The Financial Crisis And The Common Man.

: Published on Sunday, 13 November 2011

We all look aghast at the G20 meeting in France and the shenanigans of the Greek and Italian governments with regard to their debt crisis however what do all these huge figures actually mean?

In the current financial year the UK debt is set to be £909 million million pounds. Using the American English definitions (now generally used everywhere) this is £909 Trillion pounds (A Billion pounds is a thousand million).

To make the current crisis more understandable remove 7 noughts and put yourself in the shoes of a proper bank manager (i.e. like Mr Mainwaring). Mr Bulldog has come to you because he is in a financial pickle. These are his financial statistics:

His income is £58,900 in the current year

His spending (including his debt interest) is £71,000 in the current year

Due to previous excessive spending his credit card debt stands at £90,920.

He had a major discussion with his wife last year. They changed their credit card provider and agreed to austerity measures to reduce the overspend of £12,100 each year. Unfortunately the family could only come up with planned spending cuts of £2,200 and at this stage they were not certain they could make these due to the cleaner threatening to go on strike and withdraw her labour due to the Bulldogs reducing their contribution to her pension plan..

Now we know a modern bank manager would role up the debt into the most expensive and profitable loan he could sell you, create a CDO (Collateralised Debt Obligation) then sell the whole package as a low risk investment to a pension fund. We suspect however that a proper bank manager (a mister Mainwaring) would look at the root of the problem and start to sort it out.

The debt added to the UK “credit card” this financial year is projected to be £121 billion. The current government cuts will reduce this by £22 billion. How is that going to solve our problems? Interestingly running inflation at 5% effectively gets rid of £6 billion on its own which may explain the BOE's lack of concern over such matters.

Finally whilst we are bringing these huge figures down to size, if you took the UK & USA National figures and divided them between every man women and child in the country the figures per person would be:

	UK	USA
1. Tax NI and other Revenue	£9,467	£4,323
2. Government Spending	£11,411	£7,610
3. Over spending (so new debt)	£1,944	£3,287
4. Current National Debt	£14,613	£28,430
5. Planned spending cuts	£345	£77

Whilst these figures may be a depressing thought we do have ideas on where the best place to put your money might be over the next 10 or 20 years. If you would like to know more please get in touch.

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