In this, the next episode of Open Your Eyes, The Slog reveals how the markets aren’t waiting for credit agencies.

As far as the currency traders and Hedge Funds are concerned, it’s official: the UK is a basket case, and thus a target. And now no amount of warnings from Lord Mandelson about talking Britain down can shift the blame.

“We saw the polls over last weekend” said a German trader to me yesterday, “And in the light of [Mervyn] King’s hints the previous week, first thing on Monday morning everyone in the office marked Britain down as an approaching disaster”.

The sentiment was echoed by sources in Spain later the same day, where a senior credit management executive told The Slog:

“I guess most people have made their minds up here” he said, “and I’d be surprised if it was any different elsewhere. Frankly, I know it isn’t. The borrowing price faced by Britain is going up every day. Whatever S&P say will make it worse….but in a way you know, it has become irrelevant. The UK no longer has triple-A status.”

“It’s the worst-kept secret in the world” said The Slog’s previously used sources close to Fitch credit ratings insiders shortly after lunch today, “but it’s about a whole shitload more than hung Parliaments or Gordon Brown or other stuff going down. The market thinks there hasn’t been a reality check in Great Britain….and the politicians are running scared of telling the People. This is what’s edging up the points.”

The Slogger would’ve gone with the story last night, but the last source was unavailable yesterday. With the corroboration from this last quarter, we’re convinced.

But according to yesterday’s Politicshome chart, 40% of the electorate aren’t. This is what, when I was a politics student, we used to call The Democratic Dilemma.

Without a rapid change of heart, that dilemma of blind unreality is going to cost every one of us dear. But if Sterling is tumbling, the Euro’s collapse will eclipse it. Stay tuned