Monday, 21 January 2013

The End of Britain?

There is a very scary bulletin from the investors' magazine MoneyWeek doing the rounds. It is entitled "The End of Britain", and forecasts an imminent disastrous financial collapse.

I've checked with the editor of MoneyWeek, and yes it is genuinely their production. The reason why it looks different from the rest of their output is because it was written by their marketing department. And that of course gives the clue as to what this is all about. Whether or not they genuinely believe there will be a disastrous collapse is not the point, though to be fair MoneyWeek is generally fairly pessimistic about the UK and has been forecasting a property market collapse for several years now. No, this is all a marketing ploy. They want to scare you into buying a subscription to their magazine.

I could just say "Don't do it", but actually as this bulletin is seriously scary I think it would be more useful if I took it apart and debunked it. So here goes.

The first thing that the bulletin does is establish credibility by listing all the events that MoneyWeek has correctly forecasted in the last few years. So they claim credit for forecasting the 2008 oil price spike - which actually is a much under-rated phenomenon which is not often discussed. And the reason it is not discussed is because of the financial crisis and the fall of Lehman, which happened the same year. Did MoneyWeek forecast that? No, they did not. They claim that they warned people to "stay away from the big banks". But Lehman wasn't a big bank. Nor was Northern Rock, or Bradford & Bingley, or even HBOS. Nor were the Icelandic banks. Nor were the hundreds and hundreds of US lenders that went bust. MoneyWeek DID NOT forecast the financial crisis.

Then they claim that five years ago they forecast the slide in the pound, and that it has now suffered a "long decline". Let's check this, shall we? Here's the GBP/USD exchange rate chart for the last 10 years:

Click to enlarge even more


click here for larger version

Five years ago is January 2008 - by which time the pound was already falling from its 2007 high. Doesn't take a genius to forecast something that is already happening. Admittedly the pound did then fall off a cliff because of the base rate cut later in 2008, but it then climbed back up a bit and has held at around the same level ever since."Long term decline"? Doesn't look like it to me. And what about that dramatic drop? Oh wait, they didn't forecast the fall of Lehman and the subsequent deep recession, did they - you know, the deepest recession since the 1930s? So obviously they couldn't forecast the exceptional measures taken by the Bank of England to support the economy, including deliberately weakening the pound - of which Mervyn King is still rather proud.

Then they also say that three years ago they told everybody to SELL EUROPE. So that''s January 2010. When exactly did the Eurozone crisis start? The BBC has helpfully provided a timeline here. Here's an extract:


2009

Slovakia joins the euro.
Estonia, Denmark, Latvia and Lithuania join the Exchange Rate Mechanism to bring their currencies and monetary policy into line with the euro in preparation for joining.
In April, the EU orders France, Spain, the Irish Republic and Greece to reduce their budget deficits - the difference between their spending and tax receipts.
In October, amid much anger towards the previous government over corruption and spending, George Papandreou's Socialists win an emphatic snap general election victory in Greece.
In November, concerns about some EU member states' debts start to grow following the Dubai sovereign debt crisis.
In December, Greece admits that its debts have reached 300bn euros -the highest in modern history.
Greece is burdened with debt amounting to 113% of GDP - nearly double the eurozone limit of 60%. Ratings agencies start to downgrade Greek bank and government debt.

2010

In January, an EU report condemns "severe irregularities" in Greek accounting procedures. Greece's budget deficit in 2009 is revised upwards to 12.7%, from 3.7%, and more than four times the maximum allowed by EU rules.

Well, well. It seems that here too MoneyWeek "forecast" something that was already happening. It didn't take much imagination to realise that the Greek crisis was going to affect the countries tied to it by a single currency. And "Europe" is a rather wide defnition, don't you think? Here are the yields on 10 year German bunds over the period 2007-2012 (just to remind you, falling yields=rising prices and vice versa):
I hope MoneyWeek have a disclaimer on their investment advice, because they could have some very angry investors who took their advice to "Sell Europe". Germany is part of Europe.....
Anyway, that's enough of debunking MoneyWeek's claim to be clairvoyant. Now let's look at what exactly they are forecasting this time and whether it is reasonable.
1. The Debt Tsunami
The first claim they make is that Britain is about to be overwhelmed by a "tidal wave" of debt. And they produce some very scary charts indeed to show how the UK's national debt has risen since 1900. Now those charts come from a reputable source and are indeed correct. However, they show the NOMINAL amount of debt - which means they take no account of inflation. It's amazing what happens to your debt figures when you remove the effects of inflation:
Here's the chart from MoneyWeek showing UK nominal debt in £:
Now here's the same chart adjusted for inflation:
Doesn't look quite so scary now, does it? Though there is still a spike in the last few years. But I haven't finished yet. Most people would agree that the general standard of living in the UK is considerably higher now than it was in 1900, or indeed in 1950, or even 1970. That's because our national production has risen - considerably, actually. Which means we are wealthier than we were before. So if we look at our debt in relation to GDP, this happens:
We would have to suffer an absolutely catastrophic drop in GDP for our debt to be anything like the sort of burden on the economy that it was in the 1920s and 30s and after World War II.
Ok, so MoneyWeek's use of debt statistics here is distinctly dodgy. Their next chart is actually correct and reasonable. Britain does indeed have a large private debt burden and has the third highest total debt level in the world. MoneyWeek doesn't mention that nearly half of that comes from the financial sector, in which the UK is the world leader and whose business is intermediating debt to create credit. That does rather distort the figures, really. 
And Money Week then go on to add in future liabilities as if they all have to be paid today. Sigh. No, my children don't need to receive their pensions yet. Nor do I, actually. So there is no reason to show those liabilities as falling due now. That is not to say we don't have a FUTURE problem with unfunded liabilities. But MoneyWeek is forecasting imminent collapse. I really can't see how the UK can collapse in 2013 due to liabilities that don't fall due for another 20, 30, even 50 years. 
Oh, and they compare the UK to Eurozone countries. They aren't comparable. We really aren't going to end up like Greece, for reasons that I explain here.
So that debt tidal wave looks like it could be surfable. On to the next scary subject. 
2. The Overblown Welfare State
And another dodgy chart. In fact the same thing again, but for govt spending instead of debt. Here we go:
UK govt nominal net spending in £
Adjusted for inflation:
And related to the increase in national production (GDP):
Where exactly is this unaffordable growth in the welfare state? Yes, public spending has indeed grown in nominal terms, and much of that can be laid at the door of more generous health and welfare spending. But we have got richer too, and the thing about being richer is that you can afford things that poorer people can't afford. As MoneyWeek's readers should know very well. 
So is their claim that "Britain is broke" really true? Here's what they say:
If the UK had been a business or an individual, we’d have been declared bankrupt by now. We’d have been forced to sell our business premises or our home and would have been housed in a run-down flat long ago.
Er, no we wouldn't. You see, although we have a lot of debt and we spend a lot of money, we EARN a lot too. Our charts versus GDP look pretty good, really. I'd say we were definitely a going concern.

3. The great collapse

They take about 15,000 words to do it, but in a nutshell MoneyWeek forecast that rising interest rates will cause failure of the banking system, collapse of the bond and property markets and hyperinflation.

Firstly, let me say that MoneyWeek are correct to make the point that the UK's borrowing costs are historically low, and debt would be more of a burden if they were higher. No doubt their investors would like rates to be higher, which might be why they are forecasting that they will rise - talking things up often does work. At the moment there are no signs whatsoever of interest rates getting off the floor, so this looks very much like wishful thinking to me.

But then they lose the plot and start comparing the UK to Greece again. Greece had falsified its debt position and deliberately misled investors as to the true state of its public finances. Is it any wonder there was a buyer's strike? And what on earth is the reason for supposing that the UK would suffer the same fate?

And it gets worse. Further down they compare the UK to Argentina. This is frankly silly: a large part of Argentina's problem was its attempt to hold a currency peg to the US dollar at the expense of its economy. The only time the UK ever came close to trashing its economy in the same way was 1988-92 when it was pegging its currency to the Deutschmark at too high a rate, which forced the economy into recession. The UK was eventually forced out of the ERM and now has an absolute horror of pegged or managed exchange rates. Sterling is fully floating and likely to remain so. No way are we going to suffer Argentina's fate.

The property market crash they forecast I think is possible. I don't think the housing market corrected sufficiently in 2007-9 and it still has further to fall to reach a sustainable price level. In the short term this would indeed hurt people who were over-mortgaged and financially overstretched. And it would annoy the people (mostly middle-aged and elderly) who bought their properties when prices were much lower and were expecting to profit from house price appreciation. Tough, frankly. But we have had housing market crashes before and recovered. Why should this be any different?

The bank failure that they forecast simply isn't believable. The run on Northern Rock was caused by the inept handling of what was originally a liquidity crisis by both the Treasury and the Bank of England. There are measures in place now to ensure that banks really can obtain emergency liquidity - the Bank of England now has a proper discount window facility like the Fed, which it did not have in 2007. And banks actually DO have more money: they are being required to have more capital and more liquid assets to protect them from bank runs. But more importantly, it is absolute nonsense to say that the UK won't have enough money to bail out its banks. This isn't the Eurozone. The UK has a central bank and issues its own currency. It can NEVER run out of its own money. As I've said numerous times now, the risk for currency issuers is not insolvency, but inflation. Which brings me to the next scary story.

4. The inflation monster

There are two parts to this: firstly that we would see a return to the inflation of the 1970s, and secondly that the public debt level would so erode confidence in the currency that there would be Weimar-style hyperinflation. These two are not remotely related, which demonstrates how very muddled this paper is. I shall take each in turn.

The background to the economic problems of the 1970s was the breakup of the Bretton Woods managed exchange rate system, the Yom Kippur war leading to the oil price shock of 1973, and a property market collapse leading to the Secondary Banking Crisis of 1973. But underlying it all was inept fiscal and monetary management of the economy. Inflation had in fact been rising steadily since the devaluation of the pound in 1967, and the wrong measures were used to contain it. We are, frankly, MUCH better at managing inflation now. Yes, we have had slightly higher inflation than we would really like in the last few years. But in no way has inflation been allowed to run "out of control", and there is absolutely no reason to assume that that would change. I debunked the 1970s inflation monster myth here.

The idea that the UK's debt level would cause Weimar-style hyperinflation is also rubbish. The roots of Weimar's hyperinflation lay in the First World War and its aftermath, particularly the imposition of war reparations which far exceeded the ability of a war-damaged economy to pay them, as Keynes noted, and which had to be paid in foreign currency (gold). As far as I can see, the UK has not recently lost a world war and there are no claims for punitive reparations that I know of. Nor does the UK have particularly high levels of debt denominated in foreign currencies - unlike Hungary, for example. Most of its debt is in sterling. And as I've already noted, sterling debts can always be serviced - perhaps at the price of slightly higher inflation, but not hyperinflation. Whoever wrote this should have done some basic research into the causes of hyperinflation - here, for example.

And finally we get to what this is really all about:

5. GUBMINT COULD STEAL YOUR MONEY! Subscribe to our magazine to find out how to protect your wealth.....

Oddly enough, this is actually the strongest part of this bulletin. They really did do their homework on the occasions in the past when governments have fleeced their own citizens. And I have to admit that it is certainly not beyond the bounds of possibility that UK savers could indeed suffer savings confiscation in a variety of ways. Indeed they already are, through negative real interest rates. Am I bothered? Probably not. I lose much less sleep over the prospect of savers losing their savings than I do over the prospect of ordinary people losing their jobs and their homes. 


I think it is very sad indeed that a respected investment magazine like MoneyWeek is so desperate for business that it is resorting to despicable scaremongering. This bulletin is poorly researched, badly written and presents completely the wrong image. I'm not about to advise anyone what to do with their money, but I can certainly think of much better things to do with mine than subscribe to this rag. This marketing ploy by MoneyWeek is a very, very bad mistake.

231 comments:

  1. Replies
    1. Yep - nothing to see here - move along!
      Lol

      It's true - UKPLC and UK citizens have absolutely nothing to worry about as far as I can see

      Delete
  2. "written by their Marketing department" is a key phrase here.

    Moneyweek got it spectacularly right on gold from about 2002 onwards and for that and predicting the property crash (which encouraged me to sell before it happened) I will keep subscribing.

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  3. Sovereigns dont go bankrupt they wither on the vine. Bankruptcy is actually a line in the sand based on resolution and forgiveness which in a lot of ways would be better process.

    As soon as it is established the UKPLC are living within our means then Trust can be restored. Fiat money is Trust.

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    1. I agree with you about the need for debt forgiveness and resolution in cases where sovereigns really can't support their debt burdens and their currencies are under threat because of breakdown of trust (as you correctly say).

      But that is not where UKPLC is. The charts I produced clearly show that the UK IS living within its means. There is no need for this scaremongering.

      The problem in the UK is private, not public, debt.

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    2. So is it like Spain then? I read their government is prudent, but the private debt went bust?

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    3. Yes, and Ireland. Which is why I want to grab this government by the shoulders and scream in its face "IT'S THE PRIVATE DEBT, STOOPID!"

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    4. I completely agree with your views Francis. Sadly our governments at the moment have a habit of socialising that private debt.

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    5. I think that non financial minds like mine can see it as an advertising ploy and if you read carefully what they say they are referring to the next decade as imminent. However they are dramatising fears that a lot of people genuinely have. When I remember my first mortgage and the devastating effect of a rise in interest rates and apply that to the kind of debt we have now it is scary. It is however more scary for people with little room to manouvre, those depended on state and private pensions with little more than a small emergency fund in assets.
      I know that if in 12 months time when I retire, my pension was 20% lower than predicted, I would probably have to sell my home, that I will only finish paying for this year!

      People who have built up massive savings can invest abroad, buy gold or whatever but I am not sure what a person with a pension (at the moment inflation proofed but that could change) and with probably less than £15,000 in cash assets at retirement can really do to protect themselves against the kind of things we have seen in Greece and elsewhere. OK I have a home but need the bungalow I have for health reasons and downsizing would at most yield me about £20k. inflation proofed pensiona, both mine are governement owned, are easy targets in a period of high inflation.

      So debunked in part it maybe, but worrying it still is!

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  4. I read that last month, a histrionics masterclass worthy of the Daily Mail. Though why anyone would read it all, is beyond me. Do Marketing/PR scare tactics actually drive magazine sales?

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    1. Presumably they think so. But I think it's really sad that MoneyWeek apparently wants to turn itself into the UK version of Zero Hedge.

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  5. Whether or not they genuinely believe there will be a disastrous collapse is not the point? Indeed, that seems to be the whole point.

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    1. No it isn't. The whole point is selling magazine subscriptions.

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  6. You cannot tell other people what their own points are, but only speak for yourself. Maybe they simply want to generate more business, or maybe they just believe in what they wrote, or maybe those 2 points are even both at play simultaneously, but whatever the case, only they can know the answer to the question you sought to clear up for us.

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    1. The sole purpose of a marketing department is to drum up business. And the editor of MoneyWeek personally told me that this paper was written by their marketing department. I stand by what I said.

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  7. It's almost like you think marketing must be deceitful. You can market what you think to be the truth, you know, even if your end wind up being false; the 2 are not mutually exclusive. There was a recent conference in Australia, Sydney, attended by a very esteemed audience - including some of the nation's top business elite (bank CEOs and the like) and similar types of thinking were discussed.

    Maybe you should write a piece about that, too? I would love to hear your thoughts.

    Let Banks Fail
    http://www.youtube.com/watch?v=kzAPcn8QxBI

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    1. I can't possibly comment on whether or not they believe what they wrote. I'm not a mind-reader. However, the PURPOSE of this article is clear. It is to sell magazine subscriptions, not to inform the public. That is what I said in the post.

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    2. Isn't the company's goal to sell magazines BY informing the public? You are splitting hairs, dear Frances, to suit your personal prerogatives - no marketing department is very likely to think they can sell magazine in the information age by NOT informing the public. Perhaps be less quick to ascribe evil motives to the actions of people. Have more faith! Most people are pretty good.

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    3. I haven't ascribed any evil motives to anyone. I have simply pointed out the purpose of a marketing department. The gross errors in this bulletin may simply be caused by ignorance. After all, marketing people generally aren't economists.

      You are no more capable of identifying my "prerogatives" (sic - I think you may mean "prejudices") than I am of identifying the motives of those who wrote the bulletin. You have just committed the very offence of which you wrongly accuse me.

      I must now remind you to abide by the rules of my site, which are:

      - please confine your comments to the subject of the post
      - please refrain from personal attacks on me or any other commenters.

      You are straying dangerously close to the second of these.

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    4. Sorry Peter but did you actually read the article? It is essentially a long list of false juxtapositions and textbook FUD marketing. Mind you, you do have to admire their track record, as I believe they've predicted 17 of the last 4 market downturns.

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    5. I love the phrase "17 of the last 4 market downturns" - spot on. Realise this is months out of date...but I just saw this comment and loved it.

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  8. Much appreciated contribution

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  9. Great debunking, and this ukpublicspending.co.uk website is a great find. But it's still missing the ability to do a graph I've been wanting to see for a while: show public debt at a cash flow level (gilt issuance and redeeming and actual coupon payments, gross and net) as a percentage of GDP, and then plot that against total spending (which they do have). It probably looks much less frightening, and more meaningful, that the nominal graphs that don't capture interest rates other than time shifted, and thus miss most of the current action. Given that they're trying to argue about solvency, cash flow is what they should be looking at. Anyone knows of a data source for that (UK and others)?

    I think a similar observation goes some way to explain the "missing" property crash in the UK: if you look at UK house prices in term of what it cost to own one on a 20% deposit plus interest on the 80% at the interest-only mortgage rate, which is much closer to what actual buyers pay than the nominal, you probably can see both a crash and relatively sustainable numbers. There is a fat tail in the UK's mortgage market peculiar exposure to variable rates, but then you need to believe the "rates must go up" brigade (ratebugs?) for that to become a real problem.

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    1. Hi cig

      MoneyWeek fell foul of the same problem - they posted a chart showing how interest rates have declined over the last thirty years but were not able to show the connection between that and the declining cost of debt service in relation to GDP. If I can find the data sets I might have a go at it myself, at least for the coupon payments (not sure I can cope with issues and redemptions, and nearly all debt is rolled anyway).

      To my mind, the UK housing market is being propped up by two things: 1) very low interest rates, which benefit the large proportion of UK homeowners with variable rate mortgages 2) forbearance on distressed mortgages because of risk to bank balance sheets. I'm no ratebug, and as homes are important to very many people I'd be happy for rates to remain very low while the mortgage debt overhang clears - most people have repayment mortgages, not interest-only. But the second of these has to stop (which means ending or severely restricting interest-only mortgages, which are one of the main means of forbearance). Government also has done its fair share in propping the housing market, most recently through the Funding for Lending scheme, most of which is going into mortgages.

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    2. It's a small point but I think using interest-only is a slightly better modelling/normalisation as it isolates the true cost of buying a house (repayment is a form of savings, interest is payment for a service, broadly), and it makes only a small difference anyway: with typical long mortgages the repayment component on year one is pretty small, so whether you include or not repayment or not you should get similar numbers for the "monthly cost" of ownership, which is the primary driver of prices (the nominal price follows from the monthly cost of a typical mortgage, not the other way, I think).

      The interest-only number is also useful in that it can be compared with rent (capital rental cost = regular rent - servicing costs).

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  10. A wonderful piece Frances.

    These 'End of Britain' posts have been going the rounds for some time now and are clearly designed to market their journal (which does contain some interesting information of course). But was it written by MoneyWeek or [conspiracyalert] by one Gideon Osborne anxious to persuade people that there is no alternative to his austerity programmes[/conspiracyalert].

    Now there's a thought ....

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    1. They may not like what you have to say but if they believed their marketing tripe I wonder why they are still in the UK and haven't up-sticks by now.

      You might write to Merryn Somerset Webb, the editor of MoneyWeek, offering to write a (paid for) column on your views of the future and how it may affect investors.

      All the commentators on MW are themselves investors, claiming expertise but which always raises the question of whether they are bumping things for their own benefit. An honest appraisal by someone as knowledgeable as yourself could be a big bonus.

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  11. I like the charts. Wonderful picture of what war does mean for the economy and 'welfare':).

    Please consider that the GDP does contain asset transfers, the whole bunch of financial services and the growing service industries in general (growing again). It is wise to compare a somehow similar product mix.

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  12. http://twitpic.com/buaecn

    HERR Schaeuble;
    "Britain has a higher state debt than the eurozone average and I don't even want to mention the United States of America," Schaeuble said
    http://www.telegraph.co.uk/finance/economics/9809154/Britain-has-more-debt-than-the-eurozone-says-Germanys-Wolfgang-Schaeuble.html

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    1. I'm sure it does. And I'm sure the US does, too. But they have their own central banks and their own currencies. Eurozone countries don't. That's the difference.

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    2. That's another story.

      The idea of the Euro system goes back to the time after WWII 60s. Why?

      http://www.spiegel.de/spiegel/print/d-43257718.html
      Interview with Karl Blessing, 1971 (bottom)

      Yes, if you were to create a European central bank, a Federal Reserve System of Europe, which is autonomous from the government - and within the system, the government would only be able to finance up to a certain degree, budget deficits - then you can fix it.
      (Google Translated)

      If not bashing the French, bash the Brits - thats the game.

      I don't want to go beyond. See this statement as a political one - internal affairs.

      Delete
  13. We can print to infinity.....they can't basically!

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  14. "The background to the economic problems of the 1970s was the breakup of the Bretton Woods managed exchange rate system"

    L.J.P.: "The British pound sterling became the first currency to meet the international requisites of a free gold coin standard: that is, to become the standard-of-value as well as the reserve & transactions currency of the world.

    Under the aegis of the Bank of England, the pound sterling came to be regarded as "good as gold". The paper money issued by the Bank, & the book account balances of its customers, could be converted into a given quantity of gold of a given fineness on demand. So great was the confidence of international, as well as domestic customers, the bank needed very little gold to meet its obligations. Balances of customers were almost always shifted within the bank.

    All this came about without a single gold standard act being passed by Parliament. The establishment of a free gold coin standard requires faith and confidence. This state of mind cannot be created by passing laws or issuing edicts. The British "official" gold standard began in 1816 and continued until the outbreak of WWI in 1914. It was reestablished in 1925, limped along, and finally disappeared into the maelstrom of the Great Depression in 1931."

    Excessive trade deficits ended all of this.

    L.J.P.: "It is economically advantageous for creditor nations, & for the world economy, if creditor nations operate with trade deficits: deficits proportionate to their creditor status. That is, the deficits should be large enough to enable the nationals of debtor nations to acquire a sufficient amount of foreign exchange to enable them to serve their international debts."

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    1. That's a very important insight from LJP. Japan has operated as a debtor country with a trade surplus for a long time. But we are a bit short of creditor countries operating with trade deficits. As far as I can see the rule at the moment generally is trade deficit AND fiscal deficit, or trade surplus AND fiscal surplus. Maybe that's where we're going wrong. It is certainly a large part of the problem in the Eurozone.

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  15. “Sterling is in the process of losing its safe haven status,” says John Stopford, head of fixed income at Investec Asset Management.

    http://www.ft.com/intl/cms/s/0/7d21ff98-64b7-11e2-934b-00144feab49a.html#axzz2ITqid13S

    Frances, I seriously think you may get drafted for work at the BoE! Whether you should choose to opt in at this moment, however, is an entirely different question; the future for the poor, old UK does not look so bright

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    1. Hi Peter,

      Yes, it looks that way. In which case sterling will fall, which should be good for British exporters but not so good for consumers dependent on imports. It would also force up interest rates on government borrowing, but I guess the BoE can always do more QE to squash them again!

      I don't regard the future of the UK as any worse as the future of any other country, in fact I think it is better than many. But I think the pervasive climate of fear is a large part of the cause of the current paralysis. Which is why I hate scaremongering publications like this one - they squash initiative and feed stagnation. Actually this one was quite an easy one to deal with: I've seen others that are just as gloomy and far better argued. But I still disagree that civilisation as we know it is going to come to an end any time soon.

      Delete
    2. Hi Frances,

      Good for exporters? Please consult the latest figures re recent UK devaluation vis a vis exports and their growth re market share in the UK economy that's occurred say over the last 10 years, or just 5. The connexion, albeit a positive one as you insinuate, is quite far from optimal, I think you may probably agree after some quick research.

      Delete
    3. Well, that would be because of the high import content of British exports. It's never quite as simple as "devalued currency means more exports". Fortunately, or we would be in a race to the bottom ALL the time. Unfortunately we appear to be heading into currency wars now, which I think is immensely silly.

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  16. This may well be an uneasy thing to admit, especially for a very caring person who is smart and also with banking experience, Frances, but even the best regulators on planet Earth cannot regulate something which they are totally unfamiliar with. What am I getting at? Well, suppose you had the 100 smartest people on Earth, in terms of commerce and banking at your disposal as head of the BoE - even in this sunny example, there stands very little chance that said group could even begin to fully understand exactly what is 'in the banking system'. The numbers (of transactions) and the complexity of derivatives and off balance sheet shenanigans is so extreme that you simply have to throw your hands up in the air and leave it to the markets.

    It is not possible to regulate what you do not know.

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    1. No, it is probably not possible fully to understand or regulate it. It is a distributed system largely in private hands and parts of which are deliberately concealed from view.

      I regard our monetary system as having considerable similarities to a living organism. Circumscribe its activities by all means. But if you prevent it doing what it is designed to do - which is to take risk for a return - you kill it. And because of the symbiotic relationship between the monetary system and the real economy, if you kill your monetary system you also wreck the real economy. The current quest for safety at any price is immensely dangerous in my view.

      Delete
  17. I regard our monetary system as having considerable similarities to a living organism? Such wise thinking! People would do well to concede this very fundamental point to you, which for some reason seems to get lost in all the noise. A fine scientific scholar from England who is doing much to propound this view you seem to accept - that the economy is a type of organism and not a mechanical machine - is Rupert Sheldrake. If you will forgive me the liberty, I link below to 2 overviews of his exciting for which you may consider if we are lucky.

    A 4 minute overview

    http://www.youtube.com/watch?v=uD2qScZlvYE

    1 hour overviews

    http://www.youtube.com/watch?v=T1yXeZnQcQo

    The below touches on renewable energy, an area the UK is arguably a global leader in:

    Dispelling Dogmas and Opening New Frontiers
    http://www.youtube.com/watch?v=iJYrbyYFuuU

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  18. Can I sign you onto some debt without your consent, Aziz?
    No, of course not – that would be anarchy!

    http://economics.org.au/2011/08/government-is-in-a-state-of-anarchy/

    The global banking system is, therefore, ‘decoupling’ from the State, slowly but surely, like the Church once did. At least in the West. This is positive news for Peace & Commerce.

    Disconnect bondholders and bankers from government?

    http://www.bloomberg.com/news/2013-01-25/why-the-founding-fathers-loved-the-national-debt.html

    You mean to say, disinter-mediate finance to consumers from government? That would be like combining Kickstarter with Bitcoin, no?

    One can perhaps wonder, if Google were to just float the idea of toying with Bitcoin, what exactly would ensue? Chaos? I doubt that very much, of course, but also have no real idea, except to say that I don’t think such a thing would cause anybody a great deal of harm.

    Combined with an Internet that is 100x quicker? Surely, then, such a thing could maybe even yield a positive result, for both the rich and the poor.

    http://www.washingtonpost.com/business/technology/google-fiber-provides-faster-internet-and-cities-hope-business-growth/2013/01/25/08b466fc-6028-11e2-b05a-605528f6b712_story.html?hpid=z2

    ReplyDelete
    Replies
    1. Umm. You don't understand the financial system if you think it is decoupling from government. On the contrary, the ties are getting ever closer.

      Delete
  19. Well, despite my disagreeing with you very strongly about certain things, I find that it's nevertheless reassuring to have someone as smart as yourself in touch with the blogosphere talking seriously with FT employees.

    ReplyDelete
    Replies
    1. And even meeting them for lunch and drinks!

      Delete
  20. I must, also, say: the FT has over the past month or so been producing some really superb, incisive analysis. I have no idea why, but it reads like everybody over at the FT have all of a sudden become far smarter! Surely this can only be a positive development...here's hoping

    ReplyDelete
  21. Please forgive me France & feel free to delete this msg as I know it's not really related to your post above, but what do you think of carbon trading? For long while I disliked but Aziz's latest is now making me think twice.

    A chap who worked for the World Bank on carbon pricing etc lives in the UK and had a powerful effect on persuading Australia to adopt its forward leaning stance towards the new green economy, and insofar as I trust you don't like the idea of people starving or non-stop war over resources, emerging technology for new means of (cheaper?) energy may quite seriously provide some, much needed, relief to a hard done by society...So, what do you think?

    ReplyDelete
    Replies
    1. I have lots to say on this subject and am planning a post soon. In general I would support anything that moves us away from oil and towards alternative technologies that could at some point in the future give us cheap effective and clean energy. I'm just not convinced we are supporting the right initiatives yet.

      Delete
  22. Very good post.

    ReplyDelete
  23. Thanks for this which was sent to me by Fullfact.org. I have now subscribed to your blog.

    ReplyDelete
  24. Great Britain has been burning the candle at both ends since the 2nd WW. When you look at Mick Jagger you will know what I mean, the UK has withered on the vine for sure.

    ReplyDelete
  25. Yep just wanted to add my appreciation for a wonderful, common-sense post, written in an engaging, breezy style. Have subscribed

    Douglas

    ReplyDelete
  26. Hello,

    Thanks for a very interesting article.

    Does your analysis assume that the UK economy will return to the 2 to 3% trend growth rate?

    ReplyDelete
    Replies
    1. Hi Postkey. Thanks for quoting me on the Telegraph!

      Yes, I think eventually it will. But it could take a long time. I don't agree with MoneyWeek about imminent collapse, but I do think we are in for a long period of stagnation or, more likely, stagflation. We have a severely damaged financial sector, and households and corporates still have far too much debt. And government attempts at fiscal consolidation are not helping matters. Not much organic growth is going to happen while that remains the case.

      The biggest risk to growth as I see it is actually energy. Energy costs are rising and will continue to do so. Energy saving measures are all very well, but as all growth depends on energy, attempts to minimise energy use are bound to slow the economy down. That's a secular trend that could keep growth below 2% for much longer - really until we can solve the energy cost problem. Roll on efficient solar, I say.

      Delete
    2. I do like the Rocky Mountain Institute viewpoints on energy - although very US centric, they seem to make a strong case for material improvements in energy utilisation that are within our grasp - and which make other renewable alternatives more able to contribute substantially given reduced consumption - increasing renewable relative contribution.

      Delete
  27. As everybody else, you ignore the impact of the current policies to the youth and to the tenants.

    Both have to live:
    -With low savings rates which do not allow them to gather the deposit
    -Ridiculous high house prices which they cannot afford
    -High inflation which does not allow them to save
    -High rents.

    So I loose sleep over these people, and not over home (bank)- owners who made the wrong decision to invest in the housing ponzi scheme.

    ReplyDelete
    Replies
    1. here, here, this is at the heart of this -the redistribution of wealth away from the young upcoming working and middle class to politicians and their banker buddies

      Delete
  28. Thanks for your post Frances - good work!

    ReplyDelete
  29. Whilst I agree with your comment that future obligations do not impact on current cash flow, I am a little surprised that you dismiss them so lightly.

    In no small part our increase in the standard of living over the last half century has been paid for my the massive increase in the level of these unaccounted for future obligations and the ability of the various Governments to treat contributions towards things like future pensions, care costs and health service costs as if they were income.

    It depends on what one includes in the entitlements of pensioners as to how the figures work out, but my back of an envelope calculations would put the size of the pot required to fund these, in the same way as companies are required to fund their pension obligations, at about £7.5 trillion. Add on the official national debt and the civil service pension obligations and you are getting close to £10 trillion.

    The big problem is that as the bulk of this is not accounted for, no interest provision is made and without this and taking account of inflation on the benefits, this number continues to rocket.

    If the Government was required to account for these obligations, in the same way as companies are, then we could well be in the area of debt to GDP that they tricked up in their report. Of course, so would most other developed nations.

    ReplyDelete
  30. If the Scots vote for independence in 2014, how will it affect the British economy?

    ReplyDelete
  31. Hello Frances,

    Looking through my 'cuttings' I came across this:

    I thought you may be interested?

    "jon livesey on Jan 3, 6:28 PM said:
    This article is meaningless. It adds together three entirely different things. Government debt is net debt. It is owed to someone, and the country is on the hook to pay it.
    Financial debt is gross. It is debt taken on the buy interest yielding assets. It is paid back out of the profits from owning those assets. A major financial centre will always have high *gross* debt, but its net debt will be close to zero.
    Commercial debt is taken on to buy businesses. It is paid back from the profits of running those businesses.
    For what it's worth, Luxembourg has 3445% of GDP in gross debt."
    http://www.debtdeflation.com/blogs/2011/12/31/debt-britannia/#ixzz1o9jUwsGI

    However, this comment is no longer there.


    ReplyDelete
  32. Err why don't you try adjusting increases in benefits versus the national wage after tax rather than to inflation

    then it will become obvious how much money the government has been giving away

    ReplyDelete
    Replies
    1. Why don't you look at the net cost of providing benefits?

      Eg. The bottom 10% of households have an average gross income of £9622 and pay an average of £4621 {48.03%} in direct and indirect taxes.

      http://www.ons.gov.uk/ons/rel/household-income/the-effects-of-taxes-and-benefits-on-household-income/historical-data/sum--historical-tables.html


      Table 14: income, tax and benefit data by income decile for all households (1.41 Mb Excel sheet)

      Delete
  33. Hi Frances,

    I've seen some of your work on the internet and appreciate your efforts. However, I see the moneyweek article as downplaying (and late) in explaining what will happen in the coming decade.

    Yes, adjusted for inflation, the charts look less scary. Yes, Moneyweek is trying to sell more subscriptions (and desperately, because the bottom is falling out from under Britain) That doesn't negate the fact that this is a big one which will take most people by surprise. Think 'Fall of Roman Empire' and multiply by 10. Your picking on Moneyweek for their errors is commendable, but don't let quantophrenia and normalcy bias prevent you from seeing the truth.

    Prepare accordingly.

    ReplyDelete
    Replies
    1. Blah Blah Blah

      Delete
    2. Blah Blah Blah BigWordIDontFullyUnderstandButIWillUseItAnyway Blah Blah Blah......

      Prepare Accordingly.

      That's waht I got out of that Post.

      Delete
  34. I understand that I am focusing on a very small part of your article and probably a part you consider the least important but I'm an ordinary person living in rented accommodation with two disabled adult relatives, both studying at university and hoping to find work by doing so. My husband is one of them and is in his 50s. The only thing that keeps me from feeling as if I am staring over a financial precipice is the fact that my mother and father worked hard and saved during their lives and my mum now in her 80s would be able to be a safety net for us if the worst came to the worst. I have to say my heart sank when I read your attitude to savers. Savers *are* ordinary people and a lot of them are old and vulnerable and doing their best to be a rock for their relatives. My mum worries herself sick about her adult children and goes without (even though we keep telling her not to) because she wants to feel she can leave us something to help us when she is gone. A lot of savers aren't fat cats to be thrown to the wolves - they are people, sometimes people who are less able to look after themselves than some other very poor people. I am petrified she will hear about this negative interest rates for savers - I have no idea how I will be able to deal with what I know will be an immediate panic response from her. I understand that you deal with the big picture and politics and global economic strategies etc but it does make me sad (however naive and pathetic that may make me) when real people with real human concerns are implicitly dismissed. Maybe I misunderstood you - I do that sometimes - I am that much my mother's daughter. If so I would be glad to be put right.

    ReplyDelete
    Replies
    1. The dilemma facing policy makers is that protecting savers comes at the price of making things worse for people like your husband. When your husband completes his studies, he will be looking for work, which in the current climate will be very hard to find. Cutting interest rates encourages people with money to take more risk, which helps investment to flow into business and generate jobs and incomes for people. I know that people like your mother probably don't want to take more risk (and perhaps shouldn't). But if you had to choose between your husband's future job and your mother's savings, which would you choose?

      Delete
  35. DavidK: Might throw this here http://pro.moneyweek.com/myk-eob/LMYKP302/ so anyone watching it has had fine pre-debunking.

    ReplyDelete
  36. Money Week 'The End of Britain' appears to be inspired by research by Dr Tim Morgan and his team. It is a convincing series of reports doubting the long term sustainability of the economy and the return to growth. It is compelling reading.

    http://www.tullettprebon.com/strategyinsights/index.aspx

    ReplyDelete
    Replies
    1. It's nowhere near as good as Tullett Prebon's research. I have concerns about Morgan's work too, because I suspect his conclusions are driven more by his ideological stance than a genuinely impartial view of the evidence. But he is a much tougher nut to crack than MoneyWeek.

      Delete
  37. Frances you are somewhat isolated in that your thoughts around the independence from any linking of currency offers the UK protectiuon from financial ruin.

    In fact your public net debt chart adjusted for inflation is somewhat worse than Moneyweek's. It actually shows a worse situation in the 1950's.

    The fact is there is not going to be a resolution to any of our growing debt problems until the welfare state, the NHS and immigration policies are radically change.

    To suggest anything else borders on delusion.

    ReplyDelete
  38. Have we not already had a major financial collapse?

    ReplyDelete
  39. Hi Frances. I will keep this as short as I can.

    I came to this site to read a more balanced view to the "End Of Britain." I am glad to read both your views & other contributors facts.

    The knowledge that it is presented by the marketing team really bothers me. Why? I am a marketer. I develop exactly the kind of "long sales copy", there is a classic IM formula working within the piece. The Link to the Landing page & redirect is all textbook stuff. It is really well constructed and executed. Its what I produce every day.

    So with that out the way it would be normal for me to dispute perhaps exaggerated or "morphed" facts to create an opinion. "All Marketers are liars"...Right? Your recalculated (with inflation) charts do in some way re-balance the charts from the E.O.B Site.

    Now the Caveat to my reply. Have you gone through carefully the reports from Prebon's research? Or from the Pimco article
    http://www.pimco.com/EN/Insights/Pages/Credit-Supernova.aspx

    Historic figures we have but the fact that both UK & US growth is reaching its peak, a billion more people will be added to our planet soon, peak oil is almost here (especially cost ratio extraction to ROI profits), major climate pollution is effecting us right now EG Arctic circle reduction directly effecting today's UK climate & gas supplies/cost, etc

    These issues are crossing borders of all our intel. I have tried my best to dispute the Moneyweek Vid & Sales pitch as you just read. Stripping down to the bone & not even covering
    the actual control debt system of Fiat, Shadow Banking (who really knows what are the true figures hidden in the secret balance sheets www.forbes.com/sites/lawrencehunter/2012/10/29/are-federal-reserve-regulated-banks-laundering-dirty-money/), the present currency wars and China's massive increase in Gold mines & acquisition.

    My personal conclusion is that there seems to be a small almost whisper type voice in the wilderness saying "Please...no more" among the few. I am sure there are many non bankers, just ordinary people reading this blog asking what are our alternatives. I have read about positivemoney recently and it seems there is movement & a discourse developing with those as concerned as I am.

    I would really like to hear your honest views on this & perhaps together we can suggest & act upon some new way of "living"

    ReplyDelete
    Replies
    1. I would be the last person on earth to suggest that we are not living through a time of permanent change, that we can simply return to a past "golden age". We certainly can't. I've read Dr. Tim Morgan's report at Tullett Prebon and I've read Pimco's analysis. I am not as negative: I think there are huge changes in progress that actually could make life very much better, not worse. But we cannot stay as we are. There has to be a fundamental change in the way we order society, the relationship between the public and private sectors, between income and work, between generations, between countries.

      I do not support Positive Money's campaign. I have read their work and had extensive discussions with them about their ideas, and although I can see what they are trying to achieve, I think they are going the wrong way about it. If you read back through my blogs you will see that I have written extensively about this.

      Delete
    2. "There has to be a fundamental change in the way we order society, the relationship between the public and private sectors, between income and work, between generations, between countries"

      Isn't there a difficulty in both denying the possibility of major crisis and arguing that we need all this change? Human societies and institutions are very clearly resistant to sudden change, since there are always powerful vested interests defending any status quo - and so it normally takes a crisis (or several) before the unavoidability of change is accepted.

      Or, to put the same point the other way around, what happens when all this change that you rightly say we need does not actually happen as fast as it needs to?

      Delete
  40. Hey Frances. Lets discuss more please? I want to read more about your ideas...

    "There has to be a fundamental change in the way we order society, the relationship between the public and private sectors, between income and work, between generations, between countries."

    Please point me to articles that shows me your mindset.

    I have a team of people at my disposal to "Morph" the net.

    ReplyDelete
    Replies
    1. Hi,

      Do feel free to read the rest of my output on this blogsite, where I address those questions.

      Delete
  41. Thank you for this post. I was actually shaking by the time I finished the Money Week letter. Now balance is restored. You have a new subscriber!

    ReplyDelete
  42. North Korea and the Money Week marketing team. Compare and compare.

    MMM continue with this trash. Only difference is that it is longer. Now my relatives are writing to me asking what is going on.

    The bottom line may be that Money Week was taken over by a US publisher in 2003.

    Frances' excellent rebuttal is doubly useful. You can read it and it supports the existence of the critique in Wiki.

    Graham Cox

    ReplyDelete
  43. Very useful read

    ReplyDelete
  44. I read all of the MW article. And I wasn't even tempted by their 3 issue free offer once!

    Whilst it is certainly true that if the Government carries on doing what its doing things will get worse, I don't think the country will collapse!

    Society to some degree maybe as things like crime increase as people turn to desperate measures to survive.

    I have emailed them asking if their article 'The end of Britain?' concerns the whole of the UK or just Britain, considering that Scotland is in effect a separate country.

    I await their response...

    ReplyDelete
    Replies
    1. Well, after contacting them on the 8th and asking the above I finally heard from them on the 12th.

      "Your comment has been passed onto the editorial department.'

      Since when has a question been a comment! It's now the 17th, still waiting...

      After all the money spent and time spent researching this chilling revelation, where you'd think they'd have the facts at hand for a simple question like that, they still can't answer!

      Perhaps they don't know...

      Delete
    2. Well they clearly don't know the difference between 'Britain' and 'UK' since I've not heard a thing from them. Based on that evidence alone, could anyone trust anything Moneyweek print? I certainly can't!

      Delete
  45. I stumbled upon Money Week's article rather than actively sought it out but like a good many people in Britain, I suppose, the title 'The End of Britain' grabbed my attention. It seemed to be addressing my fears in a very clear and direct way. It was of course immediately apparent that it was written as a marketing ploy; there was no trying to hide that fact as far as I can see but, despite that and despite the somewhat misleading statistics, I could not help but see a certain underlying truth in the article; we are living beyond our means both as individuals and as a nation. We all know, I think, intuitively that if we in our personal lives wish to live beyond our means then we must beg steal or borrow the extra we need. All very well until the day of reckoning when people get fed up with our begging, we get caught stealing or the lenders want their money back; then we are in trouble. The same principle operates at national level and the all clever financial algorithms or all the claims of a brighter technological future will not change a thing; bad housekeeping is bad housekeeping. Of course individuals are not necessarily to blame for the mess they get in, it is inherent in human nature to gather and store as much material wealth as possible with the minimum outlay of effort and it is the job of elected government to regulate this instinct and create a fair and equal society. The trouble is; governments are made up of individuals too and more often than not, very ambitious individuals who apply their human nature on a national scale. It is not in the interest of ambitious individuals in government to pass legislation that would make them unpopular and so very little is done to curb our individual bad housekeeping and in fact positively encourage it by allowing us to be brainwashed by manufacturers into believing that we need all manner of useless products and then enticed by financial institutions to take out loans to pay for them. This general proliferation of the selfish individual is what creates the problems in our society. The welfare state is a more welcome manifestation of a fair and equal society and no reasonable person would wish to see an end to the safeguard that that offers us in times of misfortune. But, once again human nature enters the equation and because of bad housekeeping it becomes increasingly expensive to operate the welfare system as the ratio of contributors to recipients changes unfavourably; as it must in a society with increasing population, low productivity and increasing life expectancy. Many hard-working people might well bemoan the fact that in this fair societies assessment of the financial and housing needs of a family on benefits often outstrips their own meager home and income. But, there is, so we are told, a solution to all this; economic growth! How tired I am of hearing that term. Doesn't solves anything at all! Economic growth is the panacea of an incompetent government. As independent scientist James Lovelock said,'what we need is not sustainable growth but a sustainable retreat'. Just as the growth biological growth we call cancer eventually kills the afflicted body, economic growth eventually kills a society. I am 61 years old today and I can remember times when life was so much better and, rather perversely, many of those times are now used as a reference to illustrate how much better off we all are today. Yes, we may have more material wealth; things, but I for one would argue that our quality of life has suffered badly for that. In my opinion it is better by far to go to sleep poor knowing that you will wake up poor than have all the material wealth in the world and, if can can sleep at all, wake up not knowing if today you will lose it all.

    There is no need to fear the coming of the end of Britain it is already here.

    ReplyDelete
  46. I am neither an expert of spelling or financial matters but I an fairly sure that copy that contains mis-spelling should not be taken that seriously

    something that we believe will 'distabilise' the very foundations of Britain

    ReplyDelete
    Replies
    1. Maybe they want to 'distil' Britain?!

      Delete
  47. Hi frances
    I read your blog with enthusiasm as it was debunking an article which has had me perturbed since I read it..
    I notice you said in the articles above that Britain has its own central bank and issues its own currency, thus it could never run out of money? ( Weimar republic guarantees to its people?)
    I think it would be pertinent of you to explain that the Central bank is a private company and Issues ALL money as debt to each borrowing government.

    Would not a dual system of monetary exchange be a better model for long term sustainability?

    Centrally administered currency for investment at interest?

    and then a form 'Greenback' currency such as the 'Bradbury pound' issued by government for the running of the country and exchange of good and services, created debt free?

    why should any government pay interest on fiat currency for the day to day tasks of running a country?
    If they pay for a pothole to be filled, the current system carries interest for the money lenders?

    Each and every government fiscal transaction, carries the weight of interest..yet it is backed by the people, for the people.

    the spiralling national debts around the world are out of control and thus constantly create boom and bust cycles to the detriment of all but the money lenders

    This way we would have a balance, we could counter the national debt with alternative currency which will not create hyper inflation on the pound sterling.

    This would surely create a fiscal system of slow growth and sustainability, allowing trade to prosper and create enough revenue for the country to regain control of its future


    kind regards
    9

    ReplyDelete
    Replies
    1. It would be pertinent to say that if it were true. But it is not.

      The Bank of England was nationalised in 1946. It is wholly owned by Her Majesty's government. And it does not issue money as debt. It is charged by Her Majesty's Government with the responsibility for issuing bank notes and for providing liquidity to the banking system, in addition to its responsibility for monetary policy. Money issued by the central bank is not debt in any normal sense of the word - technically it is more like equity.

      Nor does the central bank lend to the government. Her Majesty's Government issues debt in the form of bonds and bills which are bought by investors in the private sector. The central bank is not allowed to participate in a primary auction of these bonds and bills, though it may buy them on the secondary market as part of its conduct of monetary policy.

      Nearly all money in circulation in the economy is created by commercial banks as a consequence of bank lending, not by the central bank.

      Delete
    2. Thanks for your reply Francis.

      I do concede that the bank was nationalised, but this was and is not the full story..

      here is an excerpt from a blog, of which there are many online

      The Bank Of England was originally a private bank, which contracted to lend money to the British Government in a financial crisis. It was privately owned at its foundation and remained so until the post-war Labour government nationalised it in 1946.

      So it is owned by the government?

      No.

      Here is how Wikipedia explains it.


      In 1977, the Bank set up a wholly owned subsidiary called Bank of England Nominees Limited, (BOEN), a private limited company, with 2 of its 100 £1 shares issued. According to its Memorandum & Articles of Association, its objectives are:- “To act as Nominee or agent or attorney either solely or jointly with others, for any person or persons, partnership, company, corporation, government, state, organisation, sovereign, province, authority, or public body, or any group or association of them….”

      Bank of England Nominees Limited was granted an exemption by Edmund Dell, Secretary of State for Trade, from the disclosure requirements under Section 27(9) of the Companies Act 1976 , because, “it was considered undesirable that the disclosure requirements should apply to certain categories of shareholders.” The Bank of England is also protected by its Royal Charter status, and the Official Secrets Act.

      In other words, you and I are not allowed to know who the shareholders are who own the company which carries out Central Banking in the UK. Some people say that Mandelson's buddies, the Rothschilds are major shareholders. Also the Queen. But the information is secret. We are not allowed to know.

      But what would surprise everybody is that the Bank Of England, which is entitled to issue cash, then lend it and charge interest to the government, is still essentially a private business.

      What would also surprise people is so is the Federal Reserve of America a privately owned bank, and all central banks of the world, including the Bank for International Settlements (BIS) in Switzerland, which is the Central Banks' clearing house.


      You see debt is controlled by persons other than the government of most nations.

      Actual printing of debt free currency needs to take place along side debt currency to create a balance
      The system we have is only debt currency this creates compound interest..to the tune of £47 Billion this year alone

      With all these harsh cuts and privatisation due to lack of 'funds', its clear for all to see that that the current system is flawed and does NOT serve humanity, nor the environment, but only the money creators/lenders.

      our national debt is approx £1.2 trillion..
      and rising..at the current rate it will take around 400 years to pay it off, IF we accrued no more debt..which is highly unlikely.

      The introduction of a greenback currency for each Government to run its country is essential imho, and the continued creation of debt created currency for private investment purposes.

      If you total up the world debts to countries around the world and make a chart, you will see the increase over the years is growing debt..bad news for the people and the planet good news for the money creators and lenders!

      regards 9

      Delete
    3. Oh dear. A subsidiary of a company cannot in any sense be regarded as "owning" it. On the contrary - it is OWNED BY the company. In this case, the Bank of England is wholly owned by HMT. It has a nominee subsidiary, wholly owned by itself (and therefore also wholly owned by HMT) which is partially exempt from FOI requests because among other things it manages the Queen's investments. You CANNOT deduce from that that the Bank of England is in private ownership or that the central banking activities it carries out are controlled by the nominee shareholders of BOEN.

      The Feds are indeed in private ownership. However, even there the situation is not quite that simple: they are in the same relationship to the US Government as Fannie Mae and Freddie Mac - in effect, they are agents of government, licensed to carry out activities mandated by government. They are not free to do whatever they please, as you seem to think.

      All other major central banks are owned by their governments, not by the private sector as you suggest.

      BIS was founded by the Rothschilds but is now owned by its member central banks, not by private individuals. It is therefore a supranational quasi-government institution.

      I really think your private sector conspiracy theory has no legs.

      Delete
    4. I'm a stickler for meanings - especially legal definitions: Who exactly is: "Her Majesty's government" and do they work for the citizens of a country or for "Her Majesty"? Maybe the answer's in the question!

      Delete
  48. I have a load of debt. I tried borrowing my way out of it but that didn't seem to work so I was greatly relieved to read that what I thought was a burden is in fact a salable commodity. Anyone want to buy it? A snip at £1.00!

    ReplyDelete
  49. Why doesn't the Bank of England just print enough currency to make us all rich? We wouldn't have to worry then. And, a bonus for the government, they would get a big tax windfall.

    ReplyDelete
    Replies
    1. Because the agenda is not about giving money to the poor or middle class, all assets and wealth are being pulled in mostly from the middle class. I fear this is just the start of a miserable future of events, to achieve nothing less than global domination for the elites. They want total control of the financial system, any other country who tries to create a new currency is instantly wiped out in order to maintain their position. Islamic banking systems are also a threat, because they don't have any interest, which is probably why such countries are currently surrounded by western allied bases.

      Delete
  50. Thanks for your analysis of this scary report on MoneyWeek. I am not especially familiar with their tone, and this was one of the first articles I read on their website. It is alarmingly similar to "The End of America" (see discussion here http://www.peakprosperity.com/forum/end-america-porter-stansberry-research/52205), and has left me with the feeling that I cannot trust anything on MoneyWeek.

    ReplyDelete
  51. I used to subscribe to MoneyWeek. They comment on that many things that they can't possibly lose. Make 1001 predictions then pick out the winners. They're also obsessed with gold. I stopped subscribing 3 months ago so don't know if they predicted the recent fall in the gold price. Though I suspect they probably predicted it would continue to rise in one edition, and crash in another. So they were right again!

    ReplyDelete
  52. Just found your blog by searching for the 'end of Britain'. A great read, thanks!

    ReplyDelete
  53. Adrian - I did it!!

    ReplyDelete
  54. Found my way here after clicking on a video link in today's Independent, which stated the video was banned, a sure attention grabber. It led to http://pro.moneyweek.com/myk-eob/LMYKP529/ - painfully slow, and no fast forward, so googled the printed article, and this rebuttal. Incidentally, the B&W photos of people illustrating the growth of the British welfare state are mainly American, so MW marketing people haven't done their homework.

    ReplyDelete
  55. There may be some errors in their research, but Moneyweek are right. This WILL happen. History shows us that NO NATION with our level if debt EVER recovers.
    I fear that many people have become so cocooned and comfortable in our 21st century consumerist and decadent lifestyle that they have to give themselves grandiose tiles such as "Master Debunker" to mask their fear. Make no mistake - this WILL happen. After Greece, the nations of the EU will fall into financial ruin one by one, leading to this international behemoth's inevitable collapse. Then, just like the 1930s, the time will be right for the control of Europe by another super-dictator, another Hitler. WAKE UP PEOPLE, PLEASE!!

    ReplyDelete
  56. Whilst I agree that the MoneyWeek article is deplorable scaremongering, I think you may have gone to the other extreme with your chart of Public net debt as a percentage of GDP starting at 1900. Including the aftermath of the war years is very misleading - we haven't had a comparable experience in the recent past.

    Choosing a more sensible date like 1980 to start from does show a rather steep increase in the past few years, although I suppose the bank rescues need taking out of the figures (assuming we will get back what we put in of course).

    ReplyDelete
    Replies
    1. I chose the same start date as MoneyWeek, obviously.

      I fail to see why the fact that there is a steep increase in the last few years is more important than the evidence that Britain's debt/GDP was considerably higher for much of the last century. The reasons why it was higher are frankly irrelevant: what is far more important is the fact that we have evidently grown ourselves out of debt before. Please explain why we can't do so again?

      Debt/GDP figures don't include the costs of bank rescues. Ownership of nationalised banks is not included because there are balancing assets. Nor are contingent guarantees given to banks in the crisis, because - well - they are contingent.

      Delete
    2. You believe that the UK can grow its way out again, but are we not facing many better prepared competitors internationally? It may not be so easy this time....

      Delete
    3. Frances, you make it clear at various points in your blog that you are concerned with constantly rising energy costs, yet you do not seem to make any allowance for it in your analysis. Surely the reason why we will have extreme difficulty in growing ourselves out of debt is the rising cost of energy. Economic growth invariably depends on increased energy use. You may or may not believe in peak oil theory, but it is clear that oil prices will never again be as low as they were in the years after WW2 and that they will continue to rise as the remaining oil becomes progressively more difficult to extract. That is the reason why it will be difficult or, more likely, impossible to replicate the growth of the post-war years. It is conceivable that there will be a breakthrough in renewables, or even in nuclear fusion, but to rely on that would be to take a big gamble.

      Delete
    4. I am indeed concerned that we are entering an era of expensive energy. But I don't think it will be a very long era. Most of the failure to progress in energy sources such as solar has been because the big oil companies have actively blocked research and development in these fields in order to protect their core market. That is beginning to change and we are already seeing the price of solar energy dropping hugely. I use that as an example, but the same is true in other replacement energy areas too - not wind, which is an expensive white elephant in my view, but definitely nuclear.

      Delete
  57. Brilliant article. As I was watching the MoneyWeek film I couldn't help shake the feeling that there were suspicious intentions afoot. There was just far too much repetition and anecdotal 'evidence' for me to trust it. By the time it got to the point where it stresses for about five minutes that their writers are so incredibly credible, I was sure I was being targeted as a customer. Or course up popped a link with subscription payments and I realised I'd just lost far too much of my life for me to stay on the article any longer. Luckily I stumbled onto your blog in my hastened escape and thoroughly enjoyed reading this article, so I feel that my time was not wasted after all! Thanks!

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  58. Sorry Francis but you come across as a government or banking shill,the country gets poorer and poorer every year,also the UK does not pay its way we borrow,we dont earn enough to survive without it.Must say your attitude towards savers stinks. The country is heading for third world status.

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    1. I do not accept comments that make personal attacks on me or on others. Saying I come across as a "government or banking shill" is frankly offensive. Also, you may think this petty, but mis-spelling my name demonstrates a lack of courtesy towards me as the host of this site. I will not accept any further comments from you that break my rules. Be polite and courteous, or be banned.

      I don't know why you bothered to read this post, since you've obviously been convinced by Moneyweek. However, regarding my attitude towards savers: you may not appreciate that savers are only able to save because others - including government - borrow. That's the way our financial system works. So for us - collectively - to reduce our debt levels in the near-absence of economic growth, it is necessary for savers to relinquish some of their wealth. Therefore I personally think the efforts of those who have wealth to hold on to it, while at the same time criticising government and other people for borrowing too much, are despicable.

      Delete
  59. Frances - I am recently retired and apprehensive of anything that jepordises all I've worked 40+ years to achieve. My thanks to you and your other correspondents for applying some balance to the MoneyWeek article - which, quite frankly, scared me. I guess my mantra must be 'balance' - if we could only maintain balance in all things the world would be a far better place. Thanks, Rik.

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  60. Hi Frances,After a recent inheritance where do I invest the money.

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    1. Sorry, I don't give investment advice.

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  61. Frances, thanks for helping clarify this moneyweek article. But if they are so wide of the mark, why do no other commentators make similar debunking analysis or am I just not looking in the right place?

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    1. I honestly don't know. I haven't seen any other debunkings though. Perhaps no-one else can be bothered.

      Delete
  62. Frances, thank you for your analysis of MoneyWeek's marketing exercise 'The End of Britain'. Watching their video I tried to imagine who might be behind it. I am no financial expert (I am a nurse) so I researched their 'expert' contributors backgrounds. They all appeared reasonable individual's - some of whom I have seen or heard on the media. It surprises me that any of them would want to be associated with this sort of rubbish. I watched the whole thing but the residual impression I was left with was that this was aimed at and provided for wealthy people who wanted to ensure that they hung on to every last penny of their wealth. Time and again they referred to the burden of the Welfare State - implying, I can only assume, that it would be best to get rid of this altogether as they don't see it's costs as containable. Pull up the drawbridge, head down to the counting house and bugger the peasants? But aren't 'predicting instruments' like MoneyWeek actually the cause of what they are describing will happen? I may be wrong, but didn't they advise to invest in commodities - thus artificially inflating the prices of both food for everyone and the rare materials needed by productive industry? Best wishes and more power to your elbow, Roger.

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    1. Hi Roger,

      MoneyWeek's contributors are indeed widely respected. But MoneyWeek's marketing department has cobbled together bits and pieces from those respected contributors to create a tawdry piece of scaremongering that is entirely aimed at selling their magazine. I feel sorry for their contributors and I hope many of them have complained about their input being abused in this way.

      Delete
  63. The Rothschilds have not relinquished all that power and control they have attained over the centuries. They are still the driving force behind the BOE, Federal Reserve and other central banks.

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  64. I watched the film with a mixture of awe and horror. I am a financial dunce, but even I spotted the failure to take into account inflation. I also noticed that they were very gung ho about equating GDP and the phrase 'the whole of the economy', when (and I hope I'm right here) the GDP figure is generated annually.

    I work in marketing and this piece is a classic example of 'long copy' marketing. Very similar to the emails you may have received that explain how someone earns £300,000 a year for just 6 hrs work a week - and how you could too!

    The tone is set as serious yet concerned - but it is also iconoclastic. The idea here is to set up a persona who has access to secret knowledge ('a foolproof method to win money on horse-racing' etc) and then offer to share it with you.

    The length of the film (you can't skip through it and it checks you if you attempt to close it down) is, counter-intuitively a well-proven way of increasing response. It's almost as though the weight of information makes the proposition more believable. Points are repeated regularly after each section. Towards the end, once you are 'hooked' there are multiple reminders to subscribe.

    I think what I disliked most about it, apart from the shocking financial illiteracy that you exposed Frances, was the smell of propaganda about the film. Although the poor, indebted and disenfranchised would be the ones who suffered most if any of these apocalyptic predictions came true, this film is aimed squarely at the wealthy. It stops just short of saying that the welfare state has allowed the poor to breed and prevented them from dying young. Advances in the welfare state are linked closely with images of rioting, strikes and 'piles of stinking rubbish piled up in Leicester Square'.

    What's upsetting is how widespread this view of our current situation has become - that it is somehow the poor who have caused the problems, and that we have been too generous to the old, the unemployed and the disabled, rather than too relaxed about the behaviour of those who have become spectacularly wealthy as a result of the crisis and our long period of austerity.

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  65. You can get 4 free issues of Moneyweek magazine here http://info.moneyweek.com/4-free-issues

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    1. I see moneyweek are commenting here now. Thats low!

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  66. Or you could read this:
    http://anotherangryvoice.blogspot.co.uk/2013/01/moneyweek-and-their-end-of-britain.html

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  67. I must admit, this frightened me, and I am thankful for your post putting matters straight. My question is who banned this video?

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    1. No one did!
      Its just Moneyweeks way of making it sound good.

      Delete
  68. I think the daft thing about the end of britain report is that if you read the money week mag. now it is trying to sell you all sorts of deels.It does not come out and say we can not recommend anything other than the end of britain report.If Britain closes how do you get your money.We should be getting a gun to shoot the pigions and starting a veg patch
    I remember reading money mail some years ago and the editor suggested that share price could not go up any further and there was a big correction and I think that the share price was about 6500.Does the share price rise above this or are we now round about the top end of the market.I think it is right we are in a mess and whoever is in power will just tickle around the edges.In Flint north wales there is only 15% employment,who is going to sort that out.

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  69. Although the poor, indebted and disenfranchised would be the ones who suffered most if any of these apocalyptic predictions came true, this film is aimed squarely at the wealthy. It stops just short of saying that the welfare state has allowed the poor to breed and prevented them from dying young. Advances in the welfare state are linked closely with images of rioting, strikes and 'piles of stinking rubbish piled up in Leicester Square'.

    I think these comments hit the nail right on the head... and how strange that this manipulation of public perception aligns so closely with the government's current propaganda campaign to release itself of commitment to the most vulnerable in society and gain support for plans to unhitch its welfare, health and social care reponsibilities.

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  70. The current system is unsustainable though, the question is not if it will collapse, but when. Printing more money with a fiat currency is not going to save it either.

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  71. I am concerned about your comment that you don't lose sleep over savers losing their savings. I think that is a little hard on those who, like my wife and I, have worked hard all our lives and acted prudently to save for our retirement, just to see our investment income cut over the past four years by 78% and our overall income (including state pensions, occupational pensions and modest annuities) cut by 56%, as a result of the low interest rate. Savers have a bad name: they are equated with hoarders and are regarded as irrelevant to the economy, yet savers outnumber borrowers by at least 5 to 1 (and more likely 7 or 8 to 1) and constitute a major section of the spenders in a domestic economy, and we are told that economic recovery will be led by a surge in domestic consumption. Moreover, the income tax we pay has fallen in proportion to the cut in our income, and the VAT we pay has fallen as a result of our spending cut-backs, so the Treasury is losing out, too. Now that the UK government has made cheap money available to the banks, not only do the banks not want savers' money, but the borrowers are encouraged to borrow even more at low interest rates, adding to the already dangerous level of personal debt. Savers are told by the press to stop "whingeing", and to spare a thought for the poor borrowers who would be devastated by even a small increase in interest rate -- but who got us into this mess in the first place? So please don't dismiss savers quite so cavalierly.

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    1. I'm sympathetic, but I don't lose sleep.

      Your incomes are not being cut to absolute poverty level, unlike the unemployed and many working people on very low incomes. You are not having your hopes and dreams devastated, unlike the young people who can't find jobs (21% of young people in the UK are unemployed). You are not facing the loss of your home, unlike working people whose real incomes have fallen so much they are struggling to meet mortgage payments - mortgages they entered into when their incomes were easily high enough to afford them. You are not facing homelessness, unlike young people whose incomes are not high enough to afford rent and who are denied housing benefit.

      None of these people caused the mess either - not even the borrowers you blame. Most borrowers did not over-extend themselves prior to the crisis: the problem is destruction of real incomes since then.

      This is what I lose sleep over.

      Delete
  72. And is the reduction in my income (what public or private sector worker would countenance a more than 50% reduction in their income?), and the consequent reduction in the contribution I make to the Exchequer in income tax and VAT, going to solve or even alleviate any of the problems you mention? In Iceland the interest rate was raised following their financial crash, and their economic recovery is outstripping that of any country in Europe. In Japan, interest rates have been near zero for two decades, and they are still in the doldrums. Maybe there's a lesson there somewhere.

    And not all borrowers were victims. Many were just irresponsible -- I know of many who took out mortgages four or five times greater than their annual income, even in the face of advice not to do so. And many continue to be irresponsible: I have relatives who are using their increased income (because of reduced mortgage interest rates) to take holidays that I can't now afford.

    I do find your attitude towards those who embraced financial prudency exceptionally aggressive. I'm not a bloated plutocrat: my total invested capital is far less than an annual bonus for a minor banker. I have children whom I was once able to help out with their financial difficulties: I can't do that now. And please do not assume that just because I made a lifestyle decision not to go into debt, to save for my retirement, and not be a financial burden on others, I am unsympathetic to those who are economically disadvantaged through no fault of their own; I am, however, unsympathetic to those who do not take advantage of the current low interest rates to pay off their mortgages and other debts.

    You say that the problem is destruction of real incomes since the financial crisis. Whilst it is true that incomes have risen less rapidly than inflation, they have not been destroyed; and unemployment has fallen, not risen, since the credit crisis. The problem was the crisis, not what happened afterwards, and the crisis was caused by debt, not by saving.

    Why are savers (i.e., spenders and tax payers) demonised in this way? We didn't cause the crisis. We worked hard for our capital and we paid tax while we did so. And now we're told we must suffer for it. Well, I'm sorry I bothered to behave responsibly. I'm certainly going to advise my grandchildren not to save: spend and go into debt, that's the thing to do -- the savers will bail you out.


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    1. I would remind you that the majority of pensioners are living on the basic state pension plus benefits, which have been protected from cuts. If your income has fallen that much as a consequence of low interest rates then you must be by any standards very well-off. How are your asset values doing?

      Real incomes have fallen by over 10% since the crisis - and the people worst hit are not the well-off like you, but working people on low incomes. Many people's real incomes have fallen by much more due to unemployment, under-employment and benefit cuts.

      Your statement that unemployment has fallen since the credit crisis is untrue. Unemployment is currently 7.8%. In mid-2007 it was 5.5% - and that was higher than it had been in all previous years since 2000. See chart here:

      http://bit.ly/16vTOm8

      Unemployment has fallen since 2011, but it remains well above where it was for most of the previous decade. It has not been as high as this since the early 1990s.

      If you really want to help your children out in their financial difficulties, you would do better to promote policies that improve job prospects and raise real incomes. Higher interest rates may enable you to help them, but it won't solve their problems.

      Delete
  73. OK, I got the employment figure wrong. Mea culpa. But please let me disabuse you of the notion that I'm well off. Your reasoning is faulty: a 50% cut in investment income can happen with an investment capital of a thousand pounds or one of five hundred thousand pounds (and I'm nowhere near that).

    I'd love to promote policies that improve job prospects, and any policy that encourages me to spend (as opposed to reducing my spending) with local enterprises and shops is one that would do a lot for jobs in this area.

    Anyway, we're getting nowhere with this, are we? You seem determined to see no merit in saving, and I can't see any in encouraging people to get into debt. So, I'll say goodbye and won't come back.

    Your debunking of the MoneyWeek scare was good, though.

    'Bye.

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    1. My reasoning is not faulty. I am assuming that you are in receipt of the state pension, which is not subject to cuts. Therefore if your TOTAL income has fallen by 56% as you say, you must be well off. And you haven't answered my question. How are your asset values doing?

      I think you are being pretty unfair. I have never said there is no merit in saving, and I do not encourage people to get into debt. But I do not think that savers should be protected from the consequences of bad investment decisions, nor from the effects of economic downturns.

      If policies that encourage you to spend more force others to spend less, there will be no net economic effect. Higher interest rates would benefit you at the expense of people whose jobs disappear or whose wages are cut when finance costs rise for businesses, and people who are forced to cut spending to maintain their mortgage payments or pay the higher rents demanded by landlords. Even if you spent every penny you gained from higher interest rates, it would not offset the contractionary effect of raising finance costs for businesses and households.

      Delete
  74. The Moneyweek ad appeared in one of my many inboxes and out of curiosity I read it. As I read on, it became increasingly clear that it was a rather over-the-top bit of scare-mongering, although I was not able to debunk many of the claims made. However, I quickly "googled" the ad looking for someone who could and found your piece. So I thank you so much Frances for your excellent analyses and your clear grasp of key facts - I learned a great deal from your article.
    Two points:
    -We all need to develop our critical thinking faculties and learn how to spot fallacies in arguments, especially in this age of too much information! Even if we don't have the specific knowledge needed to debunk particular arguments, we should at least have the skills to investigate!
    -Certainly marketing departments seek to build business - but those with any experience and skill know that long term business success is not built simply sales and sales to new customers in particular. Success comes from meeting customer needs time and time again and this requires a whole range of other marketing related tasks and skills. Also, you will find a lot of research to support the idea that using scare tactics in advertising does not work! And those few that respond to such tactics (ie: buy the subscription) are much more likely to end their relationship with the firm early - thus not leading to any long term profitable relationship for the organisation.These "buyers" are not a firm's "ideal customer type" or even likely part of the firm's core target market. They have responded on impulse and soon after purchase, cognitive dissonance (and sense!) will kick in. The most common response to having purchased something due to having been emotionally abused is anger, disrespect for the absuser, and a bit of shame at having been so duped. There relationship with the company is over forever.
    No marketer worth their salt would use such a strategy! Shame on Moneyweek....while I had a vague idea that they were a decent source of information on investments, I am now very relucant to ever look at their publication. And guess what, I could possibly have been an "ideal customer".
    Thanks again Frances. I will continue to read your blog!
    Lynn

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  75. Frances,

    Reading your very competent analysis and the comments made by so many of your readers, I get a sense of a bit of a mutual feel good society.

    Your analysis is hard to dispute, although I have to admit I have an uneasy feeling about your graphs that adjust first for nominal increases (no argument there) and then once more for growth in real GDP. I can't quite articulate this unease, but it has something to do with some of the following random observations:
    * I have seen the value of my house triple in 14 years while my nominal income has pretty much stayed the same.
    * In business, I see more and more service companies in the UK that appear to be making money without adding any discernible value.
    * People pay less for a whole chicken in a supermarket than they do for an e-book.
    * Electronic devices costing a few dollars to make in China can retail for several hundred dollars around the world.
    * My son will come out of university with £45,000 of debt that will keep growing until repaid at LIBOR +2%, while I came out with none at all.

    I agree that the Moneyweek article is fundamentally a marketing piece, but let's be wary about throwing the baby out with the bath water.

    British society, if measured using the Gini coefficient, is far more unequal than it was over thirty years ago. In real terms, even by your analysis, we are more indebted than we were following the Second World War. Our government's ability to continually spend £120 billion a year more that in raises in taxes, even when adjusted for inflation and annual rises in GDP (recently falling!) is also unprecendented. The only saving grace is that there is a lot of money sloshing around in the world and it has to go somewhere. The fact that foreigners, be they sovereign wealth funds, companies or individuals, see UK bonds earning low levels of interest as a safe place put their money helps keep our interest rates down. But what will happen if the interest rates so many people pay on their mortgages were to double or triple? Is a rise in LIBOR to 3 or 4 percent within the next five years really that hard to imagine?

    Graham

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    1. Hi Graham,

      I don't wish to suggest that there aren't serious problems with the UK economy. I simply disagree with MoneyWeek about what those problems are, and what is likely to happen. I don't think there is going to be a hyperinflationary collapse. I think a slow decline is much more likely unless there is a radical change in Government policy and, perhaps more importantly, in the attitude of those who "have" towards those who "have not".

      I completely agree that there is a problem with housing - indeed I said so in the post. On the one hand we desperately need house prices to fall to something more affordable for average earners. On the other hand, allowing them to fall would mean an awful lot of people in negative equity and an awful lot of bankrupt banks. I don't think there is going to be a house price collapse, as MoneyWeek suggests: apart from anything else, no government would ever pursue policies that would cause such a thing. The Bank of England might - it has precipitated housing market collapses before - but I don't think it is very likely to do so. There simply aren't the domestic price inflationary pressures that would justify an interest rate rise steep enough to cause a housing market crash. Regulated prices are increasing more than they should, but that is because regulators are failing to to, er, regulate - it does not justify interest rate rises.

      I do however think you confuse sovereign debt and private debt. I am personally much more worried about the levels of private debt than I am about sovereign debt. The story of the last 50 years has been the gradual transfer of debt from the public sector to the private sector, principally (though not exclusively) via the growth of home ownership and huge decline in public housing. We are now seeing downwards pressure on wages, which makes our over-priced housing even less affordable to people on average incomes. The median wage is dropping at the same time as the mean is rising, indicating that wage disparity between the top and bottom of the wage distribution is increasing - this is consistent with the Gini coefficient suggesting that inequality is increasing. In the long run this is not sustainable: there has to be either a serious increase in median wages or an equally serious fall in house prices to regain equilibrium.

      However, we are still a rich country. What we have is problems with equitable distribution of money and resources. So I have a real problem with well-off people screaming because Government or central bank is implementing policies designed to get them to use their wealth productively to regenerate the economy and benefit others. That's why I wrote this post.

      Delete
    2. Hi Frances,

      Thank you for your well thought out response. I hope you are correct. I did live in Japan through the bursting of the bubble in the early 1990s where domestic prices had remained quite stable but there had been enormous asset inflation in the markets for shares, housing and high-priced luxury items. When these markets crashed they did so rather quickly and Japan's stock market today is still only one-third of the level it was over 20 years ago. I'm not suggesting that the UK situation today is identical, but there are similarities...

      I do agree in principle with the problem you identify of well-off people screaming at government policies to use capital more effectively. However, running a small business myself, I also have some sympathy for the banks' resistance to lending, if you see that as part of the problem. Clearly if there is unfilled demand for a company's products or services that is being throttled by a lack of capital, the banks would be remiss not to lend. My suspicion though is that many companies are hoping the banks will lend them money to stave off cash flow problems without being able to produce a convincing plan for business recovery or expansion in this downbeat economic climate. If so, the risk of throwing good money after bad is high.

      On the subject of inequity, I see the disparity between pay and pensions in the public and private sectors as a problem that will plague us for years to come. Having recently learned some details of the remuneration package and final salary pension of underground train drivers in London, I think I may have made the wrong career choice!

      Delete
    3. Ref the comment "...the remuneration package & final salary pension of underground train drivers in London, I think I may have made the wrong career choice"..note that they have something a lot of other industry's don't..i.e a strong and determined union who stand up for their membership, perhaps OTT sometimes but it tells you something..so cheers to Thatcher for smashing those who did try and get an equitable deal for working people, now they are impotent the results of current and growing earnings disparity is a legacy to her and the current people of like mind who currently govern.

      Delete
  76. I just watched that film, and was pretty sure it would be marketing scaremongering, but without being a financial person wasn't quite sure where the veil separating fact from fiction lay. Thanks for tearing it apart and presenting the more objective picture.

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  77. Thank you very much Frances for your excellent debunking! I just watched the film which played on to many of my own views and concerns regarding Britain its trends and relative position and wealth. It was a clever piece designed to exploit the fears and insecurities of those who us who are informed but not experts. I will NOT be taking out a subscription. I shall be following your blog!
    One observation: There is not one economy in the UK there are two. One is London and the southeast and the other is the rest of the nation. Generalizations, statistics, ratios, etc. don't make too much sense unless you treat them separately. For example the housing market; arguably there are many housing markets and they will all behave differently. Until a government comes along that seriously addresses this issue nothing will change. Do you recall Eddie George's comment to the people of the Northeast that the pain of higher interest rates was a price worth paying to cool the overheated economy of London? Nothing has changed!
    One question: I accept your debunking but the where do those of us struggling with the hype, statistics and damned lies find the safe home for our investments?

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  78. Thank you for this well informed and balanced debunking of the money week marketing Garbage.

    My wife is Malaysian and we were just about to withdraw our savings sell up the property and off to Malaysia, HA HA, when I read your article.

    Maybe the FCA should take on Money Week as its risk managers as they would be good for client outcomes. Large volumes of suitcases that fit under beds with wallets required.
    Thank You again

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    1. I would still sell your property now, there's been no better time for years and it will lose lots in the not too distant future. You cannot have read this article too well because the one concession made to MW was agreement that UK property is due a correction, having never been allowed to naturally do so in 2007. The market will turn in due course.

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  79. Hi Frances. Found this interesting, however, I have to say I sit in the Armaggedon camp when it comes to the impossibly-indebted first world economies. Surely the currency wars and "fighting words" distraction politics we're witnessing show how desparate the situation is becoming?

    I wanted to ask, what are your thoughts on the views of asset managers such as Kyle Bass? His big bets are essentially, an implosion of Japanese debt sooner or later, causing a domino effect in Europe and the US tipping the world into depression, coupled with a major rise in precious metals.

    Thanks

    Chris

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  80. Thanks Frances
    I have been looking for a rejoinder to what was obviously overhyped scare tactics which caused me to cancel MW. I am pessimistic for the UK in the failure to really concentrate on rebalancing the economy and above all helping us rebuild our traditional strengths in engineering and the like in a modern form, as for example South Korea has done so spectacularly. Even while our universities are actually at the forefront of driving the R&D of this process. Is this the failure of banks to lend for long term or a failure of government help. No Tories ever want to remember the need Rolls Royce engines had for such help at one sticky point in their illustrious progress.

    I am also very disappointed that the property market is being helped instead of the banks being forced to lend to business... and I speak as one set to profit from that misguided policy! LOL Policy is still skewed in wrong direction.

    Interested to see that one of the bad policy periods in the past during the early 70's you mention viz. inflation (I was abroad thank goodness for most of it) was the Antony Barber Tory chancellorship. Another seems to be in the making...

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  81. Whether or not MoneyWeek were trying to gain subscriptions by frightening people, people should be frightened. This whole idea of government debt is not thought through and is unsound. At the moment UK government debt is huge, already too dangerous, yet it is being added to year by year with no attempt to balance the budget let alone pay any of the outstanding debt back. It is foolish to regard the UK as trusted, respected and worthy of low interest rates and long loan terms for its debt - it's only respected until it isn't and investors panic. It's only lent to at low rates until it isn't. It's only stable until it crashes.
    UK debt is piling up so alarmingly year on year in the last 5 years that sane investors would no longer lend to it. Those who actually understand financial markets know that markets behave insanely for periods of time and then violently correct themselves in a crash. Those who understand politics know that the UK political system is unable to balance the budget, yet this is urgently required.
    Everybody here is unaware of the nature of financial crashes. They come suddenly, and afterwards everybody understands that matters had got out of hand and that the crash was inevitable, but just before the crash everything was stable, and you would have a million arguments as to why the situation was fine and that things could continue safely.
    There is no way that anybody can reasonably argue that the UK government intends to repay what it has borrowed

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  82. One further point to add to the above, is that able people don't enter politics - a brilliant man would be able to slash the correct parts of the 600 billion odd yearly spend without damaging growth.
    The markets have to be shown urgently that not only will the UK balance the budget every year from now on, but that it will be in surplus, however small, to repay the outstanding sum. This action, continued for a few years, would convince investors that the UK was now sound, and would make the situation safer, but still, due to the nature of markets, would not guarantee avoidance of the MoneyWeek doom scenario.

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    1. Yes that's as maybe but the elephant in the room is the thoroughly manipulated and inflated UK house market. The government is meddling for purely political reasons in the most obsessive property market in the world, this is a huge mistake. The UK market should have crashed and burned in 2007 but was kept alive (just) with massive stimuli and then to make matters even worse we now have the Osborne double Ponzi scheme. This will go wrong and we all know it will go wrong the only debate is when? My money is on a collapse much sooner than the government had hoped!

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  83. You make some good points Frances though most would have been spotted by those with a modest grasp of economics. What surprises me is your dismissal of the inevitable house price correction as something we have survived before and will again. Well, that can be said of anything but in the UK the house market is all important, it drives people to do the most stupid things and of course to borrow and spend with a new unjustified confidence. Right now we are experiencing further inflating of the UK house bubble with a government funded Ponzi scheme, conceived no doubt for purely political reasons.
    If nothing else the 'End of Britain' article should make people question the status quo and consider the affect debt can have on our economy.

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  84. The elephant in the room is the thoroughly manipulated and inflated UK house market. The government is meddling for purely political reasons in the most obsessive property market in the world, this is a huge mistake. The UK market should have crashed and burned in 2007 but was kept alive (just) with massive stimuli and then to make matters even worse we now have the Osborne double Ponzi scheme. We should all remember the US and Ireland. This will go wrong and we all know it will go wrong the only debate is when? My money is on a collapse much sooner than the government had hoped!

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  85. An encouraging and insightful rebuttal but all this does is change the emphasis from public debt to private debt which is probably even scarier when you consider the full extent of private debt the British banks might be exposed both at home and abroad. After all, the UK is the global centre of finance as we are so often reminded. Are we the public expected to bail out foreign debts as well as our own in the event of British banks failing? The full extent of UK banking toxic private sector loans will only be revealed as and when cash flows to service these loans dries up in the event of the economy stagnating or if there is downturn which is why the government is desperate for growth in the economy. Of course many people will believe whatever it suits them to believe. I'm simply after the truth which is very hard to come by and often hidden but, I am an optimist and live in hope of getting to the bottom of this so we can discover what really needs to be sorted out and then demand that something is done about it from an informed position. So the jury is still out on this matter as far as I am concerned....

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  86. Frances: A trifle disdainful of those of us who have taken the trouble to marshal our resources and used to be the backbone of the economy I fear. We outnumber 'borrowers' by about seven to one. we used to spend handsomely from the position of strength of having our own money. that is to say we did not and still do not have to go cap in hand to a bank to get the money for our trinkets, and then have to endure the indignity of having to pay ever more exorbidant bank charges and even a little interest on what we have borrowed - and I nearly forgot - then pay all the money back, albeit devalued by inflation.
    Who are we? We are called 'savers', whereas we are in fact spenders; I know this is terribly difficult! Nobody in government understands it. We are portrayed as Dickensian misers - the monkey which has the piece of fruit is despised by the one that doesn't. It is the use of the word 'savers' to describe anyone who spends from the position of strength of having their own money that is the root cause of our current failure.

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  87. Just a simple thank you from me.

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  88. I found this piece because I've been bombarded by these MoneyWeek ads for weeks now and specifically every time I go to any kind of US media on line. I had no intention of reading the original article as it had libertarian scare story written all over it but I became curious enough to google why they were running the ad and came to this wonderful debunking. Thank you Frances

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  89. Hi Frances,

    I noticed that there was a comment on the Rothchilds and other banking families being in control of the BOE and the FED.

    There is alot of fear and hysteria at the moment in regards to this and I can understand this as there are some movies on youtube that do give what appears to be a factual and compelling case.

    I do not want to question your answer, but how can you be so sure, is this completely beyond the realms of possibility?

    Here are a couple of links to the movies that you may find interesting:

    The war of central banks - http://www.youtube.com/watch?v=5-IgUzWpkM4

    Fall of the Republic - http://www.youtube.com/watch?v=VebOTc-7shU

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  90. I think this kind of scaremongering is disgusting and irresponsible.

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  91. Houses prices can't correct any lower.

    Supply and demand, too many people, not enough houses.

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  92. Sadly following on from AndyK the word is probably housing rather than houses. I went to see some flats the other day (in London, admittedly) and the bathroom, wasn't (i.e. it didn't have a bath, just a shower). Still, at least the toilet was inside the premises......

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  93. Thanks for de-bunking the Moneyweek Bulletin. Clearly I have not been paying attention for the best part of a year, to have only spotted it last month. But as it seems to be advertised on every single website I visit it is hard to ignore anymore.
    Your points are written in a very clear manner, without jargon, so it feels easy to believe what you are saying. The graph of total spending adjusted for inflation did not show the axis label, and I am well aware that adjusting scales can change how the data appears, but the rest of the discussion seemed to ring true.

    I'm not an economist, as you have probably guessed, and have never had anything other than debts since becoming old enough to go overdrawn. A pretty sad state to be in maybe, but I guess the government can't steal savings from me that I haven't got (or is it called bail-in now?).
    What concerns me is that you don't appear to have considered the effect of tightening resources. Despite having historically high oil prices the last few years, suppliers have barely made any increase in production levels, even though the cost of production has increased dramatically. We have used up most of the easy cheap oil and what is left is going to cost us more money to extract.

    This effects everything. Just as a brief example, increased oil costs, result in increased fuel costs for farmers, and increased transport costs, which result in higher food prices. Now either wages go up to compensate, and companies struggle with paying increased wages and fuel costs, and probably end up laying people off, or not, but either way everyone has less disposable income. People stop buying non essentials and manufacturing slows down, demand for fuel drops, and then oil prices drop.

    Oil prices have dropped over the last couple of months. It's not down to increased production output or lower production costs, so it must be about declining demand. This seems to indicate there is another recession unfolding, would you agree?

    Judy

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  94. Glad I read this, thanks for posting it. Scared myself sh@tless watching that film, although it felt very hyped up and dramatic from the start. As if there isn't enough to stress about without scaremongering to sell a poxy magazine. I work hard, earn above an average wage and support my family of four but never seem to have a penny at the end of each month despite driving a crappy old car and not going out much. That said, I am grateful for what I can provide my kids and have a good life, it is interesting to hear about the bigger finacial picture from people who know more about it than I do. Doubt I'll be subscribing to Moneyweek any time soon..

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  95. Great blog, put me a little more at ease after watching the MoneyWeek video. If they are using statistics in such a spurious way then their video is highly irresponsible scaremongering.

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  96. This comment has been removed by a blog administrator.

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  97. Whilst I think the Money Week article is a bit of a sales pitch, there is no getting away from the fact that the UK is in decline. We sold off our industry years ago, are inefficient and backward in a lot of our work processes and have big problems with alcohol consumption and obesity. The country is full of services, all servicing each other and making nothing, which makes me laugh because we are pretty rubbish at "service". If you want to benchmark that statement, spend some time in the USA.
    Kids are not interested in learning, there is no discipline at school due to politically correct policies and the education system has been dumbed down for over two decades. If you want conclusive proof of the latter my friend is a prime example. He had to get a Grade C at 'O' level English to get into Oxford University and he kept failing, never obtaining more than a Grade E. The system then moved into GCSE education and he immediately got a Grade A and he swears blind to this day, he put no more effort in than he did previously.
    So for the last 20+ years we have had less intelligent people going through the University system, getting into thousands of £££ of debt and are helpless to get decent paid jobs. Have a look in Starbucks for proof of that. There is no doubt that most of this student debt will never get paid back and so ultimately the Student Loans Company will go bankrupt.
    The housing market is a catastrophic joke, propped up by Buy to Let Landlords (many of whom are in government and banking jobs) and the Help to Buy Scheme. The latter is more evidence something is seriously wrong. All this nonsense about not enough available property is completely false. The real truth is there aren't enough AFFORDABLE properties on the market and there never will be unless the government stops meddling. Having a roof over your head is a fundamental need in life and should never have been allowed to be used as a vehicle to make people rich. Period.
    Some commentators like to compare the UK's economic outlook to that of Japan who have spent years in a period of deflation. The major difference here is that Japan have Honda, Toyota, Mazda, Nissan, Subaru, Yamaha, Mitsubishi, Panasonic, Toshiba, Sony, NEC, Fujitsu, Hitachi, JVC, Kawasaki, Konica and Seiko to fall back on. What has the UK got to fall back on? Estate Agents, Recruitment Agencies, Contact Centres, Mobile Phone dealers, Curry Houses and Kebab Shops. Say no more.

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  98. Thank you, Frances, for your comments on MoneyWeek's "EoB" alert/marketing push.

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  99. Unlike Frances, I do give investment advice and my business card has the following quotation on the back;

    " To invest successfully over a lifetime doesn't require a stratospheric IQ,unusual insights,or inside information; What's required is
    (a) a sound intellectual framework for making decisions and
    (b) the ability to stop emotions from corroding the framework"

    I've seen quite a few situations where intelligent people have made surprisingly dumb mistakes after reading financial pornography such as Moneyweek.

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  100. Somebody needs to debunk this debunk!
    Looks like Francis has stopped replying because she knows the house market will crash and asset bubbles will deflate.
    Maybe Moneyweek is on the money after all?

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    Replies
    1. Actually I said in the post that the housing market was overvalued and needed to correct. It was the one area where I agreed with Moneyweek.

      Asset bubbles inevitably deflate, but that does not necessarily mean an economic crash.

      I do reply to comments on this post when they add something new and interesting. However, as this post was written some time ago now, most comments now do not - including yours. I've only replied because you have really been rather rude. You didn't read my post properly and you couldn't even be bothered to spell my name correctly.

      Delete
    2. I think you are being a little too dismissive of this post and perhaps you underestimate the fallout that a true and proper crash will bring. The property market is being openly used by this government for political reasons, creating it's very own (Fannie Mae) Ponzi scheme for which it will be inevitably painful to exit from.
      As with HS2 the government has been warned over and over again about the risks but it appears nobody is listening, other than Vince Cable.
      Back to the original article, the UK is still one of the most indebted nations on the planet, just look at our debt/GDP ratio, and servicing that debt is still on a knife edge. Yes I agree your original debunk of the hysterical Money-Week article is now history but I do agree that you downplayed the enormity of a true property crash in the UK, thus averted with years of stimuli and support, and now the horrors of direct government intervention.

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    3. I don't think I do. I've actually lived through two property crashes in the UK, and spent several years unable to move from a tiny house far too small for my young family because of negative equity. I know what they are like. And I am certainly no supporter of HTB. I have been severely critical of it in other posts on this blogsite - I presume you have not read those. I really don't think you should judge my views on one post alone.

      Delete
  101. Well, I was interested to see the date of Jan 2013 on the original blog post as I've just seen the same ad from MoneyWeek on my computer this morning.

    My husband died last year and was very competent with matters financial. While I'm not stupid, I mostly left him to get on with things and now he's not here I've been getting up to speed with looking after my financial affairs. My initial reaction to the article was my hair stood on end - and then I realised it was an advert. However, never having heard of MoneyWeek I speed read their very lengthy blurb. Then went looking for other information and landed here.

    It's good to find out that some of the things I questioned were questioned and reasons given here - ones which sound reasonable to me. So thanks for sharing your expertise - and thanks to all those who have commented.

    As I'm now retired, it's important I look after what I have, and make it work for me as best it can under the present financial climate. I do over react since my husband died, and for a short time this morning felt distinctly uncomfortable. Now I just feel irritated with someone who puts information out there designed to frighten people into buying something.

    I thought I might as well get the freebies on offer. But guess what? One has to commit to opening a direct debit or similar, so if I don't want to receive subsequent issues of MoneyWeek, I have to cancel. Some freebies come with no strings attached - but not this one.

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    1. Hi Prue,

      Moneyweek have been putting this stuff around for over a year now. Originally it was a leaflet sent out by email. I got in touch with the Moneyweek editor, Merryn Somerset Webb, not long after the leaflet first came out and pointed out some of the problems with it. She chose not to address my concerns, so I then wrote this post. The video came later, but it is as flawed as the leaflet. Despite my criticisms, Moneyweek have been pursuing a very aggressive marketing campaign using first the leaflet then the video. For me, though, it is now starting to look rather tired. How long can you forecast imminent financial collapse before people stop believing you?

      However, the Moneyweek magazine itself provides some useful investment advice, so I wouldn't want to stop you taking out a subscription if you would find that advice helpful. It's Moneyweek's marketing tactics I'm criticising. They really need to rethink - they are giving completely the wrong message.

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  102. Brilliant. Thank you very much for this fine analysis.

    As soon as I started watching the Moneyweek "horror movie" I realised they were using uncorrected graphs (outrageous for a supposedly "knowledgeable" money magazine) and I hoped someone would have corrected them - and lo & behold I found them here in your excellent article.

    Mike
    London

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  103. So your saying the UK is fine and theres no financial crisis? That we should all go on like this and that the government will sort it alllll out ofr us.

    Naive.

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    1. No, I did not say any of that. I pointed out the errors in Moneyweek's analysis and on that basis disputed their claim that the UK economy is on the verge of collapse. If you think that is naive, you need a brain transplant.

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  104. I came across this article while looking for some criticism to the MoneyWeek video. Upon first read of your article you simply highlighted what I already knew - that MoneyWeek was using scaremongering tactics in a shallow attempt to selll their magazines.

    However, I then went on to read the comments - and specifically your responses to them. I have to say I am disgusted with the comments yih have made about not losing sleep over savers losing their savings. Those who are responsible and save are by no means responsible - or to blame - for those who borrow to the extreme.

    Overall you seem to get incredibly defensive towards anyone who may question your article. Perhaps you should review your own "rules" and refrain from using personal insults (such as suggesting someone needs a brain transplant) if they question you.

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    1. The comment about not losing sleep about savers losing their savings was in the article itself, actually. And both that and the comments related to the alternative, which is savers hanging on to their savings at the expense of other people losing their jobs, their livelihoods and their homes. I did not say that savers were "responsible" - but neither are the people who will suffer if savers are protected from capital erosion through higher interest rates than are justified by economic performance. Many of those people are too poor to save. I lose sleep over the prospect of those people losing what little they have - not over the prospect of people who have money losing some of it. I'm sorry if you don't like that, but with all due respect, I am entitled to my opinion.

      I would like to point out that all the extraordinary interventions by central banks since the financial crisis have been designed not to protect those who have over-borrowed, but to protect those with assets (including cash savings) at the expense of those who are dependent on earned income. That includes very low interest rates and QE, both of which have prevented bankruptcies and asset price collapses that would have destroyed the value of all forms of savings and investments. It seems to me that capital erosion is a small price to pay for not losing everything.

      The person who I suggested needed a brain transplant had insulted me, actually. Or maybe you don't think describing me as "naive" is an insult?

      Delete
  105. This comment has been removed by a blog administrator.

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    1. Anonymous,
      I have removed your last comment. You are entitled to your opinions, but you are not entitled to devote an entire paragraph to attacking me because of a comment I made to someone else. This is my site, and you have to obey my rules if you wish to comment here. Your comment was really very rude.

      Delete
    2. This comment has been removed by a blog administrator.

      Delete
    3. The vast majority of people at the 'bottom' do work, or have worked all their lives, or are looking for work, or are young and have never had the chance to have a job. You don't choose to be made redundant or fall on hard times. Many work just as hard, if not harder than those at the 'top' but for far less reward. Very few people are the scroungers that the media portray - less than 2%.

      In my mind it is the bank bosses, who are earning the equivalent to 200 ordinary people who are the scroungers. Who decides that they are worth so much? How can they be worth more than the prime minister or the top army general? Their job can't be that tough! I mean they don't put their lives on the line for the greater good of society.

      The people at the bottom are being squeezed to the point where there are hungry children in our schools. If we don't take care of the people at the bottom, give them a roof over their heads and enough money to heat their homes and feed themselves, then they will become desperate. Everyone deserves the right to a basic living, whether elderly, disabled or poor. If everyone doesn't have that, then it will affect the whole of society. Nobody wants to walk along a street full of homeless people and beggars, or find the elderly dead in their homes from the cold. Call it socialist if you like, but I'm sure most people feel the same.

      I haven't had any savings since I left home at 16, but that doesn't mean I haven't worked hard. I worked nights at Burger King to pay my rent while I got my A levels. Then when I got pregnant at 18 everyone said I would never go to Uni, but through sheer determination and hard work I got an engineering degree, although at a price. Student loans barely cover living costs let alone nursey fees, so I racked up a big debt. It took me a while to get a good job and I spent 5 years working 55 hours a week, but still didn't clear all my debts after paying for childcare.

      House prices is one of the reasons. My parents bought their first house for £6000, whereas for my generation mortgages and rents are crippling. Housing equity is at the expense of the young - the prospect of my kids ever being able to leave home and buy their own place looks bleak, so I need to clear my mortgage so that there is always a secure roof over their heads.

      There is not much I want in life. A safe warm home, food for my family, a small garden to grow veg and no debt and I work very hard trying to get there. I don't want it to be at the expense of the poor or by squandering my childrens prospects. Frances is absolutely right not to lose sleep about peoples savings. Most savings aren't made from hard work, but from speculation with shares or properties. For example shareholder profits are driving up energy bills - the big six made £375billion in 2012. That money comes from all our pockets.

      If you have scrimped and saved all your life, then I can understand that your savings are precious. But if you really think your right to hoard money is more important than families being thrown out on the street, then you will find that life has some lessons for you.

      Delete
    4. This comment has been removed by a blog administrator.

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    5. Anonymous,

      Your comments both to me and to Judy are unacceptable and therefore deleted.

      Delete
  106. Thanks Frances, but I'm still going to respond.

    I chose to have a child at 18 and by doing so I knew that life wouldn't be easy and that I would have to work very hard because of it. It doesn't change the fact that there are millions of people still struggling with paying back loans for their education. There are also millions of people out there struggling to make ends meet after paying for childcare costs. These are the Drs, scientists, engineers, refuse collectors and carers that we hope to take care of us over the next 40 years. Not all of them have savings, but you can bet that they are all working hard. Personally I feel they deserve our respect, because they are working hard for less reward and increased costs.

    I don't think the world owes me a living - I am a fully qualified engineer and have spent my whole life taking care of myself thanks. However I do think it is more important that everyone receives a minimum standard of living, which means a home for shelter. You may feel you can watch people being evicted from their homes as long as your savings are kept safe, but who will protect you? The IMF talk of a one-off savings grab to balance governments books. You may find it more prudent to build community, and protect your neighbours from losing their homes, rather than rely on your bank balance for the future.

    In your original comment Anonymous you equated not having savings to not working hard, implying that if you have savings you must have worked hard. Why don't you share how you got your savings anonymous? I would love to here what hard work really is?

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    1. Brilliant comment, Judy. Thank you.

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    2. My point remains Judy that you may have less savings than others because you had a child at a young age. It truly baffles me that you think those with savings should be responsible or expected to give those up, to provide for those who have not worked as hard or saved properly or have children irresponsibly. By all means it is your perogative to do whatever you want - just do not by any means think it is right, or even acceptable, to expevt those with savings to pay for your decisions and life choices.

      Oh and in regards to hard work I often work 12/13 hour days up in the city.

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    3. It baffles me that you can think that those who have worked and properly saved (and not had a child at 18) should be exepected to give up some of their savibgs to those who have not saved so sensibly. Whilst it is your perogative what you do with you life it is shockibg that you seem to think my savings are fair game for those who decided to have a child at a young age rather than save.

      Oh and I work 12/13 hour days in the city.

      Delete
    4. Anonymous,

      I'm sure Judy can respond from her point of view. From mine, I have to say that I can't see how you interpret Judy's comments as meaning she expects you to give up your savings to support her.

      However, that is not the reason I am commenting now. One of my rules is that people identify themselves. I accept Anonymous comments because Blogger's sign-in protocol is difficult for some people. But I do ask that you sign your posts with your name. It's uncomfortable for people to discuss with someone who won't identify themselves.

      Delete
    5. Anonymous, there is really no point in commenting if you are not reading the responses. What are you saving for? A ticket to the moon?

      So you agree that working 12 to 13 hours a day is working hard. Are you earning more than double the minimum wage? If so then how would you expect someone working 12 to 13 hours a day, and only earning the minimum wage to be able to save as much as you?

      How much savings do you suppose the guy who serves you coffee has? I mean they are working in the city with all the additional expenses involved like you, but on a low wage. What about the guy who works for the council emptying the bins? Your journey to work would be pretty gross if he wasn't doing that job for you, and it is pretty hard work out in all weathers. When he retires next year after working the same job all his life, what if his pension doesn't cover his bills? Yet you would rather see him evicted than have to contribute.

      Nobody has asked you to give up savings. Frances' comment was that she wouldn't lose any sleep over lost savings, compared to people losing their homes. I have to agree with her wholeheartedly. I don't want to see your savings dwindling away, but to me it seems rather inevitable given the current financial situation. Maybe you should sign up to MoneyWeek, just to be sure your savings are safe ;)

      Delete
  107. That is a ridiculous point.... an anonyour profile exists for a reason. You seem to have alot of "rules" for a little blog.

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    1. I've explained why I ask you to identify yourself. If you aren't willing to then I'm afraid you can't comment here.

      Delete
    2. Out of interest... how are you going to stop that.

      Delete
    3. Frances, I have no problem if you want to lose this whole thread. It doesn't really relate to your MoneyWeek response, so is probably of little interest to your other followers. There would be no point leaving my comments after you have erased anonymous.

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    4. Hi Judy,

      I'm certainly not going to delete comments that have already been made, either from you or Anonymous. However, I do think Anonymous should identify herself/himself.

      Delete
  108. This may have been mentioned previously (have not read every comment). I find it somewhat ironic having listened to the danger of debt described and then being asked to pay for subscription by credit card.

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  109. This is one technology that I would love to be able to use for myself. It’s definitely a cut above the rest and I can’t wait until my provider has it. Your insight was what I needed. Thanks

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  110. Thank you Frances Coppola for this article, I saw Moneyweeks short film and it was pretty scary but just being a layman I had no idea about the effects of inflation on their figures, I am slightly disappointed in myself for not seeing that it had been done by their marketing department and lacks objectivity. Can you tell me why we don't have proper qualified economists working in government? Everyone in government seems to come from banking and you would be forgiven into thinking bankers might have a decent grasp on economy.

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  111. hi francis coppola, great article, you have directed many good films like godfather and apocalypse now and now you have turned to writing articles, good for you. I salute you.

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  112. Valuable explanation of what war does mean for the economy and welfare. Informative post.
    https://www.wealthme.com

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  113. Please tell me that youre heading to keep this up! Its so great and so important. I cant wait to read a lot more from you. I just feel like you know so substantially and know how to make people listen to what you might have to say. This blog is just too cool to become missed. Terrific stuff, genuinely. Please, PLEASE keep it up!

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  114. Lots to see on that chart, the High when it was around 2.00 for every pound, then the steep decline and a pull back to the long side, throw a fib on that and you will see a 38 retracement, which is giving you a decline on the sterling too 1.06 level and potentially further.... On top of that consistently lower highs which also can be a sign of a continuation pattern to the downside....... Thats from a chartists point of view. No manufacturing in this country anymore, a welfare state, need I continue....

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  115. Great article. Thank you.

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