Will the UK Follow Greece in Facing a Severe Debt Crisis?
The British pound sank like a stone as the Governor of the Bank of England, Mervyn King, issued a grim warning during testimony before the UK Parliament’s Treasury Select Committee. The central fiscal problem is the £178 billion annual deficit incurred by Gordon Brown’s government in the midst of the global economic crisis.
Mervyn King indicated that the Bank of England will have to continue with quantitative easing in the face of the massive government deficits, sending negative signals to investors as to the stability of the nation’s currency. He warned that both the current government, and a likely new government to succeed Brown after the next British general election, must send a clear message to the markets that they have a credible plan to significantly reduce the nation’s fiscal deficits.
I think the current breed of politicians, in the UK and elsewhere, haven’t a clue how to address the massive, unsustainable deficits that plague virtually every major and advanced economy. Which means that it is only a matter of time before the UK, and then the US, follow in the footsteps of Greece down the road of national insolvency.
