In today’s issue:

  • Elections? You’ve got to be kidding!
  • Europe gave up on democracy a decade ago
  • Who really governs us

The truth is, we don’t know the date democracy died in the UK. But we do know what date is on the death certificate. I reveal it here.

No doubt you’ll feel as I do about 4 July, if you read that report…

Elections? You’ve got to be kidding!

Has nobody read the news for the last decade? How many times do we need to learn the hard way what sort of political system we really live in?

Other countries have learned the hard way too.

The Greeks voted “OXI” in a referendum. But austerity was imposed on them anyway. By a government that not only promised to oppose it, but abide by the referendum too.

The Italians voted for parties that promised to leave the EU and euro. When they failed to live up to their promises, the Italians voted even further to the eurosceptic far right. And got an even more pliable prime minister for their efforts.

At the European elections in 2019, the Spitzenkandidat promise was broken. The leader of the European Commission who voters elected was passed over in favour of Germany’s scandal-plagued defence minister.

The national governments which Europeans had elected in Italy and Poland to oppose this sort of sham backed Ursula von der Leyen across the line anyway.

The Brits got as close as anyone to democracy. They voted for Brexit. And the government only barely failed in its attempt to undermine the result. Perhaps that’s why we’re bucking the trend to the right in Europe this year.

Still, when it comes to immigration, deregulation and many other causes, Brexit has not yet been delivered. And Labour is hardly going to improve things.

The political parties in government are polling in third place in France, Germany and the UK. Elections there might change faces. But will they change policy much?

My point is that “functioning democracy” isn’t really how you’d describe the governments of Europe. Political parties and governments are not dancing to the tune of voters. Someone else is pulling all the puppet strings. Or should I say purse strings?

What’s really going on in Europe?

Consider this quote:

“We now know that it is a choice between democracy or comfortable bond spreads. […] You can’t have a government that displeases the [bond] markets or the spread club.”

Bond spreads are how much more interest a country must pay to borrow money than the likes of Germany – the euro’s most credit-worthy borrower. The idea is that you can measure the risk of a country defaulting or leaving the euro by measuring how much more it must pay to borrow than Germany does.

France’s bond spreads recently blew out. The threat of a far-right government with far-left economic policies is making investors nervous.

Going back to the quote, its real message is that governments which try to carry out their democratic mandate will be undermined by a crashing bond market. That’s how they are brought back into line.

The Greek government would’ve struggled to borrow money without imposing austerity and agreeing to a bailout.

The Italian government would’ve gone bust had they delivered on their promises of the 2018 election campaign.

The bond market would’ve continued its meltdown had Liz Truss not fired her mini-budget Chancellor.

But, each time, the government surrendered to the demands of the bond market.

So, the data points are in. Europe chose comfortable bond spreads over democracy, every time. Subsidies and welfare money are just more important than self-governance.

Every now and then, you get a proper political firebrand who is willing to stomach a bit of bond market chaos… for a while. The Italians really had financial markets in a panic in 2018. But everyone folds eventually. Or gets fired and replaced. Usually by someone who worked for Goldman Sachs. Perhaps that’s why they’re also known as “Government Sacks”.

Anyway, this means the bond market governs Europe. Whatever government policies the bond market wants, the bond market gets. Bailouts, austerity, smaller budget deficits, pension reforms, a prime minister or president from Goldman Sachs… anything.

Democracy is out. Bond yields are in.

But hold on a minute. Where did I get that quote from?

Was it taken from former Prime Minister Liz Truss’ new book? She was fired by the bond market, if you’ll remember…

As was her Chancellor Kwasi Kwarteng – perhaps the quote is from him?

Or is it a clipping taken from Italian politician Claudio Borghi, commenting on the power of bond yields to control the Italian government?

Was the quote said by radical Greek Finance Minister Yanis Varoufakis, after he was “resigned” for opposing austerity in 2015?

Or did Bill Clinton say it after the Great Bond Massacre of 1993 forced him to cut his dangerous deficit spending (which he was elected on)?

Did the Greek “OXI” campaigners put it on their website after their referendum rejecting the Troika’s austerity programme was ignored by their own government?

Was it said during the Asian Financial Crisis? During Britain’s 2022 bond crash? During Joe Biden’s presidential campaign?

The correct answer? It doesn’t matter, because it’s true everywhere that government debt is too high. Then there is a choice between democracy and comfortable bond spreads. And we know how all politicians choose, if they want to stay in power.

Well, in office.

The real question voters should be asking themselves as they head to the polls on 4 July is this: who controls the bond market?

You won’t find his name on the ballot. But he has written the next 14 years’ of UK economic policy in stone already.

The incoming government of 2010 discovered a note saying, “I’m afraid to tell you there’s no money left.” The next government will find a note too. It’ll say, “If you don’t want to run out of money, do as we say.”

Any politician who deviates will go the way of Liz Truss, Yanis Varoufakis, Matteo Salvini and so many others.

Some would call it blackmail. But it’s how we are governed.

Enjoy voting.

Until next time,

Nick Hubble
Editor, Fortune & Freedom