UK's debt to the USA: getting there
Brown's finally writing a cheque for the next-to-last installment of Britain's war debt. After this month's payment, there's only £253m left, to be settled in 2006.
Most Americans are genuinely shocked to hear their help during WWII wasn't a gift - it was an overdraft arrangement, and at a rate of interest that'd make an East End loan shark blow out his cheeks in admiration.
Of course, countries surrounded on all sides by hordes of Nazis don't have great credit ratings, and when the USA let Britain run up a £1bn debt it had no way of knowing if a penny would ever be repaid - and £1bn to the US economy back then was a far more significant chunk of GDP than it would be today. Justifying the high interest. (The £1bn debt ballooned to over £50bn with interest, but a large chunk of that was racked up due to inept handling of the UK economy by a Labour government of the 70s.)
By waiting for the right moment and taking some big financial risks, the USA managed to strip out what was left of the UK's liquidity, add some assets to its own portfolio, and within three years complete the switching of places with the UK for world leadership. (In 1938 the USA's GDP was barely twice Britain's; ten years later it was six times.) For the Americans, the European side of WWII wasn't really a war. It was just good business.
Most Americans are genuinely shocked to hear their help during WWII wasn't a gift - it was an overdraft arrangement, and at a rate of interest that'd make an East End loan shark blow out his cheeks in admiration.
Of course, countries surrounded on all sides by hordes of Nazis don't have great credit ratings, and when the USA let Britain run up a £1bn debt it had no way of knowing if a penny would ever be repaid - and £1bn to the US economy back then was a far more significant chunk of GDP than it would be today. Justifying the high interest. (The £1bn debt ballooned to over £50bn with interest, but a large chunk of that was racked up due to inept handling of the UK economy by a Labour government of the 70s.)
By waiting for the right moment and taking some big financial risks, the USA managed to strip out what was left of the UK's liquidity, add some assets to its own portfolio, and within three years complete the switching of places with the UK for world leadership. (In 1938 the USA's GDP was barely twice Britain's; ten years later it was six times.) For the Americans, the European side of WWII wasn't really a war. It was just good business.
posted by chrisworth at 11:13 AM
2 Comments:
Good post - I read somewhere, in a similar vein, that the US motor industry wanted to get the UK's rubber plantations in Malayasia. Good business
Chris,
I just picked up some very interesting stuff on the Parliamentary channel. A fellow called Lord Laird has been asking questions about the debt. Apparently the WW 1 war debt was £4.3bn (or £4,300 Bn, unless the Government put a comma where the meant a decimal point) and the Government gave the above figure, said it had not been repaid and confirmed it was a live debt. What Brown appears to be paying off is the WW2 debt. Watch the UK parliamentary site for further info, though Parl closes in two weeks and wont open til Oct again. But if the first fig, £4.3bn is correct, the UK now owes the US £69bn (4% for 71 years compound)
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