Bye Bye AAA Rating

Discussion in 'Politics & The Economy' started by Dave, Feb 22, 2013.

  1. Dave

    Dave
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    So, the UK has had it's rating downgraded yet our chancellor despite pinning his policy on keeping the AAA rating states that it's because of the debt.

    What an incredibly epic fail.

    Borrowing higher than ever, borrowing now costs more than ever. What now?

    In the first instance I think Osbourne needs to go, he's promised so much and delivered nothing but failure.

    How frustrating.
     
  2. karkus30

    karkus30
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    He refused to cut public spending and has done nothing to encourage business growth. However, none of the other parties want to countenance it either.
     
  3. Dave

    Dave
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    Maybe it's time to vote for a party that will.
     
  4. Oldboy1934

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    What are the consequences of losing this tripple A rating exactly?
     
  5. Dave

    Dave
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    Our interest rate effectively rises meaning our increasing debt costs more to repay. It's really not a great outcome at all.
     
  6. pragmatic

    pragmatic
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    Borrowing costs have not been affected IRC, they unlikely to suddenly rise from lowest ever to highest ever over this.

    Not necessarily, but in a normal world you'd expect it.
     
  7. karkus30

    karkus30
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    Its not in their nature.
     
  8. domtheone

    domtheone
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    Let's hope it's the first of many cuts.

    Only when faced with impeding disaster, do i think that any of the 3main parties will (well actually 1 as Lab\LD won't ever) actually do anything about it.

    Junk status. 7% interest payments. 15% unemployment. Bring it all on.

    Politicians might actually believe we have a problem then.

    They might actually believe that QE and negative interest rates are not the answer too.
     
  9. damo_in_sale

    damo_in_sale
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    Well politically it looks dreadful since he repeatedly stated that this would not happen. Will probably be the nail in the coffin for this government.

    I am rubbish at correcting people Dave without also winding them up when I don't want to. I think it's a failing in my ability at written English to be honest.

    But I have issue with your use of a couple terms. And I am not blaming you for deception or anything of that nature- I actually think people are dreadfully served by their politicians and media here (politicians intentionally try to deceive, mainstream media generally is useless).

    1) "Borrowing higher than ever" - when we talk about government borrowing, we are usually talking about the amount of money that the government borrows in a particular year, literally over a 365 day period. The very basic calculation is as follows:

    {government income (tax receipts in the main)} minus {government expenditure}.

    This is what we call DEFICIT if negative, and SURPLUS if positive.

    The assertion that borrowing is higher than ever is not correct. The record in nominal terms is held by Labour during the Prime Ministership of Mr. Brown at not far off double the current amount. I suspect as a percentage of GDP the above is true during peaceful times.

    2) "borrowing now costs more than ever" - if we use the above definition of borrowing (which we must if we are to avoid sloppiness) then this statement can only be made after careful consideration. Firstly, the cost to the UK Treasury of borrowing every ADDITIONAL pound sterling is at near record lows. It is significantly lower than it was before this Parliament began.

    I suspect that you meant the governments repayment cost on PUBLIC SECTOR NET DEBT (the total amount of money that the government owes bond holders) is "more than ever". I'm not sure that is technically correct but it is one of the reasons why people such as myself fear excessive government borrowing (DEFICIT)- government borrows money to pay nurses today but, because repayment costs on debt accumulate each year, government has less money than it otherwise would have to pay nurses tomorrow.

    Government DEBT (how full the bathtub is) was always going to increase during this Parliament since we have an epic DEFICIT (how fast the tap is running) of epic proportions. It was only the deficit they promised to reduce during this Parliament.

    It is worth considering how Labour would have faired had they been in office. My personal opinion is that is was a disaster for the Conservative party that it is in office during this Parliament, and it would have been much better for them and the voters to see how a Labour government would have performed during a complete economic cycle.
     
    Last edited: Feb 23, 2013
  10. Squiffy

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    Politically this is hugely damaging, but loss of AAA status has not (yet) been a catastrophe for France or the USA.

    Let's see what happens to actual interest rates that we pay on the debt.
     
  11. Bl4ckGryph0n

    Bl4ckGryph0n
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    +1 Although I very much doubt it would have been in the short term interest of the uk, it would have been fantastic for the long run.
     
  12. domtheone

    domtheone
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    ^^^^^
    1000% agreed.
     
  13. karkus30

    karkus30
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    The coalition hasn't exactly been successful has it ? The Labour plan was pretty much the Conservative plan on the economy. They would have tried to push wages higher while increasing taxes.
     
  14. Dave

    Dave
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    Although there's no doubting Labour would have had just as many problems with the economy I wouldn't be so instantly dismissive.

    At least Labours plan would have tried to drive economic growth which is one of the major downfalls of the coalitions plan. They were too busy slashing budgets and blaming Labour to bother with things like economic growth and it has proven disastrous.

    Labour would have probably continued spending to try and drive growth ultimately ending up in the same position but we'll never know.

    Growth and austerity is a balancing act, unfortunately the coalition fell off ages ago yet choose to carry on regardless.
     
  15. Bl4ckGryph0n

    Bl4ckGryph0n
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    How would they have tried to drive economic growth? I haven't seen or heard a single policy that would have done that?
     
  16. Dave

    Dave
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    This quote in particular from the Chancellor makes me want to smash my head against the wall.

    What?

    So a decision that clearly shows your plan is failing redoubles your resolve to continue with it. You couldn't make it up. Cameron really needs to get a grip by sacking Osbourne and trying something else. It's an absolute farce.
     
    Last edited: Feb 23, 2013
  17. Dave

    Dave
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    Maybe drive growth is the wrong way of putting it. There's no doubt that the coalitions rush to cut everything in sight has stifled growth a lot. Labour have always said they would have cut almost as much but no where near at the rate the coalition have.

    I always thought the rush to cut was disastrous and little more than a politically motivated blame game.
     
  18. sidicks

    sidicks
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    They would have spent money on the public sector ( NOT invested).

    By definition this would have increased growth (because of the perverse way 'growth' (GDP) is defined).

    The fact that the increased debt (plus interest) would have had to be re-paid in the future (reducing future growth) is lost on people.

    So we'd still have lost the AAA rating (Moody's were warning about a downgrade well before the Coalition took power) but we'd have increased debts much further, interest rates would have been much higher and we'd still be facing the need to cut spending.

    :lesson:
     
  19. sidicks

    sidicks
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    Do you mean reduce the rate at which spending is increasing?
    :confused:
     
  20. Dave

    Dave
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    No, I mean exactly what i said.
     
  21. karkus30

    karkus30
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    Spending is increasing. The state cannot spend its way out of debt, or spend its way to growth.
     
  22. Bl4ckGryph0n

    Bl4ckGryph0n
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    I think it is more the lack of decisive cuts from the coalition that is one of the factors that has caused this. I can't see where the rush in cuts have taken place, or how much slower labour could have done it.
     
  23. sidicks

    sidicks
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    Well in that case you are wrong.

    Maybe you're biased because of what you see happening to the Police, but spending (which was already excessive) is continuing to increase.
     
  24. Dave

    Dave
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    I'm not saying it can because that would be daft.

    However, the message the coalition repeatedly sent out and reinforced with every soundbite and at every opportunity (and annoyingly still do even now) was that Labour ruined the economy and it was all their fault and now we have to cut cut cut.

    That's hardly a good platform for growth is it? Lets face it, with that message no one in their right mind is going to start new businesses, expand existing ones, invest money, create jobs, all those things needed for economic growth.
     
  25. karkus30

    karkus30
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    The only number that matters is the total public spend and not the shifting around of numbers.
     
  26. karkus30

    karkus30
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    Its just political speak. They should have been cutting, but instead they are spending more than ever. I don't know what your definition of a cut is, but in my house, if we are spending more I struggle to see it as a cut.
     
  27. Dave

    Dave
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    sidicks, I'm afraid your style of posting makes it incredibly tedious to read them.

    First you try and twist my post to fit your own ends then when I don't play the game you simply tell me I'm wrong. It makes for an incredibly boring and one sided discussion.

    I'm not talking about government spending, I'm talking about growth which the government has singularly failed to do diddly squat about. I'm sorry if you don't like it or have trouble grasping that I feel it's damaging the economy but there we are.

    Perhaps if the government would have actually bothered to try and stimulate growth by not simply bleating like a child about how it was all Labour's fault then borrowing would not have risen but whatever, I clearly know nothing and am simply "wrong".
     
  28. Dave

    Dave
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    It's not though, it's a message to everyone with a quid to spend that they'd be better off with it in their pocket.

    The government sold itself on it's economic credentials and have done very very badly.
     
  29. sidicks

    sidicks
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    What is incredibly tedious is someone who continues to bleat about austerity cuts and public spending being 'slashed' when anyone with minimal effort can confirm that is not the case and that aggregate spending is increasing.

    What is boring is when people continue to talk about 'cuts' when spending is increasing (and then blame it on ideology).
    :boring:

    No, of course you're not:

    Exhibit A:
    Exhibit B:
    Exhibit C:
    But of course you're not talking about public spending....
    :facepalm:

    I'm sorry if you don't understand that 'growth' based on public spending that will have to be re-paid with interest, denting future growth is not necessarily a good thing.

    I'm sorry that you don't appreciate that 18 consecutive months of private sector debts being reduced is a) not conducive to current growth but b) is a very good thing for future growth


    I'm sorry you don't appreciate how little money there was left (i.e. none) following a decade of record growth and tax receipts and hence it was almost impossible to 'stimulate growth' without risking huge increases in borrowing costs.
     
  30. karkus30

    karkus30
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    If employment is looking unsteady, you have a lot of debt, VAT has increased and inflation is making everything more expensive each month while wages aren't growing. What do you think people should do ? The Government doesn't have anything to do with it. People are bright enough to realise they have been had and they are doing the sensible thing.
     
    Last edited: Feb 23, 2013

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