He is one of Britain most respected financial pundits, a former city banker whose independent company has a turnover of £80 million a year. His prediction that Britain faces bankruptcy was recently thrown into the long grass.
Given the implications of such an event this was hardly surprising. James Palumbo has however put his money where his mouth is by turning his sterling investments into cash.
Britain, running on a credit card has maxed the plastic. As in the Weimar Republic money is being hot-press printed to keep the banks in business. Don’t try this at home. Hundreds of billions of pounds will somehow have to be repaid before the bailiffs and police arrive. Some say it couldn’t happen: Ask Iceland; ask Dubai … who next?
DEVALUATION OR EURO?
What would happen if Britain’s economic management is effectively removed from Threadneedle Street and Westminster? The painful remedies imposed by the International Monetary Fund would be so severe that even the little Englanders, hostile to the European Union, would scream for admission.
The alternative could only be root and branch reform on a Hitlerian scale that would effectively impose British interests first. Such a radical restructuring would put Britain on leper-like isolation similar to Ahmadinejad’s Iran and Saddam’s Iraq. It would be unthinkable.
Iceland needed only a $6 billion bail-out from the IMF. Dubai’s meltdown has been estimated between £48 and £90 billion. For an idea of scale it was recently revealed that in addition to publicly declared bank bail outs the Bank of England secretly transferred £62 billion to the Bank of Scotland and the HBOS. What else may soon be revealed? The UK is spending £30 billion a year more than its income.
BASKET CASE BRITAIN
Britain needs £200 billion a year just to service its commitments but the UK government has always underestimated its predictions. Such forecasts are notorious for removing ‘various’ from the balance sheets such as private financial initiatives; (PFI); the schools and hospitals plus infrastructure dependent upon private investment.
Britain’s manufacturing base has evaporated; its reserves have largely been auctioned off. The country’s social commitments are staggering in their financial enormity as are its military obligations. Its wealth was more recently based on the markets driven by its financial institutions. A proud boast – when things were going well.
If the IMF is called in Britain’s credit rating will plummet. Inward investment will virtually cease. Interest rates will go through the roof, loans will be a thing of the past, and taxes will go ballistic. Companies will disappear by their thousands, and the pound’s value will drop like a lead ingot. The social consequences would be cataclysmic. Don’t even think about it.
BRITAIN SNEEZES; SPAIN GETS THE COLD
Due to the collapse in the pound’s value British expatriates in Spain alone have lost over £5 billion in spending power this last two years. Hundreds of thousands of Brits living in Spain are dependent upon a sterling income. Pensioners have been particularly hard hit; as many more are dependent upon investment returns. This is already causing immense hardship.
It beggars the imagination to think of the social effects if the exchange rate should drop to a predicted €0.86. It is best not to think of the pound being de-valued to as little as €0.50.