How Gordon mortgaged Sterling

It's been a stealthy decline till now, but the Great British Krone has taken another hit today and is now surfing near its record lows for the year. Of course, part of that is driven by worries of recession in a country that's forgotten how to make anything tangible. The only thing I saw manufactured the last time I was there were "services" (i.e. memos, meetings and committees).

There's a much darker force at work however - the catastrophic level of government debt that's been hived off the state balance sheet. The architect of this lunacy is the insidious Gordon Brown, who has managed to bend the rules for years.

In the spirit of public service (as the BBC doesn't seem to care about it any more), I've had a read of some tedious information on the UK government sites. The table below starts with the "official" government debt figure, then adds back the two main sleights of hand: PFI (off-balance sheet public works finance) and the cost (to date) of those generous bank bailouts.

So, even excluding some other liabilities (such as unfunded public pension deficits, future costs of the wars in Afghanistan and Iraq), the UK is twice as levered up as the official figures. So from about 40% of GDP, we're sailing north of 80%!

That uncomfortable fact is the root cause of the pound's slide. Sterling used to have a connotation of strength - it's now becoming a bit of a joke unfortunately.