Bond market will finish Brown

It was James Carville, President Clinton's advisor, who famously articulated how he was stunned by the power the bond market had over governments: "I used to think if there was reincarnation, I wanted to come back as the President or the Pope or a .400 baseball hitter. But now I want to come back as the bond market. You can intimidate everyone." For those who doubted in any way the power he attributed to the bond market the events that may now unfold, after yesterdays shocking budget, should put paid to that. Its the bond market, not this shambles of a government, that will now decide the destiny of our country.

Yesterday Darling announced future borrowing levels only usually associated with wars. He stated that the budget deficit would equal 12.4% and 11.9% of GDP this year and the next, not only the highest of any leading economy, but higher than most developing nations such as Indonesia and Brazil. In short, such deficits can only be paid for by very strong future growth, higher taxes, drastic spending cuts or by printing money. Darling seems to be relying on future growth - but does not have an once of credibility. In just 6 months, he changed his growth forecasrt drastically. Not a single independent economist accepts the forecasts he made yesterday.

The government has relied on the benevolence of the bond market. We saw a failed auction already a few weeks back. Yesterday, Gilt yields shot back up to pre-QE levels.

I hope I'm wrong, but I think the bond market is about to demonstrate its awesome power.