Western politicians must dump the promises now.

Pacific Investment Management Co., (PIMCO) the world’s largest bond-debt manager, effectively called time on developed world debt yesterday. Only the week before, the company scuppered the latest Greek bond issue by staying out of the sale.

The International Monetary Fund having suggested that developing economies will expand three times faster than advanced nations this year, PIMCO put some money where the mouth is by recommending that bond-based lenders desert U.S., U.K. and European debt. Debts from places like Russia and Egypt are now seen as safer. Twelve years ago, Russia defaulted spectacularly on $40 billion of debt, but its new offering (alongside Egypt) hopes to raise $8 billion. Most observers expect them to manage this with ease.

Let’s all pause and think about this for a minute. PIMCO thinks Russia is a safer bet than the US. Egypt is seen as a safer bet than the UK. When The Slog featured PIMCO’s snub of Greece’s US bond issue, most readers ignored the story: it came and went without comment. But snubbing one nation means severe doubts about a whole continent. Just a week later, this has spread to a lack of confidence in the West as a whole.

This sort of stuff may seem like financial wonkery, but it isn’t: these latest moves by the two mega-big boys effectively make de jure a global economic shift that has been de facto for the last five years: that the power (and quite possibly the glory) are heading East…with a small B-road heading South.

Why have the IMF and PIMCO done this? Because they’re in business to make money – and lose as little as possible along the way. They have eyes, and this is what they observe:

* Obama is launching a financial reform plan – and has just passed the world’s most expensive Healthcare legislation.
* The IMF has descended on Athens, EU financial rescue is all over the place, and strikes are spreading throughout Greece.
* The British seem to lack any awareness of the debt hole they’re in. The US shows a bit, the EU outside Germany hardly any. Thus the Euro is under attack.
* British manufacturing is underinvested and overpriced. Ditto America. Ditto the EU – including Germany.
* Sovereign insolvency is about to kick off in Portugal and Spain.
* The SEC is sinking its teeth into the US banking system; the FSA is at last baring its teeth at the British version.
* Japan (Asian, but developed and westernised) is still floundering in debt-ridden deflation. It’s new goverment isn’t cutting it. Yesterday the Nikkei dropped 1.3%.
* Britain’s politics look chaotic, superficial, and uncertain. The UK’s legislature looks more and more like an Executive becoming a committee. The debt hole has hardly featured in the election at all.

Commodities are doing what you’d expect to show up when there’s little evidence of an economic future or repaying past debt: oil is static, and Gold is rising again.

Everyone alive and mature in Britain has grown up with an acceptance of Britain as in decline – but still wealthy, and with a degree of influence. No living American has ever known any other way than US growth and dominance. The EU sees itself (ludicrously) as a massive trading success. The overwhelming majority of the citizens in all these territories have built-in expectations which simply cannot be satisfied.

It would be nice if their politicians woke up to this reality – and called a moratorium on promises until further notice.