Debt: How Bad Is Bad?

We’re told we’re humungeously in debt. Well it may not be all that bad.

The Voice of America comes up with some heartening news that the UK owns $347 billion worth of US Treasury Securities.

Interestingly, the UK is the third largest holder of US Treasury Securities after China with $1.16 trillion and Japan with $916 billion.

 

And what do we owe: Well it’s a little more than $347 billion  – our debt now stands at £900 billion.

 

But if we can immediately pay off £200 billion of that £900 billion by liquidating our US Treasury holdings, then maybe things aren’t that bad.

 

Furthermore the UK is the largest foreign direct investor in US business, according to the CRS report for Congress, with investments totalling $410 billion in 2007.

 

If you assume that means we could knock another £300 billion off our debt level, then our net debt more than halves to £400 billion.

 

26% of our £1.5 trillion GDP.

 

Not exactly on the verge of bankruptcy as some of our politicos would have us believe.


Comments

14 comments

  1. Yes, he’s down the Job Centre, Mr C.

  2. Is that why my Barclays Bank Manager isn’t answering his phone?

  3. You’re absolutely right, Lefty, but if you see the news from the banking sector – HSBC laying off 30,000, big investors bailing out of Goldman Sachs, losses expected at RBS and Lloyds and Barclays laying off 3,000 due to lower returns from investment banking – then we might assume that the money being extracted for ‘banking services’ has substantially reduced.

  4. the problem still remains – the amount of money extracted continuously from the economy for “banking services”.
    Until that is resolved the economies will all continue to bomb.
    The Tax burden and Banking burden combined is far too great.

  5. I thought it was the Ghanaian Chambermaids Union but now living in the USA in an HIV hospice?

  6. Not if the French Chambermaids Union has any say in it, Andy.

  7. IMF who mentioned that? We will soon be talking about DSK again and will he make a late run for French presidency?

  8. Thanks Mark.

  9. Hmm…£1.470 trillion is the ONS figure, the $2.7 trillion figure from the IMF is after exchange rates and the PPP fiddle factor.
    If you want to compare apples with apples then use the ONS figure, otherwise you have to apply similar fiddle factors to the deficit figure.

  10. Thanks Anonymous, I was using the IMF figure of $2.7 trillion which is £1.65 trillion at the current rate of exchange. The original post put it at £1.5 trillion – not so far off your £1.47 trillion. For some weird reason I said £1.8 trillion when replying to Mark this morning – sorry.

  11. We must be in for one hell of a quarterly growth figure tomorrow if the UK GDP is now at £1.8 trillion (it was at £1.470 trillion at the end of Q1 2011).

  12. Well thanks Mark, that seems even more encouraging. If we’re only running a £122 billion deficit in a £1.5 trillion GDP UK economy, I would have thought we’re nowhere near going bust.

  13. Its the level of the deficit rather than the level of national debt that the politicos are concerned about, and in particular the structural deficit, i.e. the deficit that would remain even after the economy recovers to its normal levels of output.
    This financial year the Office of Budget Responsibility estimate’s the budget deficit will be around £122bn.

  14. Although the Bank of England does own some of the US treasury bonds, it’s UK pension companies that own the bulk of the figure mentioned so it’s not actually the government’s to use. The UK’s pension provision is rather unique in the world and does tend to create large sums of money like this which have to be invested in safe havens, unlike the US system which can invest in higher risk strategies.
    Similarly all foreign investments are from PLCs or private investors. The UK is largest into the US and surprise surprise the US is largest into the UK.

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