At the time that the credit
rating of the US was downgraded, I was in Chicago. I was lucky to see what reaction
was incurred while the wound was at its freshest, but I was surprised to see a
distinct lack of introspection in the media. I remember I was in my hotel room,
flicking through the abundance of news channels and the message was all the
same: ‘these agencies clearly don’t know what the hell they’re talking about’
(paraphrased slightly).
I’d experienced the American
media before and know how partisan it can be, so it was shocking to hear the
anchors of Fox news passing up the opportunity to let the Democrats have it.
Admittedly I was out of the country a couple of days later and I’m sure Bill O’Reilly
just needed time to settle into his indignation, but the collective outrage
from left and right put all other topics to the bench.
Compared with this barbarous call
to arms, it seems the UK’s own downgrading by Moody’s has snuck under the
radar. It’s a story that’s been cool off the press for a while now, and I don’t
mean to imply that too few inches of column have been devoted to the matter,
but why the absence of fire and brimstone? I’m not convinced that the British more
stoic (or apathetic), it just seems like another sin for the heap accumulated
by everyone’s favourite scapegoat, George Osbourne.
It’s widely held that the impact
will be more political than economic as investors tend to use their own
discretion rather than the findings of the ratings agencies. Additionally, the
agencies had a far from spotless record (AAA for Lehman Brothers before the
crisis?), but the precarious position of the pound is likely to take a further
hit. Its glib record against the dollar this year; as well as the continued
rise of import prices will surely take its toll on the average household.
I’m sure that Osbourne could read
the Book of Job with envious eyes, for what remained of his credibility rested
squarely on that AAA rating. Standard and Poor are likely to follow Moody’s
lead, with Fitch not far behind. Osbourne highlights the ripple effect of the
Eurozone, a valid point, but few are likely to have forgotten the £15billion
borrowed in December as well as his scant revisions to the economic recovery
plan.
Criticism of the agencies is not
an exclusively American trait. Marc Joffe makes a reasoned argument against
them, and our downgrading reflects the general gloom of the world economy.
However, it will be interesting to see how this might affect the political
landscape and whether this is the mortal blow to the ever resilient Osbourne.
