I'm Bond. Bond Markets.

Whilst the right wing press work themselves into a lather of pre-budget hysteria, some on the left are taking a more sober approach, notably looking at the question to what extent the Chancellor is in hock to the bond markets. Will Dunn in the New Statesman and Tom Belger in LabourList both have explainers and assessments of the operation of the bond markets. The striking point here is that a) the bond market never fails to make money regardless of the profligacy (or lack of it) of government spending and b) much of the money invested in government debt comes from the pensions and insurance industry. It is tempting to imagine that the whole thing is just a big circular money machine. The question that arises must be where is the value added? Where is the lasting benefit? I could perhaps say at this point that one benefit of the proclivities of the bond market was the defenestration of Liz Truss. But that kind of experience could equally well have befallen a Corbyn-led government for precisely the same reason—fear of unfunded promises. The only fiscal question that should matter is how much are we prepared to pay for our debt, not that we incur debt in the first place. I’m not aware of any government that actually does ‘balance its books’ or runs without a deficit. Nor do most businesses. The danger is that the debt becomes so large that the country defaults on its repayments and the consequences of that can be dire (ChatGTP provided me with sufficient evidence of that, with a handy table). Greece defaulted in 2012 to the tune of $264.2 billion. Other countries—Argentina, Venezuela, Lebanon, Russia, some African countries have all defaulted in relatively recent times. But they are comparative minnows. Large ‘developed’ economies do not default—they can, where necessary just change the rules, as did France when it exceeded the EU’s borrowing rules.
 
I think bond markets quite enjoy a bit of government economic incompetence, the general rule is that capitalists find ways of making money out of instability—but not to the extent that they want to lose their shirts, or as the terminology has it, ‘take a haircut.’ Hence the world’s largest economy, the USA should technically be in default with a government debt of $38 trillion. Yes, no doubt they are paying more to maintain such indebtedness, but there is no clamour that I can detect to rein it in—least of all from Republicans, who historically have been some of the worst for ringing the tills (whilst proclaiming their fiscal conservatism).
 
The question we should be asking ourselves is, is the debt incurred by government spent wisely? And the answer generally from Treasury bods will be ‘yes, always.’