Yes, I admit it, I did have a not-so-quiet snigger at the expense of the French when their credit rating was pegged back. I know it's small-minded but there you go, one hugs one's prejudices to one's breast because it saves one from thinking which is always a complicated business, don't you think? However, this whole international begging and borrowing lark really does have to be thought about.
Dave and George are effortlessly living up to the roles for which they are best suited (by Saville Row, naturally), that is, a couple of public school chaps with a veneer of Oxbridge who have mastered that amazing trick of being able to remove a suited chap's braces without him realising it until his trousers fall round his ankles. This trick seems to have worked even with those spivs in the City who actually wear red braces - I know, I know, shockin'! This shouldn't come as too much of a surprise, at least, to people like me who worked for many years in a trade which rested almost entirely on 'porkies'*, as we used to call them, and who realise that politics and international finance are all 'sisters of the game', as it were! Thus, so far, our smoothie duo weave their fabrication and the spivs, with the scent of a blood from a very fine French cassoulet, or a Greek moussaka, or even an Italian bolognaise, are too pre-occupied to notice the stitching is a bit threadbare.
However, Liam Halligan at The Telegraph (amongst others) has noticed. He gives credit to the coalition for being able to 'talk the talk' but it cannot long be delayed before the red-braces brigade start to look at the facts:
While the Tories' hair-shirted rhetoric has helped calm the markets for now, "austerity" itself has so far barely been implemented. Even if the Government achieves its much-vaunted aim of eliminating the "structural deficit" (that is, the annual fiscal shortfall, excluding interest payments) over the coming five years, the national debt (the stock of liabilities we must continually service and ultimately repay) will still double. In other words, borrowing keeps expanding like topsy. [My empahsis]
Lest you failed to get the message, Halligan spells it out in even more brutal details:
Buried in the fine-print of the recent Autumn Statement, for instance, was an additional £111bn of borrowing between now and 2016. That's equivalent to 7pc of national income and – repeat – is on top of the massive borrowing increase already planned. Gilt sales during 2012 alone will hit almost £180bn. That's 18 times more than in 2000. So the UK isn't a "safe haven". Our fiscal position remains perilous. There is no room for complacency in any form, none whatsoever. [My emphasis]
So why is the yield (interest) on our debt so low? According to Halligan there are two reasons, printing money and crafty regulations:
During 2009 and 2010, the Government issued a massive £475bn in gilts. That's equivalent to more than a third of the UK's annual GDP. No less than £241bn of those IOUs - more than half – have been sucked up by the Bank of England. In other words, the demand for UK gilts has been strong, pushing yields down, because the majority of them have ultimately been bought by our central bank, using "electronically-created" credits.
Our money supply has multiplied by three as a percentage of GDP in three years. But Dave and George would point, proudly, to the incredibly low level of yields required by buyers of British debt and claim that justifies everything they are doing. But time and tide wait for no man and it is worth noting what Halligan points out, that in the last ten months the cost of insuring British debt has nearly doubled!
So looking at mes amis over the channel, I am reminded of that old saying to the effect that 'he who laughs last didn't get the joke'!
*For the benefit of my foreign readers: 'a porky' (plural, 'porkies') is abbreviated London rhyming slang for a lie, as in, 'a porky pie'. (You're confused, what about me? And I'm supposed to speak the bloody language!)
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