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Sustainable Economy > Published by Alex Hern, December 21st 2011 at 10:00 am

The UK isn’t Greece, it’s Iceland

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Sometimes, a picture really is worth a thousand words:

Whether you look at international comparisons such as this one, or historical comparisons, it is clear that our government debt, though large, is not unsustainably so. Greece’s government debt is 145 per cent of its GDP; ours is 80 per cent (Eurostat).

Our financial sector, however, holds over 600 per cent of Britain’s GDP in debt, and as we reported earlier today, the Vickers report is doing nothing to stop that proportion growing. Icelandic financial debt hit 1000 per cent of its GDP before reality caught up with them.

We do have a debt crisis, but it’s not government debt, it’s banking.

(Chart from Business Insider via The Automatic Earth)

See also:

• Implementing Vickers won’t stop the next crisis – Josh Ryan Collins, December 20th 2011

• Cameron’s excuses don’t add up – Cormac Hollingsworth, December 13th 2011

• Trouble ahead for Cameron: Majority of Euro rebels were from class of 2010 – Shamik Das, October 25th 2011

• A damp squib or quiet radicalism from the Vickers Commission? – Ben Fox, September 13th 2011

• The Vickers report lacked ambition and lacks bite – Joe Cox, September 12th 2011

  • http://twitter.com/jcbweaver/status/149429743761104896 Cai Weaver

    RT @leftfootfwd: The UK isn't Greece, it's Iceland http://t.co/Nnh5PpDa

  • http://twitter.com/maximmanchester/status/149429751843536896 Max

    The UK isn't Greece, it's Iceland: http://t.co/1A41bbxC by @alexhern

  • http://twitter.com/berthaberserker/status/149430146313633792 BerthaBerserker

    'We do have a debt crisis, but it’s not government debt, it’s banking.' http://t.co/lHEyAM2o #frothers

  • http://twitter.com/politicalplanet/status/149430817058340865 Political Planet

    The UK isn’t Greece, it’s Iceland: Alex Hern presents a picture which says everything needed about the sources a… http://t.co/dOFitvEr

  • http://twitter.com/patronpress/status/149433390431608832 Patron Press – #P2

    #UK : The UK isn ’t Greece, it ’s Iceland http://t.co/MdNLNVCW

  • http://twitter.com/simonthewriter/status/149437014972956672 Simon Cheshire

    The UK isn't Greece, it's Iceland | Left Foot Forward http://t.co/tYp0x2AK (h-h-h-holy flippin' moley…!)

  • http://twitter.com/morosychristios/status/149439867422650369 Miles Douglas

    The UK isn't Greece, it's Iceland: http://t.co/1A41bbxC by @alexhern

  • http://twitter.com/thedeadduck/status/149440724331544577 Molly

    Joy. Shame we aren't like Iceland in the other way. RT @leftfootfwd The UK isn't Greece, it's Iceland: http://t.co/UeCYxWvf by @alexhern

  • http://twitter.com/45apl/status/149440827918270466 45apl

    RT @leftfootfwd: The UK isn't Greece, it's Iceland: http://t.co/NawJlBvw by @alexhern #NewsClub

  • http://twitter.com/cllrmmills/status/149441550542319616 Mark Mills

    The UK isn't Greece, it's Iceland: http://t.co/1A41bbxC by @alexhern

  • http://twitter.com/mcmlxxvi_ad/status/149441838615511040 Jamie

    The UK isn’t #Greece, it’s #Iceland http://t.co/NZa6XQRe #EU #Eurozone #economy #Osborne

  • http://twitter.com/june4th/status/149443597790494720 Noxi

    RT @leftfootfwd: The UK isn't Greece, it's Iceland: http://t.co/nIWnTFUe by @alexhern

  • Anonymous

    Really. Why is it 80%?

    Ah yes. The government isn’t going to pay any of those pesky civil service pensions. That’s spending, so its optional. No contract is there.

    Omitted from the Books. Current cost, 1.3 tn on top of the 1.05 tn ‘official debt’.

    Then there is that little thing called PFI. Again, thanks to Bernie Maddoff’s accountant, that’s off the books too.

    State pension? All those low paid civil servants, say 5 million, only manage to run up 1.3 tn of debts. There are lots of people with state pension entitlements. Ok, its small at 5K pa, but what shall we say, a tad under double the cost of the civil service pension? 2.4 tn (an accurate figure by the way). All thanks to those nice folks who used to work at Enron, we don’t have those on the books.

    State second pension?

    Guarantees for ex state enterprise pensions schemes such as BT. Current deficits 100 bn

    Nuclear decommissioning. Money taken up front – its a debt. 100 bn

    …

    Yep, all the debts have been hidden off the books bar Gilts.

    Now for that AAA rating. That is just the rating for the holders of Gilts getting their money back. It says nothing about the government’s ability to pay its other debts. Those debts are to the likes of you and me, and the ratings agencies view is that we get cut first, because governments will want to carry on spending, and they will need to borrow. Citizens are expendable.

    Now for your figures.

    1. Banks hold assets against liabilities, and they have to have an excess of assets. Otherwise they are bust.

    2. Most individuals again have more assets than liabilities – property against mortgages. Some have negative equity, but the vast majority are in positive territory.

    3. Corporates – again have assets greater than liabilities, or they are operating fraudulently.

    That leaves government. Governments have vast debts, mostly off the books. 7 tn present value (ie rising with inflation), against an “income” of 0.55 tn. Of that most of the money is earmarked not for paying debt, but for providing services. The government doesn’t have assets it can sell to raise cash. e.g Sell off a hospital. Ah but people need hospitals. So they rent it back. It’s either debt payments, or rent. Same effect on cashflow.

    They could try and say, look if we book people as slaves/serfs, we can give them a book value, their future tax income. However, people have this little pesky problem that they don’t like being treated as cash cows. They want something for their taxes – services.

    So the UK government is bust. Pure and simple.

  • http://twitter.com/ozzfan123/status/149448580237754368 Joe Andrews

    RT @leftfootfwd: The UK isn't Greece, it's Iceland http://t.co/DzWAZ0Yh

  • http://twitter.com/littlegingerkid/status/149448680380968960 Katie

    A rare case where #iceland is not a good thing > RT @leftfootfwd: The UK isn't Greece, it's Iceland: http://t.co/vazYLELH by @alexhern

  • http://twitter.com/freeedpeeps/status/149451499464966144 FreeEdPeeps

    #UK : The UK isn ’t Greece, it ’s Iceland http://t.co/MdNLNVCW

  • http://twitter.com/ladyditax/status/149452213524242432 D.

    The UK isn't Greece, it's Iceland: http://t.co/2hmqVIjq Excellent graphic showing how tiny Govt #debt is next to that of financial sector.

  • Selohesra

    We all know that the City represents a vitally important part of the economy and of course it makes sense to reduce its proportion of the economy but surely you don’t need to be a genius to see that evening things up is best done by growing the other areas rather than destroying the biggest contributor. Old man Cable and many articles on LFF seem to want war with the City & to destroy it.

    Reminds me of a Sesame St scene where they wanted to know how many balloons they had – some muppet (geddit) procedeeded to burst them one by one counting as he went

  • http://twitter.com/headlesslamarr/status/149464465224638464 Hedley Lamarr

    'We do have a debt crisis, but it’s not government debt, it’s banking.' http://t.co/lHEyAM2o #frothers

  • Trevor Cheeeseman

    Good article.

    Lord blagger – maybe you should read why 2012 coudl be an interesting year for european banks, according to Reagan’s ex-adviser…
    http://www.financialsense.com/contributors/lee-adler/2011/12/14/david-stockman-on-the-coming-euro-train-wreck

  • Anonymous

    we only have a debt crisis because all our money is created as debt…consequently if you pay all the debts back we will have no money and the economy will collapse…we have to replace debt issued money with publically created money which will have no interest attached to it….then we can pay back debts without causing a crisis and free ourselves from the slavery of debt

  • http://twitter.com/havantacluotmp/status/149500199797141506 Jeni Parsons

    RT @leftfootfwd: The UK isn't Greece, it's Iceland http://t.co/bF7AuiTU #otmp #occupylondon Someone enlarge this & us it as a poster

  • http://twitter.com/bruthamyles/status/149504573327933440 Myles Winstone

    “The UK isn't Greece. It's Iceland.” http://t.co/zLGWVO4U

  • http://twitter.com/davidwearing/status/149580676776210433 David Wearing

    Britain's problem isn't the government's debt. Its the banks' http://t.co/ASuwYQ6w

  • http://twitter.com/mr_pukeko/status/149581635984171008 Mr_Pukeko

    Britain's problem isn't the government's debt. Its the banks' http://t.co/ASuwYQ6w

  • http://twitter.com/jonathand/status/149582262839685120 Jonathan Davis

    Britain's problem isn't the government's debt. Its the banks' http://t.co/ASuwYQ6w

  • Blarg1987

    I think cable does want the other areas to grow, but lets be honest any form of economic change will cause some pain.

    Now the city will not like it if other areas are favoured over themselves even though it would be more beneficial for the overall economy so yes it is right to curtail the power of the city, if we do not do it now it will be harder to do during any economic boom as the city would just say the boom is engineered by us, which would not be necessarily true.

  • http://twitter.com/modditydodds/status/149745641935994880 Knut Cayce

    RT @leftfootfwd: The #UK isn't #Greece, it's #Iceland http://t.co/iMpDbvCq

  • http://twitter.com/creativecrip/status/149797728065560577 TheCreativeCrip

    Britain's problem isn't the government's debt. Its the banks' http://t.co/ASuwYQ6w

  • http://twitter.com/peggypapakosta/status/149799758066745346 Peggy Papakosta

    Οι αναλογίες του χρέους κρατών του δυτικού κόσμου. http://t.co/zDxc8QIx

  • http://twitter.com/achi7/status/149800036480462848 Achi

    Οι αναλογίες του χρέους κρατών του δυτικού κόσμου. http://t.co/zDxc8QIx

  • http://twitter.com/kikikogr/status/149801039799914496 kikiko

    Οι αναλογίες του χρέους κρατών του δυτικού κόσμου. http://t.co/zDxc8QIx

  • http://twitter.com/tsoufis/status/149818527535210496 Themis Tsoufis

    Οι αναλογίες του χρέους κρατών του δυτικού κόσμου. http://t.co/zDxc8QIx

  • http://twitter.com/creativecrip/status/149968240494383104 TheCreativeCrip

    The UK isn't Greece, it's Iceland: http://t.co/1A41bbxC by @alexhern

  • http://twitter.com/crtivcornercafe/status/149969860108095489 CreativeCornerCafe

    The UK isn't Greece, it's Iceland: http://t.co/1A41bbxC by @alexhern

  • http://twitter.com/rjcroton/status/150012108074008576 R J Croton

    RT @leftfootfwd: The UK isn't Greece, it's Iceland http://t.co/Cgn9sLl9 – Amazing graph

  • http://twitter.com/mole45/status/150168080939622400 joe oneill

    RT @leftfootfwd: The UK isn't Greece, it's Iceland http://t.co/2xosiDGm

  • http://twitter.com/robjohnston82/status/150696914797604866 Rob Johnston

    The UK isn’t Greece, it’s Iceland http://t.co/E3UrRtuQ

  • http://www.leftfootforward.org/2012/01/a-word-for-2012-liquidation/ A word for 2012: Liquidation | Left Foot Forward

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  • http://www.leftfootforward.org/2012/02/what-hague-had-to-say-was-absolute-crap-a-masterclass-in-economic-communication/ ‘What Hague had to say was absolute crap’: A masterclass in economic communication | Left Foot Forward

    [...] The UK isn’t Greece, it’s Iceland – Alex Hern, December 21st [...]