With the bond markets wary of anything beyond a 100 days, the Chancellor offers them something for a hundred years.
I had my doubts about Draper Osborne pretty much from Day One really, but I wasn’t entirely sure he was a plonker until he started singing the praises of Frufru Lagarde. I realise, naturally, that he only did so because she was being nice about his fiscal policy at the time; but anyone with an ounce of common sense would know that proffering any public praise of Mme Lagarde is a hostage to fortune.
Over the last twenty four hours, Mr Osborne has made his bid for leadership of the Tory Party, called The One Hundred Year Bond. The planned idea is his Budget Bazooka, his Fiscal Firewall against the vagaries of the future: “while people hold us in high regard, I shall ensnare them into buying century-long maturity bonds, and with one might bound, Britannia shall be free”.
Unfortunately for Squeaky, the idea is complete tosh. It is on a par with Meths Lite as something a manufacturer would want to get rid of, but none of the specialist audience would want to buy. Here we are in 2012, faced with the near certainty in the medium term of the money system being inflated by sovereign need and notional-paper infection, and the Chancellor of the Exchequer’s wheeze is to sell something nobody – but nobody – is going to see as a safe hedge against hyperinflation heading towards gigainflation. They are in fact far more likely to see such bonds as an unsafe minefield, just beyond which lies a malaria-riddled swamp.
The silly assumption of this Day One idea is that the Bond markets really do see the US and the UK as safe havens. But when it comes to Britain, the reality is that traders and analysts merely see us as a half-forgotten inlet full of badly camouflaged warships that nobody got around to bombing just yet.
I doubt very much if it will ever see the light of day. And it is just possible (but only just) that George nee Gideon knows this perfectly well, but needs a major distraction to take the beady eyes of Ed Balls off the disastrous Budget he is about to present.
Lest people get me wrong, I am not going the Toynbee route of convenient forgetfulness here: Osborne’s fiscal strategy has failed because previous governments variously funked rebalancing the UK economy, reducing the debt, reining in the Civil Service, and keeping at least one eye on the bankers. But George is a big boy now, and knew all this perfectly well when he came into office. He set himself the task of doing too little too late, and therefore must include himself in the Blame Game process. If he has any sense, the Chancellor will chuck this idea away as if it might be a table decoration thrown through a very expensive stained-glass window in Oxford. He does, I understand, have experience in this area from his Bullingdon days. Allegedly.
Osborne’s leadership bid has been launched now because, along with thousands of others who look down the road rather than simply using it as a can-kicking course, he is pretty sure that the Prime Minister will not survive the next stage of Hackgate. As I suggested yesterday, key players in the Opposition also hold this view: but if a combination of Miliband, Prescott and Watson on the one hand (and the Balls Beast of Morley on the other) manage a successful sniper attack on Numbers 10 and 11, we could be in for all sorts of ructions. And all at precisely the wrong time for Britain.
Power brings with it the dreaded unreality virus. If you thought this was restricted to the European theatre alone, I suggest you study this excellent piece at Zero Hedge. It describes in lucid prose the ridiculous optimism of the US Fed’s bank stress tests.