Thread: UK's Credit Outlook Upgraded to Stable

Originally Posted by PeteEU

The UK had and has no problems loaning money... that is the insane part. The UK budget deficit is one of the worst in the industrialized world, their debt vs GDP is going up faster than any big nation (other than the US) and yet they pay next to nothing on the debt they take out.

If there had been any reality in the situation, the ratings agencies would have downgraded the UK (and US) long ago to reflect the pathetic state their economies were and that would have raised their lending costs. But it did not happen, so they are paying next to nothing for loaning more and more money. That is why the system in my opinion is broken. The US and UK have been rewarded for having massive deficits, where as all others have been punished.

Well, both countries are known to pay their debts, unlike a country like Italy who, before the euro, revalued its Lire every other year. I think the rating system is up for improvement but we discussed your conspiracy theory before, I'm willing to explore the possibility but I don't see any clear cut evidence. In my view, America's spending power and the worlds banker the UK, have a huge influence on the financial market, no surprise they have less difficulty raising capital.

What surprises me in this discussion is that people blame bankers for trying to improve their tier one, eventhough its the government who demands it. Don't get me wrong, I fully support this demand but of course that affects the lending capacity of banks.

Originally Posted by Djoop

Well, both countries are known to pay their debts, unlike a country like Italy who, before the euro, revalued its Lire every other year. I think the rating system is up for improvement but we discussed your conspiracy theory before, I'm willing to explore the possibility but I don't see any clear cut evidence. In my view, America's spending power and the worlds banker the UK, have a huge influence on the financial market, no surprise they have less difficulty raising capital.

I agree, the US has the "reserve currency" status, and that makes it easier for the US to have massive deficits and debt. But we are still rewarding the US for taking more and more debt... its 10 year yield has gone down to record levels while its debt (post WW2) has gone up and up, along with its deficit, and there is no plans what so ever to contain the problem.

However for the UK it is another matter. The UK has come near or out right defaulted on debt several times. It does not have a long track record of financial stability that many people think it has. It was bailed out by the IMF in the 1970s for example. And yet it has this false reputation of being a solid economy, when history proves otherwise. Personally I think it is because the UK claims to have founded the financial system we know today, despite it being the Dutch. Granted the yields have risen of late (considerably) but it is still no where near where I would expect it to be. And it is still lower than a country like Norway... the most solid state finances on the planet... come on.

Ratings and yields should be on facts and figures, not supposed historical fact and wishful thinking. Ratings are far too important in our society these days (regrettably) and have to be as accurate as possible on existing economic facts and future economic facts.. not historical (or supposed historical). As it stands now, it is not.


What surprises me in this discussion is that people blame bankers for trying to improve their tier one, eventhough its the government who demands it. Don't get me wrong, I fully support this demand but of course that affects the lending capacity of banks.

Originally Posted by PeteEU

-- The UK has come near or out right defaulted on debt several times. It does not have a long track record of financial stability that many people think it has. It was bailed out by the IMF in the 1970s for example. And yet it has this false reputation of being a solid economy, when history proves otherwise --

Do you have any other examples of near-defaulting, I'm interested.

I can think of crises - i.e. IMF in the 70's, Black Wednesday etc.

If Britain has trouble with money (especially during Labour's pre-PC days), maybe the Government could make as much effort to spend wisely as it does being obsessive in its talk about cuts:


The Coalition is spending even more than tax-and-waste Labour - Telegraph

http://www.debatepolitics.com/europe...l-scandal.html (Express: BRITAIN'S FOREIGN AID BILL SCANDAL!)

Name-changes create even more waste: The New ConDem coalition already wasting money

Enforcing broadband? I'd much rather cash be spent on enforcing higher educational standards: thinkbroadband :: Coalition Government announced broadband policy

Originally Posted by Infinite Chaos

Do you have any other examples of near-defaulting, I'm interested.

I can think of crises - i.e. IMF in the 70's, Black Wednesday etc.

Well since the present banking system is pretty new relatively speaking compared to the age of the UK/England, then near-defaulting before that is hard to quantify before the present banking system. Our way of banking is only 39 years old and in that period, the UK has near defaulted or been in serious trouble at least 2 times. The IMF in the 70s was a "gun to the head" moment for the UK and you were a whisker from defaulting. Problem the material out there rarely speaks of near misses, but more of hits. For example, it is damn hard to find material on the Danish crisis in the early 1980s... Denmark was like the UK in 1970s, a whisker from defaulting.

Now the ironic thing is that places like Greece and Spain have defaulted once or twice, but over 100 years ago and yet the media and "experts" talk about it like it was yesterday. In fact in Europe the only defaults the last 50 years have been former soviet bloc countries... The last time any defaulted or underwent restructuring in western Europe was Italy.. in 1940 (minus Greece last year of course). So in all this talk of sovereign debt crisis.. is more hype that reality if you ask me. No major nation has defaulted in the industrialized world since Italy in 1940.. unless we count the Russia as an "industrialized" country.. Russia did default in 1998.

As for out right defaulted (UK/England speaking), I admit we have to go back a long way, to before the Empire, but it has happened. English Kings were not the best book keepers out there ...

Originally Posted by PeteEU

--The last time any defaulted or underwent restructuring in western Europe was Italy.. in 1940 (minus Greece last year of course). So in all this talk of sovereign debt crisis.. is more hype that reality if you ask me. No major nation has defaulted in the industrialized world since Italy in 1940..

That does however contrast with your previous picture - we have crises like everyone else. I'm not pretending the UK is perfect: it's not, but neither is it (anymore) about to go totally insolvent. We have periods of financial stability as well as periods of (self inflicted sometimes) instability - much like any other country.

Originally Posted by PeteEU

-- As for out right defaulted (UK/England speaking), I admit we have to go back a long way, to before the Empire, but it has happened. English Kings were not the best book keepers out there ...

That was my suspicion too.

Originally Posted by Infinite Chaos

That does however contrast with your previous picture - we have crises like everyone else. I'm not pretending the UK is perfect: it's not, but neither is it (anymore) about to go totally insolvent. We have periods of financial stability as well as periods of (self inflicted sometimes) instability - much like any other country.

And that is no different than say Denmark, Spain, Germany, France or any other European country.. and that is my point.

That was my suspicion too.

And the same can be said for pretty much every western European country. Last time a major country defaulted was as I said, Italy in 1940 (war), Germany in the 1930s (war and global depression).. else we need to go back over 100 years easy. But if listened to the so called experts, especially on US and British news, half the countries in Europe have defaulted in the last decade pretty much... so why are the US and British experts and media talking up the US and UK constantly while talking down the rest?

Originally Posted by PeteEU

-- so why are the US and British experts and media talking up the US and UK constantly while talking down the rest?

I've not been aware of UK media people talking up the UK. In fact there was a major feature this weekend from Gary Indiana which showed a very different picture than one of glowing prosperity and growth. Of course, that's not the whole of the US - but you won't find images / scenes like that in many Western European nations anymore.

Originally Posted by PeteEU

I agree, the US has the "reserve currency" status, and that makes it easier for the US to have massive deficits and debt. But we are still rewarding the US for taking more and more debt... its 10 year yield has gone down to record levels while its debt (post WW2) has gone up and up, along with its deficit, and there is no plans what so ever to contain the problem.

I think we will see that change the coming decade. During the credit crisis and the recession, investors bought securities because they were relatively safe compared to stock, real estate and bank loans (at the time). Eventhough we see more euro and yen reserves after the crisis, these currencies are also unstable and not without debt, the dollar still is the worlds reserve currency and as long as americans buy chinese products and american securities, and the chinese keep buying american securities for their dollars in return, we will see the distortion you describe.

However for the UK it is another matter. The UK has come near or out right defaulted on debt several times. It does not have a long track record of financial stability that many people think it has. It was bailed out by the IMF in the 1970s for example. And yet it has this false reputation of being a solid economy, when history proves otherwise. Personally I think it is because the UK claims to have founded the financial system we know today, despite it being the Dutch. Granted the yields have risen of late (considerably) but it is still no where near where I would expect it to be. And it is still lower than a country like Norway... the most solid state finances on the planet... come on.

I can’t think of a logical reason for it, doesn’t Norway have a positive balance, do they even have debt? My point was that London is the financial heart of Europe, a position they took over from the dutch centuries ago. I don’t have an explanation for these ratings though, they don’t always make sense to me either. We spoke about Greece, Italy, Portugal and Spain earlier this year, I’m sure we still disagree on whether they got fair ratings or not.

Ratings and yields should be on facts and figures, not supposed historical fact and wishful thinking. Ratings are far too important in our society these days (regrettably) and have to be as accurate as possible on existing economic facts and future economic facts.. not historical (or supposed historical). As it stands now, it is not.

In general I agree but I also realise that economy doesn’t deal in absolute truths. What would you suggest to improve the accuracy of these ratings?

Originally Posted by Infinite Chaos

I've not been aware of UK media people talking up the UK. In fact there was a major feature this weekend from Gary Indiana which showed a very different picture than one of glowing prosperity and growth. Of course, that's not the whole of the US - but you won't find images / scenes like that in many Western European nations anymore.

Yea saw that..... had seen such areas before and knew they existed. Pennsylvania in the old coal areas have similar cities just inhabited by white people.

As for UK media people.. no for the most part, since they are not allowed to be biased (Ofcom rules ftw), however the so called "experts" in the City do... sometimes they talk negative about the UK economy and then throw in "yea but in X country it is way worse" argument. Hate that.

The American media do it constantly, especially on CNBC. If I had an euro for each time one of their so called journalists or experts, said "but in Europe it is much worse", I would be a rich man. It was especially comical when someone from the CATO institute try to slam France on its "MASSIVE" unemployment, when in fact it was at the time (and still is I think) lower than the US. Or claim Europe was a hell hole on growth, when Europe had come out of recession officially (as pointed out earlier in the show) and the US was still at the time in recession.