News & Analysis

Never a lender nor borrower be. Britain goes Greek with the debt bill

Andrew Saks, Tuesday, 22 June 2021

Never a lender nor borrower be, wrote William Shakespeare all those years ago. A wise tome, if ever there was, and one and that perhaps the British government should heed.

As we reported yesterday, the GBPUSD had begun to decline, something that had not happened for quite a number of weeks. Indeed, the GBP has been very much able to hold its strength against the US Dollar throughout the spring and summer thus far, which is remarkable given the circumstances.

Across the length and breadth of the United States, there is barely a face mask in sight, no tenders are being touted by state governments for the mass hiring of Hi-Vis jacket wearing lockdown marshals on three-year contracts, and there is no constant flurry of endless repetition in the mainstream news.

The President may well be a signed-up member of the same union of power-hungry socialists that lead the UK and Europe, but the country itself is in the condition that its founding fathers had always intended - personal liberty and the ability to work and prosper - all intact.

If the American Dream is finally alive and well again after a year of absurdity in the coastal states - the South and parts of the Midwest never locked down - it would make sens that the Pound is losing its buoyancy as a total contrast is on the cards in the United Kingdom.

As if the British economy has not been subjected to enough of a beating, those in elected power are now talking, completely predictably, about more lockdowns.

That in itself would be enough to send any investor in any large business, or any large company that requires a good quality and uninterrupted supply chain across the Atlantic to the land of the free.

There is more to it, however.

The British Pound has for very many years been the strongest currency in the world, and remains so, yet it has played second fiddle to the US Dollar as far as the benchmark currency for FX trading is concerned, even despite the Tier 1 banks – the uppermost level of the liquidity providers from which FX markets are actually created and order flow is handled for the entire world being based in London.

Yes indeed, the US dollar is a global standard for trade in all sectors of industry, across all international settlements and for creating comparisons and performance statistics. Effectively the US dollar is the measure by which to calculate absolutely everything, everywhere, yet the British pound remains the highest valued currency.

There was talk in 2016 of the British Pound becoming the default global currency in place of the US Dollar, but this went by the board because of the step that was intended to future proof the British economy entirely by its population voting to leave the European Union.

The British pound dived in value to a 31 year low immediately – but remained higher in value than any other currency.

Of course, once the cost analysis was complete, the Pound rallied and it was clear to see that once removed from the burden of paying endless free money to sleepy and destitute European economies, Britain was free to prosper.... until Boris Johnson came along with his lockdown obsession.

Now, Britain's debt to GDP ratio is rapidly approaching 100% as the government has borrowed another £2.4 billion during May this year.

What we have is a Prime Minister who promised the British public that by leaving the European Union the economy would be free of the massive debts and constant bailouts that are endemic in certain European Union member states, and that Britain would be free to trade internationally without the shackles of bureaucracy, and then just a few months later bans all business from operating, manhandles people in their own homes and causes business travel to be either impossible or prohibitively expensive and procedural.

Dr Jekyll and Mr Hyde.

The Office for National Statistics has confirmed today that the UK’s debt hit £2.19 trillion at the end of last month, representing around 99.2 per cent of GDP, the highest level in sixty years.

With an inactive workforce and constantly buying compliance by paying endless furlough, the government is turning the British economy once a bastion of efficiency and world-leading high technology into an empty shell with aspirations of turning into Greece.

Analysts used to use 'Greek debt' as a benchmark, and British politicians and business leaders used to sneer at it in a derisory tone, however that has gone quiet because Greece, an almost completely unproductive nation with no technology or financial markets, was in such dire straits and was considered to be the bain of Germany and Britain's lives.

Now, Greece's debt is 184% of GDP, and Britain's is almost 100. Not so funny now, is it? Especially when considering that the UK is the world's financial markets and fintech powerhouse.

Central London's financial markets sector employs only 0.0009% of the entire European Union's workforce and yet it produces 16% of all European Union tax receipts and has a 75 billion Pound trade surplus each year. Exclude that small but massively productive sector from Britain's figures and you get Greece.

Even trade union-led France, with its 30-hour working week and two-month annual shutdown in the summer is being approached. France, a country with a high standard of living and short working hours has a debt to GDP ratio of 115.3%. France is open, there are no lockdowns, and it is business as usual.

In the advent of Brexit, house prices were high and confidence in British firms’ future performance and ability to negotiate free trade agreements globally with critical regions in Asia, North America and Australia – all buoyant modern economies with highly developed financial markets sectors unlike Europe which is steeped in socialism, debt and dependency, and international venture capital investors are ploughing money into the prowess of the British business minds were considerations. These are now obsolete arguments.

It is purely down to negotiating liquidity agreements. An independent Britain means new negotiations needed to be made, thus a downturn in the value of the pound was inevitable during Brexit preparation due to liquidity shortages.

At that itme, it was not lack of confidence, or the negative thought that the United Kingdom needs Brussels, but simply liquidity shortages.

Now it is far more than that as the rest of the world wakes up and realizes that the G7 nations cannot instil totalitarianism, the highly populated Asia Pacific has worked endlessly with no lockdowns and there is no negative consequence, and Mr Johnson prepares to get his keys out again.

Share article

Trading Platforms

Access thousands of markets and trading opportunities with our award-winning trading technology.

Discover Platforms

Trading Courses

New to trading? Our free courses will give you a comprehensive introduction to all the fundamentals of trading.

Free Courses

Trading Webinars

Take part in our free basics or advanced online trading courses to enhance your trading knowledge.

Free Webinars

About ETX Capital

ETX Capital is a trusted trading provider that offers innovative technology and tailor-made services for all areas of electronic trading across commodities, equities, forex, and indices.