Ilargi: There is a relative silence in the international financial press when it comes to Britain. The economic situation of continental Europe gets almost all the attention. Every now and then someone in France or Germany states that Britain, too, should be downgraded, like when S&P cut the ratings of 9 European countries, but such statements attract hardly any interest at all. This might not be overly wise, though.At the end of last year, Tyler Durden at ZeroHedge published a graph from Haver Analytics/Morgan Stanley that should probably have sounded alarm bells quite a bit louder than it did.
Still, this graph would seem to indicate that the only core issue in the UK is its outsize financial sector with its outsize debt. From time to time, however, news articles pop up that seem to indicate there's more going on than trouble in the City of London.
I found this one alarmingly interesting, for instance, from James Hall in the Telegraph on January 4:
Ilargi: Payday loans to pay off your mortgage? Sounds like perhaps Britain has a substantial hidden real estate problem, a pre-shadow inventory one that could spiral out of control at a rapid clip.Almost one million Britons have taken out an emergency 'payday' loan to help pay their rent or mortgage in the last year, according to Shelter, the housing charity.
The high degree of borrowing highlights the 'spiral of debt' that people are falling into to keep a roof over their head, Shelter said. The charity also found that seven million Britons are relying on some form of credit to help pay their housing costs.
Campbell Robb, Shelter’s chief executive, said: 'These shocking findings show the extent to which millions of households across the country are desperately struggling to keep their home.'
First of all, austerity measures. Which will hit those people very hard who are in the bottom 25% or so who already have no savings, no nothing, to fall back on. And which will also lead to a rise in unemployment, which in turn will exacerbate the vicious problem circle.
Cameron also distances himself, and his country, from continental Europe, even though that is Britain's main export destination. How smart is that?
Britain is a country of relatively large regional disparities as well as wealth disparities. The already rich center increasingly sucks up the remaining wealth of the periphery of society. There is then only one possible outcome of those one million people paying their rents and mortgages with payday loans: the British housing bubble will burst sooner rather than later.
Tax revenue has only one way to go as well. Down. So what will Cameron use to support the banks? How will he attempt to prevent a large scale repeat of last year's Tottenham riots?
Looking at all this, we also need to wonder how much longer, and why in the first place, Britain is perceived as a safe haven, with its sovereign bonds - gilts - much sought after. Sure, Britain has its own currency and central bank, it can "print", it can do QE 1001, but it's not as if it hasn't already tried that route. And still lost 20% of GDP.
Whatever it decides to do, it seems safe to presume that Britain might well steal some of the limelight away from Greece and Italy in the not too distant future.