Uk Risks Losing Top Aaa Credit Rating If Growth Is Lower Than Predicted

[interestrateripoff]

http://www.guardian.co.uk/business/2011/mar/24/uk-risks-losing-top-aaa-rating

Britain could lose its prized AAA credit rating if George Osborne's latest growth forecasts prove too optimistic, ratings agency Moody's warned on Thursday.

Moody's cautioned that there was more chance UK economic growth would lag behind rather than exceed Osborne's predictions – which could thwart his drive to cut the deficit. This would create a significant risk that Britain could be downgraded, it said.

Osborne lowered his forecast for GDP growth this year and next year during Wednesday's budget, admitting that the recovery will be slower than thought until 2013.

"Although the weaker economic growth prospects in 2011 and 2012 do not directly cast doubt on the UK's sovereign rating level, we believe that slower growth combined with weaker-than-expected fiscal consolidation could cause the UK's debt metrics to deteriorate to a point that would be inconsistent with a AAA rating," Moody's said in a statement.

The catch 22, we need higher growth but that has to come from the private sector as govt spending is out of control, but to keep GDP up the govt must borrow more money otherwise the artificial higher growth rate funded by govt spending will collapse below what the private sector can make up.

Nice.

We either have a larger deficit which will increase debt to GDP ratio, or we shrink the deficit and increase the debt to GDP ratio.

[THE BALD MAN]

http://www.guardian.co.uk/business/2011/mar/24/uk-risks-losing-top-aaa-rating

The catch 22, we need higher growth but that has to come from the private sector as govt spending is out of control, but to keep GDP up the govt must borrow more money otherwise the artificial higher growth rate funded by govt spending will collapse below what the private sector can make up.

Nice.

We either have a larger deficit which will increase debt to GDP ratio, or we shrink the deficit and increase the debt to GDP ratio.

Classic catch twenty two ....This country is in a total mess created by Gormless Gordan..the only people making money are public sectors employees in the banks and local government..

We have:

High inflation

Low growth

Budget deficit

Low wages

Poor private sector penions

[caparn]

http://www.guardian.co.uk/business/2011/mar/24/uk-risks-losing-top-aaa-rating

The catch 22, we need higher growth but that has to come from the private sector as govt spending is out of control, but to keep GDP up the govt must borrow more money otherwise the artificial higher growth rate funded by govt spending will collapse below what the private sector can make up.

Nice.

We either have a larger deficit which will increase debt to GDP ratio, or we shrink the deficit and increase the debt to GDP ratio.

A loss of the AAA* credit rating would definitely cause interest rates to rise, so maybe we should hope for that. The trouble is that Moody's, Standard & Poor's, and Fitch to are in the pocket of who pays them so I don't hold much hope for a reduction in our credit rating.

[TheBlueCat]

A loss of the AAA* credit rating would definitely cause interest rates to rise, so maybe we should hope for that. The trouble is that Moody's, Standard & Poor's, and Fitch to are in the pocket of who pays them so I don't hold much hope for a reduction in our credit rating.

I reckon they're itching to downgrade a AAA so that they can claim they were ahead of the game when one or other of them gets into trouble. You can bet it won't be the US they downgrade first, so I wouldn't be at all surprised if they went for the UK or maybe France.

[mattyfc]

The Guardian is becoming more of a propaganda machine every day.. Seems pretty obvious that any countries AAA rating would be under threat if it was not growing. Moody's are actually very supportive of the government's budget.

This story refers to the same story on the WSJ but has been reported rather differently...

http://online.wsj.com/article/SB10001424052748704425804576220040459707796.html

LONDON—Moody's Investors Service Inc. on Thursday said the U.K. budget indicates the government is tackling the current economic and fiscal challenges with plans to significantly reduce its budget deficit and levels of debt.

The ratings company said this fiscal consolidation plan is an important factor supporting the country's triple-A rating and stable outlook.

I would also like to know why the Guardian has not written a piece on the latest trade figures, possibly because they can't stand to write anything positive? The only thing I could find was a tiny editorial rather than the full piece that is done normally.

(http://www.guardian.co.uk/business/internationaltrade )

[Realistbear]

Classic catch twenty two ....This country is in a total mess created by Gormless Gordan..the only people making money are public sectors employees in the banks and local government..

We have:

High inflation

Low growth

Budget deficit

Low wages

Poor private sector penions

And what does the country gain from these three growing sectors?

More debt. And that will be seen as good news and assure the IMF that we deserve to keep our AAA positive outlook rating (unlike every other country in the G10).

Its ALL about house prices. When the collapse comes our credit rating will follow. As things stand there is no collapse only tiny fractional drops MoM with the occasional rise. At least, according to the VI data which tends to differ from actual house sales figures.

One IR hike and its all over for our housking market. Merv knows it, the IMF know it and the banksters know it and that is why it is not going to be allowed to happen.

[mattyfc]

One IR hike and its all over for our housking market. Merv knows it, the IMF know it and the banksters know it and that is why it is not going to be allowed to happen.

Mainly agree with us, the only thing that will accelerate the correction in house prices is rising interest rates. A small rise and the signal of a tightening cycle could spread panic through vendors and lead to pretty descent drops.

The only way this will happen is if the economy is able to grow without needing HPI for support, trade, ,investment, business services will be key to a potential HPC. Hope for a good result on Wednesday which could change sentiment and force up interest rates.

[cashinmattress]

Silly article.

Unless of course you know some turkeys that vote for Christmas.

[Realistbear]

http://www.bloomberg.com/news/2011-04-21/u-k-economy-expanded-0-5-in-first-quarter-economists-say.html

U.K. GDP

May

Have Risen 0.5% in First Quarter as Economy Lacked Momentum

By Jennifer "Jenny" Ryan - Apr 22, 2011 12:00 AM GMT+0100

.

Britain’s economy probably resumed growth in the first quarter with less momentum than needed to restore the pace of the recovery, economists say.

Gross domestic product rose 0.5 percent after contracting the same amount in the fourth quarter, according to the median forecast of 27 economists in a Bloomberg News survey. The Office for National Statistics in London will publish the data at 9:30 a.m. on April 27.

Next week's GDP figures will be either:

1. unexpectedly higher than forecast, or

2. unexpectedly lower than forecast

If is unexpectedly the 2nd option we can expect IR to remain the same for the rest of this year. If they are unexpectedly in the first option we can expect IR to remain the same for at least the rest of this year.

Its ALL about house prices. The government will do all they can to boost BTL to get the market moving again. One of our biggest letting agents (just E of Brighton) has 3 properties for rent on their books. £1000pm for a small bungalow. The EA said ordinary people cannot afford it but those on housing subsidy can. The government is doing all it can to boost BTL.

It is ALL about house prices in this country.

[interestrateripoff]

Its ALL about house prices. The government will do all they can to boost BTL to get the market moving again. One of our biggest letting agents (just E of Brighton) has 3 properties for rent on their books. £1000pm for a small bungalow. The EA said ordinary people cannot afford it but those on housing subsidy can. The government is doing all it can to boost BTL.

It is ALL about house prices in this country.

Nice, so those who don't work get to price out those that do? It's a perverse system, social security was never intended to create these times of poverty traps.

The govt could save itself a fortune by allowing rental prices to correct. But in doing so it would force house prices to correct, which then triggers panic and more than likely yet another banker bailout that the country can't afford.

In for a penny in for a £tr.

[Realistbear]

Nice, so those who don't work get to price out those that do? It's a perverse system, social security was never intended to create these times of poverty traps.

The govt could save itself a fortune by allowing rental prices to correct. But in doing so it would force house prices to correct, which then triggers panic and more than likely yet another banker bailout that the country can't afford.

In for a penny in for a £tr.

Quite. IMO we are headed for another rendezvous with Mr. Structural Collapse. Debt "saved the day" a couple of years ago and that foundation cannot take the mountain of debt that is already resting upon it (£4-5TR?)

.

[interestrateripoff]

Quite. IMO we are headed for another rendezvous with Mr. Structural Collapse. Debt "saved the day" a couple of years ago and that foundation cannot take the mountain of debt that is already resting upon it (£4-5TR?)

.

Unless of course the new paradigm is that you can solve a debt crisis with more debt. Perhaps we don't understand the economic paradigm of solving a debt problem by creating an even bigger debt mountain.

[Democorruptcy]

How many shares in Moodys does investment expert Warren Buffet own now?

Buffett, the biggest shareholder of Moody’s, at one point last year owned about 20% of the company’s outstanding shares,

http://blogs.wsj.com/deals/2010/10/14/warren-buffett-keeps-selling-moodys-stock/

[Fairies Wear Boots]

Nice, so those who don't work get to price out those that do? It's a perverse system, social security was never intended to create these times of poverty traps.

The govt could save itself a fortune by allowing rental prices to correct. But in doing so it would force house prices to correct, which then triggers panic and more than likely yet another banker bailout that the country can't afford.

In for a penny in for a £tr.

It's a crazy joke. The only thing that stops people on low wages throwing in the towel and going on the dole is that they'd get a nice place to live, but they'd only have 60 pounds a week to live off. There seem to be quite a few that do it and then make some beer money by becoming the local dwugs dealer.

I can't believe how they bottled it in regards to housing benefit. If we have more austerity, and rising unemployment from the public sector, we'll have shedloads more high housing benefit claims, and it won't have saved that much in making them unemployed! I'm starting to suspect that they know full well that reducing the rent burden will mean a collapse in house prices and it IS all about house prices.

I can't see how the government can pay high levels of housing benefit as the claimant count rises. The deficit will probably remain "unexpectedly high".

[needsleep]

Unless of course the new paradigm is that you can solve a debt crisis with more debt. Perhaps we don't understand the economic paradigm of solving a debt problem by creating an even bigger debt mountain.

There is nothing that difficult to understand. Natural cyclical upswing coupled with mildly above trend interest rates (not enough to seriously discourage invrstment). Mix in some well targeted cuts and some well targeted fiscal stimulus (not the short-run quick fixes of lots of fixed- contract civil service jobs but serious infrastructure investment) and in theory you may come out of it with a greater overall debt but maybe a bigger economy too to offset it. And perhaps an economy better positioned to, ahem, deal with the debt.

[interestrateripoff]

There is nothing that difficult to understand. Natural cyclical upswing coupled with mildly above trend interest rates (not enough to seriously discourage invrstment). Mix in some well targeted cuts and some well targeted fiscal stimulus (not the short-run quick fixes of lots of fixed- contract civil service jobs but serious infrastructure investment) and in theory you may come out of it with a greater overall debt but maybe a bigger economy too to offset it. And perhaps an economy better positioned to, ahem, deal with the debt.

And if you do all of this and you don't sort out the structural issues your left with even more debt and no way of paying, I think this has what has been happening for decades.

Now all the malinvestment is hatching out of the woodwork with no possible way to meet the debt repayments.

[billybong]

If they're as good as getting the UK out of the current hole as they've been over the last few decades then the UK will end up in a far worse mess than even the current mess the UK's in.

Giving the BoE "responsibility" for interest rate policy and inflation was supposed to go a long way towards getting the UK out of that situation but amazingly the BoE made an even worse mess of things.