Britain loses its triple A credit rating as pound plunges

[ilostmypassword]

I wonder how much more the English will suffer if the Scots vote to leave the UK, what I have read that will be an other massive blow. I think economically it makes no sense at all leaving the EU. Sure you will get freedom but at what cost. I do hope the Scots are smart enough to leave the UK and join the EU.

I don't like many of the EU rules.. but for trading and economics it makes sense to stay in a block like the EU, alone the UK is not much even less so if Scotland goes, I wonder how that will influence the pound and the GDP.

Before the Scots jump ship they had better check which port to sail to, Belgium and Portugal both said they would veto Scotland alone from joining the EU.

You got a source for that?

You can start with this Telegraph piece from 2014:-

http://www.telegraph.co.uk/news/uknews/scottish-independence/11054187/Spain-and-Belgium-would-veto-an-independent-Scotlands-EU-membership.html

Actually, according to the article it was Belgium and Spain, not Portugal. But what's more important, the statement came from neither of those countries but from an Irish politician who was only making an educated guess. So no, it's just a surmise, not a statement of fact.

[ilostmypassword]

I am confident that the stupid panicking will pass. The markets are so volatile nowadays, all sentiment with no substance. It used to be that currencies, share prices and subsequently company values was based upon their profitability and factual information not just sentiment.

Anyway, the dust will settle eventually.

My hope is that Britain has done the right thing but whether or not it leaves the EU is absolutely not decided despite the referendum. It is not legally binding and if a deal is struct that makes sense then I can see a turnaround, and I do not buy for a minute that the EU will not talk to Britain about this before article 50.

At the end of the day the EU was failing, anybody can see that. The wealthier states were doing ok, but not great and the poorer states, mostly Southern such as Spain and Greece have horrendous economies with something like 40% of younger adults unemployed. How is this a glowing example of EU membership? How have those countries benefitted.

The EU needs a big shake up and serious reform, it needs to behave like what it was meant to be, European countries united under a common purpose to support trade, employment, freedom of movement all to the benefit of each others economies. This is not what we have today, what we have a big bureaucratic mess with the whole continent limping along and a failed single currency.

So, I think Britain has been brave, it will weather the storm for sure and if it means the EU wakes up and starts asking the proper question of "why did we potentially lose the UK" maybe things will start to change.

If they do not change then Britain is better of out. it can negotiate with individual countries, do trade deals directly with the fasted growing Asian countries, manage its own immigration policies, manage its own welfare state without any restriction imposed.

I hope that I am right.

Those southern nations are laboring under a huge disadvantage that Britons wisely rejected: the Euro. That is why those countries have been suffering for so long. Germany imposed fiscal austerity on countries suffering from an out and out depression. At first, the EU claimed it would work because of something called "expansionary austerity." In other words, cutting way back on spending will somehow stimulate the economy. Predictably, it failed. What's more these people were made to bail out banks that had foolishly made loans. And no, these weren't mainly government loans except in the case of the small economies of Greece and Portugal. In the case of Spain and Ireland it was loans made to the private sector.

[dunroaming]

Maybe Sturgeon sees Scotland staying in the EU for other reasons too. If the UK reject the free trade agreement then there is a good possibility of both the German car manufacturers and the Japanese ones to relocate to a EU base. Irelend is one option and Scotland would be another. For a country like Scotland with their ailing oil industry it is essential that they broaden their appeal.

[arithai12]

Given the ratings agencies were culpable in the 2008 crisis, their view of things can hardly be said to be reliable.

Do you mean that the fact that the UK had a triple A rating until last week was also unreliable?

[arithai12]

The panic is over. Google U.K news. The pound is rising. The stock market is rising. The house prices are unchanged. The sh1t storm is over.

Don't think the U.K is alone in this Brexit idea. Half of Europe wants out. This is the beginning of the end of the E.U.

You think us British would crumble to dust. No.

We got spirit.

Now watch Nigel Farage put it up them!

Sure you have spirit. But I would check again the UK economy after the separation. So far it's not even started.

Edited June 28, 2016 by arithai12

[neverdie]

The poor ole UK has had its financial arse spanked in the last few days, but it will rise again. It's the nature of the beast.

Having said that there will be other 'blips' along the way as these poor daft buggers have a history of making massive cock ups and poor decisions.

For example:

1. Brexit carried out without a thoroughly constructed plan.

2. 220 years ago they let the convicts sail to paradise, while they remained behind In Their dark, cold, dingy hole of a country & they're Still paying for that mistake.

I for one don't think this is over by a long shot. Just sayin

[Linzz]

Interesting........

"Rating agencies should NOT issue political warnings. This is more of the same and S&P should be seriously investigated. They are starting to play politics FORECASTING what they will do IF THIS TAKES PLACE. An analyst lets the number speak – not opinion. Amazing how they still have any credibility after 2007 fiasco."

https://www.armstrongeconomics.com/world-news/is-sp-playing-dirty-games-with-ratings-again/ June 13

https://www.armstrongeconomics.com/international-news/britain/reaction-of-standard-poors-shows-bias-politics/ June 28

[bkkcanuck8]

Ratings agencies have every right to change the rating of a country based on economic outlook. Economic outlook in the near term has taken a turn for the worse (which some people have faith it is "temporary"). As such they have every right to adjust the ratings based on that change of circumstance. The reasons why the ratings agencies failed in 2007 is because many of them had business related to it and thus a conflict of interest resulted in biases that inflated their view of the risks etc. It is a case of people wanting to shoot the messenger.

The UK debt has risen substantially since 2008. The economy is expected to slip into recession as a result of uncertainty etc. related to the referendum result. Those two things together are enough to warrant a review and change in the ratings.

[Linzz]

One would expect them to change the ratings. But they don't have rights to make announcements of what they will do in advance of a vote. To do so with an election or referendum looming is blatant political interference that can influence the vote, no different than Obama's "back of the queue" comment pre vote, which now has practically changed to front of the queue looking at Kerry's statements.

[bkkcanuck8]

One would expect them to change the ratings. But they don't have rights to make announcements of what they will do in advance of a vote. To do so with an election or referendum looming is blatant political interference that can influence the vote, no different than Obama's "back of the queue" comment pre vote, which now has practically changed to front of the queue looking at Kerry's statements.

And reality is most likely -- somewhere in the middle. EU / US trade negotiations would be front -- bigger market -- more important.... but then sometime after that it might be front of the queue. Also a good reason why Obama would spin it as the back.

[ilostmypassword]

One would expect them to change the ratings. But they don't have rights to make announcements of what they will do in advance of a vote. To do so with an election or referendum looming is blatant political interference that can influence the vote, no different than Obama's "back of the queue" comment pre vote, which now has practically changed to front of the queue looking at Kerry's statements.

Of course they have the right to say whatever they like whenever they like. :Why shouldn't they be free to contribute their alleged experitise to the debate? That said, did they say anything in advance? I did a google search and found nothing for that. Perhaps you have a source that my google search missed?

[Linzz]

Perhaps you're right, all I said was the post was interesting so chucked it in the mix but my argument was that any announcement of intentions of such gravity from an influential body pre vote was political. Crunching the numbers post vote is factual. However I concede difficulty in finding reference too on S&P's own website but below was from the 12th June 2015 Daily Telegraph. But in fairness that was a year ago so the earlier Armstrong post reference perhaps a little conspiratorial as I beleived it to be recent and I'm not sure when the referendum was announced. Cheers

By Peter Spence, Economics Correspondent

5:31PM BST 12 Jun 2015

The UK is in danger of losing its gold-plated triple A grade, leading ratings agency Standard & Poor's has warned.

It has downgraded its outlook on the UK's sovereign rating to "negative". It is the only one of the big three credit agencies that still gives the UK a prized AAA rating.

"We believe that the UK Government's decision to hold a referendum on EU membership by 2017 indicates that economic policymaking could be at risk," the agency said.

S&P said: "There are important risks to the UK's longer-term economic prospects should it leave the EU." It said there is at least a one-in-three probability that the UK will lose its AAA rating within the next two years.

http://www.telegraph.co.uk/finance/economics/11671596/UKs-credit-rating-downgraded-to-negative-by-SandP-on-EU-referendum-risk.html

[bkkcanuck8]

Perhaps you're right, all I said was the post was interesting so chucked it in the mix but my argument was that any announcement of intentions of such gravity from an influential body pre vote was political. Crunching the numbers post vote is factual. However I concede difficulty in finding reference too on S&P's own website but below was from the 12th June 2015 Daily Telegraph. But in fairness that was a year ago so the earlier Armstrong post reference perhaps a little conspiratorial as I beleived it to be recent and I'm not sure when the referendum was announced. Cheers

By Peter Spence, Economics Correspondent

5:31PM BST 12 Jun 2015

The UK is in danger of losing its gold-plated triple A grade, leading ratings agency Standard & Poor's has warned.

It has downgraded its outlook on the UK's sovereign rating to "negative". It is the only one of the big three credit agencies that still gives the UK a prized AAA rating.

"We believe that the UK Government's decision to hold a referendum on EU membership by 2017 indicates that economic policymaking could be at risk," the agency said.

S&P said: "There are important risks to the UK's longer-term economic prospects should it leave the EU." It said there is at least a one-in-three probability that the UK will lose its AAA rating within the next two years.

http://www.telegraph.co.uk/finance/economics/11671596/UKs-credit-rating-downgraded-to-negative-by-SandP-on-EU-referendum-risk.html

I don't particularly find that overtly political, it just states that there were future risks that may affect the credit rating. It does not scream - if the UK leaves the end is near. it states the obvious. Anything that pushes a restructuring of an economy usually has near term consequences to things like credit ratings. Guess what, businesses have a hard time making plans when things are unstable - like restructuring whether it is leaving a trading arrangement or entering into a new one. Even worse when you don't know if you are entering or leaving.

[bkkcanuck8]

if the UK's debt-to-gdp were 50% like it was in 2008 instead of 90%.... there would be no question of any downgrade what-so-ever.... it would be wait and see.

[ilostmypassword]

Really, though, the ratings agencies evaluations are pretty much meaningless. If you want to know what the financial community thinks the risks are, look to the interest rate on UK bonds. If the rate is staying low, that means the financial community is not too concerned.

[nausea]

I agree. <deleted> disaster. Me and the Missus are now going to have to talk seriously, about her crazy hairdoes. 10 per cent hit seems about right. Some guys are going to going to get hit very hard, I try to resist the "schadenfeude" thing. Most of us are in the same boat right, The guys with serious/silly money, what the <deleted> are you doing in Thailand, leave it to us losers.

[slipperylobster]

To make it worse...

Thailand has just declared that Brits must pay in advance, for their beer.

[MobileContent]

I found it funny how some of the posters think that Scotland is the key to everything.

Been to Scotland many times and also Edinburgh rocks but outside Edinburgh I see nothing that can compare to England.

Of course Scotland has oil revenues but BP and Excon seem to be controlling the oil output.

Now Scotland is asking for being part of the EU, let them be and take the Euro as their official currently and get dictated by Germany and France. As for the other countries in the EU they have really nothing much to say and follow the orders from Berlin and Paris.

My guess their is no more EU in 10 years time as it becomes irrelevant.

[MissAndry]

pound at 47.5 now, 0.5 up on yesterday.

[manxninja]

It will keep rising, don't worry probably stay at around 50 for a while.

Personally I don't care if it went down to 40 as long as we are out of the EU.

Now time to send the immigrants back to France.

[GAZZPA]

I am confident that the stupid panicking will pass. The markets are so volatile nowadays, all sentiment with no substance. It used to be that currencies, share prices and subsequently company values was based upon their profitability and factual information not just sentiment.

Anyway, the dust will settle eventually.

My hope is that Britain has done the right thing but whether or not it leaves the EU is absolutely not decided despite the referendum. It is not legally binding and if a deal is struct that makes sense then I can see a turnaround, and I do not buy for a minute that the EU will not talk to Britain about this before article 50.

At the end of the day the EU was failing, anybody can see that. The wealthier states were doing ok, but not great and the poorer states, mostly Southern such as Spain and Greece have horrendous economies with something like 40% of younger adults unemployed. How is this a glowing example of EU membership? How have those countries benefitted.

The EU needs a big shake up and serious reform, it needs to behave like what it was meant to be, European countries united under a common purpose to support trade, employment, freedom of movement all to the benefit of each others economies. This is not what we have today, what we have a big bureaucratic mess with the whole continent limping along and a failed single currency.

So, I think Britain has been brave, it will weather the storm for sure and if it means the EU wakes up and starts asking the proper question of "why did we potentially lose the UK" maybe things will start to change.

If they do not change then Britain is better of out. it can negotiate with individual countries, do trade deals directly with the fasted growing Asian countries, manage its own immigration policies, manage its own welfare state without any restriction imposed.

I hope that I am right.

Those southern nations are laboring under a huge disadvantage that Britons wisely rejected: the Euro. That is why those countries have been suffering for so long. Germany imposed fiscal austerity on countries suffering from an out and out depression. At first, the EU claimed it would work because of something called "expansionary austerity." In other words, cutting way back on spending will somehow stimulate the economy. Predictably, it failed. What's more these people were made to bail out banks that had foolishly made loans. And no, these weren't mainly government loans except in the case of the small economies of Greece and Portugal. In the case of Spain and Ireland it was loans made to the private sector.

There are many complicated reasons for Countries like Spain and Greece suffering, I agree. However, being in the EU and as you say adopting the Euro has not helped them, they can hardly get any worse.

The EU needs to reform, I think anyone with any sense agrees with that. Problem is how do you do it when the EU leaders solution to all the problems so far has been "we need more EU intervention". It is going to take a big leap of faith to get them to U turn and return some control back to the member states.

I really do not know the answer, the EU sounds great in principle but it's simply not working and now there are 28 states all tangled up in this and it's going to be more then difficult to put it right.

[SooKee]

pound at 47.5 now, 0.5 up on yesterday.

Might be showing as up but the reality on exchange is different. Using a common app like XE Currency, it would often show the £ at around 50 baht pre Brexit (ignoring the optimistic peak at 52 just before when the markets were betting on a remain result). On transferring in £ I would generally get a rate of around 49.3 - 49.6. Transferred in just now with XE showing 47.3 and got 46.2. Not a bank-breaking difference but it seems you can sure count on a full 1 baht lower than XE rates at the moment versus 0.5 or just under prior to Brexit. It might be showing 47.5, but you buy at 46.2.

I just hope that those celebrating what seems to be a bounce back (albeit slow) of the £ from it's post Brexit low don't find their reasons to celebrate short lived. I'm glad it's going back up, I'm not so confident it will stay there, more so in the months ahead, not days.

[Ricardo]

Just consider the government ponzi-scheme which is the pension-system, and their current spending-deficit, social-systems which are simply unaffordable.

Meanwhile bank-shares are crashing, what does that say about their finances ?

And the Public Finance Initiative rolls ever onwards, putting a 30-year millstone round the necks of the NHS & education-authorities & so on, the tax-dodging major-companies continue to be allowed to get away with it, it's a mess.

How will the national-debt ever be repaid, as it should have been, while the North Sea Oil bonus flowed ?

AA is a generous assessment IMO.

[ilostmypassword]

Just consider the government ponzi-scheme which is the pension-system, and their current spending-deficit, social-systems which are simply unaffordable.

Meanwhile bank-shares are crashing, what does that say about their finances ?

And the Public Finance Initiative rolls ever onwards, putting a 30-year millstone round the necks of the NHS & education-authorities & so on, the tax-dodging major-companies continue to be allowed to get away with it, it's a mess.

How will the national-debt ever be repaid, as it should have been, while the North Sea Oil bonus flowed ?

AA is a generous assessment IMO.

the current interest rate on gilts (UK bonds) is .4%. Clearly the markets disagree with you.

[Jip99]

pound at 47.5 now, 0.5 up on yesterday.

Might be showing as up but the reality on exchange is different. Using a common app like XE Currency, it would often show the £ at around 50 baht pre Brexit (ignoring the optimistic peak at 52 just before when the markets were betting on a remain result). On transferring in £ I would generally get a rate of around 49.3 - 49.6. Transferred in just now with XE showing 47.3 and got 46.2. Not a bank-breaking difference but it seems you can sure count on a full 1 baht lower than XE rates at the moment versus 0.5 or just under prior to Brexit. It might be showing 47.5, but you buy at 46.2.

I just hope that those celebrating what seems to be a bounce back (albeit slow) of the £ from it's post Brexit low don't find their reasons to celebrate short lived. I'm glad it's going back up, I'm not so confident it will stay there, more so in the months ahead, not days.

I am pleased that the wild alarmist predictions of a 20% drop in GBP/THB didn't materialise (as they were never going to.

Anyone who thinks it will get worse will be putting their money where their mouth is and selling Sterling. I prefer to wait a couple of weeks in the expectation of 50 being reached again. The money I transferred at 52 will last for at least 4 months.

HSBC and Transferwise were offering over 47.7 today and I am pretty sure that the Pattaya exchanges will give 47 or better today.

Swings and roundabouts will follow........................... they usually do.

[MissAndry]

pound at 47.5 now, 0.5 up on yesterday.

Might be showing as up but the reality on exchange is different. Using a common app like XE Currency, it would often show the £ at around 50 baht pre Brexit (ignoring the optimistic peak at 52 just before when the markets were betting on a remain result). On transferring in £ I would generally get a rate of around 49.3 - 49.6. Transferred in just now with XE showing 47.3 and got 46.2. Not a bank-breaking difference but it seems you can sure count on a full 1 baht lower than XE rates at the moment versus 0.5 or just under prior to Brexit. It might be showing 47.5, but you buy at 46.2.

I just hope that those celebrating what seems to be a bounce back (albeit slow) of the £ from it's post Brexit low don't find their reasons to celebrate short lived. I'm glad it's going back up, I'm not so confident it will stay there, more so in the months ahead, not days.

I only use XE.

[bkkcanuck8]

Just consider the government ponzi-scheme which is the pension-system, and their current spending-deficit, social-systems which are simply unaffordable.

Meanwhile bank-shares are crashing, what does that say about their finances ?

And the Public Finance Initiative rolls ever onwards, putting a 30-year millstone round the necks of the NHS & education-authorities & so on, the tax-dodging major-companies continue to be allowed to get away with it, it's a mess.

How will the national-debt ever be repaid, as it should have been, while the North Sea Oil bonus flowed ?

AA is a generous assessment IMO.

the current interest rate on gilts (UK bonds) is .4%. Clearly the markets disagree with you.

The rates in general are all low. The credit rating - even now that it has been "slashed" (cough cough) is not exactly anywhere near junk bond status. the cutting of the rate is just saying, the UK is going in the wrong direction (i.e. up to 90%+ of GDP and heading into recession; was 50% not long ago). It is a warning for the UK to get it's books in order sooner rather than later.

[Ricardo]

Just consider the government ponzi-scheme which is the pension-system, and their current spending-deficit, social-systems which are simply unaffordable.

Meanwhile bank-shares are crashing, what does that say about their finances ?

And the Public Finance Initiative rolls ever onwards, putting a 30-year millstone round the necks of the NHS & education-authorities & so on, the tax-dodging major-companies continue to be allowed to get away with it, it's a mess.

How will the national-debt ever be repaid, as it should have been, while the North Sea Oil bonus flowed ?

AA is a generous assessment IMO.

the current interest rate on gilts (UK bonds) is .4%. Clearly the markets disagree with you.

Just stop and think, for one moment, what that means for savers, or retirees trying to find an income, to live on ...

... my elderly mother has GBP200k in fairly-liquid Building-Society accounts, which earn her less than a grand a year !

And one of my pension-funds is guaranteed to grow at 8.0% per-annum until maturity in 2019, either they cannot generate sufficient returns to cover that, or they must be in some very risky investments ?

I really don't expect much from my profit-sharing bonus-upon-maturity !

Lastly to point out that inflation is currently 0.3%, so the same return on gilts can hardly be described as good news, just consider the weight of desperate money chasing returns, in order to drive them down that far ?

Yet the government persist in borrowing under PFI instead, paying far higher interest, to companies based in offshore tax-havens ?

Edited June 30, 2016 by Ricardo

[ilostmypassword]

Just consider the government ponzi-scheme which is the pension-system, and their current spending-deficit, social-systems which are simply unaffordable.

Meanwhile bank-shares are crashing, what does that say about their finances ?

And the Public Finance Initiative rolls ever onwards, putting a 30-year millstone round the necks of the NHS & education-authorities & so on, the tax-dodging major-companies continue to be allowed to get away with it, it's a mess.

How will the national-debt ever be repaid, as it should have been, while the North Sea Oil bonus flowed ?

AA is a generous assessment IMO.

the current interest rate on gilts (UK bonds) is .4%. Clearly the markets disagree with you.

Just stop and think, for one moment, what that means for savers, or retirees trying to find an income, to live on ...

... my elderly mother has GBP200k in fairly-liquid Building-Society accounts, which earn her less than a grand a year !

And one of my pension-funds is guaranteed to grow at 8.0% per-annum until maturity in 2019, either they cannot generate sufficient returns to cover that, or they must be in some very risky investments ?

I really don't expect much from my profit-sharing bonus-upon-maturity !

Lastly to point out that inflation is currently 0.3%, so the same return on gilts can hardly be described as good news, just consider the weight of desperate money chasing returns, in order to drive them down that far ?

Yet the government persist in borrowing under PFI instead, paying far higher interest, to companies based in offshore tax-havens ?

But that money that is buying gilts could go elsewhere if investors believed it wasn't safe. As for the question of low returns for elderly savers... how much of the total in bonds is actually owned by elderly savers? If the UK is genuinely concerned about the plight of pensioners, it can reverse those ludicrous tax cuts for the wealthy and boost pensions.

And what has always struck me as curious is that it's often the same people who complain about government expenditures who want government subsidy when it comes to interest rates.

Edited July 1, 2016 by ilostmypassword

[ilostmypassword]

Just consider the government ponzi-scheme which is the pension-system, and their current spending-deficit, social-systems which are simply unaffordable.

Meanwhile bank-shares are crashing, what does that say about their finances ?

And the Public Finance Initiative rolls ever onwards, putting a 30-year millstone round the necks of the NHS & education-authorities & so on, the tax-dodging major-companies continue to be allowed to get away with it, it's a mess.

How will the national-debt ever be repaid, as it should have been, while the North Sea Oil bonus flowed ?

AA is a generous assessment IMO.

the current interest rate on gilts (UK bonds) is .4%. Clearly the markets disagree with you.

The rates in general are all low. The credit rating - even now that it has been "slashed" (cough cough) is not exactly anywhere near junk bond status. the cutting of the rate is just saying, the UK is going in the wrong direction (i.e. up to 90%+ of GDP and heading into recession; was 50% not long ago). It is a warning for the UK to get it's books in order sooner rather than later.

I'm not sure what you mean. The cutting of the interest rates to make loans cheaper for businesses means the government is trying to stimulate the economy. It's a pretty weak method but if you're determined not to do stimulus, it's the best option. The cutting of interest rates on bonds means that the government feels it can get a better deal from bond buyers and reduce the growth in debt. Surely you're in favor of that, aren't you?