Guernsey credit rating downgraded from AAA to AA+
Friday 11th November 2011, 2:29PM GMT.
THE island’s credit rating has been downgraded by an international independent agency.
Standard & Poors has revised its rating for Guernsey from AAA to AA+ after revising its technical scoring methodology for assessing risk.
In its November report out yesterday, the agency said it considered external vulnerabilities and monetary flexibility as credit weaknesses for the State of Guernsey.
‘For smaller jurisdictions, the new technical scoring methodology does not work in our favour, and yet we have been given a high grade score of AA+, the highest rating that is achievable for us against the new methodology,’ said Treasury minister Deputy Charles Parkinson (pictured).
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It matters not one jot what Standard and Poor rates us as because we don’t borrow money, we print it.
Guernsey is quoted by knowledgable economists in various parts of the world as an example of a jurisdiction which controls its own money creation.
I believe if all governments created there own money instead of so called central banks the world wouldn’t be in the mess it is in at the moment.
I would go further and say that the creation should be spent first by the government, and abolish all taxes. This would encourage people to store their wealth in gold (where it should be) and leave money to do it’s proper job of lubricating the transactions of the economy.
This would result in inflation replacing taxes whereby those with most are mostly affected. This would eliminate all tax evasion, and also save the costs and resources of tax collection.
A big plus would be all the brain power that could be diverted to real wealth production.
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zzzzzzzzzzzzzzzzzzz.
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I wonder who would pay for the street lights, police force, customs and immigration controls, roads, environmental services, public litter collection, maintenance of public spaces, cliff-paths, beaches etc
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It Would seem that S & P have decided that the gutless surrender over QE means that we no longer have our historical ” monetary flexibility” and are therefore considored “WEAK”.
If only I were Chancellor and only had to worry where to park a bus or three!
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oh dear, not still arguing that we should jump on the QE bandwagon are we?
and we don’t have a “Chancellor”
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Terry, there is not a problem with QE in itself. If money is the lubrication of the economy and the economy is suffering a lack of it, then it makes sense to pour more in.
I think the building of the Hoover dam in america was one such attempt at lifting an economy by pouring in more lubrication via goverment spending. This method is far better than having a private central bank producing the money, and the government taking it on as a debt at interest. Worse still if they then just pour it into the banking businesses, this just short circuits the economic cycle. It is government debt at interest that is the real problem.
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Steven – I agree with you. QE (within sensible limits) in the UK makes sense , because the money ends up in the hands of banks who will, most likely, use it to help kickstart the economy.
What LBB has failed to explain previously is what good it would do to Guernsey. We don’t have local banks able to get involved in QE. If we did have our own QE programme, the banks would just upstream the money to the UK, so we would be diluting Sterling further, but only benefitting the UK economy and not ours.
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Give me a smoke of what this mons on
Hilarious
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Steven
Knowledgeable economists have also said that the debt crisis is a global problem and that nowhere will be exempt from its repercussions. Maybe you just believe that Guernsey is out of this world so cannot be affected. Oh how I wish the island were out of this world.
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I have it on very,very good authority that Guernsey’s credit rating HASN’T been downgraded in the slightest- all that’s happened to it is that it has been RE-CLASSIFIED. It still stands at the same level of AAA but that level under a new methodology is now called AA+.
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@Terry
Most likely not.
What has happened is that the lax accounting practices by banks, their practice of fractional reserve money (debt) creation, and highly complex financial products, had enabled them all to credit themselves with making huge profits where little existed. This is what the credit crunch has exposed.
The governments have been called upon by the banks to effectively monetise the debt, to shift it from one column of figures to another. Sounds great, an easy fix. Let’s forget the ethics of interfereing in market forces for the moment. The result is the working populations of various countries are being required to pay for this monetisation, and pay interest on it, to the very people who created the debt in the first place. Now that’s what I call extremely rich.
This has now impacted upon sovereign debt to the point that fully exposes the fact that not only have huge amounts of taxes been paid in interest but that we can’t sustain any more. Which then lays bare the real problem. Government debt at interest.
Don’t be fooled by the adage ‘trickle down’.
If governments create money at no interest and initiate creative programs employing the population there will be a trickle up, towards banks which should be facilitating the transactions within the economy.
When I compare money created by private enterprise at interest, with money created by a well run government interest free, and consider them as a choice of oils for an engine, I know what my choice is.
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some valid points there. but there is also the adage – give a man a fish and he will eat for a day, teach a man to fish and he’ll eat for life.
Government capital projects create jobs while they are being built, but then stop. If money is used to finance sustainable businesses, then those businesses will continue to grow and employ people and contribute to GDP.
But either way, this has little application to Guernsey. We don’t need our “Hoover Dam” to kickstart our economy and we don’t need QE.
We have no government debt and so no crippling interest payments.
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We all know Guernsey traditionally has higher inflation than the UK, driven by the pressures of not having a large pool of unemployed (but employable) labour.
We also have the issue of our currency being pegged to the GB pound. The UK is politely defaulting on its debt by inflating away its credit problems (QE etc). Guernsey will have no choice but to import inflation from the UK.
State stimulation during a depression? One would hope that it was Hoover, the new deal etc. But it wasn’t, the end only came with WWII. (14 years after the 29 crash unemployment reached 5% again in the US). I am not advocating his actions but with some irony the evidence points clearly to Hitler ending the depression.
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” having a large pool of unemployed (but employable) labour.”
Have you seen,talked to or overheard the Natives that are so called “employable”? I wouldn’t give them the responsibility of getting dressed in the morning on their own,let alone the responsibility of taking my order in a Restaurant.
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