An Irish diplomat was recently reported as noting that the UK Government has worked out just what an economic catastrophe Brexit is.
That is bad news.
If you pay attention to nothing else ever on this blog, pay attention to this, however – there is worse news.
Manic car buying on credit… frankly crazy mortgages… mass credit card debt… pay-nothing-up-front consumer booms… that was exactly where the UK was in 2007. We all know what happened.
Yet it is also exactly where the UK is now. In fact, the UK’s credit card debt ratio and car buying spree is in fact considerably worse than it was then.
Now, as then, all these debts (and leases) are being packaged up and sold in bundles, the majority of which constitute relatively solid loans and are thus packaged as “AAA” (the highest possible rating). Now, as then, banks simply do not have enough money in their vaults – too much of it has been lent out. Soon, as then, the minority of the debts and leases which are plain junk will bite, will cause a run even on the safe loans, and financial institutions will fall.
The result will be another financial catastrophe. House prices in England will plummet, lending will become impossible, government revenues will crumble.
Peculiarly, Northern Ireland will suffer least from this because house prices and car sales have remained at a relatively sensible (i.e. fairly depressed) level, although credit card debt is a serious concern as will be the inevitable “austerity” which affects what is still an overwhelmingly large public sector (though not as comparatively large as a decade ago thankfully).
In England, where the average house price exceeds £300K and car sales are the comparatively fastest in Europe, however, there is the real prospect of a calamity worse than the first “Credit Crunch”.
The simple fact remains, as it did 10 years ago, that the UK does not pay its way in the word. Its trade deficit, contrary to Brexiteer fiction, is actually a monumental disadvantage because it means the economy (and thus the whole of government finances for Health, Education, Defence etc) runs in deficit and thus on credit – which means when there is no credit (as there soon won’t be) the country is essentially bankrupt.
No one will heed this warning, of course, any more than they will heed the warnings about the insanity of leaving the European Single Market or the EU Customs Union. It is part of the human condition that we do not learn from negative memories, even if comparatively recent. Mark my words, however: we will soon regret that flaw…