A weaker pound does not spell disaster for Britain
Borrowing costs are rising, but the market has not damned the new government yet
Fretting about sound money is unfashionable in today’s Conservative Party. But for those who still do, the nightmare scenario is clear. A profligate government spends more than it taxes, borrowing from the bond market to cover the difference. Gradually, the national debt builds up. As interest payments rise and the government gets no thriftier, investors worry about getting their money back. Then, suddenly, they no longer want to lend enough to cover the deficit. The currency crashes, and Britain is forced to ask the imf for a bail-out, just as in 1976.
This article appeared in the Britain section of the print edition under the headline “Crisis? What crisis?”
Britain September 10th 2022
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From the September 10th 2022 edition
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