And just like that the era of easy money for governments is over.
At the turn of the year, the UK government could borrow for 30 years and pay just 0.76% per annum [pity the buyer of that bond]. Now His Majesty's Treasury must pay 5%.
In a country that runs twin deficits with an uncapped energy liability, the bill will run up rapidly.
But this isn't about the UK, it's about the world. What's happend in Britain is a messge to governments everywhere that the era of free money is over. Shelve the plans for stimulus, support or new programs; prepare to pay down deficits much more quickly than planned or risk a UK-like disaster.
It may take more than the example of one country for governments to get the message, but they eventually will.
What it means is even slower global growth. Central bank rates are one form of stimulus for the economy but the more-powerful one is the government purse. It wasn't zero rates that rescued economies during covid; it was government handouts.
Until last week, governments thought they could continue with generous programs targeted in social programs or softening the blow of inflation. It's time to rethink that.
The blow to the global economy will be measurable and ratchets higher with every day of the bond rout.
We had all hoped the era of austerity is over, but it's back and will be even worse this time.
