Matthew Lynn

The 5 percent barrier has long since been left behind. This week, the yield on 30-year American government bonds hit 5.6 percent, its highest level since way back in 2002, while the cost of ten-year borrowing rose to its highest level in 20 years. However hard the Treasury Secretary Scott Bessent tries to control it, the interest rate the American government has to pay to finance its vast deficit keeps on rising relentlessly. As it climbs towards 6 percent and perhaps even higher, surely we must soon see a change in the political debate. Three decades of financial complacency will be swept aside – and the politics of deficit reduction will be back.

We already know that Andy Burnham, with his talk of public ownership and ending ‘neoliberalism’, wants to take the county back to the 1970s. But now it turns out that his Chancellor John Healey plans to go one better: he wants to take us back to the 1950s. In his speech to the Labour party conference today he has pledged to put shipbuilding at the heart of his plans to reindustrialise the British economy. But is shipbuilding really the industry of the future? It at least made a change from ministers blathering on about AI or the opportunities in space. When he addressed the Labour party faithful in Liverpool, the Chancellor offered something that he clearly thinks will prove more substantial. He promised 'a new age of industrialisation'.

It was the kind of line that Robert De Niro would deliver perfectly in a gangster epic. “I am the house now,” the United States Treasury Secretary Scott Bessent declared confidently last week. “And you can bet against me if you want.” It was the most aggressive attempt yet by the most powerful financial official in the world to take on and tame the traders of Wall Street. With major interventions underway to control the yen-dollar exchange rate, and the yields on America’s $40 trillion national debt, Bessent’s message was clear. They will lose money if they dare to defy his will. Well, perhaps they will in the short term. With a background at the world’s most successful hedge fund, Bessent knows more about the market than most people. There is just one snag.

One of the sub-plots of the last twenty years has been the growth of “derangement syndromes.” It started with Bush Derangement Syndrome at the start of the century, morphed into the far more powerful Trump Derangement Syndrome, took a side trip to the other side of the Atlantic with Brexit Derangement Syndrome, and then turned into Tariff Derangement Syndrome. The basic symptoms are always the same. Some fairly minor, and probably not even very radical reforms, get reframed as an existential threat to the economy, democracy and even civilization itself. We are now seeing the latest example. Warsh Derangement Syndrome, named after the new Chairman of the Federal Reserve, Kevin Warsh – and for investors it is likely to prove the most expensive yet.

The Trump White House has been complaining about Britain's digital services tax for months. But now it is ramping up the pressure, calling on Andy Burnham's new government to scrap the levy. Will Chancellor John Healey surrender?  The US has long taken umbrage with the digital services tax, which is levied at 2 per cent on the revenues of tech giants such as Google and Amazon. Because the companies targetted by the tax happen to be almost exclusively American, the White House sees it as discriminating against the country's most successful companies.

It would be easy to make fun of the takeover of Harvey Nichols by the Sports Direct founder, Mike Ashley, this week. And yet, there is also an element of truth in it. Ashley is, without question, a very smart retailer. But he is more Newcastle than Knightsbridge – and it will be very hard to restore Harvey Nichols to its former glory.  It is a mark of how much London’s economy has declined over the last few years that there was so little interest in buying Harvey Nichols. Once Princess Diana’s favourite store, it was at one time one of the most glamorous fashion retailers in the world. Its owner, the Hong Kong tycoon Sir Dickson Poon, had, however, tired of its recent losses.

In the run-up to his elevation to prime minister, it would be safe to say that Andy Burnham did not have a great reputation among investors. Last year he declared he didn’t want to be in ‘hock to the bond markets’. He also had many plans to spend billions nationalising the utility companies and reducing the cost of living. Securing Lord Jim O’Neil, a former adviser to Gordon Brown and once a senior economist at Goldman Sachs, as part of his team was meant to be a great help. And yet today we learned that O'Neil may decide against joining Team Andy after all. Why? Because, among other things, he opposes a wealth tax – and he is completely right to do so.

The cheaper bus fares will have to be paid for. So will the modest cut to electricity bills, along with the shelters to end rough sleeping. The new prime minister Andy Burnham has made plenty of extra spending pledges during his first few days in office, but, some creative accounting aside, has said very little about how it will all be paid for. Still, never mind. The major banks have helpfully reported bumper profits, and Barclays has even had the gall to pay out bumper bonuses to the people who made them. Burnham could just slap an extra levy on them. Problem solved. Except if he does so, he will also do huge damage to what remains of the British economy. It has been a good week for the banks. Today Lloyds reported £4.

Harvey Nichols used to be one of the most glamorous department stores in the world. But now the business has gone up for sale – and it looks as if only the retailer Next and Frasers Group – owned by Mike Ashley of Sports Direct fame – are bidding on it. There is nothing wrong with either company. But the lack of interest in one of London’s most iconic retailers is a sad sign of the city’s economic decline.  In its heyday in the 1980s and 1990s, Harvey Nicks, as it was always known, was emblematic of the easy money, low-tax, globalised trading hub that London had become. Patronised by Princess Diana and popularised in the comedy series Absolutely Fabulous, it might have been a little brash. But it symbolised wealth and glamour.

There are bus fares to pay for, a rates cut for the pubs, and of course extra shelters for the homeless. In the few days since he became prime minister, Andy Burnham has announced a whole series of small increases in spending, while saying very little about how he is going to pay for them. But is Gary Lineker riding to the rescue? Today the football pundit has offered to help out with a demand that he pays higher taxes. But here's the catch: there is already nothing to stop Lineker paying more tax – he just doesn’t seem very keen to actually write out the cheque. Lineker was one of 120 ‘patriotic millionaires’, including the musician Brian Eno and the romcom writer Richard Curtis, who have written an open letter asking for some form of wealth tax.

Even for an economy as large as the United States, $70 billion still counts as a significant sum of money. After the first round of President Trump’s tariffs were ruled illegal by the Supreme Court, customs officials have already issued that amount in refund checks. Here’s the problem, however: none of it appears to have been passed on to consumers in the form of lower prices. In reality corporate America is pocketing the money – but it is also playing with fire by inviting retaliation from President Trump. Almost no major policy has ever been quite so chaotically implemented as the tariffs imposed by President Trump on the oddly named Liberation Day in April last year.

They might threaten to head for Monaco, the Bahamas, or even Dubai if the missiles stop flying overhead. But in the end they will always stay. Steve Rotheram, the Mayor of Liverpool and a key ally of the Prime Minister-in-waiting Andy Burnham, this week dismissed the threat of people fleeing from wealth taxes. He also dropped heavy hints that some kind of extra levy is planned by the new administration. This is the kind of delusional blue-sky thinking you'd expect from a new administration on the cusp of power. But there is just one snag: there is plenty of evidence from around the world that wealth taxes drive out the rich, and more significantly, investment. Team Andy are likely to have a big shock if they try it.

It won’t be anything on the scale of 1973, when President Nixon imposed year round daylight saving time to reduce electricity consumption as well as a 50mph highway speed limit. Nor are we likely to see the thermostat restrictions, or the standby plans for rationing, that were introduced by President Carter in 1979.  The "oil shocks" of the 1970s were not just from a different era, they were of a different magnitude as well.  Trump may well step in with some form of oil export controls Yet that does not mean that the American economy is immune to another crisis, nor that we won’t see a dramatic response from the White House - because, in reality, the US could easily run out of oil later this year.