While I was in the middle of my RRSP season one of my reader, Clare, sent me this link (http://www.webtvhub.com/bankrupt-britain/) and ask me if I think that the UK Government was pushing UK into bankruptcy. I certainly don’t think that UK is going bankrupt, but we have here another example how media can twist our minds.
I personally think that many individuals are benefiting from the current crisis. Some people are deeply investing in the market while stocks are low; some others are trying to get as much attention they can from the media. Saying that UK is going bankrupt for example can provide quite exposure to the world.
Why I don’t think UK is going bankrupt:
As it is the case for many countries during the economic crisis, the UK government proposed an economic stimulus (this word is quite popular these days 😉 ) plan. They offered to lend a lot of money to banks, nationalize some of them and inject a ton of money in order to reinstate trust in the market. Well all those measures cost awfully a lot to the government and one day, tax payers will receive the notice.
In the meantime, the UK government is financing his economic stimulus while digging one of the biggest deficits ever seen for this country. So, some people are saying that UK is heading towards Island fatal destiny: bankruptcy. Well I don’t think it will happen simply because there are so many countries that will keep lending UK to finance their measures. The question is: Do we believe in UK’s capacity of creating growth in the future? Hell yeah! Countries such as UK and USA had proven that they can stand up during the economic turmoil and put their economy back on track.
#2 Commercial alliances
Then again, several countries are making trades with UK on a daily basis. They certainly want to make sure that UK keeps buying their products and that they have access to this market. I’m pretty sure that most countries in Euro Zone will support any Euro countries (including UK).
#3 Possibility of joining the Euro
If things really turn sour for UK, they will avoid bankruptcy by joining the Euro. They would avoid any problems related to a devaluated sterling by changing their currency to the Euro. Then again, they would also benefit from the help of other countries.
In the end, I think the resources, the technology and infrastructure in the UK will put them back on track sooner or later. I would actually be more worried about BRIC’s than “mature” countries such as UK ;-).
image source: Flickr
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