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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.
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.
• 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.