Garys Economics Do bond markets control the government?
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Jul 2, 2026 They unpack how bond markets can shape government choices and trigger political crises. You get a clear run-through of what bonds are and who holds government debt. The conversation covers refinancing risk, the feedback loop of rising rates, and why investors crave low inflation and stability. It links wealth concentration, taxation choices, and shrinking public assets to real political power.
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The Doom Loop That Can Decapitate Governments
- A feedback 'doom loop' can form where rising yields worsen fiscal sustainability, prompting higher demanded yields.
- Stevenson connects this loop to the market reaction that removed Liz Truss and threatened later governments.
How Bond Markets Forced Political U-Turns
- Gary recounts markets forcing political retreats after bond stress, referencing Liz Truss and near-hit to Keir Starmer.
- He says Starmer's team retrenched in 2025 after a run of rising yields and an inflation print calmed markets.
Why Wealthy Investors Buy Bonds
- Investors hold government bonds for security and diversification, not high upside.
- Stevenson explains pension funds, insurers and wealthy individuals value predictable income and crisis protection from bonds.
