Bottomless Pits
Bottomless Pits
Do you remember that Morland cartoon, the one with a perspiring Gordon Brown shovelling sand into small buckets, for Alistair Darling to pour into a bottomless pit? It was on the back page of The Times’ ‘Recession Budget’ supplement on November 25th 2008. I though it summarised our financial predicament with wonderful clarity.
The cartoon came into my mind again when I was glancing at statistics in the Bank of International Settlements’ Quarterly Review for December 2008. The deep hole in which the UK finds itself is visible in the data. Take table 2A, the external positions of banks, in all currencies vis-a-vis all sectors. The figures in this table come from the unconsolidated gross international on-balance-sheet assets and liabilities of reporting banks in 41 countries.
In which country did banks report the highest assets, as at June 2008? Why, the UK, $6,681.8bn of the $34,853.5bn for all the countries counted, a share of 19.2%, almost a fifth. The big story relates to liabilities, though. The UK came top again, with $7,210.1bn of on-balance-sheet liabilities, 22.2% of the overall $32,514.8bn. The excess of liabilities over assets in the UK totalled $519.2bn, more than for any other country including the USA, where the liabilities were $504.0bn greater than assets. Italy ($309.7bn), Spain ($154.0bn) and Ireland ($139.1bn) also reported significantly more on-balance-sheet liabilities than assets. Germany and Japan, in contrast, held comfortably more assets than liabilities, $1,681.9bn in the case of Germany and $1,782.4bn in the case of Japan.
The figures form just one snapshot of one category of data, but they remind us that:
- The UK is in deep financial trouble.
- The international value of the £ sterling will languish until and unless the UK embarks on some serious economic restructuring, i.e. reorders priorities away from financial services, towards a sustainable ‘Green New Deal’.
- Germany can justifiably lecture the UK on matters financial.
Oh yes, isn’t it a Spanish bank, Santander, that has bought the UK banks Abbey and Alliance & Leicester, and the savings arm of Bradford & Bingley?
And what about liabilities that are off balance sheets? I shouldn’t open that woodshed door just yet, if I were you.
Hello! My opinions are, for obvious reasons, not entirely independent of your own. The evidence does indeed suggest that both Germany and Japan have learned from past mistakes whereas Britain and America seem to have grown over confident in their positions. Seems to me it’s about time to accept the many mistakes and get on with the future, not that there’s much choice of course. Oh and don’t forget the large slice of humble pie.