Financial tsunami warning! The UK is bankrupt, and the US debt is collapsing. Musk is even warning that the US dollar will become worthless. It can be said that a series of chain reactions have finally arrived.

So, what kind of major changes will the global economy face next? Today, let's take a look together.

Just two days ago, the British Prime Minister suddenly announced that the UK has gone bankrupt and is in disarray. This is because the UK now has a public finance deficit of over 20 billion pounds, equivalent to 185.8 billion yuan! This could become the last straw that breaks the camel's back for the UK. It's really the end of the empire on which the sun never sets!

Advertisement

Let's look at a set of data: As of the second quarter of last year, the UK's public sector net debt was about 2.6 trillion pounds, equivalent to 3.34 trillion US dollars, accounting for 100.1% of its GDP, and is 18 times its foreign exchange reserves! In the first quarter of this year, the UK's GDP only grew by 0.7% quarter-on-quarter. Although this data is considered better than expected, it still cannot avoid the UK's economy falling into a stagnant state for 15 years! Now both Moody's and S&P have downgraded the UK's sovereign credit rating.

If Vietnam's debt scale is 2.38 times its foreign exchange reserves and is on the brink of bankruptcy, then the British Prime Minister's announcement of the UK's bankruptcy is a fait accompli!

And we must know that the UK was once the empire on which the sun never sets, a highly developed Western country, and the pound is the third largest payment currency in the world. So why has the UK come to this point?

The first reason is that since the UK's Brexit in 2020, it has had a significant impact on the UK's economy.Firstly, according to data from October 2022, the UK's purchases of products from the EU decreased by 16%, while other European countries' imports of goods and services from the UK fell by 20%!

Secondly, due to the reduction in European immigration, the UK is facing a labor shortage. In the first half of 2022 alone, British farmers suffered a loss of at least £60 million because they could not harvest a large amount of fruits and vegetables in time.

Additionally, after Brexit, the UK has incurred additional costs in goods transportation, leading to a continuous rise in food prices! Currently, the UK's core CPI for June is 3.5%, which is higher than the 3.0% in the United States!

The second reason is the tax reform under pressure from the United States, which allows some overseas profits of UK companies to be exempt from taxation, resulting in a significant loss of tax revenue for the UK.

Let's take an example: in 2020, Amazon's UK company had sales of £20 billion, but only paid £18 million in taxes to the UK government, with a tax rate of less than 0.1%. This is a tax haven for American companies! No wonder British economist Hutton said that the UK has become the 51st state of the United States! It is clear how much dissatisfaction this has caused!

The third reason is the strong interest rate hikes by the US dollar, leading to the devaluation of the British pound, a continuous flow of UK assets back to the United States, and a sharp increase in the scale of foreign debt. The exchange rate of the British pound against the US dollar has once fallen below 1.25, setting a new low in five months! Of course, the UK's tax exemption policy has also led to a significant devaluation of the pound. It can be said that the last two reasons are all caused by the United States.

So, what is the intention of the UK government's announcement of national bankruptcy?

Who would like to expose their own wounds and say they are bankrupt? Moreover, if such a highly developed country as the UK goes bankrupt, then looking at the whole world, I'm afraid no country would not go bankrupt. Therefore, the UK Prime Minister's remarks are more than just a warning about the poor state of the domestic economy, but also a warning about the economic crisis and economic hegemony of the United States.

Because the current scale of US debt has exceeded $35 trillion, it has increased 34 times in 40 years, accounting for 130% of its GDP! This year's interest expenditure on US debt will also exceed $1 trillion, accounting for 76% of all US income tax! On average, every American citizen is burdened with a debt of $104,000.It can be said that the current state of the U.S. economy can only be described as abysmal.

If we make a comparison in this way, U.S. debt has already avalanched, and the United States has long been bankrupt. Indeed, Musk is now warning that the U.S. is on the brink of bankruptcy, and if the U.S. does not take some measures on its debt, the dollar will become worthless.

In this light, it seems that the UK is still a discerning observer, subtly pointing out the United States' sore spots, which not only expresses its strong dissatisfaction with the U.S. but also sounds the alarm for an economic crisis in the U.S.