Austerity Europe – NYTimes.com

United Kingdom: stamp

United Kingdom: stamp (Photo credit: Sem Paradeiro)

This is an interesting article from Paul Krugman, the Nobel economist in his NYT blog.

via Austerity Europe – NYTimes.com.

I wonder where the UK would fit on the matrix, especially given that the triple AAA have now been lost?

Any thoughts on the graph or the loss of AAA for the UK?

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3 responses

  1. Pingback: Multiplying the Old Divisions of Class in Britain – NYTimes.com « Dr Alf's Blog

  2. The problem I have is that none of the expert economists who comments I have read seem to know any of the answers nor indeed to agree with one another. So, to a simple observer it seems to me that some of the traditional measures are no longer valid (if, indeed, they ever were). What exactly is growth? Does it take into consideration work which creates human comfort such as caring but produces nothing? If not, are we saying that producing things is more important than looking after each other? Is creating a profit but nothing else as in the buying and selling of shares rather than investing new money into enterprises “growth”? It seems to count but is as unproductive as looking after an old person with dementia.

    So, frankly I really cannot see that the UK’s credit rating matters very much. Perhaps someone could enlighten me.

    • Rodney,

      It seems that our ideas are converging!

      I agree that there are serious problems with too much focus on growth, especially short-term growth. Our financial community is obsessed with quantitative data, despite series flaws in the robustness of its calculation (I am a finance professional by background & a former interim finance director of Office of National Statistics).

      Here is a link which explains the term “economic growth”:

      http://en.wikipedia.org/wiki/Economic_growth

      With regard to rating agencies, in my view, they do matter because the cost of borrowing increases the lower the rating – in essence, lower ratings imply greater risk so the markets price in a premium for lending to a more risky buyer. All of that said, the writing has been on the wall for several years about the UK’s credit rating. Once again, UK Chancellor, George Osborne seems to have been light on economic judgement.

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