4th September 2026
Why should pensioners and people dependent on social security pay the price when bond investors demand higher returns?.
That is the question raised by the latest turmoil in government bond markets.
The Financial Times argues that governments should heed the warning from bond investors, avoid interfering with market prices and confront rising pension and social-security costs instead, making the most vulnerable pay for a crisis not of their making.
I think precisely the opposite response is required.
Government exists to protect people, particularly when they are vulnerable. Its purpose is not to guarantee wealthy asset owners whatever return financial markets happen to demand.
And governments have far more power over bond markets than conventional economic commentary usually admits.
In this video, I explain how the UK could end quantitative tightening, reduce interest rates, stop unnecessary bond issuance, abandon the full-funding rule, reform interest payments to commercial banks, discourage financial speculation through taxation and increase taxes on those benefiting from higher interest rates.
These are political choices.
The deeper question is, therefore, not whether the bond markets have spoken.
It is whether democratic governments are prepared to say no to their demands. That's because if every economic crisis ends with wealth being protected while ordinary people pay the price, something has gone profoundly wrong with the relationship between markets and democracy.