Sunday, February 24, 2013

Britain’s Conservative Government Becomes a Laughing Stock

Here’s Why We Are Laughing At Them, Not With Them

Despite being close allies, the United States and Britain took opposite positions with respect to recovering from the Great Recession.  The United States decided to use fiscal policy to stimulate the economy, and although its fiscal measures were insufficient and badly targeted, they did result in a mild and ongoing recovery.

In Britain the Conservatives took power and decided that reducing the deficit and maintaining the country’s Triple A bond rating would lead to economic success.  And here’s what happened.

Moody's Investors Service stripped the United Kingdom of its triple-A rating. Shown, the Houses of Parliament and Big Ben in London.  Yep, London in a fog, just like the Conservatives governing the country.

Moody's Investors Service  stripped the United Kingdom of its triple-A credit rating, predicting economic weakness will weigh on public finances for years to come.

Moody's lowered the U.K.'s domestic and foreign-currency bond rating one notch to Aa1 and changed its outlook to stable. It is the first of the three major ratings firms to do so, though both Standard & Poor's Ratings Services and Fitch Ratings have the U.K. on negative outlooks.

So where is the humor in this?  Here we go.

Messers. Osborne and Cameron had made retaining the triple-A rating one of their priorities when they took power in 2010. Since then, the U.K. economy has barely grown.

More recently, however, Mr. Osborne has downplayed its significance. In December, he told a parliamentary committee that although losing the rating "wouldn't be a good thing," it was only one test of the U.K.'s economic policy. "The ultimate test is what you can borrow money at."

Late Friday, he issued a response to the downgrade, saying he planned to stick to his austerity plans. "Tonight we have a stark reminder of the debt problems facing our county," he said. "Far from weakening our resolve to deliver our economic recovery plan, this decision redoubles it."

That’s right, instead of learning from their mistakes, and changing policy because the current policy is resulting in exactly what they were trying to avoid the British Conservatives will have even greater resolve to continue the failed policy.  So unless you are the British population, that’s funny.

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