Wednesday
Here is one of those quotes where you add "read the whole thing":
But next time you are told that Osborne is imposing savage, reckless cuts on the UK, remember that the figures tell a different story. So far, spending is still going up. The plan is for total spending to go up in cash terms overall this financial year and to fall by 0.6 per cent in real terms (the measure that really matters). This will hurt, especially given that debt interest payments are soaring, reducing the funds available for public services by a lot more than the 0.6 per cent overall cut. But this should also be put into context. Barack Obama, who was in London yesterday, wants to cut public spending by 3.8 per cent next year, more than the 3.7 per cent pencilled in over four years by Osborne. In other words, Obama’s cuts – which many in the US want to make even larger – are four times larger than the average annual cuts proposed by slowcoach Osborne.So it is no wonder really that the UK’s credit rating was downgraded yesterday by (wait for it) Chinese rating agency Dagong, which cut the UK by one notch to A+, from AA-, and placed it on a negative outlook. You may snigger – but unless the UK is able to deliver on its fiscal austerity not just this year but for the next four, our creditors will soon start panicking again, with good reason.
That's Allister Heath, writing in the London giveaway newspaper, City A.M., which he edits. His point being that the journey in question has only just begun.
Read the whole thing. The above quote comes at the end. Before that come a few of the facts and the figures.
I suppose the optimistic take on all this is that you can't wrench a graph that is going up onto a downward path, just like that. But how much wrenching is actually going on?
The claims for reductions in government spending that Barack Obama (supposedly) wants are oft repeated, but are false.
Actually the Obama budgets are even more dishonest than the British government budgets.
It is not just Allister Heath, I have also seen F. Nelson (editor of the Spectator) come out with the "Obama is trying to cut" stuff.
Indeed Mr Nelson has also compared the Tea Party to leader of the French National Front (last week - in the News of the World, in the same newspaper there was a film review that said that the character of Captain America was popular with "American racists", odd considering this character spent most of his time fighting the Nazis). In short people who really do want to cut government spending are smeared as racists (which they are not) and someone who has no intention of cutting government spending (Barack Obama) is held up as a example to follow.
"Yes but.... Paul".
No there is no "yes but".
Talking nonsense about the United States is not justified by the noble aim of trying to get the British government to reduce its spending.
Posted by Paul Marks at May 26, 2011 05:54 PM
[T]he UK’s credit rating was downgraded yesterday by (wait for it) Chinese rating agency Dagong, which cut the UK by one notch to A+, from AA-, and placed it on a negative outlook.What kind of grading scale is that? Do credit rating agencies also design sound equipment for Spinal Tap?
Posted by CayleyGraph at May 26, 2011 10:57 PM
[T]he UK’s credit rating was downgraded yesterday by (wait for it) Chinese rating agency Dagong, which cut the UK by one notch to A+, from AA-, and placed it on a negative outlook.What kind of grading scale is that? Do credit rating agencies also design sound equipment for Spinal Tap?
Posted by CayleyGraph at May 26, 2011 10:58 PM
Actually, their rating system isn't too different from other established rating agencies':
AAA: Highest credit rating
AA: Very High credit rating
A: High credit rating
BBB: Medium credit rating
BB: Low medium credit rating
B: Relatively low credit rating
CCC: Low credit rating
CC: Very low credit rating.
C: Lowest credit rating. Issuer is unable to meet financial obligations and possibly in the process of bankruptcy.
Intermediate ratings are offered at each level between AA and CC (e.g., AA+, AA, and AA-).
Posted by Laird at May 27, 2011 05:41 PM
The importance from one grade to another matters a great deal.
The step from A to BBB is very important since the bond is no longer 'investment grade' but instead 'speculative grade'. A lot of index tracking mutual funds that track investment grade indices will be forced sellers of your debt etc. Also, banks must for regulatory reasons hold capital that has a minimum credit ratings (I think AA but don't know).
It is of course also a pretty big deal for a developed nation to lose its AAA rating.
Posted by PeterT at May 27, 2011 08:27 PM
@PeterT: that is of course if the rating is by one of the 3 major rating agencies (S&P, Moody's, Fitch). The Chinese agency (for now) holds much less weight.
Posted by hovis at May 29, 2011 06:53 PM
