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S&P Validates Worthlessness By Confirming UK AAA Rating (Negative Outlook)
The UK, which many think is quickly becoming the uber-Greece of Europe, just got a pat on the shoulder by S&P.
From S&P (feel free to provide your best suggestion what this acronym stands for)
Overview
- The outlook on the United Kingdom remains negative, based on our view that, in the absence of a strong fiscal consolidation plan, the U.K.'s net general government debt burden may approach a level incompatible with a 'AAA' rating.
- We expect to review the long-term rating and outlook again once medium-term fiscal policy becomes clearer following the 2010 parliamentary elections.
- We are affirming the 'AAA' long-term and 'A-1+' short-term sovereign credit ratings.
Rating Action
On March 29, 2010, Standard & Poor's Ratings Services affirmed its 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the United Kingdom (U.K.). The outlook remains negative. The Transfer & Convertibility (T&C) assessment for the United Kingdom is 'AAA'.
Standard & Poor's rating outlooks assess the potential direction of a rating, typically over a period of up to two years. An outlook revision does not necessarily precede a rating change.
Rationale
We revised the outlook on the U.K. to negative on May 9, 2009, as a result of what we viewed as a structural deterioration in the public finances, and the lack of a well-specified fiscal consolidation plan, against the backdrop of the rapid increase in the government debt burden. We currently estimate general government debt to rise to 77% of GDP in 2010 and to approach 100% by 2014 (compared with 44% in 2007), notwithstanding the Treasury's £11 billion (0.8% of GDP) downward revision to its borrowing estimate for 2009-2010. In our view, the government's 2010 budget, released March 24, 2010, did not include any material new information relating to its medium-term fiscal
strategy. As we indicated in May 2009, we expect to review the rating and outlook on the U.K. again in light of the additional fiscal measures we expect to be announced after the upcoming parliamentary elections, likely to take
place in May 2010.
We believe that substantial uncertainty persists with regard to the details of what the current government has indicated will be a largely expenditure-focused fiscal consolidation program starting next year. Official projections indicate that growth in real current spending will slow sharply from around 4.0% in 2010-2011 to 0.8% annually from 2011-2012. However, how this reduction in expenditure growth will be distributed across departments remains unclear. Moreover, we believe that additional spending measures will likely be required to put the public debt burden on a clear downward trajectory later in the current decade. As a result, we will await further clarity on fiscal policy from the new government following the general election. We expect that the institutional framework of budgets, pre-budget reports, and spending reviews will enable us to gain additional insight into medium-term fiscal trends by the end of 2010 regardless of the composition of the new government.
Under our current projections, we believe that the general government deficit reached 11.5% of GDP in 2009 and will still be close to 6% of GDP in 2014. This is based on our estimates of how quickly the erosion in the government's revenue base may be repaired, and the extent to which the growth in government spending can be curtailed. We are less optimistic than the government with regard to the U.K.'s annual economic growth prospects, which we expect to average around one percentage point lower over the next five years than those underpinning the official public finance projections. This conclusion reflects our expectation that fiscal consolidation will weigh on incomes, amid a prolonged period of deleveraging in the highly indebted private sector (we estimate domestic credit at 206% of GDP in 2010). We expect, however, that weaker domestic demand is likely to be offset by a positive contribution to growth from net exports, supported by the 23% depreciation in sterling's trade-weighted real exchange rate since July 2007. This gradual rebalancing of the economy is likely in our opinion to result in less buoyant tax receipts than in the previous economic cycle.
As a result of the sizeable structural general government deficit, together with our weaker economic outlook, we project the general government gross and net debt burdens to continue on an upward trend towards 100% of GDP (the difference between gross and net debt being about 2% of GDP). The official forecast is for the general government debt burden to peak at 89.2% of GDP in 2013-2014. A sustained increase in the general government debt burden toward 100% of GDP over the medium term would, in our view, reduce the government's capacity to respond to future shocks, raise real interest rates, and lower growth potential over the medium term. We therefore believe such an increase in the debt burden would be incompatible with a 'AAA' rating.
Outlook
The outlook on the U.K. remains negative, based on our view that, in the absence of a stronger fiscal consolidation plan, the U.K.'s net general government debt burden may approach a level incompatible with a 'AAA' rating. The rating could be lowered if we conclude that the incoming government's fiscal strategy is unlikely to put the U.K. debt burden on a secure downward trajectory over the medium term. Conversely, the outlook could be revised back to stable if comprehensive measures are implemented to place the public finances on a more sustainable footing.
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In related news S&P also confirms the virginity of Jenna Jameson.
Did the S&P "investigate" Jenna or did they just take her word for it.
BTW, wikipedia claims she is a "former" pornographic star but is now an "American entrepreneur. So that makes her a "virgin" entrepreneur.
http://en.wikipedia.org/wiki/Jenna_Jameson
"she is a "former" pornographic star but is now an "American entrepreneur."
Just like Michael Milken is a former "felonious criminal securities fraudster" but is now a well respected "philanthropist."
They both fuck for money but I would much rather spend my time with Jameson... She has a moral and ethical value system much superior to Milken...
damn it dont' just confirm, give me Jenna's LT and ST outlook
We just updated our UK analysis to take into consideration the recently announced government measures. It still doesn't look very good, and we are much more objective than S&P, not tom mention historically much more accurate. As excerpted from Lies, Damn Lies, and Sovereign Truths: Why the Euro is Destined to Collapse!:
What about the UK?I'm glad you asked. We just finished our UK analysis (subscribers, see UK Public Finances March 2010 2010-03-24 09:32:01 617.23 Kb), and the Greek theme has continued into the land of the Brits.
... and in terms of government balance over-optimism???
The UK government’s projections are based on real GDP growth of 1.3% and 3.5% in 2010-11 and 2011-12, respectively while the (extremely and unrealistically optimistic) consensus estimates stand at 1.2% and 2.1%, respectively. The latest estimates announced by the EIU (Economist intelligence unit) in March 2010 are even lower at 1.2% and 1.5% for 2010-11 and 2011-12, respectively. The European Commission has also raised similar concerns with the Commissioner for Economic and Monetary Affairs, Olli Rehn, criticizing governments after scrutinizing the strategies of 14 countries, including Germany, France, Italy, the U.K. and Spain, that “their budget projections were based on favorable macroeconomic assumptions after 2010 that may not materialize” (stated in a press article on March 18, 2010)
Raising concerns on the UK, the European Commission also stated that “The U.K. won't meet the EU's recommended target of reaching a 3% budget deficit by 2014-15, and projections for economic recovery may also fall short. Details on how the U.K. government, whose budget deficit is expected to hit 12.7% in the current financial year, will rein back its spending are also lacking. The absence of detailed departmental spending limits is a source of uncertainty”.
Continuously rising fiscal deficit has led to a continuous increase in the government total debt, which increased from 43.3% of GDP in 2007-08 to 72.9% in 2009-10. Moreover, according to EU Commission estimates, after Ireland, the UK is poised to incur the worst deterioration in the gross debt ratio in the EU, from 44.2% of GDP in 2008 to 88.2% of GDP in 2011. Though the average maturity of UK’s debt is considerably higher compared to other nations (thus no refinancing risk in the near future), the expanding interest burden is exacerbating the already strained fiscal deficit.
Moreover, rising debt not only restricts government’s fiscal stimulus and support to the economy, but is also forcing the government to undertake sharp fiscal consolidation measures to moderate the adverse impact of rising interest expenses on the fiscal deficit. This is bound to have an internal deflationary effect.
The government expects an increase in its debt from 55.5% of GDP in 2008-09 to 90.9% in 2012-13. In absolute terms, the government debt is expected to grow from £796.4 billion in 2009-10 to £1,486.2 billion in 2012-13. However, we expect the debt to increase much higher off higher primary deficit owing to relatively lower GDP growth assumptions.
Reggie, Thanks for the details.
Apparently S&P still thinks the relationship is special.
thanks good stuff
Right....they can create money out of thin air...clearly they are AAA. Oh wait...didn't Zimbabwe already try that?
The Macro View
http://themacroview.wordpress.com
This is getting all too ridiculous. Whatever happened to the "2-way" market? I mean, what the frek?
I wonder, how much does a AAA rating cost these days?
Nothing when you're in the the position to tell them what to say.
The rating is rock solid until the Queen decides to emmigrate
She doesn't have to pay taxes. so why should the people pay for her and the rest of her brood.
Save a lot of money if she went!
she does pay taxes and takes public tansport (not like Obama who scoots around in a personal jumbo jet). God Save the Queen (guitar riff).
Suadeo & Pecco
Having just returned from a visit to the UK, I can attest that the government is doing a great job in hiding just how bad the finances are from the general populous.
There are no national assets left to plug the gap, the pension systems are close tot collapse and once the cheap migrant labor moves on to greener pastures, the overpaid and under educated masses will get a rude shock to see what their future holds.
Discovery Announcement ~ The densest element in the known Universe has been found!
M
Pelosium:
A major research institution has just announced the discovery of the densest element yet known to science. The new element has been named Pelosium. Pelosium has one neutron, 12 assistant neutrons, 75 deputy neutrons, and 224 assistant deputy neutrons, giving it an atomic mass of 311.
These particles are held together by dark forces called morons, which are surrounded by vast quantities of lepton-like particles called peons.
The symbol of Pelosium is PU.
Pelosium's mass actually increases over time, as morons randomly interact with various elements in the atmosphere and become assistant deputy neutrons within the Pelosium molecule, leading to the formation of isodopes.
This characteristic of moron-promotion leads some scientist to believe that Pelosium is formed whenever morons reach a certain quantity in concentration. This hypothetical quantity is referred to as Critical Morass.
When catalyzed with money, Pelosium activates CNNadnausium, an element that radiates orders of magnitude more energy, albeit as incoherent noise, since it has half as many peons but twice as many morons as Pelosium.
Maybe the Uk will invest in Pelosium.
Weeeeeee.
hah! that's fucking good!
+!!!
It has demonstrated a continuity of properties when physically stretched to the point of tearing................................... Good gasket material!
I thought S&P went by it's real name anyway?
Buy their Standards & you will be Poorer
Why do newspapers pretend that S&P is still a respectable organization? Where is the journalistic integrity? Where is the absolutely necessary acknowledgement that this is an organization that has repeatedly failed at it's core responsibility?
Isn't it because they are even more stupid that Stupid and Pathetic?
Have you read a newspaper lately? If so, what would give you reason to think they would print any story that would refute this glorious recovery?
Didn't they rate the icelandic banks AAA just before they went belly up?
Tyler should open the Zerohedge Center For Ratings Services Who Can't Validate Government Debt Good And Wanna Learn To Do Other Stuff Good Too.
Tyler should open the Zerohedge Center For Ratings Services Who Can't Validate Government Debt Good And Wanna Learn To Do Other Stuff Good Too.
A "crack addict" has more street cred than these corrupt rating agencies. Disregard any of their opinions.
Ok seriously.
Ratings agencies; aside from being one of the guiltiest parties at the table in this SHAMWOW! period of American history (as it's later to be known), they are on par with other esteemed enterprise niche business sectors like say I don't know... Professional wrestliing? Escort services?
The ratings agencies are owned, ls&b.
We've reached the level of total virtual separation, and I expect to see a widening split gapping through between real? reality and make believe government/wallst/ratings agencies/media/kstreetmafia/corp speak to power/accountants/regulators world.
It's already moving there, the divergence, and it's accelerating.
Funny thing happens when faith is lost in a fiat currency based on debt issuance, frns/dollar. Generally debt repudiation, depressions, war of all stripes.... A boom crash of yeast on a petri dish is apt, and it all ends badly.
He who panics first panics best, panics first is the saying? We as a people need to accelerate the shift, and take control of it. We as a people can do so by repudiating mortgages where legal escapes are possible, and or payment striking for a period of months as a community. We can as a people raise the withholding so as to not lend the government short term liquidity. We can choose not to buy anything not made in the US. We can refuse to business with TBTF whenever possible. We can vote out every incumbent, red or blue choose the new guy movement. We can just stop hearing the bullshit and start local swap neighborhood exchanges like the good old days.
We don't have to fight a revolution we just have to get past the slave fear of telling the man, in a great American tradition, to go fuck himself. I would conjecture that most red blooded Americans have done so at least a time or two, in some way or fashion. It's time to do what it comes natural for all Americans to do, look straight at your next mortgage statement, paycheck stub, 401k breakdown, neighborhood get together, and raise the glorious bird into the cogs of the system.
We bring it down. We as a people decide what is best. We say how it is going forward, not corporations, bankers, robber barons, or spin machines.
It ain't hard people, if you've got a pair. Let's do this thing. Hey Wall St/Washington I've got it right here for you Harvard/Yale/Bombs and Bank super turds....
Turn on the bird, it's easy, it's cheap, and everyone who is cool is doing it.
Racer,
"She doesn't have to pay taxes. so why should the people pay for her and the rest of her brood."
Please correct me if I'm wrong, but I am sure the Royal Family DOES pay taxes.
DavidC
I said that she paid taxes too! in reply to the post..damn i need a split screen to scroll ahead..and I said that she takes public transport...no jumbo jet fleet for her..like Obama has!
Damn, those behind these entities sure has the whole thing rigged!
Squidshit & Piss
Scheme & Ponzi
S&P = Shit & Piss.
I wanna piss on you.....poop poop.
stupid and pathetic Ratings Agency or swap Moody's Investor Services for Moody's Debasement Services
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