It is getting curiouser and curiouser, as Alice said in Wonderland. We might be emerging from a severe financial crisis that tipped the global economy into the worst recession since the 1930s, but this has come at a high cost. Central banks have pumped out huge amounts of liquidity that threaten to stoke up inflation, while massive fiscal deficits in relation to GDP in many countries need such heroic financing efforts that their governments are in danger of being overwhelmed. Greece's fiscal disasters are well documented, but what caught the eye this week was stark evidence of the UK's headlong rush into its own fiscal quagmire. January is a month in which the UK government's finances are in surplus due to surges in tax revenues before the end- January tax-return deadline, but this January they were in the red, a horror-laden outcome. UK gilt yields rose and Sterling fell in response to the dire news, while views started to circulate once more that the UK is likely to remain mired in recession.
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