AN AESTHETIC ISSUE, NOT AN ECONOMIC ONE (via BookForum):

Is Britain bust?: For 300 years our best minds have fretted over the threat of national bankruptcy. As government debt surges upwards, they are doing so again. How worried should we be? James Buchan, 7/27/09, Prospect)

Well, the country is not about to be invaded at the urging of irate foreign bondholders, as occurred in Mexico in the 1860s or Egypt in the 1880s. Nor is it yet subject to the civilised modern equivalent, last seen here in 1976, when the government of the time agreed to restrictions on its spending devised by the International Monetary Fund (IMF). But there have been anxious moments in recent months at both the treasury and the Debt Management Office. An auction of £1.75bn in super-long gilts on 25th March did not attract enough bids. Stheeman also suffered a bad quarter of an hour on 21st May when the rating agency Standard & Poor’s lowered its assessment on British sovereign debt from “stable” to “negative.” Yet Britain can borrow, and in its own currency, at 4 per cent interest and an average maturity of nearly 15 years which only a handful of countries in history have ever been able to do. The foreign appetite for the sterling liabilities of the British government is rising not falling. This appetite has not been soured by recent falls in the sterling exchange rate, which at points exceeded the great devaluations of 1931 and 1949, and the lesser of 1967 and 1992. “My opinion,” says Stheeman, “is that this thing has nothing to do with an excessive supply of gilts. It is to do with the market’s perception of the UK economy, which is not as dire as it was three months ago.”

Moreover the accumulated British national debt in relation to GDP—at 75 per cent—is still lower than in powerful trading countries such as Germany (about 78 per cent) and Japan (about 190 per cent). It is also lower in relation to the productive wealth of Britain than after the two world wars of the 20th century or in the elongated 18th century between the glorious revolution of 1688 and the battle of Waterloo in 1815.

During that period, England and then England and Scotland ran a national debt far higher in relation to its trade than the IMF would tolerate in a developing country today. The best minds in England and Scotland—Swift, Bolingbroke, Hume, Smith—forecast national bankruptcy. As if in mockery of their reasoning, Britain emerged from the field at Waterloo the richest and most powerful state on earth. The only time when Britain came close to grief was, perversely, when it attempted to liquidate the national debt in the speculation known as the South Sea bubble in 1720-21. In short, debt is as British as the village green or the public house.