Some columns are vitriolic in their condemnation of Labour and how it has allowed the fiscal deficit to explode. Many argue that Britain just can’t afford its debts and it will all end in a crashing pound, soaring interest rates and the story of the UK will be just like the Argentinean story, of a once rich country relegated to the status of a land just a heartbeat away from Third World status.

The risk of sovereign default is growing. Dubai has highlighted the danger. The Greek economy could become just like an ancient Greek ruin. Will the UK be next?

Well Georgy Boy doesn’t think so. The man who beat the Bank of England back in 1992 when the pound was forced out of the ERM, the man who became known for his ruthless currency trading, but who has since gone all cuddly and philanthropic reckons the UK will be okay.

George Soros told Sky News: “There has to be pressure on Greece to put its house in order but I’m sure that Greece will not be allowed to default. The same applies to the UK.”

Default, then, isn’t an option for the UK, it just won’t be allowed.

There’s an important point about the massive fiscal deficits within the world’s largest economies that gets forgotten.

The credit crunch is the reason why fiscal deficits have risen so high in the UK and US. The credit crunch occurred as investors ditched risk, and went for safety. They poured their money into government bonds. In other words there is something circular going on. The factors that created fiscal deficits are the very same factors that are ensuring there is a flow of money into government coffers. Should the flight to risk come to an end, the yield on government bonds may be forced up, but equally we should see a much stronger economic recovery meaning governments won’t need to borrow so much.

The risk lies in the danger that markets will conclude that government bonds are no longer safe, or that the UK is significantly less safe than say the US. The former is unlikely. As for the latter, don’t forget that the UK’s overall fiscal debt is no greater than US fiscal net debt, so it seems unlikely investors will ditch risky UK government debt for safer US government debt.

For more on the fiscal deficit click here: Is the UK bust?