JUDGING by the callers on a late-night BBC radio programme, the British public is none too enthusiastic about the country's participation in the Irish bailout. The standard reasoning was "Why are we giving money to Ireland when we haven't got any ourselves?" Perhaps similar sentiments were being expressed on Radios Luxembourg, Belgium and Portugal. (Those who want to vote on the issue can take part in our poll here.)

But of course, the money isn't being given to Ireland, it's being lent. And even if the eventual rate is below the market level of 8%, the new debt may still carry a rate of 5% or so. Well, Britain is still paying 3.3% for 10-year money. So this is a profitable gig, borrowing at 3.3% to lend at 5%. Perhaps the government should sell the scheme to the public as the ultimate carry trade, turning Britain into a hedge fund like LTCM.

America has been acting as a hedge fund for years. Despite decades of trade deficits, America's investment account has held up remarkably well. The capital it has invested overseas has generally gone into equities and direct investment, while foreigners have bought Treasury bills and bonds, currently earning less than 3%. This "turn" earned by America explains why it has been able to run its deficits for such a prolonged period. The ability of the US to get foreigners to accept its currency in return for goods was dubbed the "exorbitant privilege" by the French in the 1960s and is still going today - indeed, it's the title of Barry Eichengreen's upcoming book.