Ever since this horse meat scandal started spreading around Europe, we've all known that Ikea meatballs are made of horse meat. Of course they are. I mean come on, they cost about 30p each, and that's in the restaurant. What did you think they were made of? Prize cuts of Aberdeen Angus.
The thing is, none of this changes the UK's ability to repay its debt. If it needs the £s to pay it can just print them. They may become worthless relative to any other currency or any good or service, but the obligation will still be met. The risk of default remains unchanged. In Moody's eyes, they've moved from the “lowest credit risk” to a ” very low credit risk”. This doesn't make sense. The only reason the UK would default on its debt is if there were a political desire to do so. Nothing in Moody's statement pointed to a change in the political landscape weakening the UK's commitment to meeting its obligations.
Moody's have simply further damaged their reputation in my eyes with this action. They are not great as an assessor of default risk and even worse as economic commentator. As a stick for the Labour opposition to beat the coalition with, however, maybe they have a role to play.
Anyway let's move on to more important stuff like Italian elections. Surely that's worth a 30% VIX spike.
