The UK budget deficit for December alone was £11.4 billion. The numbers are so big that you have to break them down. The government is overspending - tax receipts minus expenditure – by over £14 million an hour, 24 hours a day, 7 days a week.

At PMQs Gordon seemed to boast about his plans to overspend. This is not sustainable.

The City, home of eternal optimists, has begun to seriously price in the all too real risk of national bankruptcy. It would be the first time Britain has defaulted on the national debt since the dark ages. An historic legacy for the former chancellor who, ironically, once claimed to be prudent.

Guido had lunch with a Labour MP recently, when the conversation turned to the economy it became clear that the City and finance were a foreign place, far away, not really understood. The important thing was that there were new hospitals and schools. That the lights may go out with teachers and nurses left unpaid as result of New Labour’s Peronismo policies was not contemplated.

In contrast the writers on the Telegraph have gone into apocalyptic group-think; Simon Heffer wants the IMF in immediately to deal with the insanity of Brown, horrified that £37 billion has been wasted on the banks “a sum larger than our defence budget”, Iain Martin reckons history will see Gordon Brown as the Neville Chamberlain of economics, Ambrose Evans-Pritchard warns of the perilous mismatch between Britain’s foreign reserves at £61 billion (less than Thailand’s reserves) when our foreign liabilities are $4.4 trillion.

Clearly the dire economic situation is of an historic and epic magnitude. Brown is doing the only thing he knows, throwing taxpayer’s money down the plug-hole. The opposition response has been slow to coherence, now under the slogan of sound money they tentatively advocate fiscal responsibility coupled with measures to boost business lending. When seeking to blame Brown for the perilous debt situation, they need to avoid being relentlessly negative, Labour will accuse them of “talking down the economy”. It is a long dark tunnel, yet the opposition needs to offer some optimism and hope that there is light at the end of the tunnel.

Most of the losses occurred in the last hour of trading. The City is awash with rumours as to why. With the Treasury looking at a second round of bank bail-outs it looks like the taxpayer is going to need a lot of lube for another big shafting. Admittedly it could just be an old-fashioned bear ambush now shorting financial stocks is permitted again…

*Guido covered his gilt short anyway, when fear grips the markets government bonds tend to rally. Will short gilts again later…

Guido’s main concern about the Tory plan to insure bank-to-business lending was that it would encourage risky lending in a failing economy. The lenders would not really have to worry too much about the risk because the taxpayer would pick up the tab. The government’s scheme will provide banks with guarantees covering 50% of the risk on existing and new working capital up to £20 billion. It shares the risk between the banks and the taxpayer, encouraging the banks to lend for the same profit for half the risk. This is in some ways smarter than the Tory plan.

The small business component is for a £1.3 billion of bank loans with a government guarantee of 75% to cover working capital. Presumably this is to reflect the riskier nature of small business lending. This is a drop in the ocean and will barely be noticed. We are six months into the credit crunch. The options were admittedly not very palatable. Why did it take so long to put a plan into place? Could it be Mandelson wanted to get the politics right to fit his timetable of spin? No rush..

The Tories are highlighting the terrible debt burden being foisted on Britain’s children. Guido was recently chatting to the economist Tim Congdon about the gilt market and the historically unprecedented taxpayer liabilities in terms of the government’s admitted debts, the unfunded public sector pension liabilities and the PSBR trajectory even if the Tories win the next election. We also discussed on the prospects for the U.S. and Ireland.

The conclusion was that if Guido wants his daughters to grow up in an English speaking economic powerhouse in the coming century, unburdened by high taxes servicing government debt, perhaps it is time to look to India. The external debts of Britain amount to approximately $166,000 per person, the equivalent figure for India is some 1% of that, which combined with their better growth prospects suggests that economic opportunities in India might be greater in the future. When it comes to bonded slavery, Britons will be worse off than Indians in the future.

Gordon Brown’s Job Summit at the Science Museum in London will announce plans to pay employers “golden hellos” of up to £2,500 for recruiting jobless people. What does the DWP’s Jobs Minister, Tony McNulty, say about the plan?

The sharper among you will point out that this is a Tory plan he is criticising as a “complete fantasy” and “desperate stuff”. So what will McNulty say about the plan now the government has lifted it lock, stock and barrel? McNulty’s Shadow, Chris Grayling, welcomed the chance to implement his policy by proxy “I think it is the right step to take. But it is ironic ministers are walking around saying the Conservatives are a do nothing party, then adopting our policies.” Ouch!

UPDATE : Some bloggers copy party press releases, some blogs are copied by party press offices… CCHQ at 10.38 sent out a press release quoting McNulty’s above November attack on what is now government policy. Wonder where they got that idea?

Bank of England cuts rates half point to 1.5%, the lowest rate in over 300 years. Is it because we have the economy best placed in the world to weather the recession?

UPDATE : Am particularly impressed with the insight of Edmund Conway, the Telegraph’s economics editor, with the base rate now at 1.5% he sagely tells us “Interest rates are now nearing their bottom”. Well spotted Ed.

As it is in the U.S. of A. so it is in the U.K., borrowing is how Gordon will save the economy. Our children will be truly in Gordon’s debt.

Alex Barker in the FT yesterday drew our attention to Gordon’s hubristic 2005 speech to the Labour Party conference where he claimed to dealt with the house price bubble:

Why has it been that at every point since 1997 faced with the Asian crisis, the IT collapse, a stock exchange crash, an American recession, last year a house price bubble, this year rising world oil prices, why has it been that at every point since 1997 Britain uniquely has continued to grow?

In any other decade, a house price bubble would have pushed Britain from boom to bust….

I tell you, it is because with Bank of England independence, cutting debt, fiscal discipline and the New Deal this Labour government has shown the strength to take the tough long-term decisions, that inflation is low, interest rates are low, growth has been sustained in every year, and we are closer than ever to the goal which drives us forward: the goal of full employment for our generation.

Labour, the natural party for economic strength in our country today.

The hubris and the lies – fiscal discipline is a joke, Gordon has presided over fiscal incontinence on an unprecedented scale, the too low interest rates because he excluded house prices from inflation targeting will prove to have been the key determinant of Gordon’s bubble. Inflation was not so low if you included house prices. Gordon can’t blame that on anyone else, it wasn’t an American finance minister who made that policy choice…

UPDATE : Unemployment is now higher than when Labour came into office. It is a fact that unemployment has always ended up higher when Labour is voted out than when it is voted in. Just as every Labour government has ended in financial crisis.