UK Credit Rating Downgraded to AA, But British Better Off

Big Ben Brexit (Justin Tallis / AFP / Getty)
Justin Tallis / AFP / Getty

Breitbart News correctly predicted that if the British peopled voted for “Brexit,” that would cost the UK its AAA credit rating. And our other prediction — that the British would be better off leaving the EU — is also looking good.

Breitbart News warned that a successful June 23 referendum vote for Brexit “will cause the United Kingdom to lose their top-tier AAA bond rating.” Three days later, Moody’s credit service cut its AAA credit rating on the UK sovereign debt from “stable” to “negative.” Less than 24 hours later, S&P downgraded British bonds to AA.

A ratings downgrade is theoretically expected to cause higher interest rates. But just like after the United States was downgraded by S&P, interest rates on long-term British bonds fell by 6 percent. UK sovereign bonds, known “Gilts,” also spiked up in value on the downgrade by 3 percent for the day, and are up 13 percent over the last 12 months.

Breitbart News has argued that the currency exchange markets have correctly been forecasting a successful Brexit since November 2015. Over the last 8 months, the exchange rate of the British pound versus the euro has steadily fallen by 15 percent.

Brexit is a windfall for domestic British manufactures and workers, since continental European-produced goods now cost up to 15 percent more in the UK, and British-produced goods cost up to 15 percent less in continental Europe. French and German companies and their workers will be the biggest losers in this devaluation of the British pound.

This explains why British stock market prices are down only 2.6 percent in June; while French stocks are down 10 percent and German stocks are down 9.3 percent.

As Lee Adler of the Wall Street Examiner artfully suggests, the real “Black Swan” from the Brexit is that the European Central Bank (ECB) just lost the UK, the world’s fifth-largest economy, as an implied guarantor of its $14.3 trillion of sovereign debt.

Given that the European “PIIGS” — Portugal, Ireland, Italy, Spain and Greece – have been allowed by the (ECB) to sell over $3.3 trillion of their near bankrupt debt to European Union banks as “fully valued collateral,” there is now a higher probability that if any of the “PIIGS” go bankrupt, most of the European Union banking system will be massively insolvent.

Note: Of the 110 nations with sovereign debt outstanding, the 11 that are still rated “AAA” include Australia, Canada, Denmark, Germany, Hong Kong, Lichtenstein, Netherlands, New Zealand, Norway, Singapore, and Switzerland.

The United States lost its AAA rating on August 5, 2011, and its Puerto Rico protectorate has the worst credit rating in the world at “D.”


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