Gordon loves to quote the policy endorsements of Paul Krugman, the New York Times columnist and Nobel Prize winner – always neglecting to mention that Krugman is a friend and ally. The New York Times today however is not so keen on Britain’s economy.
The business section is mainly read by Wall Street liberals, nevertheless they run investment funds that move markets. The UK this morning is bracketed with Greece, the NYT warning that if the Tories don’t get a strong majority:
“… investors could start to make it greatly more expensive for the government to raise funds, setting the stage for a potential double-dip recession, if not worse… If you really want a fiscal problem, look at the U.K… In Europe, the average deficit is about 6% of G.D.P. and in the U.K. it’s 12%. It is only just beginning… the British government … has been able to finance a budget deficit of 12.5% of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.”
As the pound slid Nick Clegg tried to reassure investors that if there is a hung parliament the LibDems would not risk Britain’s creditworthiness – surely that effectively means he can’t prop up Gordon Brown. Clegg said this because he realises that once foreign investors realise the only buyer of government gilts last year was the Bank of England and they lose confidence in a Tory election victory, they could rush for the exit. Foreign holdings of gilts fell from 35% to 29% last year. Capital flight is already starting…