Is the U.K. 'Finished'? 25 comments
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"We must find new lands from which we can easily obtain raw materials and at the same time exploit the cheap slave labor that is available from the natives of the colonies. The colonies would also provide a dumping ground for the surplus goods produced in our factories."
These words of Cecil Rhodes, founder of the famed De Beers Mining Company and the nation of Rhodesia (now Zimbabwe), embodied the colonial vision which lifted Britain out of its first economic crisis since the start of the Industrial Revolution.
Listening to British Prime Minister Gordon Brown unfolding a bank bailout package worth hundreds of billions of dollars on Monday, it was apparent that the colonial vision had finally folded. "The U.K. is finished," Jim Rogers, Chairman of Singapore-based Rogers Holding told Bloomberg Tuesday morning, while advocating aggressive selling of the sterling and U.K. shares. Mr. Rogers did not elaborate on what exactly he meant by "finished"; but the empirical evidence does indicate that the British economy has lost virtually all its competitive constituents in recent years.
In fact, without the wealth and income generated from tourism and financial services, London would be in dire straits today. Tourism accounts for 12% of London's Gross Added Value and for 15% of its workforce. One quarter of Europe's 500 largest companies are headquartered in London; by last count, 185 international banks and 225 global securities companies were based in the City, along with 60 major hedge funds.
Given the ongoing global recession, the tourism and financial sectors are both undergoing a substantive and painful contraction. London's "buy-to-let" and "bed-and-breakfast" markets have deteriorated beyond repair. And the transactions to rent or purchase luxury properties have ground to a standstill, as rich Russians, for example, scramble to save the value of their assets back home.
Jim Rogers predicts that the cable (sterling/ dollar) rate over the next few months will fall below 1.0520, last seen in February 1985. That prediction, of course, will depend upon how the U.S. economy fares. But the short case for cable (EGB, FXB, GBB) is compelling indeed; in Asian trading, the sterling fell to its lowest level (127.50) against the yen since 1971. And its future against the Euro is deemed uncertain only because currency traders doubt that more bad news from Germany, France, Italy, Greece and Spain is due to enter the public domain during the first and second quarters in this year.
Cecil Rhodes died without fulfilling his dream, and the dream of other proponents of the Empire, of a "red line" on the map from Cape Town to Cairo. But he must be turning in his grave wondering why, after the Second World War, Britain began granting independence to its colonies since, by his calculations, Britain did not possess the internal resources to keep its rising population in good cheer. Besides, the late Mr. Rhodes did not want British novelists to have any further cause to write another Bleak House or a Little Dorrit, or for ideologues like Karl Marx to state that Victorian novelists "issued to the world more political and social truths than have been uttered by all the professional politicians, publicists and moralists put together."
If Jim Rogers' "get-out-of-UK" call was meant to imply that another state-of-the-nation novel (Hard Times, 1854) was imminent, then he was not too far off the mark. The official unemployment figure is expected to surge to 8.2% in 2009, from 5.3% at present, amounting to a total of 2.55 million people out of work. The real measure of unemployment (to include acute underemployment) paints an even more dismal picture. With the economy on the verge of the most viscous slump since 1946, Britain's equivalent of Line U-6 (in Table A-12 of the U.S. employment report) is closer to 9.5%. If SGS-type alternative methodologies are applied, that figure rises to 14%.
In excess of five million workers (roughly 22% of all employees in the U.K.) earn less than $10 an hour. There are 1.7 million British children living in poor households. Seventy percent of "workless" households suffer poverty. Forty-two percent of women work on a part-time basis. And, due to the influx of "underground" workers from around the world, wages at the lower end of the British job spectrum are now under severe pressue.
Regardless of the sharp declines in equity prices since mid-2008, the continuing case for short U.K. bets via Exchange-traded Funds (EWU, ISF-LSE, MIDD-LSE) was enhanced yesterday by Prime Minister Brown himself. The U.K. Treasury has effectively entered the credit default swap business by its decision to insure a wide range of balance sheet risks. CDS dealers are expected to begin pricing that decision into U.K. government default spreads very shortly.
Disclosure: Short EWU, FXB
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Olé!
On Jan 20 11:17 AM Debt Junkie Scum wrote:
> Rakesh,
>
> In excess of five million workers (roughly 22% of all employees in
> the U.K.) earn less than $10 a day.
>
> Do you mean $10 per hour?
To go to a 19th century comment from C Rhodes to get an angle on the 21st century UK economy is mad.
To overlook the fact that the UK has oil (unlike the Netherlands which has a higher population density and is doing OK) and state that it has no resources and THEREFORE to many people is economic illiteracy.
The Implication that there is a 'real' 14% unemployment rate involves using the most bias statistical selection I have EVER seen.
Few would doubt the UK has a heavy reliance on finance and banking, and that this will punish the economy given the downturn in these sectors, but this story is garbage!
The UK minimum wage is about $10 per hour, the USA minimum wage is $6, and all other G8 nations are lower than the UK minimum wage.
The UK unemployment is around 6.5%, which again is lower than Spain, Italy, France, German and the USA.
The Pound is in trouble because of Browns stupid borrowing and tax on non doms, the man is and idiot.
The UK has gas and some oil also.
The UK needs to stop taxing investors and quit borrowing and we will be fine.
On Jan 20 03:29 PM Dashingprince wrote:
> For the last 500 years people have predicted [and hoped for] the
> end of the British, who knows maybe this is the time it will end.
>
>
> The UK minimum wage is about $10 per hour, the USA minimum wage is
> $6, and all other G8 nations are lower than the UK minimum wage.
>
>
> The UK unemployment is around 6.5%, which again is lower than Spain,
> Italy, France, German and the USA.
>
> The Pound is in trouble because of Browns stupid borrowing and tax
> on non doms, the man is and idiot.
>
> The UK has gas and some oil also.
>
> The UK needs to stop taxing investors and quit borrowing and we will
> be fine.
The article is a little sloppy, although I cannot disagree with the general "short the pound" theory. I wouldn't be so sure about the London equity market though. Around half of the earnings in the FTSE100 are derived overseas, so a weak pound actually helps there. Disappearing banking sector notwithstanding.
Regards,
An under-employed Brit ;)
Furthermore, I would like these stats to be compared with US stats.
UK is certainly in trouble but not more than the rest of us.
lonestart,
I believe there could be a typo: "Iceland" would replace "Island".
Thanks for being observant.
Teutonic
On Jan 20 08:58 AM lonestar1 wrote:
> If any one of the G7 go down the same path as Island, that will be
> UK. The country has a bigger housing bubble than US. At least US
> still produces many real products while UK produces nothing except
> for a more bloated financial services industry.
Yes, I missed having been an Oxbridge Man. So don’t go away, UK!
This statement by Rogers is aimed at getting a run on the banks in London they move their money to Singapore where Rogers has a business, doh.
It is an attempt to destroy the UK, has been tried many times before read a history book.
The points Rogers made were all incorrect I am guessing this antp guy has ran away from answering them.
The UK has is pumping more oil than ever, major fail, and the UK has vast gas reserves.
UK national debt is lower than Italy, Japan, France, USA and Germany, our minimum wage is higher than them all.
In one instance, 5.3% = 2.55 million
and then, 22% = 5million
In fact, there is not much to guess how these numbers went so wrong as it seems posters like these as they are so biased towards their hypothesis that they try finding some numbers to support their theories.
<<5.3% at present, amounting to a total of 2.55 million people out of work.
In excess of five million workers (roughly 22% of all employees in the U.K.)>>
On Jan 22 05:47 AM Mindguru wrote:
> There are some really absurd number crunching here (if ever it was
> provided).
> In one instance, 5.3% = 2.55 million
> and then, 22% = 5million
>
> In fact, there is not much to guess how these numbers went so wrong
> as it seems posters like these as they are so biased towards their
> hypothesis that they try finding some numbers to support their theories.
>
>
> <<5.3% at present, amounting to a total of 2.55 million people out
> of work.
> In excess of five million workers (roughly 22% of all employees in
> the U.K.)>>
These past 17 years the Labour Party politicians have tried to make the electorate feel guilty for our past centuries activities and have virtually wiped the name England from the map.
They also issue almost daily edicts, treating the population as if they are idiots on how to do things, like tie-up show laces and the proper way to pick-up a box. In addition, their petty 'health and safety' rules and regulations are there just to enable them to interfere in our lives. We have cameras watching our every move every ten yards so they can spy on us and they have given our local authorities unbelievable rights to interfere in our private matters, including the rght to spy on us to see if we throw our garbage away according to their instructions and to enter our homes without gaining a court order.
This Labour Party government have allowed all and sundry into our crowded Isle and given them priority over our own people just so they can crow about Britain being a multicultural society. They also give them our money and housing. and the distribute our cash to all and sundry all over the world and send our troops to fight in other country's wars.
Over the years they have ruined our manufacturing economy by taking excessive tax from companies to the extent they could not afford to re-invest in the latest techologies to stay competitive.
Now they have more than spent the large surplus they found when they entered power and not policed our financial institutions correctly, allowing them to get involved in highly leveraged investments that can be best described as flakey at the very least.
So they have ruined this country and left our people without decent jobs and incomes. All this hase been accomplished by Brown, an unelected party leader, and the man that signed away our hard fought rights at the E.U and refused to honour his party's election promise to allow a referendum on our desire to stay in that useless and spendthrift club, The E.U.
No wonder Australia and New Zealand are receiving hundreds of thousands of immigrants from England, Scotland and Wales who want to get away from an interfering police state that pushes its people down.
If you look at the debt of other countries such as Italy there debt is huge compared to us.
The UK is long from finished! This is a global problem and you will see us bounce back. It will just take time.
We are a rich nation and in my opinion one that is underestimated.
Just watch and see!
On Jan 22 05:47 AM Mindguru wrote:
> There are some really absurd number crunching here (if ever it was
> provided).
> In one instance, 5.3% = 2.55 million
> and then, 22% = 5million
>
> In fact, there is not much to guess how these numbers went so wrong
> as it seems posters like these as they are so biased towards their
> hypothesis that they try finding some numbers to support their theories.
>
>
> <<5.3% at present, amounting to a total of 2.55 million people out
> of work.
> In excess of five million workers (roughly 22% of all employees in
> the U.K.)>>
I know first hand having been born there and been fortunate enough to have escaped to Canada many years ago where I have a paid for house and a thriving small business, the UK has become a frightening place to be economically, I hope many more people get to escape the UK nightmare, I realise every day how lucky I am not to be living there.