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By a Guest writer

That could be the epitaph of Scotland’s anti-Independence politicians. Particularly those who are now using the scare story that Scotland may not enjoy a AAA credit rating from all of the major rating agencies.

This – they say would put up the cost of borrowing for the Scottish Government and damage the prospect for future growth.

A pretty chilling scenario which is, unsurprisingly, completely at odds with reality.

Let’s look at the numbers.

On Valentine’s Day, when the UK AAA rating came under threat and Moody’s downrated their score to AA negative the UK – with a net debt of 72.9% of GDP – was paying yields of 1.0, 2.1 and 3.3% on its 5,10 and 30 year bonds.

Canada however with three AAA stable scores and a net debt half the level of the UK (34.9% of GDP) was paying more (1.4%) on 5 year gilts, the same (2.1%) on 10 year gilts and less (2.6%) on its 30 year debt.

And Japan, with a colossal 130% of GDP net debt and two AA negative scores was paying less than the UK or Canada on its 5, 10 and 30 year bonds (0.3, 1.0 and 1.9%).

In short any politician who tells you there is a direct read-across from a rating agency score and a real yield doesn’t know what they are talking about.

So what does this tell us about Scotland?

Well firstly it confirms that unionist politicians who to try to imply a worse rating for Scotland than the rest of the UK are wrong. Not least because Scotland has been in a better fiscal position than the UK as a whole for the last five years.

And secondly, it renders laughable the idea that anyone could imply a higher yield based on an implied agency rating.

The truth is it is the yield that counts – not the AAA rating or lack of it.  This should be a salutary lesson to for the anti-Independence campaign in Scotland.

But also a lesson for George Osborne who now needs to stop obsessing over the AAA status.


2012-03-13 08:35

2012-03-13 12:41

Good article, I had heard much of the stressing over AAA status and had assumed that it had some binding regulatory function. I guess I was naive to think there would be any regulation.

Triangular Ears
2012-03-13 11:15


In short any politician who tells you there is a direct read-across from a rating agency score and a real yield doesn’t know what they are talking about. So what does this tell us about Scotland?

It also tells us that ratings agencies are part of the problem rather than the solution.

The entire global financial industry seems to be corrupt from start to finish.

O/T, Ferguson’s programme on China last night told of an astonishing tale of corruption in Chinese history; Heshen.

In 24 years of being the emperor’s “favourite”, he managed to amass a personal fortune the equivalent of 15 years of government revenues! Mindblowing stuff.

2012-03-13 12:37

Are they perhaps concerned that without Scotland’s oil the rump UK’s ratings would plummet?
2012-03-13 14:01

One of the interesting bits of information about ratings agencies, such as Moody’s, Fitch, and Standard and Poors, which came out during the banking crisis was that much of the income of these agencies comes from the banks themselves.

They are not independent bodies. While governments may see their countries, credit rating as some sign of how well they are doing, or not as the case may be, the markets look at a lot more than how some agency has rated them.

Part of the reason the UK is doing relatively well in the bond market is that they know that the UK can print more money and inflate its way out of trouble. BUT, and it is a big ‘BUT’ the sentiments of the market can turn in a blink and if the UK goes too far down the QE/inflation route it will be hammered.
2012-03-13 14:17

A very succinct article. Says it all in easily digestible chunks, to be commended.

Any more in your repertoire “Guest Writer”?
2012-03-13 15:32…/…

Either this guy lost his marbles or the author thinks its April 1st?
2012-03-13 17:42



• We conclude the failures of credit rating agencies were essential cogs in the wheel of financial destruction. The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval. Investors relied on them, often blindly. In some cases, they were obligated to use them, or regulatory capital standards were hinged on them. This crisis could not have happened without the rating agencies. Their ratings helped the market soar and their downgrades through 2007 and 2008 wreaked havoc across markets and firms.

2012-03-13 18:08

I’m nodding to several comments above.

Let’s not forget that these credit-rating agencies are essentially private companies out there to make a buck. Their main customers are (or were, before they branched out to intimidating national governments) big banks, which buy the agencies’ analyses to help them in their own decision-making. It can (did?) get cosy between them in the high global finance, where nations and civic society and ordinary people don’t mean much.

They’ve got where they wanted. Now national governments are beginning to kowtow to them. Oh, power is a sweet thing…

But, as pointed out above, there isn’t a direct link with AAA or less credit rating and the price of borrowing.

When I set up my small company, I was approached by agents of these credit rating companies. If I supplied them with data that I payed my bills on time, they’d give me a fancy AAA-diploma to hang on my wall. At a price, of course. I said, no, thank you.
2012-03-13 21:19

It’s high time we did some scaremongering of our own:
a no vote will cause the UK govt to pander to English nationalism and cut public spending in Scotland by 20% causing massive job losses;

after a no vote, the UK govt will repatriate most powers from Holyrood to Westminster to punish the Scots for entertaining the idea of independence;

after a no vote, British Summer Time will be scrapped to punish the Scots – dawn in wintertime Scotland will be after 9.00am children will go to school in the dark;

after a no vote the number of MPs representing Scotland will be cut to 45 to reduce the Scottish voice in Westminster;

after a no vote, taxes in Scotland will rise by at least 20% (across the board) to pay for the UK deficits and the national debt;

after a no vote, the UK govt will withdraw all “UK assets” – military, financial, scientific, administrative, etc – so that Scotland will become more dependent on the UK, massive job losses will result;

Scottish representation in athletics, football, rugby will be scrapped in international competitions to kill off a separate Scottish identity;

Scotland’s separate legal and educational systems will be abolished to kill off a separate Scottish identity.

Lets play the unionistas at their own game.
Ben Power
2012-03-14 19:53

Not far from a possible reality actually. If the NO vote wins, Unionists will be settling scores painfully so that Scots do not try it on again about Independence for a long long time.
Look at their history to see how they treat political opponents, and what they consider acceptable.

Scots should be afraid, very afraid of a NO vote.

Vincent McDee
2012-03-13 23:00

I would like to add a wee but pretty important point, as they themselves should say:

They are Americans, honey!

Mighty dollar is the notes in their pockets. Any other currency users are looked at in a slanted and biassed manner.

They are would be referees and players too, at the same time.
2012-03-14 13:25

As an ordinary punter, I naively imagined that Democracies ran their own economies and if they got in extreme difficulties went to International Banking funds for bail-outs, such as the IMF. But recently, since the ‘crash’ I’ve become of these ‘Rating Agencies’ which apparently can dictate the economic viability of a particular State. Consequently, we have the sight of ancient democracies(apa  rt from short periods of dictatorship) such Greece , Spain and Portugal being designated unviable by whom?…as more informed correspondents on here point out.. self-regulating cronies of the banking system..the very same crowd of swindling incompetents that got us into the crisis in the first place. You honestly couldn’t make it up!

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