Warner: Britain’s inflationary route to default (15)

George Osborne’s idea of refinancing the national debt with 100-year gilts, or even gilts issued in perpetuity, is a bit too clever by half.

Far from being the masterstroke it pretends, it is just another piece of nonsense which is unlikely to find significant traction among investors and merely distracts from the wider priority of reviving the economy and getting Britain back on to a sustainable footing.

Competent management of the public finances – the apparent purpose of this initiative – is a fine ambition as far as it goes, but it is no substitute for the radical economic strategy the nation so desperately needs. Now I don’t want to rain too hard on the Chancellor’s parade. For the Government, it makes obvious sense to attempt to lock in today’s ultra-low interest rates for such long periods of time, or as the Chancellor has put it on a visit to Washington, to take advantage of Britain’s current “safe-haven” status.

Potentially, the saving to taxpayers would be huge if and when interest rates start rising again. Britain’s already relatively long debt maturity profile has stood the country in good stead, making it less vulnerable to the speculative attacks which have bedevilled the eurozone periphery. The introduction of 100-year bonds would further extend the profile out into the long-term future.


See Also:

China’s housing market to remain cool

Corcoran: Goldman rant light on logic

UK could lose coveted AAA rating, warns Fitch

New elections in key German state after coalition crumbles

EU at loggerheads over financial transaction tax

Afternoon Updates:

12:16 pm EDT, March 15th, 2012 — Britain’s 100-year bad bet

12:17 pm EDT, March 15th, 2012 — Employee’s rant costs Goldman $2.2-billion


There’s a moral to this story.  “Never piss off the troops.

12:18 pm EDT, March 15th, 2012 — JPMorgan’s Dimon Warns Workers Not to Seize on Goldman Letter

12:20 pm EDT, March 15th, 2012 — New warning over UK’s AAA credit rating rocks Osborne ahead of Budget


I’m leery of this warning because Fitch may be under the strong influence of the EU.  Readers should be aware.

12:23 pm EDT, March 15th, 2012 — Life insurance premiums to rise by 30pc

12:26 pm EDT, March 15th, 2012 — Despite Progress, Euro Crisis Is Far From Over

12:29 pm EDT, March 15th, 2012 — Spanish towns fall from riches to rags

12:32 pm EDT, March 15th, 2012 — Greek tax evasion runs rampant

12:38 pm EDT, March 15th, 2012 — Portuguese Seek Greener Pastures in German Town

12:44 pm EDT, March 15th, 2012 — Debt crisis: live

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