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Moody's Downgrades UK Credit Rating

There's been a lot of talk but to be honest I didn't see it actually happening

http://www.moodys.com/research/Moodys-downgrades-UKs-government-bond-rating-to-Aa1-from-Aaa--PR_266844

Thoughts?

Personally I think it's a tad soon, our economy is slow but stable. There's certainly no risk in buying our bonds. I'm really dreading Milliband and Ball's collective smug faces.
(edited 11 years ago)

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We should sue them like the yanks

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Original post by Patriot Rich
There's been a lot of talk but to be honest I didn't see it actually happening

http://www.moodys.com/research/Moodys-downgrades-UKs-government-bond-rating-to-Aa1-from-Aaa--PR_266844

Thoughts?

Personally I think it's a tad soon, our economy is slow but stable. There's certainly no risk in buying our bonds. I'm really dreading Milliband and Ball's collective smug faces.


Generally, not surprising. The UK has been moving towards this for some time, as the austerity programme is clearly not achieving much other than (predictably) cutting demand and keeping the country in recession - whilst at the same time, failing to reduce the government debt or even meet targets for its growth.

The credit agencies are playing it much safer now with lots of countries, following their contemptible failures to report properly prior to the financial crash - therefore they err on the side of negativity. As the US has already lost its triple-A rating, which given its dominance in the structure of the international economy is a somewhat abstract notion, it's difficult to see this having much effect other than a small increase in the cost of servicing the debt and therefore yet more pressure on austerity.
Reply 3
Wish they'd elaborate a bit more on why...
Original post by Aj12
Wish they'd elaborate a bit more on why...


Subscribers get more, and all the big news media are subscribers, so we will get more detail in the press in the next couple of days, once they start analysing it. It will be interesting to see if the financial press take apart the alleged reasoning.
Credit ratings for government debt don't make much difference to influencing investors. Really they just make headlines for newspapers and allow politicians to make political capital out of each other.

The reason for credit ratings is to solve a problem of information, where potential investors don't have access to enough information about the credit worthiness of a business. With government debt though there isn't an information problem as investors have access to loads of information about the relative credit worthiness of a country, because of all the economic indicators that are published. Most people would know that lending to Switzerland, Germany, Sweden etc is safer than lending to Greece, Italy, Portugal but if you were comparing between lending to private businesses, apart from the big names it would be much harder to differentiate without having the credit rating as a guide.

So whilst credit ratings can drive investor behaviour a lot with lending to private firms, we are unlikely to see much effect if any on the demand for lending to the UK. Nobody is going to think the UK is more likely to default tomorrow than today just because of this rating downgrade.

The biggest issue with this downgrade is political not economic. Osborne made himself a hostage to fortune, by staking his economic credibility on retaining the UK's AAA rating. The UK has never been downgraded before, so Osborne probably guessed he was on safe ground by making the AAA rating a benchmark of his own performance. Every time he is asked about poor growth figures, poor employment etc he always uses as his main achievement "we have retained the AAA rating due which is a signal of market confidence in our economic strategy". No Chancellor before has ever banged on about the credit rating.

Now this has come to bite him on the ass because we have lost it and so obviously he has now failed on his main claim to credibility.
Reply 6
Didn't Gideon say something like "our AAA rating is the benchmark I will be judged on"?

Maybe they'll acknowledge that their austerity isn't working, or at least in the way they're implementing it.
Original post by Skip_Snip
Didn't Gideon say something like "our AAA rating is the benchmark I will be judged on"?

Maybe they'll acknowledge that their austerity isn't working, or at least in the way they're implementing it.


He's been getting ready for this news for a while by making noises in recent months that it doesn't matter so much after all, etc.
Original post by MagicNMedicine

Now this has come to bite him on the ass because we have lost it and so obviously he has now failed on his main claim to credibility.


I agree with the rest of your analysis, but given that the US has also been downgraded, and the endless crisis in Euroland, I'm sceptical it will do him that much political damage. Maybe if all the agencies act in a concerted way around it and give it another knock down in a while to boot, that will start to hurt.
Reply 9
Original post by Fullofsurprises
He's been getting ready for this news for a while by making noises in recent months that it doesn't matter so much after all, etc.


Surely instead of trying to excuse his failure, he should take measures to avoid it ...
Original post by Skip_Snip
Surely instead of trying to excuse his failure, he should take measures to avoid it ...


You would think. He seems alarmingly tied to the Austerity - There is No Alternative mantra, maybe that's part of the reason Moodys have acted this way.
Reply 11
This really isn't an answer on whether Austerity or Stimulus is best. In fact, I find the dichotomy to be a falsely-constructed pile of rubbish.

Moody's state that the main reason for this downgrade was slow growth projections- spawned by 'the anticipated slow growth of the global economy'.

Frankly speaking, this does very little damage in real terms to our economy. Osbourne's mistake was in placing his political reputation on these discredited, glorified economic think tanks. The opposition are going to take this opening with glee.

People should be focusing on the deficit before our Credit Rating. A deficit that has approximately been cut by a quarter in the past three years.
(edited 11 years ago)
Reply 12
I don't get this credit rating thing? Moody's is a private company based in America so why can't we get President Obama to send round some CIA goons to bully them into keeping Western credit at AAA?
Original post by peter12345
I don't get this credit rating thing? Moody's is a private company based in America so why can't we get President Obama to send round some CIA goons to bully them into keeping Western credit at AAA?


There is a school of thought that the major credit agencies are controlled from Langley. I think if I was the CIA, I might be interested in infiltrating them. However, a more prosaic explanation is that they are controlled by the major neoliberal business interests, who ensure their message ties in with their goals for world domination at any given time.
It was a nice little badge of honour, but it's not like it ment anything in reality. Unemployment continues to fall, the economy continues to slowly stabilise, the debt-to-GDP ratio remains relatively healthy. Investors aren't going to suddenly flee from the UK. Life goes on.
Except for the left, who I imagine are going to start foaming at the mouth and blow this way out of proportion. I bet it will be headline breaking news at the BBC as well, with completely 'impartial' interviews and commentary from the likes of Ed Balls and Bob Crow.
(edited 11 years ago)
Original post by pol pot noodles
It was a nice little badge of honour, but it's not like it ment anything in reality. Unemployment continues to fall, the economy continues to slowly stabilise, the debt-to-GDP ratio remains relatively healthy. Investors aren't going to suddenly flee from the UK. Life goes on.
Except for the left, who I imagine are going to start foaming at the mouth and blow this way out of proportion. I bet it will be headline breaking news at the BBC as well, with completely 'impartial' interviews and commentary from Ed Balls and Bob Crow.


Lol, everything is marvellous in your little Tory world, isn't it.

Don't worry that incomes have plunged over the last 4 years, that the economy is stalled and all the kickstarting in the world has achieved, er, nothing, the banks appear to STILL be largely dead in the water, the government are refusing to re-divide them by splitting the casino from retail banks, which everyone acknowledges to be at the heart of the danger, all of the main indicators remain poor.... sigh.... I could go on, but reality appears to be something that some people struggle with.
Original post by Fullofsurprises
Lol, everything is marvellous in your little Tory world, isn't it.

Don't worry that incomes have plunged over the last 4 years, that the economy is stalled and all the kickstarting in the world has achieved, er, nothing, the banks appear to STILL be largely dead in the water, the government are refusing to re-divide them by splitting the casino from retail banks, which everyone acknowledges to be at the heart of the danger, all of the main indicators remain poor.... sigh.... I could go on, but reality appears to be something that some people struggle with.


What did I say? Typical leftie coming in and blowing everything out of proportion. Marvellous? No, no where did I say everything was marvellous?
Life's pretty crap in my little Tory world as well, I simply get on with my life instead of whine and moan like a lot of people seem to be doing.
I stated three simply facts, all of which are true, and all of which are more concerning indicators for the long term health of our economy than anything you've since stated. All you've done is launch into a big long rant about things I'm not disputing. Get a grip.
Original post by Pedd

People should be focusing on the deficit before our Credit Rating. A deficit that has approximately been cut by a quarter in the past three years.


And so he is going to miss his deficit target too unless he removes the other three quarters in the next two years.
Original post by pol pot noodles
It was a nice little badge of honour, but it's not like it ment anything in reality. Unemployment continues to fall, the economy continues to slowly stabilise, the debt-to-GDP ratio remains relatively healthy. Investors aren't going to suddenly flee from the UK. Life goes on.
Except for the left, who I imagine are going to start foaming at the mouth and blow this way out of proportion. I bet it will be headline breaking news at the BBC as well, with completely 'impartial' interviews and commentary from the likes of Ed Balls and Bob Crow.


has it really fallen though. they now include full time students in the employment numbers whereas Im sure they didn't before.
Reply 19
Original post by Fullofsurprises
There is a school of thought that the major credit agencies are controlled from Langley. I think if I was the CIA, I might be interested in infiltrating them. However, a more prosaic explanation is that they are controlled by the major neoliberal business interests, who ensure their message ties in with their goals for world domination at any given time.

They must be. I really can't see why an all powerful government would let some private company have so much power over their entire economy. It's like putting G4S in charge of the British Army.

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