The Lesson from the U.K. Budget Meltdown: Fear Currencies, Not Bond Markets

James Carville should have wished he could be the currency market.

The famous 1994 remark by Bill Clinton’s political adviser that he would like to be reincarnated as the bond market encapsulates a widespread perception among investors and officials that, when currencies are left to float freely, soaring public debt becomes the key constraint on government spending. The U.K.’s budget crisis shows why they are wrong.