Working respectively for the ratings agencies Standard & Poor’s, Moody’s and Fitch, this trio have the job of deciding whether the UK can pay back the hundreds of millions of pounds Brown’s government is borrowing every day through the gilts market in order to keep afloat. One day soon, it may be their job to declare that it can’t. ‘Britain should lose its triple-A rating,’ said Stuart Thomson, a bond fund manager at Ignis Asset Management, which has £70 billion under its control. ‘If the ratings agencies were being honest, they would downgrade the UK.’
Ratings matter, for two reasons. They impact on how much you pay to borrow. Every notch you drop down the scale, the price of borrowing rises to reflect the perceived increase in risk that investors are taking on. Perhaps more importantly, ratings also determine who can own your debt. Gilts are often owned by pension funds or foreign central banks, which classify them as part of their reserves. Both are often only allowed to buy Triple-A paper. Lose that status, and your best customers can suddenly no longer touch your bonds.
Japan was downgraded by Fitch in September 1998: at the time, the Japanese government was struggling with a huge volume of problem loans in its banking system, and a third consecutive quarter of negative growth (sounds familiar, eh?). Moody’s and S&P followed suit.
I wonder if the manic mincing madman has the IMF's number on speed dial on his latest Nokia? But why should we care, anyway?
It’s true that all three agencies are woven into the City’s fabric, and depend on it for their income. Nor do the problems stop there. ‘The political problem is really in the US,’ said Marc Ostwald, a strategist at Monument Securities. ‘Any move to cut the UK rating, or even to put it under review, immediately begs the question of why they aren’t doing the same thing for the US. It is following very similar policies to the UK.’ Indeed so. But cut the rating on US Treasury bills, and the world financial system would be right back hanging over the brink of the abyss.
This is all due to letting that fucking madman and his badger-browed sock puppet get on with the jobbie. Our political class of uselessly supine opposition and economically illiterate government are equally to blame for this.
We really are so fucking fucked.