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February 22, 2013

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Alex

Meh, sad-donkeyism, and French academic guff. Menckenian horselaugh required.

Malcs

A little rich to dismiss the article in such terms, Alex - whether the charge of "guff" be justified or no, it isn't edifying to read a refutation that sees you disappearing up a hole made of code-words.

I can see that the power of a credit rating might be overblown; but is it so wrong to suggest that reports of "market anxiety" have an effect on politicians' decision-making? I'd be genuinely interested to know.

ajay

I can see that the power of a credit rating might be overblown; but is it so wrong to suggest that reports of "market anxiety" have an effect on politicians' decision-making? I'd be genuinely interested to know.

What market anxiety? Moody's is not the market. Moody's is not the market! Look here, for example:
http://www.tradingeconomics.com/united-kingdom/government-bond-yield

That there, _that's_ the market. Run that back to the 1990s and you'll see that UK ten-year debt is almost at a 20 year low in terms of yield.

So, yes, it's perfectly possible that market anxiety would affect politicians' decision making. And it should! Borrowing costs are things that politicians should be thinking about when it comes to drawing up budgets, and the market is where borrowing costs come from. Just as a government that plans to build a lot of hospitals should be thinking about the cost of concrete, and a government that is planning a national health service should think about the cost of pharmaceuticals.

But, right now, the market is supremely unworried about lending money to the UK government.

So the linked writer is making a crucial error: he thinks George Osborne knows what he is talking about and that "Moody's sovereign debt rating muppets" is a viable synecdoche for "the bond market".

He's also been paying very little attention to the news. The UK's new Moody's sovereign credit rating is not AAB, it is Aa1. Moody's doesn't do AAB. In fact, no major rating agency will give a rating of AAB. A minor point, but it does undermine his credibility a wee bit.

ajay

And, and this is a point that is worth making, are we really supposed to believe that George Osborne and David Cameron are deeply, seriously committed to increased social spending on "the weak, the solitary, the sick and the unemployed", and it's only their fear of the bond market's wrath that's stopping them?

Malcs

Cheers Ajay.

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