Charlie Parker: The pro-equity consensus is shattering

The Faustian drama unravelling in the offices of Wapping and Westminster reminds us of a cynical truism of modern politics. Namely that when a genuine crisis breaks our esteemed leaders will generally be found somewhere quite different politicking, posturing and pronouncing on a side-show with the express aim of covering their own backsides.

While Murdoch and Goneril have been distracting our leaders the rest of us have witnessed a rapid deterioration of the debt crisis on both sides of the Atlantic and seen in just two weeks the risk attached to all assets other than safe-havens rise sharply.

The cause of the deterioration is not hard to spot. In Europe bond investors have shown themselves willing to press the nuclear button of threatening the creditworthiness of Italy - a nation to big to fall. As markets insist on staying one step ahead of the politicians those self same individuals appear relaxed to the point of belligerence.

Angela Merkel postures that she will only turn up to the next emergency summit on Thursday if she is going to get what she wants. Meanwhile the ECB firmly refuses to accept any defaulted debt as collateral. Are European policymakers really edging closer to a solution? Maybe but at a perilously slow speed.

Across the Atlantic lawmakers on Capitol Hill are playing a game of chicken with the world's economy, threatening a default of US debt as they rehearse old-fashioned left-right arguments about tax rises versus spending cuts.

Perhaps markets could have overcome this had it not been for the dire June US payrolls that popped up last week. Against all predictions the figures hit investors like a sledge hammer to the face, leaving analysts scrambling for face by talking about the 'margin of error' in the figures and calling them a notoriously fickle reading. These arguments were not being made the day before, then they were supposed to be the moment when we all realised that everyone was too bearish.

In other words all over the Western world the chronically high debt levels built up over two decades of unfunded excess are finaly hitting the point where they appear unpayable.

Investors comfort themselves with the notion that it is not 'as bad as 2008'. Quite what difference that makes I do not know. Yes it is true that if the political will is strong enough this time then this does not have to be a solvency crisis. Europe in aggregate is solvent. Yet realising that solvency for the periphery is proving immensely hard. It is entirely possible that German leaders will be so slow that a disorderly default somewhere occurs before they pay up.

These realities are being felt in asset markets across the world. The gold price has risen sharply again, Robin Griffiths prediction that gold could hit $8,000 no longer feels quite as crazy as it did in April when he made it.

There is no doubt that the pro-equity consensus I spoke about as being 'terrifying' in May has been resolutely shattered in recent days. Things could well get worse before they get better should Thursday's gathering of Eurozone finance ministers hit the skids. And in America while no doubt lawmakers will agree to raise the debt ceiling they look incapable of agreeing the $4 trillion of long-term cuts that analysts agree are necessary to return debt to a sustainable footing.