In These New Times

A new paradigm for a post-imperial world

Sterling crisis looms as UK current account deficit balloons

Posted by seumasach on January 8, 2013

“What’s more, capital flows from the eurozone to perceived “safe havens” such as the UK are slowing as the crisis eases.”

As these columns have consistently pointed out this was the real motive for the campaign against the euro. It succeeded in that it gave the totally bankrupt British economy a couple of years grace reinforced by the illusion that we were cutting our fiscal deficit.

Nearly thirty years of current account deficit have been covered by pounds sterling. These in turn will have been mainly reinvested in UK government bonds. This the free lunch that Prof. Michael Hudson talks about with respect to the US economy. The end of the free lunch is the end of the game. We have no choice but to negotiate our terms of bankruptcy with our international partners. Demilitarisation and definancialisation of the key cards we will use in these negotiations

Jeremy Warner


7th January, 2013

It’s the sort of problem you might have thought disappeared with the 1970s, but as the Coalition renews its wedding vows, that’s the unsettling possibility raised by economists at both HSBC and Royal Bank of Scotland. With fears of a eurozone break-up, a calamitous fiscal contraction in the US, and a hard landing in China now fast receding, it is possible financial markets will refocus their attentions on more conventional concerns. The failings of the UK economy might be prime among them.

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