Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Rating agency Egan-Jones cut the UK credit rating on Monday to AA-minus with a negative outlook from AA.
They are not one of the major agencies, like S&P or Moody's, but this is a warning that Osborne needs to cut more deeply and faster. I have been saying for a long time that he has only been doing the minimum needed to calm the markets and hold down our interest rates. This down rating itself is not a problem because of who has done it but it does show how close to the edge we are.
So, yes Osborne needs to cut more deeply and use much of the savings on targeted tax cuts aimed at where they will help growth most. Such as speeding up corporate taxes and cutting employer's National Insurance rates. Other tax cuts are needed, that will be self-funding, - chopping the 45p rate back to 40p or better still a new top rate of 35p as a step to flatter and simpler taxes. It would help as well if Cable were to be sacked and the recommendations recently made to cut business red tape were implemented in full.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
george will do what makes the government look good in the media so i doubt that any of the measures you mention will be implemented barry.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Politics are coming before good economics, that's the problem.
Brian Dixon
- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
aha the start of the slippery slope one thinks.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Since when did you support the extra cuts needed and the other changes I have outlined Brian?
Paul Watkins- Location: Dover
- Registered: 9 Nov 2011
- Posts: 2,226
Moody's cut some important German banks this morning.
Watty
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
We're a long way off the bottom, I hear people talking about recovery, I cant see what will happen to trigger it.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
Barry may correct me Howard, perhaps they are exposed to debt in places like Greece and Spain, theres every chance they wont get their money back
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
having read it through properly it seems you are right david, now we need an expert on the subject to explain the likely effects on us.
when something goes wrong in the global economy there is normally a knock on effect.
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
Its a chain howard, I owe you, you owe Barry, Barry owes Paul who owes me. Its an almighty mess that politicians cant or wont face up to.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
David is right.
The problems of how this will be resolved are massive.
If a currency looks like decoupling from the Euro to devalue then there will certainly be capital flight including a likely run on the banks. If any country also defaults on debt then lenders in Germany and elsewhere will lose dosh. These lenders who could lose out include banks, insurance companies, investment companies, pension companies and governments.
Decoupling does not necessarily mean default - indeed it may make countries like Greece be more able to afford to service their debt also default does not necessarily mean all loans will be defaulted on either. This is why we need the decoupling, devaluations and defaults to be carefully managed.
Decoupling from the Euro, difficult as it certainly is, happens to just be the least bad option and the one that offers an end to the crisis (well, the start of the end anyway).
Germany not only have their heavily indebted banks to worry about, but by weaker countries leaving the Euro, the value of the Euro would improve making their exports less competitive and that would be very painful for their manufacturing that has coined it at the expense of the Greeks and Spanish for quite a while.
To throw one more complication into this - Germany have an election in 2013 and may do anything to stop Greek leaving the Euro before then but those measure that have a chance of preventing that will also be electorally unpopular as Germany would be bankrolling all the weak spendthrift Eurozone countries.
It is a very complex picture.
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
Good post barry thanks.
The reality is that we have been living on debt for too long, the lifestyles of millions will have to change, most of these millions have no concept of the problems we face. Politicians everywhere are in a state of denial, if you look at the recent French election, the party that vowed to only spend what the govt collected was annihilated.
Sorry to sound like a doom monger, I just cant see a way out without govt spending being cut massively. Weve seen no austerity yet
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
You are spot on David.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
after reading barry and david's assessment it must be time to reach for the hemlock.
i cannot see any way out for greece than default which would encourage spain and portugal to follow suit, maybe italy later.
the measures already in place have caused much hardship with deficits hardly touched.
no government(including ours) would get away with inflicting the necessary hardship to get to grips with what seems to be an insurmountable problem,
my prediction made a month or two ago of a mass default still stands.
Guest 655- Registered: 13 Mar 2008
- Posts: 10,247
Howard - as I have said a partial managed default is likely to be part of the solution alongside the decoupling of weaker countries from the Euro. These countries will also have to get their deficits under control but devaluing will help to do that by making them more competitive, deflating the debt, increasing tax receipts and boosting growth.
There are no painless solutions at all but there is no need for that hemlock of yours.
The lessons are clear that government's must restrain their expenditure to affordable levels and down to what does not damage the economy. It will take a long time to fully rebalance these economies (including ours) but it must be done and the current crisis coming to a head will start the process, difficult as things will be for a while.
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
howard, I have no idea where it all ends, but take Spain, 50% of under 25s have no work, that is simply unsustainable. Now a Spanish bank needs billions more to keep going, I cant believe thats an isolated case. I agree that a mass default is highly likely, its what happens as a result of that I cant envisage.
Brian Dixon- Location: Dover
- Registered: 23 Sep 2008
- Posts: 23,940
barryw,i dont,i share mr hollades views.stuff the cuts and build.
howard mcsweeney1- Location: Dover
- Registered: 12 Mar 2008
- Posts: 62,352
pension funds will be devastated for starters david.
barry mentions the time factor in cancelling out the deficit, only 6% of the measures needed have been taken in 2 years.
all 3 of our main political parties have actually no idea how to cut the deficit and promote growth, cutting red tape is only the tip of the iceberg but even that cannot be agreed upon.
the young unemployed across europe is the most serious problem we face, you cannot tell the young that their services are not required and that there is no future for them without getting serious social disorder.
Guest 714- Registered: 14 Apr 2011
- Posts: 2,594
I think thats fair howard if a little optimistic.
Brian wants us to build, I'm not sure what he means. To build anything we need to borrow even more, once we've built who will buy?
