We are one step closer to a fiscal crisis

There are days when I find it a struggle to read the financial times. I dread what might read there. I just had a look at their website, and it reported a fearful collection of UK fiscal numbers.

"Britain’s public finances slid further into the red in November, with a drop in tax receipts – principally on income – contributing to a current budget deficit of £13bn against a shortfall of £8.1bn the year before. Total current receipts from taxes, social security and other categories slipped to £35.1bn in November from £37.1bn in November 2007.

Tax receipts were also below those of 2007 in October, marking the first time that receipts have been below those of the year before for two back-to-back months since 2003."

Brown and Darling think they can pull the UK economy out of recession by running an 8.5 percent government deficit next year. The UK fiscal position is already deteriorating at an alarming rate. They are not going to get away with 8.5 percent. The fiscal stimulus is not going to work. They will fail.

How can we be so sure? All deficits need to be financed. New labour's budgetary plans require such a huge borrowing requirement that long term yields on government paper will have to rise. As they do, all long term rates will rise and push the rest of the economy further into recession.

This scam has been tried before. It has always failed, and it will fail again.