Debt Statements

When i first saw this chart (late last year) it made me blink. Then i forgot about it.

Fitch’s recent revision of it’s UK outlook (zerohedge) put it front of me again. Despite the obvious madness of basing anything on the fiction that is GDP, taken at face value, this chart says some interesting, if not shocking, things:

  • total UK debt (as a percentage of GDP, just imagine i’m saying that after each of these statements…) is roughly twice the level of the EU zone average
  • government debt in Japan is just insane, nobody even comes close to this level of madness
  • Sweden?! Norway?!?! What is going on there?
  • household debt in the EU zone is significantly lower than it’s G10 peers. Wonder where the likes Brazil will fall on this scale?

However, the obvious ‘elephant in the room’ is the debt of the UK financial sector. If it was still possible to imagine a rational financial sector in the UK, one might hope that the debt was money being put to use for productive activities. Of course such musings are now impossible, and we know that it’s propping up a mountain of badly made wagers, using strategies that really only insured that bonus criteria were met, regardless of the long term consequences.

Yes, it’s possible to argue that this wasn’t (isn’t?) universally true, but the aggregate result pretty much negates the need to further debate. They gambled, and lost. Given the propensity of successive UK governments to socialise these losses, the distinction between Government and Financial debt is increasingly blurred.

The continuing failure to regulate, or even attempt to moderate, the sectors excesses means that this debt will hang like a slow burning tire around the neck of the UK for decades…

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Wise words...

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