Oh dear: UK more at risk than other major economies of losing top credit rating

[EternalOptimist]

This stupidity is a drop in an ocean of tulip that he got this country into with house pricing bubble and waste of taxpayer money on public services.

I don't know history of UK well enough, so maybe someone can help me out - was there any other person who caused more damage to this country than Brown with his economic policies?

Even Spanish Armada would have done less damage

fking hell

comparing bobble eye brown to the impact of the religious wars and the threat of invasion from Catholic Spain. Thats novel that is.

AtW you should write a book about this quick whilst its still fresh, and before someone elese can nick the idea


On a serious note - do you mean economic damage, or any type of damage ?

[AtW]

For the UK economy, the BoE's interest rate still has the biggest impact.

That's utter bollox.

What recent events have proven is that BoE rates mean jack to UK - they dropped them down to nearly 0, but what are the morgage rates? Credit card rates?

They had to print money to actually have any effect on economy and this isn't working particularly well, apart from sterling devaluation but that's not even rates dependent anymore.

[AtW]

comparing bobble eye brown to the impact of the religious wars and the threat of invasion from Catholic Spain. Thats novel that is.

Catholic spain would have pillaged coastal cities, but then pulled back - vikings have been doing it for centuries, one more invasion would only make locals stronger.

What Brown did is put whole country into debt - the damage he caused is going to last longer and cost more than even Luftwaffe: at least those could be shot down, where as Brown will retire on his cushy final salary pension.

[Gonzo]

How would this impact the man/woman in the street if it happened?

As centurian explained, the UK government is spending more cash than it receives by an unprecedented margin and it has to borrow to fund that difference.

If the county's credit rating is downgraded then the cost of servicing that debt will be more expensive.

The overspending cannot go on forever and will have to be corrected by reducing spending or increasing income in the future, otherwise the country will go bust.

If the debt servicing is more expensive than that corrective action becomes more difficult.

The obvious answers to the corrective action are higher taxes and / or government spending cuts, both will have to be more acute if the government is spending more to service its debts. That is how the person in the street will be affected.

There are other options - print money or invade a mineral rich country come to mind but neither of these are without pretty drastic consequences.


I don't know what the knock-on effect to the debts of the general public could be but that is another possible consequence.

Over here, earlier in the year the Finance Minister went on a massive charm offensive to stop the rating agencies donwgrading the country's credit rating. Being a tiny economy, the house price boom of the past few years has been funded by credit from overseas. If overseas decided to stop lending that would result in property-market armageddon.

I doubt that retail lending in the UK is so dependent on overseas finance to have the same knock-on effect for the consumer though, but I don't know the figures.

[pzz76077]

As centurian explained, the UK government is spending more cash than it receives by an unprecedented margin and it has to borrow to fund that difference.

If the county's credit rating is downgraded then the cost of servicing that debt will be more expensive.

The overspending cannot go on forever and will have to be corrected by reducing spending or increasing income in the future, otherwise the country will go bust.

If the debt servicing is more expensive than that corrective action becomes more difficult.

The obvious answers to the corrective action are higher taxes and / or government spending cuts, both will have to be more acute if the government is spending more to service its debts. That is how the person in the street will be affected.

There are other options - print money or invade a mineral rich country come to mind but neither of these are without pretty drastic consequences.


I don't know what the knock-on effect to the debts of the general public could be but that is another possible consequence.

Over here, earlier in the year the Finance Minister went on a massive charm offensive to stop the rating agencies donwgrading the country's credit rating. Being a tiny economy, the house price boom of the past few years has been funded by credit from overseas. If overseas decided to stop lending that would result in property-market armageddon.

I doubt that retail lending in the UK is so dependent on overseas finance to have the same knock-on effect for the consumer though, but I don't know the figures.

Shirley MP's can just put all this on their expenses?? Job done.

PZZ

[Gonzo]

That's utter bollox.

What recent events have proven is that BoE rates mean jack to UK - they dropped them down to nearly 0, but what are the morgage rates? Credit card rates?

They had to print money to actually have any effect on economy and this isn't working particularly well, apart from sterling devaluation but that's not even rates dependent anymore.

There was an interesting piece on the BBC website last year about interest rate setting:

http://news.bbc.co.uk/2/hi/business/7680552.stm

Over here, people have taken umbrage over the fact that the local banks (mostly Australian owned) haven't been reducing interest rates as far as the Reserve Bank. As I said in the previous post, it is because vast sums of credit are sourced overseas but some locals see it as an argument for the government to take more control over local bank behaviour.

[centurian]

That's utter bollox.

What recent events have proven is that BoE rates mean jack to UK - they dropped them down to nearly 0, but what are the morgage rates? Credit card rates?

They had to print money to actually have any effect on economy and this isn't working particularly well, apart from sterling devaluation but that's not even rates dependent anymore.

Because the economy is so fooked (and was before the credit crunch even started) that nothing the BoE can do will completely solve it alone. But then neither can any other organisation, so I maintain that the BoE has the biggest impact of the existing players.

Back to my Sun/Moon analogy, the Moon has the biggest influence over water flows, but the Moon can't lift water out of the seas, nor can any other astronomical body (through gravity anyway).

[centurian]

If the debt servicing is more expensive than that corrective action becomes more difficult.

In short, cut now, or cut a lot more later... whether you like it or not...

[Gonzo]

In short, cut now, or cut a lot more later... whether you like it or not...

Or invade Norway .......

[AtW]

There was an interesting piece on the BBC website last year about interest rate setting:

http://news.bbc.co.uk/2/hi/business/7680552.stm

Over here, people have taken umbrage over the fact that the local banks (mostly Australian owned) haven't been reducing interest rates as far as the Reserve Bank. As I said in the previous post, it is because vast sums of credit are sourced overseas but some locals see it as an argument for the government to take more control over local bank behaviour.

BoE rate: 0.50%
LIBOR rate: 4.05% (http://www.swap-rates.com/)



BoE rates totally meaningless... well, that's the rate UK Govt probably borrows from BoE