Monday, 25 February 2013


The credit rating agency Moody’s (viewed with derision by the Chinese government and ignored by Warren Buffet) has just downgraded UK government debt.
Well the markets don’t seem to agree with Moodys. At least the UK’s creditors get less of a reward in real terms for each dollar of UK debt than they do for other major countries. By “real terms” I mean the real or “inflation adjusted” rate of interest.
In fact taking the yield figures from this Financial Times site, and inflation figures from here, the inflation adjusted yields on the debt of Germany, UK, US and Japan are -0.2%, -0.55, +0.4% and +0.6% respectively.
In other words creditors are prepared to take a lower yield for the privilege of holding UK debt than holding the debt of other countries.  Or to put that more crudely, the UK is ripping its creditors off more ruthlessly than other major countries (if you count this God forsaken, rain soaked island where I live as a “major country”).
Britannia waves the rules.
The above is however a very crude back of the envelope calculation. Errors and omissions expected.

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