On the edge

Yesterday Fraser Nelson in a Coffee House Blog quoted some figures and analysis from Michael Saunders of Citi Bank. They make sobering reading.

Debt owed by various groups rose as follows: (expressed as a percentage of GDP, national output and effectively national income, to avoid the problem of a changing value of money).

Household and non financial firms - 98% in late 1987, 128% at end 1997 and 219% in mid 2008 (This last was the highest in the EU)

Non-bank financial firms (funds, wholesale mortgage lenders, etc.) - 66% at end 1996, 172% in 2008 first quarter

Banks sterling and foreign exchange - 240% at end 1996, 521% in early 2008.

For all the above, and including the government debt, externally, ie to overseas creditors - 129% in 1987, 197% at end 1997, 413% in 2008 third quarter.

(As a footnote, roughly 75% of the external debt is short term, that is could be recalled quickly if creditors lost confidence in the UK's ability!).

Nelson apologises for lacking the ability to explain clearly what this all means, although he does talk in terms of Britain, like the RBS our dodgiest bank, have the same "credit default swap" rating - the estimate of likelihood of going bust.

There is a real threat, especially as the saviour of the world, contemplates borrowing and splurging still more money. (The speaker on "Thought for the Day" this morning actually spoke about a Brown like a gambler is throwing more and more at trying to retrieve a situation.

If foreigners decide they do not trust sterling any more, and pull out their money when it matures. We shall have to persuade them or others to lend us some more. The only way they could be persuaded would be for us to pay a higher and higher rate of return to them. As our traders and importers, among others, have to repay the same will apply. It is not possible entirely to separate internal and external interest rates, so internal rates will rise again, and .....

There is little surprise that Brown's bounce, polling and gait, is less obvious now. He is becoming a desperate man. This is not due to the global problem as he likes to call it.

It is due to the vast bubble of debt which he caused and permitted when once he turned his back on Prudence.