Real life example for you right now.
Bond vigilantes picking on UK gilts in February - did they then turn their ire on Greece?
Greece, whose government has been seen doing too little and too slowly, to deal with their deficit. IMF called in for 20bn, no 35 bn no, €45 billion bailout..
Shackled to the Euro, they couldn't devalue their currency enough to alleviate the crushing debt, although this just dampens the debt spiral.
This is bringing the rest of the Eurozone down, and the Chermans are not happy.
S&P cuts Greece gilts to junk bond status, 2 year Greek gilts now at over 13%, from ~3% at the start of 2010. How the hell Greece expects to climb into debt reduction is beyond me, imagine what it'd be like if your mortgage went from 5% to 13% overnight?
So there we have it dearest leftists, a real world example in a modern setting and every single facet of it within Breakermatic diaries passim. Out of control debt, astronomic deficit, bond market activism, IMF called in, gilt markets through the roof. The only difference is we've been able to destroy our currencies' worth by ~25% and as the Government owns the banks, the Quantative Easing can go on a little longer than simply printing money.
But it is clear that UKia must begin to live within its means, and soon. You don't want your borrowing shooting up from 5%->15% just in time for your 2 year gilts to roll, or servicing that debt becomes a millstone. Deficit as % of GDP, not looking too good for UKia.
The problem is, not one single bastard mainstream party in UKia either has any clue how to deal with it, or the balls to be honest (link to most interesting report) about what's needed to bring our deficit down. Don't frighten the horses.
None of the parties are really being straight with us - from those IFS reports, Conservatives have a £52.5bn blank of unspecified cuts, Labour ~ £45bn, and the LibDems ~£34bn. In short, the media is failing to highlight this and the populace is either too stupid or apathetic to care.
We're fucked; a populace that can't handle the truth that we need to cut our spending, soonest, and politicians who don't have the integrity or spine to level with us when the message they have is not "jam tomorrow".
It's going to have to go bang for the UKian Treasury before people will clamour for Something To Be Done, which is all the more galling as we can avoid detonating by taking action now.
Update [2010-4-29 11:15:40 by Breaker]: Overseas bandwidth limit reached, off line until tommorrow. Of course, if I paid less tax, I'd have more money in my pocket to spend on internet access.
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