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If You Live In Britain, All Your Savings Belong To Debt (Not a Wealthy Nation Anymore)
Business Insider ^ | 02/14/2012 | Ashvin Pandurangi, The Automatic Earth

Posted on 02/14/2012 6:54:12 AM PST by SeekAndFind

The great myth of the last few decades is that people can establish sustainable savings by investing in other people’s debt. That is how relatively astute and candid writers, such as Jeremy Warner for the Telegraph, can claim that “Britain is still a hugely wealthy nation” and actually mean it. In his latest blog post, Warner tries to convince us that aggregate private debt in Britain is not so bad when we factor in “assets” as well.

From his piece:

Believe it or not, Britain is still a hugely wealthy nation

Last week I drew attention to a report by Royal Bank of Scotland, which argued that we were only about a third of the way through the process of household deleveraging – that is the reduction relative to income in household debt – and that continued adjustment in this regard would act as a significant drag on domestic demand for many years to come.

Well here's the other side of the coin. Yes, household debt relative to income rose to unprecedented levels just before the bust and remains way above what RBS considers "sustainable". Yet the point that is frequently forgotten is the asset side of the balance sheet, which as can be seen from the Office for Budget Responsibility table below, remains far in excess of the debt.

The physical assets alone (mainly housing) were last year worth 382pc of income. Add in financial assets such as pensions and other forms of saving, and the figure rises to 827pc of income, an excess over the debt of 667pc.


Automatic Earth 4001

The Automatic Earth

(Excerpt) Read more at ...

TOPICS: Business/Economy; Foreign Affairs; News/Current Events; United Kingdom
KEYWORDS: britain; debt; savings; uk

1 posted on 02/14/2012 6:54:14 AM PST by SeekAndFind
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To: SeekAndFind

All they need is another trillion dollar stimulus package!


2 posted on 02/14/2012 7:09:02 AM PST by GeronL (The Right to Life came before the Right to Pursue Happiness)
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To: SeekAndFind
If your "assets" are accounts receivable from a whole bunch of insolvent debtors, you are no better off than those debtors. Smoke and mirrors not "wealth". The fools are at work.
3 posted on 02/14/2012 9:03:53 AM PST by Myrddin
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To: Myrddin
Right on, but it goes further than that. There's a whole heap of difference between "assets" and "valuables". Even the article writer admits that most of the asset is housing. Well even I know that your house is only, at best, potentially valuable. If no one will (or can) buy it, then it's effectively valueless. In fact it's less than valueless, as you have to pay to upkeep it.
4 posted on 02/17/2012 3:47:56 AM PST by Vanders9
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To: Vanders9
There are whole blocks of deserted housing in Detroit. Stuff that is valued as low as $1. The city wants to bulldoze vast areas to eliminate the "inventory" of unwanted, "valueless" housing. How much of the treasury's "assets" include such property?

I looked at a recent breakdown of spending in the US. Defense spending as a percentage of GDP. We're down to 3% and Obama wants to cut more. The elephant in the room is servicing the debt. After debt service and entitlements, there just isn't much left of the tax revenue stream. A small move in the interest rates on the debt could drive up debt service costs so high that nothing remains for entitlement or defense.

5 posted on 02/18/2012 12:53:01 AM PST by Myrddin
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