Governments desperate for money will need to pay more to get it. Stand by for the nuclear bubble: think about safe havens.

The earlier story about Britain’s lost credit rating marks the start of a process which now looks unstoppable: the hands of higher maintenance costs and market nerves tightening on the testicles of debtor nations like us.

You probably missed this in all the euphoria of not having to live in Stafford, but last week it was reported that Greece’s two year bond yield rose to 7.4% – last November it was 1.5%. Ignore the jargon and focus on this: in just four months, the cost to the Greeks of borrowing money has risen over 300%. As you might imagine,this isn’t going to make their deficit management any easier.

If you’re a Government, raising money by issuing bonds is a bit like playing poker and hard to get at the same time: make the fact that you’re borassic and desperate too obvious, and people will both sell the bonds they’ve got…and not buy the new ones on offer.

It’s pretty damned obvious to almost everyone today that the Brown Government is flat broke. It’s also pretty obvious that lots of other EU governments (and dare I say it, the good old US of A too) are in the same rather undersized lifeboat. Thus, issuance of government bonds will accelerate…and not be taken up: because too many are on offer, and they’re all risky.

This will in turn make the global credit agencies downgrade the bond issuers as credit risks. This will be coupled with further issuance. So the yield promises will get better and better. Just like those high rates on offer in Icelandic Banks two years ago. The consequential rise in government bond yields will become unbearable for the sovereign borrowers. Up and up will the bubble be blown and then…

The trouble with this movie is that there’s no unexpected twist at the end. If you think that, in this context, gold is going to do anything but explode in price, then you are probably Piers Morgan and I hope you grow a brain soon.

Gillian Tett of the FT recently noted that the only reason the Japanese domestic bond market kept afloat for so long was because of the peculiarly patriotic nature of the Japanese. That age is dead – especially in the EU, to which (quite rightly) there is no loyalty at all.

The EU will collapse like a spaghetti RSJ under this sort of pressure – which must come now, as the other options were not taken up in time. The only good thing to come out of this is that Nigel Farage will have no raison d’etre. But it’s not much of a compensating thought.

Hello? George Osborne? Anyone at home???