Defaulting banks - where will it stop?

[Jan Klimkowski]

The bosses of ratings agencies such as S&P should all be in prison right now: their information is never objective.

The attack in the Torygraph article below on universal entitlement to healthcare and the pensions of ordinary working people is to be expected from capitalist ideologues.

Of course the financial elites who created this mess will keep their private healthcare, and their fatcat pensions and pension pots, whilst claiming that the NHS and the state pension are simply unaffordable.

The real meaning of the Torygraph article is that Britain should brace itself for what Naomi Klein has correctly termed "Shock Therapy".

Shock Therapy has been routinely applied to developing or Third World countries, and to east European economies - eg the rape and looting of Russia in the 1990s, the destruction of the Argentine economy by the IMF/World Bank/investment banks at the beginning of the C21st.

The logical next step of this current financial disaster is for Shock Therapy to be applied to First World countries.

S&P is clearly lobbying for Shock Therapy to be applied to Britain.

UK's debt will quadruple unless drastic steps are taken, says S&P


Britain's national debt will quadruple to peaks only ever seen in the wake of the Second World War unless the Government takes drastic steps to address the pensions and ageing crisis, Standard & Poor's has warned.


By Edmund Conway

Published: 10:30PM BST 27 Jun 2009

The ratings agency has calculated privately that the UK's public sector debt could quadruple from its current level of just over 50pc of economic output to 200pc or above within the next four decades as the cost of servicing public sector pensions, ballooning social security costs and healthcare burdens becomes overwhelming, The Sunday Telegraph has learned.

The warning is doubly sobering since S&P last month placed Britain's debt on to "negative outlook" – an explicit signal that it could soon be downgraded

Although the agency calculated two years ago that the effects of an ageing population, alongside high pensions and healthcare costs could push Britain's net debt up above 150pc by 2050, it now fears the added cost of the financial crisis means the debt mountain could in fact rival that in 1945, when the cost of fighting a world war pushed debt well beyond 200pc of GDP.

The warning coincides with research showing that the true size of the UK's unfunded public sector pensions deficit, which needs to be funded through taxpayer's cash, is now £1,177bn – a staggering £20,000 for every person in the UK. A study for the highly-respected British-North American Committee, written by former Bank of England economist Neil Record, finds that the UK shortfall is far more severe than in the US or Canada.

Moritz Kraemer, head of S&P's sovereign ratings in Europe, Middle East and Africa, said Britain was facing a double challenge – first, to mend its books in the wake of the financial crisis and then to overhaul its economy drastically to stifle the pensions crisis. He said Britain was facing deficits unlike any before in peacetime history.

"We don't think they are willing to look into this fiscal abyss without taking any action," he said. "Following the financial crisis, the proportion of the problem is significantly larger than we thought but the Government has time to react to address these issues." The shortfall may mean having to raise taxes, cutting public pensions or healthcare spending, he added.

The agency said that unless Britain and its fellow leading Western nations took action to stem these costs, "the ratings of the high grade sovereigns would be very different."

Although the UK is the only country on so-called "negative outlook", meaning the agency is considering stripping it of its AAA rating for the first time, Mr Kraemer said the gold-plated rating could be salvaged if the next Government proves it is willing to bring the public accounts back in order.

He added: "We take pre-election pledges with a pinch of salt; they don't always materialise. Actions speak louder than words. It's easy to come up with solutions on paper but difficult to make them stick."

http://www.telegraph.co.uk/finance/econo...SandP.html