compared to the Brits, our central bankers are superstars.

Jan 23, 2009
ideating:

Yeah compared to the Brits, our central bankers are superstars.

That's not saying much...

Jan 23, 2009

Couple things:

  1. Jim Rogers is clearly short the pound. Anything that makes the British economy look bad could translate to money in his pocket. Opposite him is GS ( http://www.bloomberg.com/apps/news?pid=20601087&si... ) who are long the pound. Considering how well GS has weathered the downturn (at least in comparison to their competitors), they deserve to be heard.
  2. The attacks being levelled at the U.K. are pretty similar to what we have seen concerning the U.S. The Pakistani Daily Times' article reeks of crass populism, calling the securities industry "a casino" and making them responsible for the downfall of Citi and BoA. The stats rattled off by Sir John Gieve are eerily similar to what we've been seeing stateside. The only reason the U.K. would be worse off has to do with the fact that they are a much smaller country. Thing is, London has always been the financial center for much more than the U.K, more like all of Europe, Africa and the Middle East. Unless all economic activity in Europe disappears, finance in London will still exist.

I do however think that the UK should consider joining the euro zone, mostly because that will make my life a lot easier when I'm on vacation.

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Jan 23, 2009

1) Jim Rogers has been extremely negative throughout this period of time. He predicted hyperinflation just before the G7 met and global meltdown of securities markets.

2) At least going to Britain as a visitor will be cheaper! (Thats hoping you're on a stronger currency end.)

Jan 23, 2009

Look at the end of the day, they're right. On a macro basis, when banks lever up and fail, they get bailed out by taxpayers; if they do well, their shareholders do well. The regulation of the industry and more active central bank involvement is definitely necessary. You can disagree with the verbiage and it really sucks for us who profit from it but that doesn't change the facts.

Jan 23, 2009
Jan 23, 2009

any time GS announces something, you can bet they are taking the other side. same thing goes for PIMCO's bill gross.

Jan 23, 2009

ROFL @ Bill Gross. That was hilarious. That guy is permanently stuck in the 80s. Seriously dude 1986 called they want its style back.

"Oh the ladies ever tell you that you look like a fucking optical illusion" - Frank Slaughtery 25th Hour.

Jan 23, 2009

The Economist had a good article about this a little over a month ago, and drew some parallels with what happened to Iceland:

http://www.economist.com/world/europe/displaystory...

Jan 24, 2009

I trust Jim Rogers over GS anyday simply because Jim was on BBC a couple of days ago and claimed he had no position against the pound reluctantly, and looked like a complete idiot saying it was going lower, but not willing to invest. Obviously, he has a substantial position against it, and doesn't want to suffer any legal repercussions from front-running. (He made a slight reference to his lawyer in another interview) I am still convinced he was largely influential in 1992 when Soros broke england. Rogers hasn't waited 15 years for nothing.

Jan 24, 2009

Oh yes, and the only difference between Rogers and GS is that Rogers shorted a while ago while GS wants in badly, so typical.

Jan 24, 2009

That's about as reputable a journal of opinion as the Daily Growl. The ayatollah does not approve.

Jan 26, 2009

Jim Rogers that backed up the truck for China last year? the same Jim Rogers that reiterated last year that we are in a supercycle for commodities?

He's not dumb and he's not poor but he's not my profit prophet.

Jan 30, 2009
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