“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe, the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”
The recent political maneuvering in England is only making things worse, pushing the pound below $1.50 and raising 10yr gilts above 4%. Britain’s solvency is clearly in question, and Britain’s debt in the rangefinders of the bond vigilantes.
If Britain can’t coordinate its politics to gather the will to cut spending, bond holders will walk away from the country. This is the world we live in today.
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