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IMF calls for bank guarantees to be included in the national debt

First let’s pop that popular illusion and often banded about number. Namely that the UK’s national debt is ‘only’ 60% of GDP or £876bn. It isn’t. The real figure is much, much higher.

We will leave aside for another article unfunded liabilities like pensions, medical promises and the PFI (Private Finance Indicative), all of which aren’t included in the debt numbers either.

Let’s concentrate just on the government bailouts, back-stops and guarantees for the banks from the financial crisis in 2008 – yes, they’re still there incase you’d forgotten. Again, these numbers aren’t included in that 60% GDP figure – this maybe about to change however.

Today the IMF released their ‘Global Financial Stability Report’. Although the report was mainly looking at the US, their conclusion can equally be applied to the UK. In it they call for government guarantees to be added to the ‘official’ debt figures:

However, government guarantees should be explicit and fully accounted for on the government’s balance sheet. Over the medium term, and with appropriate reforms to encourage “safe” securitization as discussed in the chapter” – Chapter 3 p35

So how would this change that 60% figure mentioned at the start? The UK’s debt, according to the Office for National Statistics, would leap from 60% of GDP to a whopping 149% of GDP or £2.25tn, that’s TRILLION with a ‘t’ by the way.

Screen shot 2011 04 06 at 21.30.58 300x248 IMF calls for bank guarantees to be included in the national debt

Clearly the UK’s finances are worse than we are led to believe and now even the IMF thinks that these guarantees should be added to the numbers. Even if the guaranteed debt was added on a ‘risk of default’ basis, instead of the entire number, it would still substantially raise the ‘real’ figure.

Remember that bankrupt Ireland hit the skids with their debt to GDP expecting to top out at ‘just’ 111% in 2013. Let’s also not forget the most recent member of the ‘national bankrupt club’, Portugal, who today finally officially admitted it needs a bailout, ‘only’ has a debt to GDP of 83.2%.

We’re sure this will be one report by the IMF that won’t be being quoted by government officials in the future. And all this without even delving into PFI and pensions.

 

Related posts:

  1. Yuan should be included in the SDR basket “now”
  2. Endgame: the debt problems are still mounting
  3. The Effects of Sovereign Debt
  4. World Bank President Suggests Return to Gold Standard

Link to this article: : http://www.goldmadesimplenews.com/gold/imf-calls-for-bank-guarantees-to-be-included-in-the-national-debt-3380/

Posted by on Apr 6 2011. Filed under Gold News. You can follow any responses to this entry through the RSS 2.0. Responses are currently closed, but you can trackback from your own site.
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