Parties Warned Against Debt Binge as Threat of ‘Bond Vigilantes’ Looms

Economist Daniel Lacalle said loose fiscal policy, when coupled with restrictive monetary policy, will increase the cost of debt servicing and embed inflation.

Wads of British Pound Sterling banknotes are stacked in piles, at the Money Service Austria company's headquarters in Vienna, Austria, on Nov. 16, 2017. Leonhard Foeger/Reuters

Politicians are warned against overspending after BlackRock said pre-election pledges might spur “bond vigilantes” into action and destabilize the financial market in the UK.

While opinions are divided on whether investors will get fidgety over fiscal policy, Daniel Lacalle, chief economist at the Madrid-based investment firm Tressis and an Epoch Times contributor, said runaway government spending, when coupled with restrictive monetary policy, will increase the cost of debt servicing and perpetuate inflation.