Discovering the world on $20 per day ......................

Post 259: It's a mad world .. so buy your new bike now

The world has lost the remainder of it’s marbles and everything has been turned on it‘s head. We have a new President of Europe, Mr Herman Van Rompuy. Apparently he’s the Prime Minister of Belgium but until now, I and millions of other Europeans had never heard of him. In a game of political ‘Top Trumps‘, Van Rompuy would probably be the one crappy card that nobody wants but like it or not, we’ve all got him now. Personally I don’t really mind because his name alone will make comedy shows more interesting and if the alternative was Tony Blair, then it’s got to be much better news than it might have been. Every comedy character worthy of the sketch writers ink deserves a suitable sidekick and Herman Van Rompuy has been given Lady Cathy Ashton as his Foreign Minister. Yes, I’ve never heard of her either. Apparently a late runner for the post of EU Foreign Minister was our very own Lord Peter Mandelson, he of Hartlepool and Foy, First Secretary of State, Lord President of the Council, Secretary of State for Business Innovation & Skills, Prince of Darkness and sometime lapdog to Saif al-Islam Gaddafi. We should therefore count our blessings that Lady Ashton was shoe-horned into the post because without Lord Mandelson’s selfless efforts here at home, who knows where we might have been. New Labour love league tables and ever since Gordon jumped into the metaphorical bed with Peter, we’ve rocketed to the top of all of them. Highest debt per capita #1. Highest debt as a percentage of GDP #1. Longest recession of any major economy #1. For a British performance in Europe they’re mighty impressive results in all categories, especially when you consider that we didn‘t even go to a penalty shoot-out in any of them.

In a plan to make us Brit’s feel a little better about our own fiscal furrow, Dubai World this week announced that is was delaying repayments on £36 billion of debt for a period of six months. On the face of it, a seemingly oil-rich Emirate suffering along with the rest of us shouldn’t really be any great cause for concern, but it is. Dubai is not oil-rich and the debt of Government owned Dubai World is really Sovereign Debt and not Corporate Debt. International money markets instantly lost confidence in Dubai’s ability to service it’s debts on a long term basis and a vast quantity of manure hit the Emirates air conditioning unit. Thankfully, it seems that it’s oil-rich neighbour Abu Dhabi has stepped up to the plate and quite possibly saved Dubai’s artificial bacon. The measure of Dubai’s fiscal fall from grace is quite staggering and it’s credit worthiness has dropped to below that of Iceland when it teetered on the brink of bankruptcy. You’re probably still not shedding any tears, but if you consider that Dubai’s debt is a mere innocent kiss in comparison to the full blown orgy of Britain’s Sovereign debt, then there may indeed be trouble ahead for Blighty. By the time of the general election in 2010, Britain’s ‘official debt’ will exceed one trillion pounds, that’s one thousand thousand million pounds - £1,000,000,000,000.00. If the Government were honest with us and added in the hidden liabilities, then that figure can easily be doubled and I have no idea if that includes the billions of pounds that were printed during the process of quantitative easing. Assuming that as a Nation we don’t borrow any more money, and it’s unlikely that anybody has any left to lend us, then for every individual UK tax payer, the Government will be carrying approximately £35,000.00 of debt. If as in the case of Iceland and Dubai, the international money markets lose confidence in Britain’s willingness to reduce this unsustainable level of debt, then the interest that we pay will dramatically increase and the value of Stirling will crash like the proverbial lead balloon. Despite what our smiley politicians might tell us today, come June of 2010, they’ll look more closely at the books, blame somebody else for the fiscal failure and kick each and every one of us sharply in the nuts. It’s going to hurt and nobody will be immune from the fallout.

The good news is that if structured in our favour, a fall in the value of Stirling could effectively decrease the level of our debts, but the bad news is that this will lead to stagflation. A stagnant economy with hyper-inflation along a very long tunnel with precious little light at the end of it. So, if you’re going to buy a new bike, then I’d advise that you do it now. If Stirling crashes and the real price of imported goods rockets, then next year you won’t be able to afford it and your existing bike might not be exciting enough to take your mind away from the economic doom and gloom. While you’re buying your new bike, I’d also think about hanging onto your existing one. The dealer will probably only offer you a token of what it’s worth, but if the economy does take a further tumble in 2010, then the value of clean and desirable previously enjoyed models should be an awful lot stronger than they are now. I might be wrong, and I hope that I am, but if anybody needs an extra excuse to buy a new bike, then I'm happy to help.


Anonymous said...

Struth Geoff,
Why is it all the people that know how to run the country are driving black cabs, cutting hair or riding courier bikes!!

Once again, Geoff for PM....

All the best, keep the blog going we are all still out here :-)
Mike (LB)

'Blue 88' said...

Mike..quite simple. Cab Drivers, Hair Dressers and Couriers, as a group people give us 'instructions' which means that we don't need to think for ourselves. This leaves plenty of time for obscure thoughts .... plus, we never have to make our own decisions and so it's nice to 2nd guess those who do ;-)

Anonymous said...

Nice one Geoff, we live in dangerous times. I collect my pension in April next year, I doubt it will have half the value it should have in real terms. I really enjoy the blog.

PS I can be ready for Romania it hours, you really need a good steady old man from British West Hartlepool riding behind you picking up the bits that fall off.