It’s the finances, stupid.

Audio –

09:04 min.

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  • snedmeister1

    Good evening, Nick…

    I’m curious, what are your thoughts on the potential downgrade of UK debt…???
    I was listening to the radio today in the car, where certain commentators were playing it down, others were bigging it up etc…

    I was kind of hoping you may have made a Mystic comment on it..??? :) 

    I don’t mind admitting, the Snedmeister gut carries a certain amount of uneasiness about it, but the brain says “So what??”…

    I suppose it comes down to, how seriously are the ratings taken now..???

    • It’s just a crack….Sometimes cracks don’t open up…..Sometimes they do.
      Reading the reasons for the `downgrade watch negative` was the interesting part.  That is that the government really isn’t doing much/any austerity, but the economy is still looking crap.

      The people of the UK probably think that the government is `making things right` and expect a bit of `downside` while they do, but the fact is that the coalition government is spending more than Labour said they would spend.
      They haven’t started cutting yet~!
      Moodys look at charts.  They don’t read the Daily Mail. 

      • snedmeister1

        That is interesting, yes…

        Take on more debt, and get downgraded… Become austere without growth form private sector to offset, and get downgraded….

        Being that growth from the private sector will only happen if people take on much more debt themselves, 
        I sometimes wonder if Mr Osbourne, gets any sleep at all..??? 

        • Willbick

          Is this the same rating agency that rated sub-prime mortgages AAA? I love the laughable preciseness of it all – ‘there is a 30% chance of a UK downgrade in the next 18 months’ – hahahahaa – where do they make up this crap??

          • Willbick

            The only reason George Osborne makes such a big deal about having a AAA rating is because its about the only thing related to the UK economy that isnt disasterous!! As soon as the UK is downgraded he’ll say its not important!!

            • snedmeister1

              Although valid comments on here at OTP, the main question for me is: Who takes the ratings seriously…??

              They ( Moody’s ) may grab the figures out of the air, or not…
              If people listen and act accordingly, don’t we get the self fulfilling prophecy…???

              Do investors distinguish between France and the UK, when it comes to sovereign debt…???

              We may discuss here, that the world is round, but how many out there think it is flat, or haven’t even thought about it…???

              Popular opinion carries a lot of clout, as it always has….
              The analogy has been used before… It doesn’t matter if the world is round, if the people believe it is flat,
              they will behave accordingly, and confine themselves to their own self imposed boundaries…….

              Similarly, if they push a little further out, challenging their preconceptions, they may find that it is all a closed
              circle and they won’t fall into oblivion after all….!!!??

              ( Hello Willbick )

              • Slough of Despond

                The New York bond traders are watching.  They are a nasty lot with a great deal of power and influence.

                • snedmeister1

                  Afternoon SoD….

                  The world, at present, is short of 100% safe assets….
                  Is there enough room in the world, for all the cash to be in super safe assets…??

                  Where would they park their cash…???

                  It’s difficult, but something would have to threaten the value of these assets, before a flight happens….

                  This was my concern with the downgrades…. If you get downgraded enough, your assets are no longer 100% safe…
                  This safety is what holds the investors in…. They need the assets super safe, for the balance sheets….

                  You are probably more than aware, that there is no scenario where the UK can not repay…
                  This, in effect, means we are totally different to the rest of Europe, that the risk is in inflation or our desire to pay, instead of ability to pay…

                  The ratings should reflect this, but if we begin a move to rating sovereigns as a single entity ( club us all together ), this might actually become
                  the self fulfilling prophecy I mentioned to Willbeck….!!!???

                  • Slough of Despond

                    Good afternoon, Sned”the risk is in inflation or our desire to pay, instead of ability to pay”I
                    don’t think inflation will be a problem in the UK.  I understand that
                    the UK can always meet its debt obligations.  The problem lies in your
                    govt.  Will they continue this self-destructive austerity plan, or will
                    they follow the America’s lead, and adopt a QE approach?  My gut
                    instinct does not like the U.S. govt’s incredible spending or the Fed’s QE.  But, my
                    brain is telling me that it is the correct approach during these
                    difficult economic times.  But, the Fed may not be helping for much longer according to Dallas Fed president Richard Fisher.

                    not sure if inflation will be a problem for a very long time.As for investors, there has been a lot of cash going into the U.S. stock market (since the start of 2012).

                    • snedmeister1

                      In my opinion, BoE will be doing the QE, for a considerable period of time….
                      The Gov’t won’t be doing their bit though….

                      BoE doing their bit + Gov’t not doing their bit = No solution..!!

                      For this to work, we need the monetary ( QE ) to combine with the fiscal ( Gov’t spending )…??

                      At present, we don’t have that…. :-(

                    • Slough of Despond

                      Correct, QE and lots of govt spending (and a low interest rate).  Without a unified policy, the UK won’t grow.
                      Sir mervyn said you’ll be “zig-zagging” for the rest of the year.

          • Slough of Despond

            Good point.  These agencies have become a joke.  They lost their thunder with their sub prime ratings fisaco.

        •  My first thought was that an upswing in the world economy could be a problem (the safe-haven thing helps no longer).

          “Take on more debt, and get downgraded… Become austere without growth form private sector to offset, and get downgraded….”   That’s about the size of it~!

          With growth, nothing matters, everything is forgiven.

          Those Conservative top men are very poor men by the look of ’em.  I would not trust them in a fight.

          The BoE looks like it is playing a blinder, but cannot carry the team against a world-class recession.

          Civil servants will never really put their hearts into the game.

          Pensions, demographics and a lack of energy are waiting to come on for the other side.

          Housing has played its little heart out, but is going to have to go off.

          I expect inter-player-handbags as the game turns against them.

          They may even have to go into administration and lose ten points.

          Not a good game to watch.

          • Slough of Despond

            The UK is in a very, very tenuous position.  Their only hope is a resurgent American economy, which is a distant hope, at best.  Without that, the UK is dead.  Buy the flowers, pay your repsects and move on.

          • snedmeister1

            Afternoon Nick…

            Hopefully, any return to growth, as you say would mean more room for BoE to play it’s part…??

            If you are right, and everything is forgiven in growth ( Which you probably are ), as long as we have growth, we will all
            become the Three Wise Monkeys, and ignore the BoE card tricks..!!??

            I think it comes back to another of your lines of thought…
            As long as things are getting relatively better for us collectively, people won’t care how we get there….

            Much of the focus and finger pointing, probably comes from the realisation, that things are stagnant at best…

            And then, maybe like fish in a tank… They sense the weakness, somewhere…???
            Maybe they will keep nibbling and searching until growth returns, or they all realise which one is “The weakest link”, just like the fish…???

  • We only need one fat lady….not just for Europe, but for the ‘world”.

    •  Hello T,
      How’s the love flowing~?

      •  Eternally……helps to get the green and red line back together again:)

  • CSArichardo

    India will not be anything is an interesting observation.  I guess you mean India as a nation as opposed to India as a bunch of elite global corporate leaders.  The system is set up not for governments but for industry to survive and control, everywhere in the world.  So what is government for ?  To assure equalization ?

  • Randall

    “Faith and Credit” ~ “Gold and Backed” – The first word shall be last and the last word shall be first.

  • Willbick

    I think the lump in graph 2 may be something to do with Vietnam?

  • Bigcollapso

    The disability comes from three sources that I know if.
    1. Welfare reform. The people just moved to disability. There as now law firms that specialize in getting you your benefits.
    2. Obesity. Obesity is a “disability” and many are on disability because of it.
    3. Diabetes is at epidemic levels and qualifies many for disability.

    • Slough of Despond

      Don’t forget the “crazy checks”.  I know that in California, many people (especially the young) receive a diagnosis for bi-polar, schizo, ADD, depression, etc.  Then, they are get into the state/federal disability program (SSD?).  Once they are accepted, they start collecting their “crazy checks”.  Most of them are just scamming the system.

      • Bigcollapso

        Each time that I point out that non renewable energy is finite, an that they debt based monetary system is exponential, I am told that I am crazy. Where do I sign up?

        • Slough of Despond

          You’ll have to see Dr. Richard for your evaluation.

  • Slough of Despond

    I susoect the large increase in Federal Disability benefits is from the wars in Vietnam, Iraq and Afghanistan; especially Post Traumatic Stress Disorder (PTSD).
    The hump in the 1970’s follows the end of the Vietnam War.  The more recent growth is from Iraq and Afghanistan veterans.  Even today, Vietnam veterans are being diagnosed with long term PTSD.