We seem, to an amateur observer of the financial scene, to have all the ingredients necessary for a credit crunch. On the one hand, the Government wants to encourage more borrowing - both to sustain the house price growth that produces an irrational "feel good" effect in the British and to sustain the consumer-led boom which has done so much for so long to make New Labour popular (and to mask the effect of dozens of stealth taxes).
On the other hand, the Government's own borrowing requirement is doing what the borrowing requirements of feckless governments must always do. The Government must either tax us to pay its debts (forcing us to restrict our spending) or compete with us in the debt market, thus driving up interest rates (and forcing us to restrict our spending).
On this, there is no "third way" - if there ever was on anything else.
Guardian Unlimited | The Guardian | Government borrowing reaches June high