What is going to happen?

It is obvious:  I missed something.

The amount of defaulted mortgage debt in this country over the last two years has resulted in about £2bn in losses for the banks.  Total mortgage debt is about £208bn.  This does not seem like a problem.

The number of people declared bankrupt over the last two years has created debts of less than £2bn.  They didn’t owe all that money to banks but it probably came round to them in the end.

Why did we (the government, us) have to put 100 times that into the banking system?  Probably good and well documented reasons.  However the disaster could not have been of our making, us, the UK population.  Somebody else walked away from their debts, not us.

The government has run up £805bn of debt which is 65% of GDP.  This is perilously close to the level at which we can never repay.  I have seen an estimate that the PFI and unfunded pension commitments come to £1.35trn.  This is definitely a level of debt that cannot be paid.  Alas we owe it even though the government ran up the debt on our behalf.  At 5% interest we are paying £100bn a year in interest.  If we were able to pay off a small amount of the loan and treat it like a sinking fund it will take more than 30 years to pay it off.  This requires that we spend less than we earn (as a nation) and can afford the 10% of GDP needed to service the loan.

Very big numbers, yet the average household debt is made up of £2,000 of loans and £8,000 of mortgage.  Most of us can manage that.  Can’t be a problem.  Not many of us are going to default on it.

So far the government response is that they are going to cut expenditure, most of which is spent in this country and increase taxes.  I don’t believe they can do it.  Any tax increase or spending cut is going to reverse any recovery.  Without action the loans we have will get very expensive as lenders start to doubt that we will repay.

I think that it is like a house of cards.  When you pull one out at the bottom you know it is going to crash but you can’t say where the cards will land or what bits will remain standing.

It is obvious: we’ve all missed something.