A timely warning from Frank Field MP

From the blog of one of the few remaining moral Members in the House of Commons when concluding his comment on the budget, linked here and his site has now been now added as one of the few permanent links to the side bar of this blog:

In these very early stages the Government is finding the gilts market sticky when it comes to issuing its endless new tranches of debt. What happens if the gilt market proves itself even more difficult in coming up with the funds for the gilt floatations? At some stage, maybe soon, gilts will be sold at lower prices, thereby pushing up long-term interest rates and damaging the recovery.

Even worse is the outlook if significant increases in the long term rate of interest still do not attract the necessary loans to balance this year’s books. That could lead to a run on sterling.

If the Government has to revise soon its borrowing requirement for this year it would be well advised to accompany that statement with the announcement of either an increase in taxes or real cuts in public expenditure.

Panic in the money markets will lead to a much more deadly confrontation than the one seen of depositors peacefully lining up outside Northern Rock to lift their savings. Investors in gilts will act much more ruthlessly.