What does the United Kingdom do and why it is the Greece that will really fail

Greece is teetering on the brink but it is very likely to be rescued by a reluctant neighbour (Germany).

The rescue may come by EIB loan, outright purchases of (cynically: "investments in") Greek bonds by larger Eurozone members, or some other mechanism involving front loading of EU structural funds.

The next domino in the banking world (the Lehman Brothers of sovereigns) is the UK rather than one of the PIIGS.  Who is coming tot he UK's rescue? (its not in the eurozone and its debts are totally unsustainable)  Pimco, Soros, Rogers and others are on record with colourful language about the UK gilt market though one must naturally dilute their rhetoric by their book positioning.

Apart from a now failed banking sector it does seem tough to establish what the UK actually does, makes, owns or controls that will provide the earnings to save it from a debt crisis.  
It is not self-sufficient in food or energy, and although manufacturing accounts for 80+% of exports, it also accounts for just than 24% of output compared to 30% in Germany. The FTSE 100 index is littered with multinationals in the resources sector, but a shrinking fraction of the resource is territorial.

Simplistically, what does the UK actually do from the viewpoint of a foreign debt investor with an itchy sell finger?  Is it bereft of value or does British modesty cause it to hide its light under a bushel?

  • I have come to the conclusion that the British economy is fuelled entirely by the housing sector; what one man buys he sells to another for a profit, and the government collects the stamp tax.
  • The whole world economy is built around bubbly speculation by the wealthy, with a mass of impoverished poor people doing the real work. But will this edifice ever collapse? 
  • The City of london co-ordinates the world economy. Whether you're a Texas gas firm building a power plant in India or Somali pirate who snagged a Saudi tanker, you're probably dealing with an intermediary in the City. This is why Heathrow is the most important airport in the world. The UK doesn't, make, it serves.
  • world's second biggest producer of video games,
  • second largest exporter of pharmaceuticals and weapons and television programmes, make the artificial joints for hip replacement, tons of other odd niche stuff especially medical.
  • The UK is a giant hedge fund - still borrowing from one group of foreigners and lending or investing the money elsewhere - an industry that even last year generated a 100 billion dollar services surplus.
  • It's scary how specialised the UK economy is though and how many sectors just don't exist.
  • post-secondary education, research, TV, really bad food, itchy sweaters.

1 comment:

  1. I have to say that is a terrific assessment of the UK economy! We have such liberal laws about buying companies that British companies are being sold overseas at an alarming rate, leaving only Finance, and over-rated Education System and a load of McDonalds outlets as the only employers. The greed of financiers has fed down to the workers, who have therefore priced themselves out of the market, driving manufacturing overseas too. We complain about immigrant workers, but refuse to do the work that immigrant workers WILL do. Not an attractive country to be part of at the moment.