BM Talks Bonds Part 2: Quantum of Solvency

In fact, Ben, I believe you would like us to cover that really 30 years of policy decisions ends up in the bond market.

Is that right? Yeah.

Yeah, I think that's the best way to look at it.

You have to kind of look at this thing on a long time horizon.

So one of the reasons you can link it all back to why is the city so big? Because we borrow too much money as a country.

So why do we borrow too much money as a country? Because we run a massive current account deficit.

Why is that? We're consuming more than we're spending.

Sorry, exporting.

And what we're consuming, we're not necessarily spending it on useful things like infrastructure that might generate higher return in the future.

So oddly enough, when you're getting yourself slowly and surely into debt, your financial sector gets bigger and bigger and you end up de-industrializing over time.

So I think...

You're saying that was a conscious decision to financialize and de-industrialize?

No, I just don't think people realise the long-term consequences.

If you really want to read of somebody who did understand the long-term consequences, Sir James Goldsmith in back of the early 1990s.

If you read his two books at the time, one was called The... response which is actually from memory the better of the two because he actually goes for economic theory and i think the first one's called the trap which is a bit of more good old-fashioned polemic but his kind of uh thesis which drools very heavily on keen's is observations from the great depression is uh you're open up to the world of international trade which is fabulous but unfortunately the real world doesn't operate like the textbook and a bunch of economists said it did And you've got a bunch of countries out there that want to run export surpluses, and you've got people that are prepared to absorb it.

We are the second biggest absorber of current account or export surpluses in the world.

And therefore, to finance that, you often have to sell things, whether that's Mayfair property or companies.

But that's partly how it gets financed.

So you end up slowly but surely de-industrializing your economy.

So that's if you wanted to kick off a single market NAFTA WTO from a average worker in those countries perspective, the UK and the US was probably a mistake.

And it was very good for people like me who got to work in the financial sector.

But you've had 30 years of that and the productive capacity has gone down and down and down.

And therefore, your ability to finance your debts has also gone down with it.

So here we are.

So 30 years ago, a lot of British government debt would have been financed domestically.