If Thursday is the new (old) Friday, and Saturday night’s alright for fighting, then Friday is the night of the downgrade. I seem to recall this happening to the US and France at the same kind of “I’m sorry there’s no one here to take your call” bit of the week, and now it’s hit the UK.
I wasn’t planning on posting today but you can’t let something like this slip by without some kind of comment. Well, you might be able to. I can’t.
The big question is does it matter?
Economically, not as much as it used to. France can still borrow cheap. So, obviously, can the US. Given the persistently negative image the UK economy has, lasting this long was little short of a miracle. I expect borrowing costs will rise slightly over coming months, but only slightly. Because the markets don’t take the ratings agencies as seriously as they used to (for some reason). Because although this happening now does seem like a bit of a shock, the negative outlook meant everyone saw it coming, and sooner rather than later. And because it’s not like there are a hundred other safe havens out there any more. So is it going to affect the mortgage-payer, the small-business-owner, the Goliath plc shop-floor employee? A little, maybe, but not so’s you’d notice.
Politically, though, it’s something else altogether. George must be shaking his head and wondering which way to turn. He’s staked his plan on keeping AAA. He’s insisted it’s critical. So where does he turn now it’s gone?
The conversation probably goes something like this.
GO: it’s just the one agency. We can spin that, can’t we?
Advisors looking at one another and slowly shaking their heads: The others will follow eventually. They always do.
GO: Well how about we say it doesn’t matter after all? I mean, all that stuff about borrowing costs not really going up a great deal. We can use that, can’t we?
Advisors: Oh George. George, George, George, George, George. For nearly three years you’ve been insisting we keep AAA or we’re all doomed. You’ve based your entire economic policy on it. Sure, we all knew AAA was shorthand for market confidence, and maybe we’ve still got that, but it’s not what you said.
GO: so we say it is all doom. We were right. We told you so.
Advisors, burying heads in hands: but you didn’t. What you said was your policies would stop this from happening.
GO, gently banging his own head on the table: But it doesn’t really matter. It’s not fair. It’s only thanks to me we can borrow at all.
Advisors: Maybe, Georgio. Maybe. But is that really your line? It’s quite bad but not as bad as I said it was going to be and it would have been worse if the Eds had been in charge?