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Friday, December 12, 2008


why britain could be iceland

the spectator with a stunning chart. note at least that this is gross external debt -- britain also has large claims on foreign assets.

i've commented on iceland a bit and the potential for currency crises to strike where a nation is reliant on foreign financing.

the united states has a problem with foreign finance because the finance required to close its yawning current account deficit is large in relation to the global capacity to provide such finance.

britain has a much more straightforward problem -- they've borrowed far too much from outside the pound currency regime in relation to their income. it's no wonder the pound is collapsing.

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