From Volume 38, Issue 33 of EIR Online, Published August 26, 2011

Global Economic News

Bankrupt Britain Has Put Up Its Defense Hardware in a Fire Sale

Aug. 15 (EIRNS)—Make no mistake about it: Britain is bankrupt. Last February, in an interview with the BBC, IMF chief economist Simon Johnson said: "Put the U.K. on the list" of coming sovereign debt downgrades and defaults. The European countries on "that list" are facing sovereign debt crisis and default because of the huge layouts they made in ultimately futile actions to bail out their big international banks. £144,600,000 is the interest the government has to pay each day on the U.K. net debt of £2276 billion (which includes financial interventions). This is estimated to rise to £182 million a day in 2015-16.

Facing this crisis, what has the Cameron government chosen to do? They put Britain's defense hardware up for sale. To plug a gaping £36 billion hole in the Ministry of Defense's budget, the aircraft carrier HMS Ark Royal, built at a cost of £200 million, has been put up for sale for a ridiculous price of £3.5 million on an eBay-style website.

Also on offer at almost throwaway prices are Type 22 frigates costing £400 million each at £300,000, destroyers at just £1 million, writes the Daily Mail, quoting senior officials.

It is not only the naval weaponry that is up for grabs, but also the 13 Gazelle helicopters which cost almost £5 million to build apiece are being sold at just £100,000.

For car lovers, the armored version of the Jaguars are going for just £12,000—cut from £200,000—and snatch Land Rovers at just £2,000, down from their retail price of £65,000.

British Unemployment, Especially Among Youth, Increases Sharply

Aug. 18 (EIRNS)—In the three months ending in June, unemployment has increased by 38,000 to 2.49 million (from 7.7 to 7.9%), while a record 1.26 million were working part-time because they have been unable to find full-time work. The Trade Union Congress points out that recent riots have occurred in areas where unemployment is highest. Of the 38,000 increase in unemployed, 21,000 were women.

Youth unemployment among 16-24-year-olds is now at 20.2%, the highest since the 1980s, and among the highest in the European Union. The Daily Telegraph puts youth unemployment even higher, at 24%. It currently stands at 949,000, an increase of 15,000 in the last three months. While there was a record number of students reaching "A" levels when graduating secondary school, there are only 40,000 university positions open to over 250,000 who will be applying. This will only add to the unemployment rolls.

Fears of Major European Bank Failure Choke Up Interbank Lending

Aug. 19 (EIRNS)—European banks are increasingly refusing to lend to one another, for fear that the borrower-bank will go bust before repaying. In an interview with Handelsblatt on Aug. 19, European Central Bank chief economist Jürgen Stark said the bank is taking the problem "seriously," citing the fact that certain Eurozone banks were depositing surplus cash with the ECB rather than lending it to other banks. Eurozone banks parked EU90.5 billion (about $130 billion) overnight with the ECB from Thursday, Aug. 18, to Friday, an increase from the previous day, and the highest level since Aug. 8, when it was EU145.2 billion, Agence France Presse reported. One unidentified Eurozone bank borrowed $500 million for seven days from the U.S. Federal Reserve's swap lines via the ECB this week, at a relatively high rate of interest, as we reported previously. reported today that, "Overnight, fear and indiscriminate selling reached new levels of hysteria, as news broke that a European bank had sought funding from the ECB because it couldn't get it elsewhere."

A front-page article in the Aug. 18 Wall Street Journal pointed a finger at the Federal Reserve's funding of European banks via their New York branches and otherwise, also effectively making the point that the European end of the breakdown can't be separated from the U.S. end. The Journal noted that much of Bernanke's QE2 money-printing had landed in European banks, and said that the Fed is getting near-daily updates on the cash positions of the New York branches of the European banks. Their total reserves on deposit at the Fed jumped from about $419 billion in July 2010, to $900 billion July 13 this year. Was this Fed money?

Then they dropped down to $758 billion by Aug. 3. Were the European home offices vacuuming in the cash to try to stay afloat?

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