[Sdiff]

(Original post by Otkem)
It won't be long before we're downgraded. If the USA's credit rating was downgraded, then how is her poorer cousin going to keep their AAA rating?

Because our fiscal position is much better. Lower deficit. Lower debt. Whether measured as a % of GDP, GNP, per capita, you name it.

[wildcolonialboy]

(Original post by sexbo)
What I don't understand is how can S&P be impartial?

Because the financial industry relies on them to be, and pays them to be. There have been issues with impartiality in the past, where those being rated were the ones paying for ratings, but I think they've fixed that up.

Large mutual funds like pension funds etc tend to be the largest institutional investors, and if the ratings are rubbish, they'll take their money elsewhere or do it in-house.

They're just a private company based in a sovereign country (the US) so why can't Obama just send round some CIA goons and threaten them into raising America's credit rating (and **** over Iran by lowering theirs)?

Industry and commerce dwarfs the US government. And it's borderless. And a large proportion of it happens in the City of London, which is like the Jerusalem of international finance.

[Harve]

(Original post by Sdiff)
USA debt per capita = ~ 50,000$
UK debt per capita = ~24,000$
If George Osborne was willing to double our debt (which would be a terrible idea), then our growth levels would be a hell of a lot higher than America's

Yes, the USA are actually putting in a lot more fiscal stimulus than us (despite the Tea Party), although I believe debt levels haven't actually started dropping in earnest quite yet. It'll be interesting to see who comes out better in the long-run, although there are of course plenty of other variables.

[wildcolonialboy]

(Original post by TopHat)
To be honest, I'd ignore the ratings agencies regardless of what they say. It's the bond yields that tell us what the market really thinks. The only reason the ratings agencies matter is because investors are often restricted to investing only in say, AA or above funds, so if we drop a rating, investors may be forbidden from their clients by investing in us.

Very well put, probably the best explanation I've seen on here. There are a lot of covenants and investment agreements related to ratings that mean it's important, but ultimately it's not like the demand for bonds will go away if Britain fell a notch.

[Danen]

(Original post by Quady)
And the Americans.

Man it'd suck to have their economy right now.

their economy is doing better than britain's

[Quady]

(Original post by Danen)
their economy is doing better than britain's

If that were the case why would I make a post like that?

[crazycake93]

(Original post by calumsteele1)
its just something to thumb our noses at to the french

And the Americans.

[Danen]

(Original post by Quady)
If that were the case why would I make a post like that?

because you dont know your facts?

[Quady]

Doesn't really explain post #10 though does it?

[Sdiff]

As I said, position is much worse then ours. Their debt per capita is twice ours and their deficit is also much higher as a % of GDP) That's why they have been downgraded and we haven't.

(Original post by Danen)
because you dont know your facts?

[calumsteele1]

(Original post by Quady)
You remember they had CDOs rated as AAA right?

Bond yields are where its at, not ratings agencies.

aye credit rating agensies are notoriously unrelaible such as with Enron when they didnt downgrade their rating untill it was far to late and with Hannovre RE where they junked their debt rating because they wouldnt cough up for a new subscription ... these peoples rating need to be taken with a pinch of salt

[Danen]

(Original post by Sdiff)
As I said, position is much worse then ours. Their debt per capita is twice ours and their deficit is also much higher as a % of GDP) That's why they have been downgraded and we haven't.

whats debt got to do with economic growth?

[Hobo389]

(Original post by isthisthereallife)
Err...why? Consensus GDP forecasts are for 2.2% GDP growth in 2012, 2.5% in 2013. Growth was also 1.7% in 2011.

This compares to:
1.5% (2011), -0.03 2012, 0.9% for 2013 for the Eurozone, and
0.9% 2011, 0.9% 2012 and 2.0% for 2013 for the UK.

These are the latest forecasts from the CBI in their March 2012 report.

Also bear in mind that the US also has a higher GDP per capita already than the UK/Eurozone, and the gap is only widening.

Furthermore, unemployment is at very similar levels to the UK (8-9%), but falling quicker...

PS - Odd as it may seem, the UK is actually starting to outperform many of its rivals (France, Germany etc) and coming more into line with the US. This is probably because of the governments corporation tax cuts, and some of the business friendly legislation they have passed...certainly thats what many in the business community feel.

The problem for the UK is that Spain and Italy are both in a lot more trouble than it seems - and the effect of a eurozone problems, destroying our European exports. But still, as of last summer, 600k new jobs in the private sector had been created in just 1 year (more than in the previous 13...) - the problem is the sheer scale of public sector cuts and the private sector is struggling to create as quickly as the public is cutting...

Concur (almost) entirely, just one thing to add. We are one the bigger contributors to Spanish investment, currently £600bn of public sector pensions are invested in the Spanish gvt. They go tits up then public sector workers won't have a pension plan to complain about :/

[Sdiff]

(Original post by Danen)
whats debt got to do with economic growth?

If you borrow money and inject it into the economy, the economy will grow. Still not a good idea as the growth is illusory and the debt has to be paid off.

Again, if Britain were to borrow more and just send stimulus checks to everybody like in America, the economy would grow. It wouldn't be genuine growth though and we would have a huge debt burden.

[Danen]

(Original post by Sdiff)
If you borrow money and inject it into the economy, the economy will grow. Still not a good idea as the growth is illusory and the debt has to be paid off.

Again, if Britain were to borrow more and just send stimulus checks to everybody like in America, the economy would grow. It wouldn't be genuine growth though and we would have a huge debt burden.

well the uk does quantatative easing and they dont have economic growth

[MirandaPanda]

(Original post by isthisthereallife)
Lol. Well, they do have a lot of social problems, and the whole thing in Florida with the guy who shot the kid is just f---ed up.

Which country does not have "a lot of social problems"? We're in the UK certainly no better-off relatively speaking (given that we're no larger than the State of California alone in the US).

[Hobo389]

(Original post by Danen)
whats debt got to do with economic growth?

Debt has a lot to do with growth. Businesses without their own financial backing are always borrowing to pay back later when they start. The more debt that a government has, and the private companies within it then the less likely that people are going to be able to borrow on credit and the more expensive it will be for them to do so because of the perception that an economy is running on debt and soon the bubble will burst.

Secondly when a government is able to borrow at record low interest rates from the money markets (as we are now, currently competing with Germany for the lowest in Europe) then it shows a lot more confidence in the gvt. This low interest rate and subsequent confidence is translated across to private sector lending also.

Though this may sound wishy-washy because it's hard to prove for a government that is doing well. If you take Spain as an example then there is almost no willing investment in the country as evidenced in the fact that Spanish banks are now relying on the ECB loans and this week borrowed a record amount from them.

[superfoggy]

I thought the standard and poors downgrade of america happened right about the time there was that whole fiasco about raising the debt ceiling. They were argueing over it untill the last possible day before they would have defaulted. Or was that just a coincidental thing.

[MagicNMedicine]

(Original post by wildcolonialboy)
Because the financial industry relies on them to be, and pays them to be. There have been issues with impartiality in the past, where those being rated were the ones paying for ratings, but I think they've fixed that up.

Large mutual funds like pension funds etc tend to be the largest institutional investors, and if the ratings are rubbish, they'll take their money elsewhere or do it in-house.

When it comes to rating government debt there isn't really a need for these rating agencies as investors have access to lots of information in the public domain about the particular government's accounts. When the US got downgraded it didn't make any difference to the demand for US bonds, investors were not suddenly selling them to switch to AAA rated bonds, the investors trusted their own judgement rather than that of the ratings agencies.

[sexbo]

(Original post by wildcolonialboy)
Because the financial industry relies on them to be, and pays them to be. There have been issues with impartiality in the past, where those being rated were the ones paying for ratings, but I think they've fixed that up.

Large mutual funds like pension funds etc tend to be the largest institutional investors, and if the ratings are rubbish, they'll take their money elsewhere or do it in-house.




Industry and commerce dwarfs the US government. And it's borderless. And a large proportion of it happens in the City of London, which is like the Jerusalem of international finance.

Yeah but this is America and the freaking CIA. blank cheques, virtually above the law, completely black operations. How hard can it be for them to infiltrate one international company? Who's to say they haven't already? America's credit rating could be worse than they say it is. Even if the main CIA itself doesn't operate outside the law you can't deny that the US government probably has a couple top secret agents with a license to kill.

And really? that creaky old medieval town is the world centre of finance? But places like New York and Hong Kong looks so much bigger and shiner? Whenever I go to the city I am decidedly unimpressed. Plus if America is the richest country in the world then why is the world centre of finance in London?