Thursday, February 19, 2009

Government stakes in RBS and Lloyds could add £1.5 trillion to UK national debt

Cripes. Nice one, Gordon.

UPDATE: There's a great post on this over at Obo's place, featuring our friends from the BBC.


not an economist said...

I match your "cripes" and raise you a "scary fuck".

Intersting article by Gary North over on the Lew Rockwell site. He notes an article initially appeared in the Telegraph on line saying that there was a secret EC report that European banks needed a bailout to the tune of $25 Trillion dollars - yes thats trillion. Bush did the Tarp for a miniscule £700 billion I think.

The Telegraph article was quickly edited so as to miss out the actual numbers but the gist of it remained. Link is here:

It could be that the journalist double cheched his sources and found the $25 trillion price tag was wrong. Obviously I don't know. But with all that has happened in the last 1.5 years one does wonder if maybe the $25 trillion price tag was correct and it was pulled for fear of the consequences in the financial markets if it remained on line.

One last thing: I get even more nervous when I read about this crisis hitting the rest of Europe, Esp Gernamy and Austria. Its just they have their own unique way of dealing with these sort of problems ...

Jack Maturin said...

Now you're starting to scare me too! :-)

I think the derivatives industry has about $500 TRILLION!!! dollars worth of contracts outstanding.

A lot of these do balance each other off, but what everyone forgot about (except Peter Schiff) was counterparty risk.

If you engage in a risky deal, but hedge this out with a derivative, that's absolutely fine until you need the hedge to come through and the counterparty has gone bust.

Now you're up against the wall, and the person you took YOUR risky bet against is also looking at you going bankrupt and unable to meet YOUR obligations.

Ever seen one of those giant domino world record attempts?

Fortunately there is an answer. Everyone to repudiate all government debt, in the best style of Uncle Murray, and the slate-clean establishment of a new single world gold currency based on a 100% reserve.

I don't think governments will do it. Taxpayers might though. I await the first major world tax rebellion with interest, to refuse to pay off government debt and then the first legal tender rebellion to refuse to take government scrip.

But I'm starting to sound like a broken record on that one, so I'll let you fill in the rest of the details.