UK Economy Sinking Amid Worst British Financial Crisis Since Great Depression
Complicating the economic problems in the UK is its disastrous banking crisis, which rivals that of the United States. Much of Britain’s banking sector is insolvent, prompting a costly bailout by Gordon Brown’s government. With plunging tax revenues due to the nation’s economic contraction, the UK has been forced to borrow vast amounts of money to cover the cost of subsidizing the nation’s zombie banks. The combination of bank bailouts and stimulus spending has created staggering budgetary deficits, prompting the governor of the Bank of England, Mervyn King, to warn that further government indebtedness threatens the long-term stability of the UK’s finances.
The IMF actually challenged the official UK government estimate on the cost of taxpayer funded bank bailouts, presented in Darling’s budget at 60 billion pounds. When the IMF issued its own cost estimate of 200 billion pounds, Gordon Brown and his team went ballistic, forcing the International Monetary Fund to lower is projection to an earlier figure of “only” 130 billion pounds, still more than double the official UK estimate. However, strong-arming the IMF cannot alter the fact that the national debt of the UK is climbing at an astronomical rate. Alistair Darling is projecting that the UK will need to borrow more than $500 billion during the next two years, a sum that exceeds the cumulative borrowing of all previous British governments since the creation of the Bank of England more than three centuries ago, according to the leader of the official opposition, David Cameron.
The UK economy has been transformed, in effect, into a candle burning at both ends. Insolvent banks are consuming taxpayer funds at a rate that is intergenerational while the domestic economy tanks and unemployment soars .In the meantime, the national debt is exploding. Deflation is raging now, while the specter of hyperinflation hovers around the corner, as eroding financial fundamentals cripple the value of Britain’s currency. Amid the acute economic and financial crisis afflicting the UK, the nation’s political establishment offers only rosy projections. Tony Blair may have been called George W. Bush’s lap dog, but Gordon Brown is proving to be his economic disciple.
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