How long will any coalition last? That is the question most pressing for the bond market.
They already know, whatever the complexion of the coalition, it will not be able to withstand huge public unrest if any were to surface. A Conservative led coalition will be more pliable when it comes to cuts, of course. But a labour coalition will not really be prepared to defy the bond market, I don’t think.
In my opinion the euro is already in trouble. The pound will begin to get crushed in the coming weeks. If the EU does debase the euro with another mammoth bail-out then the speculators will have a field day with it. This will distract from the pound and give Sterling a little breathing space. But not for long.
The cost of insuring our debts will rise first. Slowly at first but inexorably. SO far we have been largely spared. But they are going to call our number soon. The the rate we pay on our debt will rise. Mortgage rates will go up with it, after an abortive attempt to defy financial gravity.
As all this unfolds the coalition will groan. They will start to have to come clean with the public about the real scale of the cuts. At some point people will finally realise the scale of the wave coming at them. At that point we see how whipped people are or what fight they have left in them. If they have any fight the coalition will fail.
And this, I think is the worry of any bond market and why the cost of our longer term debt will rise forcing the government to issue shorter and shorter term debt. Which is itself destabilising because that debt comes back to be re-financed while more debt is still being desperately offered to the market. This is where Greece has been and where Spain is.
You get to the point where you have a mountain of debt to sell but not one penny of it will actually help you going forward. Because the whole mountain is just old debt, you are desperately trying to re-finance so that you don’t have to repay the principal.
The bond market from day one, Monday that is, will be worried that the coalition, whoever it is, won’t be able to keep whatever promises it makes. They will fear that the coalition will borrow money on the basis of an agreed plan of cuts and then not be able to force the people to stick to that plan or those cuts. The coalition might be forced to call an election. What then, if a new government has different ideas? Leaving the bond market heaving lent money and then find the cuts don’t materialise.
So from the start that worry will mean the debt market will want higher returns and want to lend for shorter periods. Neither is good.
The jaws of our debts are tightening.
Theres an interesting piece in The Guardian today, asking academics, historians and essayists to offer advice to the coalition government.
http://www.guardian.co.uk/books/2010/may/08/advice-new-government-books-reading
Particularly interested in how you find the views of David Kynaston
Hello William,
Thanks for the link. Haven't had a lot of time today. I had never heard of Mr Kynaston, but found I liked what I read. basically have we advanced any since the sinking of the Titanic. Do the wealthy still think it is their right to have the life boats reserved for them while the lower classes are left to drown below decks? And if that is still their presumption what are we prepared to do about it?
I would suggest reading – The World Turned upside down by Christopher Hill. About the English revolution and the work started there that in my opinion we have still to finish. And I don't mean the religious stuff.
Hi Golem,
Yes, i agree. We need to remind ourselves of our radical and heretical past. If only such an egalitarian and democratic heritage would reverbrate in today's political discourse. How do we re-invent such legacies and alternative ways of life and give them substance -theoretically, practically? These are questions that constantly intrude on my thinking. I have found no comprehensive answers, apart from the conviction that the political mainstream has nothing to offer us.
I take solace from Gramsci: "the crisis consists precisely in the fact that the old is dying and the new cannot be born".
Perhaps such issues are beyond the purview of your blog, but I'd be delighted to hear more of your thinking about how we might approach troubling yet vital issues.
Hello Ian,
I think its worth remembering that when that magnificent radical thought and action erupted and swept all fear before it, the country was as we are today. Drowning in cynicism and corruption. think if John Donne writing just prior in Anatomy of the World,
And freely men confess that this world's spent,
When in the planets and the firmament
They seek so many new; they see that this
Is crumbled out again to his atomies.
'Tis all in pieces, all coherence gone
But then suddenly ordinary men and women stirred in their hearts and minds and rose like Leviathan. We did it then and were no better then we we are now.
We will do it again. I hope to be there.
We will do it when we realise we are not the people we have been told we must be. For 60 years we have been told, we are Homo Economicus. But we are not. When we cast off that lie, as we cast off the lies of church and sovereign-lord, then we will find the courage.
These thoughts occupy me as they do you. Whether they should be part of this blog I cannot say. I don't want to turn people off with ranting and high flown hopes and thoughts.
I know you didn't actually ask but I'd recommend every politician read the excellent and entertaining history of finance 'Money : where it came from, whence it went' by J K Galbraith. This is a book I've profitably reread every few years and it's full of fascinating nuggets. Since it was written in the 70s there's probably a lot of stuff in it that's particularly relevant just now and you can probably pick it up for a few pence on amazon.
Thanks Tam,
It is one I should have read. Maybe with reminder I will.
Please keep suggesting. having more voices here, make this a better place.
Hi Golem,
thank you again for your perceptive insights and also those of your commentators.
With regard to the discussion of having more voices and also the connection between your analogy of the Titanic and Ian's mention of Gramsci there is important work to do in "organising" not just a resistance but the terrain upon which ideas exist.
By this i mean currently the media, our schools and universities, law, democracy, the military and many other institutions in our global finance capital system have been manufactured to support the accumulation of wealth over all other ideas and possibilities.
I now wonder how best to not only be critical of such relationships but how to achieve the organisation of a majority of persons to confront the status quo. It should not be a question of waiting till people are suffering enough that it leads to violent results. Perhaps for many that is the only alternative but against well armed governments that can only end badly. I would hope it can emerge sooner than then but it will need organisers, strong personalities and critical knowledge becoming part of the mainstream.