2nd July 2012. Banking Scandal and Debt.
‘Things fall apart, mere anarchy is loosed upon the world, the centre cannot hold, the best lack all conviction, whilst the worst are full of passionate intensity’: Yeats.
As the problems accumulate a chain reaction of diverse events occur, resulting in a spiral into decline, both personal and corporate.
This was seen Today in 2012 when Marcus Agius, Chairman of the already besmirched name of Barclays Bank resigned over its involvement in Credit Default Swaps (CDS and Personal Protection Insurance (PPI).
But it was the ‘fixing’ of the inter-bank Libor Rate which forced the departure of Agius, followed the next day by his CEO, Bob Diamond who said ‘he didn’t know what was going on’.
Britain’s National Debt has grown over the centuries, mainly due to war, but it is the personal indebtedness since the 1930.s which has been a game-changer, beginning with Hire Purchase (HP), Credit Cards-starting with Barclay’s in 1967-and later following Thatcher’s financial deregulation, unrestricted loans and mortgages.
It spawned a culture of ‘get rich quick’ and ‘devil take the hindmost’, leading to disregard for sound practice, casino-like gambling of investment banking, aided by the new computer technology which saw ‘whizz-kids’ trading in millions over which top management had little knowledge or expertise.
It brought down banks such as Barings and caused the collapse of the UK banking system in 2008.
In 2012 Government Debt was 88% of the £1.7 trillion Gross Domestic Product (GDP), this along with UK consumers having £1.5 trillion in mortgages and loans.(1)
The National Debt is still rising and according to the Office of Budget of Responsibility, could be £1.5 trillion by 2017. The Institute of Economic Affairs says the figure could balloon to £5.5 trillion.(2)
This takes into consideration demographic change resulting from the post-war baby boom and longevity which will impact on future pensions and health care.
The concern for ordinary mortals lies in the meagre returns from savings as banks receiving Government money via Quantative Easing require less from savers, though mortgage borrowers have reaped the benefit.
Problems for the future lie in the ability to pay off debt, along with a growing longevity impacting on the NHS and Pensions.
(1) The National Debt rises £5,000 a second in 2016.
(2) The overall National Debt is up from 380b a decade ago.
Ref: Andrew Oxlade. Mail Online pub. 27.6. 2012.
Ref: bbc.co.uk/today.Monday 2.7.2012.