Bank of England announces the beginning of the Second Great Depression

According to the latest report of Bank of England the country shows signs of heading towards 1930s-style depression. In its Quarterly Bulletin issued today the main bank of England  the country is showing the early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month. It is the first time when British bank has compared the current situation in the UK with the period of the Great Depression in the US.

According to the bank analysts the main problem that threatens the national economy is deflation. Despite the growing inflation the prices continue falling rather than to rise, that will very soon result in deterioration economic environment.

The potential victims of such situation are believed to be the families with high debts whose debts will grow in view of the deflation mentioned above.

According to Bank of England the country is particularly at risk since relying on the statistics there is a great number of families with high levels of debt, and many of them are on fixed mortgage rate, hence they fail to benefit from rate cuts. Continuing the topic it is necessary to say that total personal debt of Britons, including mortgages, loans and credit cards, is £1.46 trillion, more than the value of what the country produces in a year. Comparing this figure to the value of 1997, the personal debt has grown by 165% and each household now owes an average of approximately £60,000 that is believed to be the highest personal debt level in the world.

The country authorities including Gordon Brown, who is to host the G20 leaders at a summit in London in the beginning of April, have already been warned about the current situation to prevent the national economy to repeat the tragedy happened in 1930.  

The entire Quarterly Bulletin  can be found here.