What does S&P stand for?

Oh no, Standard and Poor’s (S&P) has revised its outlook on long-term UK government debt from “stable” to “negative”, meaning Britain is more likely to lose its “AAA” rating. Oh no!

Why (oh why) I wonder? Well, it’s because they think it more likely that “within the next two years … fiscal performance weakens beyond our current expectations. We believe this could occur in particular as a result of a delayed and uneven economic recovery, or a weakening of political commitment to consolidation.” Ahh, so “fiscal performance” means onsolidating government finances i.e. cutting the deficit. Ahhhh.

But, hang on a mo, isn’t there a tension between fiscal ”consolidation” i.e. cutting government spending/raising taxes and economic growth especially right now as per the following statement; “We continue to believe the government's efforts over the next few years to engineer the planned correction in the U.K.'s fiscal accounts will likely drag on economic growth”.

Ahhhh. So there is a tension, a proufound contradiction even especially when private sector demand is so weak, between fiscal consolidation and economic growth. I wonder who came out with that mad view? Err, that’d be S&P in the same note setting out why they’ve moved the UK to a negative outlook.

Except, further on S&P then say “We could lower the ratings if we conclude that the pace and extent of fiscal consolidation has slowed beyond what we currently expect. This could stem from a reappraisal of our view of the government's willingness and ability to implement its ambitious fiscal strategy.”. So at the same time as S&P is saying fiscal consolidation is a drag on economic growth they’re also saying they’d probably downgrade the UK if consolidation slowed down?

Oh. I guess you could go off on one here about double-think. Personally, it reads to me more like S&P are setting out their “analytical” prejudices (cut spending, cut spending) and reality, then failing to acknowledge let alone reconcile the two. This would be nice if it was a purely academic exercise, except its not. Or is it? 

Before some dicksplash shouts Greece, Greece like a Pink Lady gone wild, we’ve actually now got a meaningful example of what impact a UK downgrade would have; a month after France lost its “AAA”, French long-term borrowing costs “hit a record low at an auction”. So there you then, a one notch downgrade doesn’t matter diddly right now, which makes sense given there aren’t too many practical alternatives to British government debt i.e. there’s only so much “AAA” Finnish debt to go around.

This reality should be a marvellous and liberating thing for government policy. Now, not only can we get a real, counter-cyclical, debt funded government spending programme (social housing, social housing!) we could do so safe in the knowledge that S&P’s incoherent shite (plus whatever leaks out of Fitch’s and Moodys pants) can be safely ignored. 

We should, but as things currently stand we won’t cos S&P aren't the only people to have those same prejudices plus there's the major and therefore probably politically unpalatable u-turn doing so here would involve, Shame & a Pity really. Sad & Pathetic even. Shysters & Poobahs or is it Sock-Wranglers & Pie-chart-interferers? Nah, its Shite & its avoidable Pish.

Budge-this

My favourite budget bit so far is “We are also taking the opportunity to rebuild Britain’s reserves, which had fallen to historically low levels. I can confirm our gold holdings have risen in value to £11 billion. This does not include the 400 or so tonnes of gold sold a decade ago for £2 billion, and which would now be worth six times that at over £13 billion pounds.” i.e. Gordon-the-gold-seller-Brown, you are one seriously useless fucktard.

The 7% new stamp duty rate on £2m plus houses combined with the new 15% rate if you bought them through a company is also awfy cute the way it tells Bob Geldof and co they can try and dodge the stamp duty us plebs pay if they want by buying via a company, but it’ll cost em’more if they do.

In the background to this though and the next few budgets is the supposed reality the Fitch rating agency spelled out when they issued the following chat to explain their decision to move Britain to “negative outlook”: “The triggers that would likely prompt a rating downgrade are … : -- Discretionary fiscal easing that resulted in government debt peaking later and higher than currently forecast;” (then 2 other triggers are mentioned, one is “blah blah blah” and the other “ya de ya de ya”).

Now Fitch is very clearly using jargon to mask an assertion of ignorant and very debateable prejudice. Negative outlook? That’d be them saying we think certain factors means that a downgrading of Britain’s credit rating has become a real possibility, which matters because markets respond to changes in outlook as well as actual ratings. And for both a negative move typically sees governments having to hand over more tax payer fivers to cover its debts. Discretionary fiscal easing? Hmm, that’s quite a cute one really; discretionary? That’d be what a budget is. Fiscal policy? That’d be about taxing and spending.

So essentially, Fitch said in the immediate run up to the budget don’t cut taxes or increase/not reduce spending in ways we don’t like or else i.e. it’s an assessment that can be read as a warning that’s open to interpretation as a threat.

Of course a rating agency would never see things like that, they only ever provide independent opinions based on privileged access to company data after all that others are “free” to choose to act upon or not (similarly, shops only sell guns whereas it’s the psychopathic outsiders who actually use them to shoot their classmates). And yet would a more active, discretionary fiscal policy be a bad thing?

Paul Krugman certainly thinks it wouldn’t, similarly John Kay today talked about how increased public spending on construction in its widest sense would “as the National Audit Office recently observed, be likely to reduce public expenditure over the medium term, not to raise it. The weakness of current – necessary – austerity programmes is that they focus on capital projects and expenditure deferrals because these cuts are easy, even though they are precisely the opposite of what is needed to balance the books in the long term. We need to devote much less attention to headline spending totals and much more to the detailed composition of public expenditure.” Heck, even this joker thought this was a good idea in 2009 cos he’s also mindful of how cos counter-cyclical government spending “leaks” in an open economy such as the UK there’s a need to focus on stuff that doesn’t like building shit. Except, these kind of grounded in facts but still – lets be honest – ideological views are effectively being swept aside by chat like Fitch’s, which is a bad thing.

Fitch’s chat illustrates perfectly the kind of dogma and prejudice that continues to define the terrain on which British fiscal policy is now set and its overall direction. This makes it a clear assault on democracy and, in the view of all sorts of bods, one that is actively shitting on the prospects of both the British economy and the livelihoods of hundreds of thousands of people left unemployed as a result.

Am trying to think how to draw this to a close, howzabout: The budget is shit and all the ConDems should be made to dress up like girly shepherdesses. This is cos government passively accepting the undemocratic constraints on its fiscal freedom private companies i.e. rating agencies, are imposing is a very, very bad thing.

Instead the debateable analytical and moral capabilities of the latter and of the "market" more generaly should be recognised. Thereafter, these external bodies should be held up to more and more aggressive public scrutiny and regulated til they squeal like pigs.

We should also have, because we need it, a huge increase in public sector debt funded public spending on construction. Given the Labour response has been to fixate on the tinkering and ignore the overall thrust of fiscal policy, Milliband and Balls should similarly be ordered to dress up as shepherdesses complete with pink gingham bonnets. There.

Green Investment Bank fail

One minute investment banks are the scourge of society, the next they’re a panacea for all an economy’s ills. Pile of utter fucking shite either way if you ask me.

Starting with the scourge and the barbarians at the gate thang, investment bankers receive far too much money for doing deals that deliver no added value over the medium to long term both to the shareholders involved and the actual economy as a whole, is how the argument usually goes. And all that strikes me – enviously if honest, given the wages and bonuses they get – as containing a large chunk of truth, which prompts the question well how da fuck have they been getting away with it for decades then?

State initiated investment banks on the other hand are apparently the panacea for all an economy’s ills according to yer average career politician regardless of whichever party they happen to be in. Hence, all the current shite about establishing a green investment bank. Now the rhetoric here is fantastic – a green investment bank is an economic imperative that will build a hi-tech, future-proofed economy, it’ll ensure Britain maintains its global lead in renewable technologies, generate ‘000s of new jobs by capitalising on established, cutting edge technical competencies, leverage existing engineering and innovation infrastructures and act as a transformative capital provider that will underpin the transformation of I don’t know, things that presumably need transformed. All utter fucking bollocks really, like pure rhetorical shite and fuck all else for the most part.

Like I mind hearing some politicians spout off about it and what became utterly fucking clear was that they didn’t have a fucking clue about any of it. Like knowing an investment bank provides equity not debt would have been a good starting point (that and knowing the difference between equity and debt, obviously). Then following on from that there was the question of at what stage should the investment bank start investing e.g. should it focus on the venturing side and finance blue sky thinking in the first instance? Or what about financing taking an already proven technology to market, or marketing an already established products or is it all simply providing the equity needed to go along with the debt for proven technologies in project finance type situations such as a new windmill farm as opposed to a wave based thingy? And how should these decisions be taken, like are we looking to establish however many committees chock full of ignorant place men and all the vested interests and expenses claims that entails or instead is it actual private equity/investment bods that would decide when and how much to invest given all that entails in terms of them getting wages that are however many times the Prime Minister’s? All of the above boring, practical stuff just seems to be flim-flam getting in the way of a politician telling us how the government is INVESTING in a sustainable future or some other such fucking shite.

The other thing of course is that the actual sums being talked up are fucking pitiful. The £1 billion capitalisation Nick Clegg wanked on about is fuck all when you compare it to say the 75 billion Euros in bonds raised by an existing German state investment bank. Rather, the reality is £1 billion is an arbitrary figure that lets politicians say billion a lot with a bilious emphasis on the “BILL” as if them coming across as if they have a speech impediment fucking counts for something.

I was going to wank on a bit at this point about the Macmillan gap identified in the 1930s, the subsequent creation, then eventual reorganisation of 3i and the associated positive role government funded capital investment can play in an economy where the provision of equity finance definitely was subject to market failure on a sustained, systematic basis. But, I’ve some beers on the go so feck it.

What all this does provide though is a lovely context for the 2011 budget when it arrives on March 23rd and all the sound bite shite about growth that’ll contain.

Like so far my impression is the ConDem government is really and I mean really gunning for libraries and disabled people, cos you know those are exactly the kind of nasty fuckers that are asking for it. At the same time it’s already hacking back on public sector investment to an extent that hugely outweighs all this green investment bank shite (1). Rather, the latter will simply be an exercise in political sleight of hand. Like if you were to point out however many libraries are going to close, the response will be, ahh, but we’re establishing a green investment bank. Or if you pointed out however many home helps are being made redundant, the response would again be ahh, tough choices and we’re establishing a green investment bank, and so on and so on.

Personally, the only debate the above prompts is what type of cunts politicians are. On the one hand you’ve the ConDems simply setting themselves up to prove once again that they are indeed snidey cunts. On the other you’ve got the Scottish parliament voting to build a new Forth Road bridge last December (that it’s currently forecast to cost £2.3bn provides yet another benchmark for the fuck all capital base of the Green Investment Bank). The overwhelming sense I had when the MSPs voted for the new bridge was of a shiteload of mediocre shifters desperately wanting to do and to be seen to be doing something in a half-arsed, unthinking Keynesian multiplier kind of way. I reckon on balance they were well-intentioned when they voted the way they did. I also reckon they did sowhile applying fuck-off selective memories when it comes to the deep inability of government to deliver major capital projects in Scotland (e.g. the parliament and the Edinburgh trams) and what that means in terms of the general public having to eventually cough up fucking shed loads more and lose out on public services to cover their asses. So yeah, what’s worse – snidey cunts or fucking useless cunts, you decide.


(1) To quote the Institute for Fiscal Studies’ latest public sector spending note - “Public sector net investment over the first ten months of this financial year has been £28.1bn, which is 20.8% lower than in the same months of 2009−10” i.e. the year to date figure for January was almost £6bn down on the previous year. Compare that with a £1bn fucking green investment bank, then wonder how fucking stupid do politicians think we are (the answer is very and they’ve got a point).