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Aprril 2nd 2013 Dear friends, I have edited the following attached article written by

Money-line. This article is one of the very best articles put together by financial experts, from the UK, who normally advise those who have wealth, how to safely invest their money, inspite of different money crises in different parts of the world. Unusually so, they have put out a very dire and stark WARNING of an IMMINENT FINANCIAL COLLAPSE OF THE UK, due to it's unannounced TOTAL DEBT being one of the very worst in the whole world, and totally unsustainable. I have have cut out a lot of the very long article,but I can very much recommend this article for a thorough understanding of the financial situation in the WORLD today, and in particular the UK. This article is very shocking and is like the article "THE CRASH" by David Berg, which was written exactly 40 years ago on 16 December 2013. Best Wishes, Peter Brave-Heart P.S Any reactions are much appreciated

We cite our success and experience with the crises of the

past because there is an even bigger crisis looming –

something that we believe will distabilise the very

foundations of Britain.

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And that is why we've spent a significant amount of time and

money in the past few months preparing this letter... perhaps

the most important letter you’ll receive this year.

This looming crisis is related to the financial crisis of 2008...

but it will be infinitely more dangerous. As we’ll explain,

there is an unsolvable problem at the heart of our financial

system. One that dates back over a hundred years.

In that time this problem has eaten away more than £10

trillion in public funds. It has been at the root of practically

every major political argument in this country, and it affects

every aspect of the way we live our lives.

Twenty-five Prime Ministers – from both political parties –

have come and gone without ever having come close to

solving it.

We believe the outcome of this problem is inevitable… and

the recession, joblessness and instability you see right now is

only the first stage of it. Many people think the slump we’re

in now is as bad as it will get.

But the truth is, it’s only the start.

In fact, you will certainly see the consequences of this deep-

rooted problem unfold across the cities, towns and villages of

Britain. No one will escape the fallout.

In all recorded history, no country has ever recovered from

the financial position we find ourselves in today. No

government has ever been able to reverse this trend. No

emergency action has ever come close to a solution.

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This inescapable problem has only ever had one outcome:

financial collapse.

Believe me, we don't make this prediction lightly and we have

no interest in trying to scare you. We're simply following our

research to its logical conclusion.

We did the same when we anticipated the global credit crisis,

the property slide and the collapse of the banks.

That's why, before we go any further, we need to make

something clear...

This is the most serious warning we’ve ever made

This is not just about your money. Yes, at its core, money is a

big part of the issue. But it goes deeper than that.

What we are going to say is controversial. It will shock many

people. In fact, we anticipate an inbox full of angry emails for

what we are about to reveal.

And the ideas and solutions we are going to suggest might

seem somewhat radical to you at first.

Way back in 2005 – when we began warning about Britain’s

dangerous debt burden – very few took us seriously... not at

first. Back then, most mainstream commentators – from the

Financial Times to the Daily Mail – just ignored the views we

published.

People couldn't refute our research... but they weren't ready to

accept the enormity of its conclusions either. Our guess is

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that, reading this, you may say that too. You’ll say: "There's

no way this could really happen... not here. Not to me."

But consider this:

No one believed us six years ago when we predicted the oil

“super spike” months before it made its 82% climb.

No one believed us five years ago, when we anticipated the

slide in the pound, calling our national currency ‘Down and

out’. It has since suffered a long decline and will do so for

many years to come.

And no one believed us three years ago when we advised our

readers to ‘SELL EUROPE’. The eurozone crisis has since

devastated stock markets across the continent.

In each case we were right to issue these controversial

warnings early.

Those who received our early insights – our regular readers –

would have made and saved thousands from these events.

They had quite an advantage.

And that brings us to today...

The same financial problems we've been tracking from bank

to bank, from company to company for more than five years

have now found their way into the heart of our financial

system. we’ll explain how this came to be, because what it

means is critically important to you and everyone in the

country.

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The next phase in this crisis could threaten our very way of

life.

We predict that everything about your financial life will

change: where you bank, how you store your money… when

you plan to retire… the way you protect your family and

home.

we'll explain why we believe these events are about to

happen. You can decide for yourself if we’re full of hot air.

As for us, we are more certain about this looming crisis than

we have been about anything else in our publication’s

history. It makes us worry about the future for our families.

Here at MoneyWeek, we know that debts don't just

disappear. We know that bailouts have big consequences.

We know that printing mountains of money can only end in

disaster. And, unlike most of the pundits on TV and in the

mainstream press, our analysts understand what’s really going

on, and they have made a habit of getting the majority of these

big calls right.

Of course, the most important part of this situation is not

what is happening… but rather what you can do about it. In

other words, will you be prepared when this crisis becomes a

national emergency, as we predict?

We fear that most people will not know what to do if

banks fold and they are unable to withdraw their savings.

They won't know what to do if the stock exchange

suspends trading. They will be clueless if their pension

income dries up. And if their home loses 50% of its value.

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If the NHS is sold off and benefits are scrapped, the

confusion will turn into rage. Media coverage will be of

course, unhelpful.

You can challenge every single one of our facts and we are

confident you'll find that we’re right about each allegation we

make. Then you can decide for yourself.

Will you act now and take this chance to protect yourself

and your family from the catastrophe that’s brewing right

now in our financial system?

We hope so. And that’s why we wrote this letter.

We are going to talk you through exactly what’s happening

and what you can do as well. We can’t promise you’ll emerge

from this potential crisis completely unharmed – but we

sincerely believe you’ll be a lot better off than people who

don’t follow the simple steps outlined in this letter.

But we're getting ahead of ourselves a bit.

Let's start at the beginning. Here’s why we are so

concerned, and what we believe will happen in the very

near future...

The downward slide has begun

Britain is about to be flattened by a tidal wave of debt. It

doesn’t matter if you vote Conservative, Liberal, Labour,

UKIP – or for no party at all. The facts are the facts.

Let’s take a look at some numbers…

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Two and a half years ago, when the Coalition government

formed, we were already in a huge amount of debt. In fact, the

previous government had left the country sinking under £700

billion’s worth. Take a look at the following chart:

Source: ukpublicspending.co.uk

The Coalition has spent the last two years desperately and

very publically trying to get our finances in order. We’ve

had an “austerity” budget. We’ve had tax hikes. We’ve had

“the cuts”.

But for all that, our national debt is still growing at an

incredible rate.

Despite David Cameron’s talk of “austerity”, he’s going to

add an estimated £700 billion to the national debt in just five

years. That’s more than Tony Blair and Gordon Brown added

to the national debt in eleven years. It’s more than every

British government of the past 100 years put together.

The fact is, when you look at our finances as a whole, the

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Coalition isn’t cutting anything. State spending is going up…

our national debt is going up… and our interest payments are

going up.

By the next general election in 2015, our national debt is

estimated to stand at almost £1.4 trillion, as this chart shows:

Source: ukpublicspending.co.uk

It’s clear: our public finances are in an enormous mess.

Anyone can see that. And to some extent, some politicians

will admit it. But add in our financial, personal and private

debts… and an even darker picture emerges…

Compared to the size of our economy, Britain is now one of

the most heavily indebted countries in the Western world.

That’s official. Our total debts stand at more than FIVE

TIMES what our entire economy is worth.

Proportionally, that’s more debt than Italy… Portugal…

Spain… and almost twice as much debt as Greece. Those are

four countries already in the throes of financial crisis. We’re

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the odd one out because we haven’t collapsed – yet. But

things can’t stay that way for long.

You see, the only countries that have more debt than us are

Japan, where the economy has stagnated for 20 years and the

stock market has crashed by 75%... and Ireland, where the

housing market has crashed 50%, and the government has

been forced to accept a bailout.

In fact, our debts tower above almost every other nation’s –

here are the figures that prove it:

Source: Haver Analytics; Bank for International Settlements;

national central banks; McKinsey Global Institute

That's absolutely incredible, isn't it? Yet you’ve probably

never seen this fact reported in The Telegraph or on Sky

News.

And the worst part is, even THAT isn’t the full story…

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Because when you add in all of Britain’s “unfunded

obligations” – promises the Government has made on things

like public sector pensions – our debts swell to 900%

of our economy.

That’s right – when you add everything up, we owe TEN

TIMES what our entire economy is worth.

Our political leaders still like to see Britain as a world

power. But let’s not delude ourselves. It’s clear to see: we’re

totally broke.

It doesn’t matter which set of figures you use, or which way

you look at Britain’s debts. We’re merely talking about

different shades of disaster here.

A country can either pay back its debts or it can’t.

And it is very clear to us that Britain can’t.

But how did we get here?

After all, we were once the richest and most powerful

nation on earth.

What happened to all of our money?

A dangerous experiment gone wrong

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On the 1st of January, 1909, something happened for the first

time in British history.

The government agreed to redistribute taxes to support people

in their old age. On that day, more than any other, the modern

welfare state began in earnest.

The rules were simple. Men aged 70 and above could claim

between 2 and 5 shillings per week from the government.

But for all the positive press and good feeling, the government

wasn’t really making that big a financial commitment –

because back then the average working man could only expect

to live to 48 years of age.

That’s the equivalent of offering someone a pension today…

but only when they reach the ripe old age of 115. So the idea

of rewarding anyone who made it to 70 with a hand-out from

the public purse seemed perfectly fair. And more importantly

for the government, cheap.

That first year only 500,000 men qualified for a government

pension. So at the time there were 10 workers for every

pensioner.

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Lloyd George initiated a social experiment that would soon

spiral out of control.

It was a perfectly workable policy, but few politicians realised

that they were setting in motion a sequence of events that

would inevitably lead to the crisis Britain faces now.

And let’s not forget, at the beginning of the 20th century,

Britain still had a booming overseas Empire. It had yet to fight

in the cripplingly expensive First World War. The economy

was on a seemingly permanent upward trajectory.

And the idea that Britain could face any kind of decline –

financial or otherwise – had not yet entered mainstream

thinking. We could afford to pay for a welfare state, so why

shouldn’t we implement it?

But there was one problem: now the welfare state had

started… no one had any idea where it would stop… or

whether it could actually be stopped if it became unaffordable.

We’d created a trap for ourselves… then stepped right into it.

“Please sir, can I have some more?”

It wasn’t until the Second World War was finally over that the

welfare state really began to grow…

Welfare was seen as a major part of “Winning the Peace”;

keeping the forces of Socialism and Fascism at bay. Of

course, politicians soon realised welfare wasn’t just a tool to

win the peace. It was also incredibly effective at winning

votes too.

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This same scenario came to be repeated across the world – in

the USA, Japan and across Europe. Seemingly limitless

economic growth and prosperity allowed politicians to make

an essentially unlimited promise:

The government promised to look after you “from Cradle to

Grave”. This single, powerful idea gave government the

licence to swell to a size unimaginable just half a century

earlier.

The promises got bigger, and so did the cost.

In just a few short years, the size of the welfare state grew,

almost uncontrollably, in a flurry of new laws. There was The

Butler Act, which reformed schooling. The Family Allowance

Act. The National Insurance Act. The National Health Act.

The list went on. The problem was, this all came with a nasty

side effect. It was immensely expensive.

Everyone assumed we’d be able to pay for it forever.

But they were wrong.

Politicians found themselves totally and utterly caught in

this trap. Any attempt to reduce the size of the welfare

state was met with often violent resistance in the form of

strikes and protests. Or the party trying to cut back – to do

the sensible thing - was simply voted out of power.

After all, an ever growing proportion of the population

now benefitted from the welfare state, in one way or

another. The safety net couldn’t just be pulled away. The

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government would forever be saddled with an expense that

could ONLY grow.

And grow it did:

Since public pensions were first introduced, average life

expectancy has grown from 48 to 80 – a 67% increase.

But the age at which we retire has remained essentially

the same. This has resulted in an estimated £5 trillion

worth of pension promises the state has made to its

citizens – roughly five times what our entire economy

is worth. No one has any idea how we’ll pay these.

The recent attempts by the government to change the

retirement age don’t go anywhere near solving the

problem.

As people have lived longer, the strain on the NHS – the

demand for medication, more doctors, nurses and other

staff, as well as a skyrocketing cost of caring for the

elderly – has pushed our finances to breaking point.

In fact, as state spending has grown, so has the cost of

running the welfare system itself. For instance, the state

employs half a million civil servants. To put that into

perspective, during the height of the British Empire,

when Britain ran a quarter of the planet, the state

employed just 4,000 civil servants.

If you’re in any doubt just how out of control state spending

has become, simply take a look at this:

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Source: ukpublicspending.co.uk

As you can see, spending has exploded in a way no one could

have imagined 100 years ago.

With the idea of welfare being such a vote-winner, no

government could take the bull by the horns and cut it back.

Not in any meaningful way. They could fiddle round the

edges and save a few pennies here and there, but as the

population grew larger and lived longer, all they could really

do was sit back and let a future generation sort it out.

And now it’s come down to us.

In 2012, for example, the government will spend roughly

£120 billion more than it collects in taxes.

Government over-spending = BORROWING

And in a situation like this – when you spend more than you

earn – there’s only one way of paying for it. By borrowing

money.

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That alone is bad enough. But remember, we also have to

service our debts – to pay interest on a pile of debt that’s

mounting ever higher… debt that we’ll never pay back.

So a vicious cycle was set in motion. Politicians realised that

to remain in office they needed to make bigger promises, call

for bigger reforms, and ultimately borrow more and more

money.

This addiction to debt has spread into every corner of

British society. Banks… businesses… the ordinary man on

the street – these days they all carry a great weight of debt.

Debt has become normal. Want a holiday? Pay for it on credit.

Want a new crowd-pleasing cut in taxes? Fund it with debt.

To put it bluntly our politicians – so-called educated people

who are meant to be looking after our interests – acted like

teenagers with their first credit card – all to win votes.

If the UK had been a business or an individual, we’d have

been declared bankrupt by now. We’d have been forced to sell

our business premises or our home and would have been

housed in a run-down flat long ago.

We are broke. We have been for a long

time.

But very soon, it will really hit home.

The most powerful world trend of the next 20 years

So what’s different about today? Why can’t the government

just keep giving us MORE – and take on more debt to pay for

it. That’s worked for 100 years – why won’t it work now?

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The answer to that is simple. The explosion of government

spending and government debt has mostly come in the past 30

years. And during that time, it’s been easy and cheap for the

government to borrow money.

You see, interest rates on the government’s debt have been

steadily falling for thirty years. Here, let us show you…

Source: Gecodia.com

In 1982 Margaret Thatcher’s government had to pay 15% to

borrow money for three years. This came in the form of a

bond (a gilt). Anyone with money – be it a rich country or a

pension fund – could invest in the bonds, and receive 15%

interest in return.

But over time the government’s borrowing costs have fallen –

dramatically. Now, the government only has to pay 2% to

borrow money over the same period. That’s seven times

cheaper than in 1982.

And low interest rates make it easier to borrow money.

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Debt has been getting steadily cheaper for three decades.

That has allowed the government to borrow more and

more money, without having to face the consequences.

But these ‘good times’ are about to come to an abrupt end.

The simple truth is, if interest rates were at their normal

rate of 5% - instead of the extremely low 2% they’re at

right now – there’s absolutely no way Britain could ever

repay its debts. In fact, at normal rates of interest we’re

already bust. Not just ‘in over our heads’ but six feet

under.

It’s simple maths. If interest rates moved back towards the

normal 5% level, our cost of borrowing would triple.

Just to put that into context, if our current debt repayments

tripled, the government would have to take drastic action –

like abolishing the state pension. Or privatising the NHS.

Or pushing tax rates back up to 90%, as they were in the

1960s.

In short, Britain would change radically.

And that’s just if interest rates move back to “normal”

levels.

The fact is, when you’re in a lot of debt, interest rates are

either your lifeline… or your death sentence. So long as

rates stay low, you can just about keep things on track. You

can service your debts… keep borrowing… and keep the

wolves from your door.

When rates move higher… you get squeezed… and

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eventually, you’re finished. All of a sudden, you have to find

more and more money to cover the interest on your debt.

They say a picture tells a thousand words. So we’ll save a few

words and show you this:

Source: Bloomberg

This is an extreme example of what happens when interest

rates take off. As you can see, in 2009, the Greek government

could borrow money at just 1%. Then in the wake of the

financial crisis, the Greek economy hit the rocks, fell into

recession and the markets realised what a complete mess the

country was in.

Interest rates shot up vertically. And Greece imploded. Not

just financially, but socially and politically too...

As you’ve seen on the news, there have been riots, suicide,

overnight poverty, snap elections and crushing general

strikes. People couldn’t get their money out of banks fast

enough, businesses collapsed. In that environment, just

keeping your family safe is a big challenge. That’s the

danger of rocketing interest rates to a country with huge

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debts.

As Douglas Carswell, MP, said recently: “Greece might be

the first Western country to discover that you cannot keep

running up debts to pay for a lifestyle you did not earn.

She will not be the last. The laws of mathematics are

universal.”

In Britain, interest rates on government borrowing now stand

at record lows. If we’re not at rock bottom, then we’re

incredibly close.

That means the most important trend of the next twenty

years is almost certainly rising interest rates.

Debt has been getting cheaper for thirty years. Now it’s

about to start getting much more expensive.

We’re now facing an unprecedented crisis. As interest rates

rise, our record debts will become impossible to bear.

No one can say how quickly things will escalate. Interest

rates could rise overnight. Or they could slowly and inevitably

push higher, taking years to slowly strangle the economy, the

housing market, the stock market… stripping us all of our

wealth one day at a time.

What we can say with certainty is that sooner or later interest

rates WILL rise. We’re approaching the day when foreign

investors realise the scale of our problems, and demand

higher interest rates… or stop lending to us altogether.

When that day arrives, we are certain things will get nasty.

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How Britain collapses from within

So what happens to Britain when interest rates rise? What

shape will the crisis take? And what does all this mean for

you, and your family?

The first “flashpoint” will be the banking system. We’ve

already seen this across Europe. This is because banks

hold huge amounts of government debt. When interest

rates rise, the value of government debt (bonds) falls.

Even a small jump in interest rates would wipe

billions of capital off banks’ balance sheets. It’s

impossible to say exactly which high street banks – if

any – could withstand that kind of hit.

Imagine standing outside your bank, not knowing whether

you’ll be able to withdraw your savings.(Image © Bloomberg)

As news of the banks’ problems hits the press, and rumours of

a new round of b ailouts spread, the public will

catch on to what’s happening. We are likely to see a run on

the banks. Picture the scenes we saw at Northern Rock, as

people rushed to get their savings back, but ten times

worse. That’s because this time round, the government

simply won’t have the money to bail the banks out again.

But the crisis will not be confined to the financial sector.

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The disturbing reality is that a tiny increase in the interest

rates could force tens of thousands of people to miss

payments and default on their mortgages.(Image ©

Bloomberg)

The next domino to fall will be the housing market. Most

mortgages are linked to interest rates. As interest rates

shoot upwards, millions of people will be pushed

“underwater” by a combination of falling housing values

and rising mortgage payments.

But that isn’t all…

When a financial system ceases to function, the social fabric

begins to fray. We are not simply talking about shares falling

or house prices dropping, which is devastating enough. We

are talking about the breakdown of social order.

The important thing to realise is that Britain is going to

change – very significantly. Things might never be the

same again.

A warning from history

Is this all too alarming? Some of our critics would say so.

Most people think Britain’s debt collapse can’t happen. Of

course, it’s hard to picture. Banks look safe until they

announce they’re broke. Governments say everything’s under

control, until they beg for bailouts.

These events often come as a shock to the public. Many

people assume they’ll never happen. But assumptions can be

misleading. Especially ones that are widely held.

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The Victorians thought the British Empire would last forever.

Americans in the 20s thought the stock market boom would

never end. And here in the UK, during the 90s and early

2000s, we thought we could keep borrowing and spending

forever.

But if you need any convincing of how quickly things can

change… of how rapidly order can turn into chaos… history

offers us a number of painful reminders.

Let’s take just one of them...

In the early 20th century Argentina was one of the world’s

largest economies. Rich in natural resources, a massive

industrial sector, so cultured they called Buenos Aires the

Paris of South America. In fact, a popular saying 100 years

ago was as ‘rich as an Argentine.’

But fast forward to the end of the 20th century, and things

looked very different. Argentina’s borrowing spiralled out

of control…

A debt implosion isn’t pretty. Order very quickly turns

into chaos. That’s what happens during a debt

collapse.(Image © Bloomberg)

As Argentina’s debt accumulated in the late 90s, its

financial system buckled. Austerity measures were put in

place (sound familiar?), businesses closed, trade fell off a cliff

and investment fled the country by the billion…

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Come early-2001 the country was in a state of siege, with

banks blocking cash withdrawals, rioting in the streets

and the total collapse of government. So desperate were

villagers for food, they hijacked livestock trucks and

slaughtered the animals in the streets.

To give you some idea of how bad things got – and how

quickly they escalated… you need to listen to our man in

Argentina, Federico Tessore. Federico is one of our private

network of analysts. He worked as a Financial Advisor for

Citibank in Buenos Aries at the time, experiencing the chaos

first hand.

He’s got quite a story to tell…

“It was 2001… the US had just suffered the 9/11 attacks,

many Argentines were frightened about what could happen in

America. It was chaos. So they decided to bring back their

money to Argentina...

But that was a terrible mistake, because in December of 2001

the Argentinian government created the "corralito". In

English you would say "playpen", I think... we called it a

“money prison”.

This meant that you could only get out 500 US dollars per

week in cash from your bank account. It didn’t matter if you

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had $1 million in the bank, in cash… you could only get $500

per week.

For two months this madness continued, until the government

decided to convert the US dollar deposits into Argentinian

pesos...

The official exchange rate was 1.4 to 1, but the illegal market

exchange rate was 3 to 1. Even worse, this conversion was not

in cash. The government created a 10-year bond for the

depositors.

So, people that had a $100,000 deposit in the bank were given

an Argentina pesos 140,000 10-year bond...

This of course enraged people, who stormed into the banks

very angry. I was working at the Citibank bank at the time. I

saw what was happening from the inside. More than once my

life was threatened by desperate customers who just wanted to

get their money back. I had to talk with thousands of people

per day, many old people, and try to explain what was

happening... it was almost impossible.

One of the hardest parts, was to explain why the

international banks like Citibank, decided not to recognize

the dollar deposits to their customers. They had the money

abroad to do that. But they didn´t do it. They basically

defrauded their own customers...

The depositors attacked the banks, rioting outside, smashing

the windows… all the walls where painted with insults and

complaints. We had to enter the bank escorted by the police...

it was like living in hell."

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It’s a chilling story… within three or four years the country

fell into financial and social anarchy. And what happened

next? Well, Argentina wasn’t crossed off the map. It still

exists. But twelve years on, it’s barely recovered. Conditions

for many honest, hard-working people are simply terrible.

They are still trying to understand what happened to their

tattered country.

The government has raided public pensions, the stock market

is depressed and the global market steers well clear of

Argentine bonds. It’s not complicated. Once your country has

imploded and trust in systems and institutions has evaporated,

investment stays away for decades.

Regular Argentines now hoard gold. Endless government

scams and corruption have made them suspicious and

distrustful. And a culture of short-termism pervades.

But that’s Argentina, right? A crazy South American

country full of impulsive hot-heads and corrupt

politicians. That could never happen here in Britain. That

could never happen to us.

Really?

Anyone around fifty years old will know that, we’ve had our

own taste of financial and social collapse, in the relatively

near past.

Around forty years ago, Britain entered its own ‘lost decade’

of economic chaos…

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“Them Was Rotten Days.”

The Smiths

Back in the 1970s inflation ate into cash savings at a rate of

28%. Yes, 28%. It seemed like every time you turned your

back, bank savings lost more of their value. Every single day,

you became a little poorer.

The FT30 entered the worst bear market in history, falling

73% between 1973 and 1974. Even gilts – our so-called

“safe-haven” – collapsed as interest rates went sky high.

Rising interest rates buckled the financial system. But it

went deeper than that. The speed of the social breakdown

was frightening…

It seems insane now, but social order quickly breaks down

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when the money stops flowing. Britain’s coming debt

implosion could plunge us back to the darkest days of the

1970s. (Image © Getty)

The general strike meant dead bodies went unburied as

gravediggers joined the picket line… Stinking piles of

rubbish rotted on the streets, towering inside Leicester

Square… Those lucky enough to have jobs had to swallow

huge wage-cuts during the infamous ‘three-day-week’.

Shoppers scoured supermarket shelves by torchlight

during blackouts.

“We used to think you could spend your way out of

recession and increase employment by boosting government

spending… I tell you that option no longer exists. And so far

as it ever did exist, it only worked on each occasion… by

injecting a bigger dose of inflation into the economy,

followed by a higher level of unemployment as the next

step.”

Jim Callaghan. (Image © Getty)

These words are amongst the most important ever uttered in

the history of modern British politics. Unfortunately, almost

everyone has forgotten them.

For a left wing Prime Minister to admit that too much state

spending is dangerous SHOULD have marked a big turning

point in our history.

But of course, it didn’t – as this chart so aptly

29

illustrates:That’s not to mention the violent civil unrest,

where thousands of the unemployed and strikers clashed

with the police. For millions of people trying to keep their

hard-earned money secure, it was a nightmare.

As the top rate of income tax peaked at 83% in 1974, foreign

investment steered away from Britain as if it were an

island colony of lepers. We were the ‘sick man of Europe’.

Property and banking crises meant that, people’s lives

changed dramatically for the worse: jobs were lost, family

businesses closed, people had to dig deep into their savings

just to make ends meet. The country was brought to its

knees.

So when we’re talking about financial emergencies, don’t be

under any illusions. It can happen here in Britain just as it

can happen anywhere – given the right conditions.

In 1976, humiliated, the UK government had to be rescued

by the International Monetary Fund, with Jim Callaghan

going cap-in-hand to beg for a huge bailout. Humbled, he

delivered what was meant to be a wake-up call for the British

financial and political system:

30

Source: ukpublicspending.co.uk

In the 1970s the spend-borrow-spend experiment should

have ended. It should have been our wake-up call. But we

just kept on spending. So long as interest rates kept going

down, there was always a way to put off the pain… a reason

to borrow more… a justification for not balancing the books.

But the day of reckoning is approaching.

When?

Well, we can’t say exactly. It might be a long, slow drawn-out

process that drains your wealth over the next decade. Or this

time next year, the financial system could be breaking apart.

It’s impossible to say.

But we think that savers and investors who are not aware of

the full risks – and who fail to protect themselves – will suffer

the most.

The vast majority of people here in Britain will have no idea

31

what action to take as they watch their wealth and financial

security drain away, out of reach, perhaps forever.

The important question for you is:

When this happens, will you know what to do?

The problem facing everyone in Britain

When these events unfold, very few people will have any idea

how to respond. Most will see the assets they have worked all

their life to secure begin to lose value, rapidly.

It won’t matter if you have £5,000 in the bank or £500,000. It

won’t matter if you own a five bedroom house in Esher or a

one bedroom flat in Croydon. This crisis will lay waste to the

wealth of anyone who isn’t prepared for it.

The most horrible feeling will be the loss of control and the

confusion.

Desperate to take some sort of action, many people will feel

pressured into making investments that could blow up in their

faces.

The cost of making the wrong move with your money, over

the next few years, could be lasting. What if your money is

trapped in one of the banks that collapse? What if your

invested wealth is stuck in one of the companies most likely

to crash? This is about knowing what you CAN do with your

money if the worst of the crisis unfolds.

Our intention is not to be melodramatic. But if events

unravel as we expect, thousands of people will lose a lot of

32

what they have. And they won’t be able to do a thing

about it.

By the time most people have pieced it all together, or the true

significance of this information makes the headline news in

the financial press, it will be too late. And that’s why so many

people could get caught out and lose so much money.

It’s essential you prepare for these events. You can’t rely

on mainstream commentators to help you.

So who do you listen to?

Warning: Prepare for this disaster or you could lose a

serious amount of money.

For most people, disasters of this magnitude come out of

the blue.

But for our readers, financial crises are rarely a surprise.

Often, we spot these dangers approaching - as we have this

one - and give our readers time to prepare.

For more than a decade MoneyWeek has been sharing its

insights with private investors. We have helped steer them

away from dangerous areas of the market, into profitable

ones.

In short, we have a track record of getting many of these

things right.

We gave our warning to steer clear of British banks as early as

2005.

33

But when they crashed in 2007, a lot of Britons still had their

money tied up in banking shares – and they lost a lot of it.

Let’s take another example – property.

In October 2006, both the FT and Telegraph were singing

property’s praises.

“Property prices take off as buyers return to the market” – The Telegraph, 12 October 2006.

“Property boom extends across UK” – The FT, 13 October 2006.

But we saw things differently. Our research told us the market

had dangerously topped-out. Our message was loud and clear:

“Get out of property NOW!” – MoneyWeek, October 2006 – February 2007

Within just a year the property market began its steep fall –

just as we’d warned.

We don’t know if you personally lost money in the property

34

collapse, but many people did. Thanks to the the UK’s

obsessive property mania, egged on by the mainstream media

, many unfortunate people timed one of the most important

investments of their lives completely wrong.

On the other hand, those that listened to our timely warning

had the opportunity to secure their wealth.

“Without the catalyst of MoneyWeek I surely would be part of

the herd and suffered greater losses through these challenging

times – that is a fact.”

T Le Grange, Southampton

Another example…

“The FTSE giants have nothing to fear” – Telegraph, 29 July 2007

Once again, our team saw which way the wind was blowing.

“Here comes the crunch” – MoneyWeek, 27 July 2007

And right before the colossal crash of 2008 we issued a

35

stark warning: “The credit carnage is far from over.”

Our message right now is that we believe Britain is

entering a long, downward cycle. One that is likely to be

punctuated by a devastating financial, and even social

collapse.

Our research group draws upon the knowledge and experience

of some of the brightest and most forward-thinking financial

minds in the country.

.

The fact is that many ideas about investing, which

emerged over the past few decades, have to be radically

re-evaluated. The idea that you can just ‘buy and forget

it’ – whether we’re talking shares or property – is plain

wrong. That’s how things used to work. But not any more.

That kind of wrong-thinking over the coming months and

years, could be disastrous for you.

Escape is impossible

If you take one thing away from this presentation, it should be

this:

In recorded economic history, every single country with

debts as big as ours – every single one – has suffered a

devastating economic collapse. There are NO exceptions.

36

For example…

During the Great Depression – when thousands of ordinary

people lost everything – America’s total debt hit 252% of

GDP. In any circumstances, that’s bad.

But things can get worse. During the Japanese economic

collapse – which triggered more than two decades of deflation

and a 75% drop in the stock market – Japanese total debt hit

498% of GDP. That’s twice as bad as the level of debt seen in

America during the Great Depression.

If Britain’s current debts were at those kinds of levels, it

would be worrying. But in truth, our debts are now much

worse than either of those two examples.

Shockingly, our debt load is now on a scale comparable with

one of the most frightening economic disasters of the 20th

century…

We're talking about the Weimar Republic.

Back then, suffering under the weight of brutal war

reparations, civil unrest and shattered public finances, the

Weimar Republic’s total debt equalled 913% of its

economy.

I’m sure you know what happened next: the government

printed money and hyperinflation took off. In the end, it was

cheaper to decorate your home with bank notes than

wallpaper. Ultimately, the country descended into a period

of economic and social crisis… a catastrophe that ended

37

with the rise of the Nazi party.

And that was with debts worth 913% of the economy.

Today, Britain’s total debt equals 900% of

the economy.

When you add in our financial sector debt, government debt,

personal debt and corporate debts… our debt load rivals the

Weimar Republic in scale.

To put it mildly, this worries us a great deal. It should worry

you, too. Because this simple fact alone proves just how

inevitable Britain’s coming crisis is.

Remember, as you saw earlier the only thing delaying the

crisis right now is the fact that interest rates are at

historical lows. That’s what allows life to carry on “as

normal”.

But things won’t be this way for long.

Because the simple fact is:

When interest rates rise – and they WILL rise – Britain

will face the greatest crisis in generations.

And there’s one more thing you need to consider.

The first danger you face won’t be the falling price of your

shares… nor will it be the insolvency of the banks. Those

things, we believe, will happen. But first, you face an even

more immediate threat:

38

The desperate actions of our own government.

How the government could seize your wealth

There is nothing the government can do to solve the debt

crisis. Better people than David Cameron and George

Osborne have tried to get out of similar crises in the past -

and failed. As you have seen, the hole we have dug for

ourselves is simply too big to ever fill back in.

But that won’t stop politicians making a series of bad

decisions to fight the inevitable, while they are still in power.

They must be seen to be doing something. And that’s bad

news for you.

As the crisis deepens, panic will take hold. In a desperate

attempt to pay off the debts and try to regain control,

politicians will cast around for any sources of money

available, and use almost any means to seize it.(***such as

has just been done in Cyprus March 2013)

Invariably, that means they’ll turn to their primary source of

income: you.

Throughout history, when countries are in financial crisis,

governments automatically raid the wealth of their citizens.

It’s all they can do.

It goes as far back as Ancient Rome. As the Empire crumbled

and inflation raged, the Emperors raised taxes over and over,

squeezing as much coin as they could from their subjects.

Back to the 20th century… In 1933, President Roosevelt

39

signed executive order 6102, forbidding the man on the

street to hold any significant amount of gold. In the midst

of the Great Depression, the government basically made it

illegal for anyone but them to hoard the precious yellow

metal. Refusal to comply with these demands was met with

a five year prison sentence. That’s essentially how the US

filled Fort Knox – by seizing other people’s gold.

Just last year in Hungary, facing a debt crisis similar to

our own, the government nationalised all pensions. In

effect, they confiscated people’s savings. Can you imagine

waking up one day and being told that the income for the last

30 years of your life hangs on a government promise?

In Greece right now, benefits have been cut to the bone,

salaries and pensions have been slashed up to 40% and the

retirement age has been hiked to generate more income

from the population – the very victims of the crisis.

But you don’t have to look too far from home to find one of

the cruellest examples of seizing private wealth. In 1974, the

top rate of income tax under Edward Heath was 83%. Imagine

how it would feel to be so blatantly fleeced by your own

government.

In other words, in times of financial panic, the government

will come after the people with money and savings.*** If

you are someone who has worked hard, been responsible,

considered the future, thought about your family, planned

for your old age, and built up savings and some wealth –

you are the prime target.

The government and financial authorities will never admit

40

this, of course. They will never announce or admit to these

‘confiscation’ policies. In fact, their official statements are

designed to conceal it.

And yet, in the end, their actions and the new controls they

implement will undermine some of the core principles of

the British way of life:

The protection of private property. Individual freedom. The

rule of law. Clear limitations on the role of the State. Or to

put it colloquially: “an Englishman’s home is his castle”.

It’s not just your home that will come under threat, it’s

your money. And the outcome could be very

uncomfortable indeed.

Just imagine the following situations:

Your spending money limited: You set off to take a

brief holiday on the Mediterranean. As you go through

security at the airport, you are asked to reveal how much

money you have on you. You take out your wallet.

Anything over £500 is confiscated. And you can’t use

your credit cards overseas.

Your investments restricted: You come across an

interesting investment idea, that involves buying a

foreign share. You open up your online stockbroking

account and search for it. Instead of the usual ticker code

and information, all that appears is an error message:

“Sorry, but overseas shares are no longer available”.

A dividend super-tax: You decide to review your

investments, and look through your latest pension and

41

broker statements. To your dismay, you find that the

dividend income you expected is much, much lower than

usual. You notice a small note at the bottom of the

statement. It says, “Dividend income is now subject to

additional Dividend Control Tax, at 25%”.

Your pension, downgraded: You are watching the ten

o’clock news, when the newsreader calmly announces

the Chancellor of the Exchequer’s latest policy. It’s a

bombshell. In three months’ time, all private pensions

will be nationalised “in the national interest”, and the

government will take control of all pension provision.

In Europe, right now, in Italy, Spain and Greece, wealth

restrictions are already bei ng implemented..

These measures have already been discussed amongst

Eurozone finance chiefs. Limiting the size of withdrawals

from cash machines, border checks, the suspensions of

free travel between countries… there are draft plans to

initiate these extreme measures under desperate

circumstances.

Considering the UK has one of the largest debt to GDP ratios

on the planet, how long will it be before your money is seized

by our cash-strapped government? Will it be when interest

rates creep up 1%... 2%? It’s impossible to predict exactly.

42

“A nation trying to tax itself into prosperity is like a man

standing in a bucket and trying to lift himself up by the

handle”. Winston Churchill (Image © Bloomberg)

Unfortunately, you cannot stop the government taking this

course of action. Even worse, these measures will

primarily be aimed at people exactly like you. People who

have worked hard, saved their money and paid their taxes.

There may be resistance, even mass protests, but if things

get bad enough, we think capital controls WILL be put in

place once again.

Remember how Britain got into this dangerous situation in the

first place:

The enormous cost of welfare started spiralling. We had to

borrow hundreds of billions to service it. We had to pay

interest on that borrowing. The debt has grown and grown.

Soon the rates of interest could rocket. At that point the

government cannot function. And very soon we believe they

will target YOU and your wealth to pay for everything.

But that doesn’t mean you have to just sit there and accept it.

Now that you understand the danger Britain faces – and the

events we believe will take place in the near future – we’d like

to show you exactly what we think you can do to defend

yourself.

Here’s what you need to do - urgently

43

Clearly, the most important thing right now is to be aware

of what’s coming. The worst thing that can happen to you

is to be left in the dark as the crisis escalates.

You can make a choice today. You can take positive action

to get ahead of the coming disaster… or you can do

nothing........... Will you survive the events we believe are

coming?

Do you want to risk being one of the thousands of people

that could be standing outside a bank all day, not knowing

whether you’ll get your savings back… or whether your

savings still exist?

Do you want to be one of the millions of people who panic

when the price of basic staples like food and fuel

skyrockets?

Sources:

£10 trillion in public funds - MoneyWeek calculations based

on historical welfare spend

UK Total Debt as a percentage of GDP - Debt and

deleveraging: Uneven progress on the path to growth,

McKinsey Global Institute, 2 January 2012

500,000 pensioners in 1909 – BBC article: The state pension

turns 100, 31 July 2008 Average life expectancy - World

Bank data, 31 October 2012

An estimated £5 trillion government debt – IEA article: True

level of UK government debt exceeds £5 trillion, 12

November 2012

£120 billion net borrowing – Office for National Statistics:

Public Sector Finances August 2012, 21 September 2012

44

MP Douglas Carswell quote – The End of Politics and The

Birth of iDemocracy

James Callaghan quote – British Political Speech, Blackpool

1976, 28 September 1976

America, Japanese and Weimar Republic total debt – Global

Financial Data, Bridgewater's An In-Depth Look at

Deleveragings report, February 2012

Salaries and pensions slashed up to 40% - The Guardian:

Greece is ripe for radical change, 8 November 2012

Euro zone discussed capital controls – Reuters, 12 June 2012

For the calculations of UK debt, and more information about

the charts,.

Information in MoneyWeek magazine is for general

information only and is not intended to be relied upon by

individual readers in making (or not making) specific

investment decisions. Appropriate independent advice should

be obtained before making any such decision. MoneyWeek

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