Home > General Politics > The downgrade and some shockingly bad BBC journalism

The downgrade and some shockingly bad BBC journalism

I flicked on the Radio 5 Saturday Edition earlier for a minute and heard this exchange (from around 13mins 50s secs) on the matter of the downgrade and possible implications for debt and interest rates:


When we’re talking about borrowing money, borrowing money internationally, from whom?

BBC Business Correspondent:

Well, this is borrowing from from international lenders.  People will give the government money in return for a set interest rate and that money of course is used to pay off all sorts of things….

This is of course, utter rubbish.  As of December 2012, overseas holding of gilts was at around 30% of the total, according to the UK Debt Management Debt Office.  This is up from roughly 20% pre-crisis, on account of the UK’s continuing ‘safe haven’ status.

This is shockingly ignorant reporting by a supposed BBC expert, and is important because it fits a popular narrative that something must be done about our debts.  The fact remains that most of our debt is effectively owed back to ourselves.  This may or may not be a great idea*, but it’s not the same as international creditors breathing down our neck.

The only substantive issue with the downgrade is that, because some pension funds and insurance companies holding gilts may find it difficult, in terms of their fiduciary duties, to hold anything less than AAA status, demand may slacken and interest rates rise (I don’t think this will be a big issue, but time may tell).

With BBC journalism like this, I’m surprised they need any Troy spokepeople on.  Anyway, I’m complaining officially. I’ll let you know how it goes.


* Maybe worth repeating what Vince Cable’s SpAD, Giles Wilkes, said on this issue:

All we get [from increased government deficit] is a shifting balance between private and public assets and debts, in the absence of a massive international imbalance. Which means we can always afford to resolve either private or public indebtedness with a political solution, if we are brave enough.

But why exactly is 75% of GDP in public debts, owned by the private sector and paying just 4-5% interest, a problem – when the private sector needs such instruments?

That is a question Conservatives bury under the term ‘burdening our children with debts’.  It is just as much ‘providing our pensioners with assets’.

Categories: General Politics

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