Britain thrown to the pigs

The British pound is recovering from an earlier belly-ache brought on by the specter of a loss of its AAA credit rating. According to Standard & Poor's, there is a one-in-three chance that the government's incessant spending to stave off recession will end in a loss of its ranking. In that case it would be the fifth west European nation to lose its crown and would join the so-called PIGS of Europe – Portugal , Ireland , Greece and Spain . The pound fell to $1.5515 at its weakest point today after a New York close of $1.5753. By 10:00am in New York today the pound has recovered to back above $1.5700.


Britain is singled out as a basket case by the ratings agency on account of its rising debt burden, which is reaching 100% and the agency thinks that this might be more like a medium term event than anything else. The jolt today sent stocks in London down alongside the price of British gilts as well as the cost of insuring against gilt defaults. 


S& P announced a reduced outlook on Britain moving its outlook from ‘stable' to ‘negative.' While four nations have already been stripped of AAA status, it's probably a simple function of the recession and to not reflect the deterioration in public finances across the western world would likely make a mockery of the already-tarnished ratings agencies. The industry has in the past been criticized for moving too little, too late to reflect weakening fundamentals at companies.