Dear PGM-Capital, blog readers,
On Friday, February 22nd 2013, Moody’s Investors Service downgraded the domestic- and foreign-currency government bond ratings of the United Kingdom by one notch to Aa1 from Aaa, with a stable outlook
Moody’s motivates the downgrade on the following facts:
- The continuing weakness in the UK’s medium-term growth outlook, with a period of sluggish growth which Moody’s now expects will extend into the second half of the decade;
- The challenges that subdued medium-term growth prospects pose to the government’s fiscal consolidation programme, which will now extend well into the next parliament;
- And, as a consequence of the UK’s high and rising debt burden, a deterioration in the shock-absorption capacity of the government’s balance sheet, which is unlikely to reverse before 2016.
In a related rating action, Moody’s has today also downgraded the ratings of the Bank of England to Aa1 from Aaa. The issuer’s P-1 rating is unaffected by this rating action. The rating outlook for this entity is now also stable.
As reflected by the stable rating outlook, Moody’s does not anticipate any movement in the rating over the next 12-18 months. However, downward pressure on the rating could arise if government policies were unable to stabilise and begin to ease the UK’s debt burden during the multi-year fiscal consolidation programme. Moody’s could also downgrade the UK’s government debt rating further in the event of an additional material deterioration in the country’s economic prospects or reduced political commitment to fiscal consolidation
In our previous blog post and year 2013 outlook we predicted that the club of AAA countries will be further decreased and that the UK will be the first one to lose its AAA rating in 2013 We also predicted a further downgrade of the USA and France in 2013.
Below you’ll find the top 10 financially safest countries in the world by EuroMoney, updated January 2013.
| Rank | Previous | Country | Overall score |
|---|---|---|---|
| 1 | 1 | Norway | 89.87 |
| 2 | 3 | Luxembourg | 87.29 |
| 3 | 4 | Singapore | 86.81 |
| 4 | 5 | Sweden | 86.81 |
| 5 | 2 | Switzerland | 86.78 |
| 6 | 6 | Finland | 84.54 |
| 7 | 7 | Denmark | 82.64 |
| 8 | 9 | Hong Kong | 82.43 |
| 9 | 8 | Netherlands | 81.82 |
| 10 | 8 | Canada | 81.82 |
See also this link for list of countries by credit rating.
Ladies and gentlemen, we are currently experiencing the biggest shake-out that this planet has ever seen. During this shake-out, the Economic titans of the the 20th century will go down and that the shift in economic supremaccy will go to small, well-educated and well-managed coutries like the Scandinavian Countries, the Netherlands, Luxembourg, Switzerland, Singapore and Gulfstate countries.
Downgrades like the ones of the UK and those other mighty titans of the 20th centurty will lead to more quantitative easing and subsequent currency war with the ultimate effect dilution of all fiat currencies. Gold and Silver will prove to be the only real money that cannot be printed by Central Bank and consequently their intrinsic value cannot be manipulated.
Having said this, the logical investment decision is no guess-work: follow gold and its precious metal brethren.
Until next time
Eric Panneflek