The link is to a Bloomberg piece by Megan Greene, who I met at
Kilkenomics this year. Anyway, she uses the ‘the debt rating was priced
into the market’ cliche which is wrong because if that were so, the
pound would not have dropped like a rock off a cliff on Friday. This is
just ‘MSM talk’ meant to calm the masses and it’s untrue. Then she goes
on to explain how this downgrade will goad policy makers to go easy on
austerity and open up the flood gates of spending and that’s a good
thing. No, not really. The only thing keeping the pound and UK Gilt
market up these past 2 years has been the promise of fiscal restraint.
Will increased government spending boost GDP? No. The debt load in the
UK (inclusive of all public/private debt) is now close to 1,000% of GDP.
Adding more debt with more spending will not boost GDP but it will
increase inflation a lot sooner. In any case, no policies in the UK will
promote growth without the government first breaking up the TBTF banks
who sit like trolls under the bridge connecting the BoE and the ‘real
economy.’ They grab the money as it comes off the presses and hoard it;
buying gov’t bonds; buying their own bonds, buying other bank’s bonds to
try and keep the Ponzi scheme going until the next bonus season.
Source
Source