I watched two Chinese films recently: Dear You and Once Upon a Time in the Middle East. Different stories. Both worth the time.
Bond yields were jumping around, so stepping away from the screens felt good. There is only so much market drama one can take in a day.
Then I came back to the real plot. France, the US, Japan and the UK have very different politics and economies. They share one problem. How long can a government spend beyond its means before the bond market sends the bill?
France is the clearest warning. I read that protests over rundown high schools shut as many as 900 of them. Over 150 were still closed on Thursday. When a government cannot keep classrooms in decent shape, this is no longer a spreadsheet issue. It is a social and political one.
We all know that governments can borrow for years. They can run deficits and postpone hard choices. The bond market does not care. Here is the irony. Bonds are supposed to be the safe part of a portfolio. When the worry shifts from growth to debt and fiscal credibility, sovereign bonds stop absorbing the shock. They become the shock.
The films were a good break. The plot outside them is not.