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11 January 2013


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Chris Downing

If a set of individuals were faced with the facts of your last blog - income £27k outgoings £34k overspend £7k total rolling debt £54k - I think they might accept something needs to be done. Although personally, their common fix was to morph that problem into a higher mortgage - job done!

Having educated themselves into believing financial problems can be just mortgaged away, they now seem to think that Governments will be able to do the same. Britain is demonstrably not a nation of savers. Paying off debt and living within your means is counter-culture for a huge proportion of the UK population.

For individuals and Government, it may take the 'bailiffs' at the door to jump start the necessary actions. We need a catalyst that causes a discontinuity so that politicians can blame the catalyst for action that should have been taken years earlier. Somebody to blame rather than take responsibility.

Ian Cameron-Mowat

Worrying and a sort of "Accounting for growth" for the word financial system. But

1. what would the balanced, no borrowing, state of the UK economy be like, with the multiplier rate more than one? Bad enough to provoke civil unrest? Maybe the politicians understand this.

2. and maybe the Chinese are happy to manage our slow decline and their long-term rise-lose money, but avoid WW3? Smarter than Europeans in 1914 and 1939.

Len Karpinski

So in other words we are just as much a debtoholic as Argentina was, though nobody has got around to admitting that we are as they do in a AA meeting.

With all of this in store Terry do you see any point in remaining in the UK? Should we all be doing a Jim Rogers and moving to Singapore? Every time I go there I really think what is the point on getting on the plane to come back as all the shite that you have to put up with in this country just does not exist there e.g. bent politicians/bankers not getting serious jail time, over bloated welfare state etc

Len Karpinski

Chris the problem is that the debt has not been accumulated to pay for a Versailles, though the Olympics came close to it in terms of money down the drain. It is instead for basic run of the mill stuff such as the state pension (which is the biggest item of state expenditure) and the NHS that have caused the problem. Which politician is going to have the balls to make those affordable? If anything with regard to the basic state pension they have just made the problem worse in that you now get it for just thirty years worth of NICs and they have included the "triple guarantee" on how it will increase in payment each year too.

Unfortunately I see the "reform" only coming after an Argentinian style 2001 blowout with the associated disorder on the streets. You can also challenge your lefty debt denying friends that it is racist to think the UK is too sophisticated to go the way Argentina has and that it will not happen here to

Will S.

Mr. Smith, I am currently a senior in college studying Accounting and Finance. I just want to say that reading your blog and Accounting for Growth have really begun to have a profound impact on where I see my career headed. If it would be possible, I would really appreciate if you could e-mail me? I have a few questions for you as I prepare to start my career in Finance. I really appreciate that you are sharing your financial analysis and thoughts. Best regards.


The thing I find difficult with this stuff is, what can I, as a layman with a job, do in response to it. If you read the numbers, grasp them, have the courage to face reality of the situation... well what else can you do?

Make sure you work hard to keep your job. Save money and use Isas, perhaps. Terry, you'd recommend drip-feeding Fundsmith I expect, subject to other financial priorities and requirements (eg a substantial cash cushion).

But really, what else can you do? Buy gold? And if there isn't much you can do... worrying about the macro picture isn't much fun, or very motivational.

Terry Smith

Guy: I would suggest saving rather than spending if you are in a position to do so. I know plenty of people who are living in a fool’s paradise-because their mortgage payments on their 100%+ interest only mortgages are so low. They are still spending like the proverbial drunken sailor on shore leave and have no significant retirement savings. I think an ISA is a good vehicle. I won’t recommend Fundsmith-that’s for you to decide-but I would advocate owning things which are likely to do well in a period of inflation/currency depreciation.

Terry Smith

Len Karpinski: I agree with you. If I did not have commitments in the UK I would leave and Singapore would be my first choice of destination.

Little Old Me

As ever, this blog is once again a refuge of fascinating reading and sage advice in the midst of so much spin and poor leadership on the part of our so-called politicians.

I must admit, by my own efforts (often called common sense, but deeply frowned upon by many these days, certainly so by those on their must-have 100% mortgages, methinks), I had actually got to the stage of asking myself the following two questions - as I am sure must many others who have stubbornly refused to adopt what seems like the mandatory debt-fuelled lifestyle we now operate, and dare I say it, even worship here these days.

1. What can ‘little old me’ do about all this to help ‘little old me’ in light of the fact that I don’t see myself as having contributed to this mess in the first place, yet now having to pay for it whilst at the same time having my prospects of a good future continue to be wrecked (added to the fact that I am not a financial guru, or for that matter, employed in financial services).

2. If the UK’s ‘broken’ - and obviously, I could use far stronger language than that, but I do quite like my country and many people have sacrificed a lot for it, not least in two major world wars - where else could/should I live and work?

Like the other regular folk out there, I’m ‘on’ ISAs, amongst other things. I even have some great gold jewellery, but converting that into real money as opposed to simply its scrap value (even though that’s above average right now), is not as easy/lucrative as the talk would have you believe! So, frankly, this is not doing it for me. But moving to Singapore? Is that the answer then?


"but I would advocate owning things which are likely to do well in a period of inflation/currency depreciation"

What sort of things Terry :)

Nick B.

What possible interest could our politicians plus their civil servants and supply contractors have in a balanced budget, serious expenditure reduction and a plan to reduce the national debt?

Those you live on the public purse are well aware that they get more out than they put it in taxes. They are therefore the last people likely to be committed to bringing things back into balance. When the main policy for balancing the books seems to be inflation and fiscal drag they will be well aware that our pain is their gain. Government gets to spend printed money first. By the time it reaches us it does not buy as much.

Government spending continues to support zombie businesses and the zombie banks. A lot more inefficient businesses need to go bust before the economy will be in a position to create real growth. It’s easy to be Keynesian when you are spending someone else’s money. Trouble is in a society where a significant proportion of the population get all their income from government (that’s the tax payer) and perhaps well over 50% rely on the system for some sort of top up it is not going to be easy to get a vote for self reliance and prudence.

Stephen Hedges

Mr Smith, I am astonished by your Singapore revelation! Of course I also approve of their government's reputation for fiscal rectitude(deserved)and incorruptibility (arguable). Oh and the climate really gets to you after a while.
Even the title of this blog suggests potential for conflict, surely? Too much straight talking in Singapore and your feet wouldn't touch the ground....

len karpinski

Blackpearl I think Terry is saying avoid investing in cash or bonds. In Malaysia where my in laws live and which has a bit of an inflation problem at the minute. You could even just do as they do and buy bottles of Hennessy down the supermarket and watch them rise in value over the years. There are no brokers to deal with or cgt to pay on disposal. Other than that the traditional hedges are gold,land and shares in high quality cos like you find in Fundsmith

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