Doom and gloom?
The Organisation for Economic Co-operation and Development, (OECD), has warned that the effects of the pandemic will be far reaching and will likely hit the UK harder than other comparable major economies.
As the OECD reports of a very slow and difficult recovery for the UK, we are also reminded that UK debt has now reached historic levels. The World Bank and the IMF have voiced their opinions about debt too.
And not wishing to be left out of the doom and gloom discussion, the CBI inform us today, 11th June 2020, that British businesses do not have the resilience to cope with a no-deal Brexit after suffering severe coronavirus damage.
Historic UK debt level
There is so much bad news right now as we begin to wake up to the post pandemic after shock – but the worst of it for the UK in my opinion, is yet to be revealed and one of the big problems the UK face – will be the unprecedented level of debt that has been accumulated.
It is estimated that the UK will reach a grim milestone in June, a national debt of £2 trillion, and this according to projections from the Office for Budget Responsibility.
£2 trillion in debt?
The £2 trillion debt burden equates to something like £80,000 per UK household. The Bank of England reportedly commented that the UK will likely experience the worst recession for more than 300 years.
The debt of £2 trillion would place the UK debt level at 100% of national income – the highest level since the Second World War. And worse, it took more than 300 years to reach that burden of £1 trillion debt, but then only 10 more years to reach a £2 trillion debt pile.
Cheap money
It has become far too easy to borrow at low rates as central banks pour unprecedented amounts of ‘cheap’ money in to the global financial system to shore up credit lines, UK included.
There is so much ‘easy’ money sloshing around right now that this is the main reason we have witnessed such a fast recovery in stocks post pandemic lows. Money is especially cheap for those that don’t need it and can easily afford it, but not for those that do. This is not sustainable.
We now have the lowest interest rates in history and businesses and individuals are being encouraged to borrow, borrow, borrow!
That’s all very well, if the interest rates remain low, but at some point they will increase and debt will become an even bigger burden than it is now, especially so for you and me.
Debt keepers around the world, beware!
Market moving events likely to move markets scheduled for today, Thursday, 11th June 2020
U.S. – initial jobless claims data due: 13:30 BST – This will be one to watch. Sensitive data! Likely to move markets!