Bond villains

After working for Bill Clinton, the political strategist James Carville said he had changed his mind about where power really lies. ‘I used to think that if there was reincarnation, I wanted to come back as the President or the Pope,’ he said. ‘But now I would like to come back as the bond market. You can intimidate everybody.’

By this he meant that every political leader, no matter how powerful or radical, lived in fear of going too far into debt, lest the market hiked up interest rates, tipping the government into collapse.

Alas, that’s no longer the case. This magazine ridiculed Gordon Brown for claiming to have ‘put an end to boom and bust’. The idea that you can buck the trade cycle or business cycle is as hubristic as it is economically illiterate. But during the election campaign, each party has assumed that the recovery will never end. The Conservatives plan to run deficits for another three years, and Labour plans to run them for ever. For the SNP and the Greens, forever isn’t enough.

Nowadays, no one is intimidated by the bond market. Everyone is banking on an uninterrupted orgy of cheap debt. Five years ago, when George Osborne passed his first Budget, his message was simple: the bond market has a gun to our head. Look at Greece, he said, crucified on its huge borrowing rates, forced into sado-austerity. Britain needed to balance the books or we’d be next.

Now, Osborne talks about cheap debt as if it has replaced North Sea oil as our biggest natural resource. He plans to increase debt by £150 billion over the next five years. And that’s if all goes well. His latest budget envisages household debt rising even higher than it was before the crash.