Crisis in the UK

Harder-Edged Warnings About Britain’s Economy
By LANDON THOMAS Jr. 28 minutes ago
Britain’s deteriorating public finances may require the government to seek International Monetary Fund aid.

The UK is the world's 5th largest economy folks!

Excerpt:

Speculation that Britain may once again seek monetary fund assistance — and become the first major western European country to do so during this crisis — rests upon a crucial, uncertain assumption: that the combination of its steep debt and wounded banking sector will put too much pressure on the already wobbly pound.

The numbers are worrisome. Britain currently runs a budget deficit of 11 percent of its gross domestic product, compared with 13 percent forecast for the United States this year. Analysts say that without severe spending cuts and tax increases, government debt will jump to 80 percent of the overall economy in the coming years, from today’s level of about 40 percent, a ratio that approaches that of troubled economies like Greece and Italy.

So far, investors have been willing to fund Britain’s debt at relative low interest rates, unlike countries like Hungary and Latvia, whose reserves have been drained, leading them to turn to the I.M.F. for support. Last month a failed British government bond auction in London sparked some fear, but subsequent debt sales have been successful.

That could change, according to Simon Johnson, the former chief economist of the I.M.F., if those now holding British assets lose confidence in the government’s ability to pay its debts and start abandoning the pound in droves as they did in 1976.

A very ugly picture. Note especially that highlighted bit about spending cuts and tax increases. In a Recession/Depression!?!? This is very hairy.... WTYTII