It was inevitable and the markets have already priced in the rate cut months ago.
But losing the prized AAA rating is the least of our worries; debt is over £1 trillion and Sterling is in free fall. Government spending is still increasing and the Coalition are failing to insure Britain can live within her means. The downgrade will have little or no affect on interest rates due to the Bank of England being the majority holder of the national debt. This will not become an issue until the central bank has to sell its holdings back to the market.
Then the shock will hit and Sterling could possibly be destroyed.
Our deficit is not the real problem; it’s the government naively increasing debt and hoping to inflate the problem away. It has not occurred because the Eurozone has collapsed. The BoE planned to use inflation to deal with the size of the national debt, which is a clandestine partial default. Nobody expected a deflationary depression and Britain becoming the 21st Century Japan.
But it has happened.
Now the markets are telling us to stop spending . We have no choice, but to listen. The downgrade will force the hand of the Treasury to do what must be done. Parliament now has to address the economic reality; there are many pleasures that we, as a country, can no longer afford.
And we cannot simply tax the problem, either. This debt was accumulated, over a decade, without our consent; the taxpayer should not be held responsible because the government cannot control its spending. Why should we be made to suffer? This problem began in 2002, when the debt fueled boom was born. The boom turned into an economic nuclear bomb.
Now, in 2013, we are left with £1 trillion debt and a fractured financial system, partly owned by the taxpayer. A morally and financially inept health care system, expensive welfare state and a corrupt political franchise. In other words, the real downgrade occurred many years ago.