Here’s something that made me laugh on my journey into town last week. I was following the Twitterings of John Band on my iPhone. Well you’ve got to do something when you can’t get a seat on the Tube. His comment on the bond auction had me chuckling away:
Note to right-wing tossers: the gilt auction didn’t fail, 93% of the gilts were sold.
To be fair, the panic merchants are not all right wing. From what I can see hysteria seems to have spread across the political spectrum. John was right about the doom-laden over-reaction, though, and, as if to prove his point, the bond auction the following day was oversubscribed.
Investors are cautious about all government debt, not just that of the UK. Only two months ago, Germany couldn’t sell all its bonds either. No-one seemed overly concerned. Oddly, the shortfall in the UK’s bond auction hasn’t affected the UK’s CDS rating. It has been steadily improving over the past few weeks and continues to do so. As Mr Dillow points out, there is some evidence that the economy is not in as bad a state as we might have thought and that the end of the world is not nigh after all.
But the Conservatives and Tory-supporting newspapers seem determined to amplify every piece of bad news about the economy, or even to create panic where none exists. At the weekend the Daily Mail shrieked yet again about the country going bankrupt. This time the paper selectively quotes George Soros.
The dire state of Britain’s public finances means the country may have to go to the IMF for a financial bailout, according to billionaire investor George Soros.
What he actually said was that, while it is, of course, a possibility that Britain might have to seek IMF help, it is “not a likelihood”. He also said last week’s bond auction shortfall was most probably a blip.
In a more sober article in the same paper, the politician who has been right about the economy for the longest explained that, while things are bad, the country is not about to go bankrupt.
Of course, none of this will stop dozens of bloggers from paraphrasing or simply copying the Daily Mail’s George Soros article in a chorus of hell-in-a-handcart posts.
I can understand why the Tories want to attack the government on the economy and it is, of course, in their interests to do so. It therefore makes sense to talk up the economic mess the country is in. At least, it does up to a point. Recessions are, to a large extent, psychological phenomena. Every hysterical apocalyptic article chips away at people’s confidence in the UK, both at home and abroad. Every piece telling the world that Britain is an economic basket case makes it just that bit more likely to come true.
Unless there is a dramatic shift in public opinion over the next few months, David Cameron will be running this country a year or so from now. He will inherit the British economy and all its problems. It is surely in the interests of the Conservative Party that things don’t get much worse, or else David Cameron could be set for a short and troubled spell in office, Ted Heath style.
Might now be a good time for the Tories to ease off a bit on their Britain-is-worse than-everywhere-else ranting? It may come back to haunt them if they don’t.