The UK in crisis

I’ve been talking amongst friends now for over a year about the gravity of the UK’s situation.  Calculated Risk pointed to this Roubini comment saying the UK is not the next Iceland–which Jim Rogers apparently claimed it might be. I didn’t see Rogers’ comment.  He’s often a little bit on the theatrical side but I always like hearing what he has to say.

The political demands to keep Sterling are obviously profound.  Britain still sees itself as a global player of empire-level importance.  This separate stand will work against the UK in the long run I suspect.

Still the UK is adding debt at a dangerous rate and the truth is, no one, Rogers or Roubini included, can forecast where this comes out for the UK with any plausible accuracy.  Iceland was a smaller economy and much more at risk of short-term radical bank failures.  Iceland has several hundred thousand people.  The UK has tens of millions.  Still, to see ancient institutions like the Royal Bank of Scotland crash and burn is more than bit troubling.  The UK is certainly the large economy that is most distressed right now.  Spain and Germany are also struggling, but as I interpret the data, they look to be a bit more in conventional recession than the institutionally challenged UK.

In sum, I doubt both Roubini and Rogers.  I think the future is far too murky to forecast accurately just yet.  We definitely need to see an end to the decline of real estate prices in both the UK and the US (as well as Spain and Ireland, etc.) before financial stability is going to return.

Here’s Der Spiegel on the catastrophe that is German banks.

John Kemp at Reuters throws in his 2 cents.  I think Kemp is closest.