My goodness are these economists such ideologues

It's not just Labour politicians who have been laying into David Cameron's conference speech that "the only way out of a debt crisis is to deal with your debts", or his claim that the Government's austerity programme has given the country record low interest rates. Labour has got plenty of heavy weight support from the economics profession for its point of view. Take this piece from the FT's Martin Wolf (£), or in the US this from Paul Krugman, and again from Brad DeLong.

OK, so these are all the usual suspects, but as I've argued before, they've got a point in suggesting that record low interest rates in fact have not a lot to do with getting to grips with the nation's debts and absolutely everything to do with the fact that the economy is going down the pan. I wouldn't have put it quite so colourfully, but here's what Brad DeLong has been telling his students at Berkeley.

Right now record-low interest rates are not a tool for improving the economy. They are a consequence of the fact that the British economy is 100% scr—d and about to become 150% scr—d. The risk that other investments in Britain will go south as the double-dip hits is sufficiently large that investors are terrified and willing to buy British Treasury debt at absurd and outlandish prices.

You'll only know for sure that the economy is on the mend once interest rates begin to rise again, as investors switch out of gilts into growth orientated assets such as equities.

But where these neo-Keynsians go wrong is in failure to recognise the extreme dangers for Britain of financial market and sovereign debt contagion. They don't seem to realise what a perilous, knife edge, position the UK is in. Aggretating all debt together – sovereign, household, private sector and banking – the UK is far and away the most indebted country on the planet.

In the circumstances, it is a miracle that we've got the low interest rates we have. Other nations are being punished by markets for far less. The UK has managed to avoid similar treatment only because it has retained market confidence and thereby its triple A credit rating. This in turn has been secured by taking pre-emptive action on the deficit.

Had the UK stuck to the much milder consolidation plans of the last government, it's highly likely that the triple A would now be lost. To reflect the supposed credit risk, we would in such circumstances now have long term interest rates similar to those of Spain and Italy. The US, which this summer lost its triple A, is not a valid comparison here, because it's still the world's reserve currency and in unstable times will therefore suck money in from all over the world. It's fantasy to think that a UK economy running 10pc budget deficits into the indefinite future would enjoy the same privilege.

Now admittedly, Spain and Italy are in an even more precarious position. Membership of the euro precludes the monetary activism that has been applied in the UK, where long term rates have been manipulating down through quantitative easing. Even so, it's hard to believe markets would have continued giving Britain the benefit of the doubt without a credible deficit reduction strategy. Long term rates would have been several percentage points higher than they are.

Nevermind what that would have done to the over indebted household sector, rates at this level would by now also have invoked another banking crisis. As we have seen in the eurozone, once the sovereign becomes impaired, so does the banking system. The triple A is a kind of banking gold standard – it is the asset class that gives depositors confidence in the safety of their money. (For further reading on the linkages between the eurozone's sovereign debt and banking crises, see my column for Friday's edition of The Daily Telegraph).

So there is a sense in which they are both right – Cameron and Brad DeLong. Personally, I'm very suspicious of any entrenched ideological position. The first rule of public policy is that it has to remain adaptable. Unfortunately, the debate over the deficit has become extraordinarily ideological and very polarised. These economists are just as guilty of it as the politicians. That's a very bad development.