Is a Depression Starting in the United Kingdom?

A frightening piece of 20th century financial history could repeat itself in the United Kingdom.

A near collapse of British pension funds triggered a financial crisis that could lead to a global recession or depression. To elaborate, on 23 September 2022, British pension funds began panic selling of UK government bonds or gilt.

Falling gilt prices meant some pension funds could not cover their losses, The Washington Post reports. Consequently, the Bank of England began buying gilt to shore up the price.

British Pension Funds Almost Collapse

Britain’s central bank bought the gilt because some final salary pension plans were hours from collapse, CNBC reports. Many British retirees rely on such funds for income, so the middle class was at risk.

The funds almost collapsed because they use a strategy called liability-driven investment (LDI) in which they keep no cash. Instead, the funds rely on credit to finance their operations. If credit dries up, LDI funds collapse.

Ironically, British Prime Minister Liz Truss triggered the panic by announcing a…