Thursday, 26 March 2009

I'm lovin' it...*

...the Guido/Dolly Draper smackdown, that is. Draper's little 'dossier of evidence' against Guido, culled from a couple of newspaper diary pieces, is a masterpiece of bathos and own-foot shooting.

It's all entertaining in itself, and it diverts attention away, in welcome fashion, from the gulp-inducing meltdown of our economy. There's a terrifying take on that subject by Edmund Conway in the Torygraph -

...Frightening as the failure of the gilt auction yesterday was, the real horror lies some months or even years ahead. It will come after the Government has already borrowed two, three, four hundred billion more, when the Bank is no longer buying gilts to finance "quantitative easing" but is getting rid of them, on top of those being sold as part of the Government's usual borrowing. But at that point, investors should be piling back into the stock market, and will no longer be willing to splash out on safer government debt. Thus, the Nightmare on Threadneedle Street really begins.

How will it unfold? Even in the best-case scenario, the vastly increased size of the public debt, alongside investors' unwillingness to fund it at anything like the present interest rates, will push up financing costs for the Government. That sounds pretty harmless, until you realise that when the Government has to pay higher interest rates, the rest of us do, too. At worst, investors from home and overseas will simply give up on funding the UK. Sick and tired of pouring cash into a currency whose controllers are intent on over-borrowing and, one presumes, inflating that debt away in the future, they will simply abandon ship. When that money dries up, the UK will be left rather like Iceland – except that our accumulated debts are so big that not even the International Monetary Fund could afford to mop them up.

*McDonalds - I really think you should sponsor this blog. I love and admire your scrapulous product; I'll give you a mention every week, and it'll come in under £50k pa for you. Mail me and let's talk turkey, fellas!

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