“The strong-hold of the American government is falling to pieces. She has lost her prestige among the nations of the earth. One of the greatest powers of America was her dollar. The loss of such power will bring any nation to weakness, for this is the media of exchange between nations. The English pound and the American dollar have been the power and beckoning light of these two great powers. But when the world went off the gold and silver standard, the financial doom of England and America was sealed. The pound has lost 50 percent of its value. America’s dollar has lost everything now as power backing for her currency, which was backed by gold for every $5 note and up. All of her currency was backed by silver, from a $1 note up.”—————ELIJAH MUHAMMAD
By Edmund Conway and Angela Monaghan
Published: 5:00AM GMT 09 Dec 2009
In an acutely embarrassing blow for Alistair Darling only hours before today’s pre-Budget report, the ratings agency said that Britain faces the threat of a debt spiral unless drastic action is taken to rebuild the public finances.
Within four years almost 10p in every pound of tax paid by British families and companies will go straight towards interest payments on the national debt, even in an optimistic scenario, the agency said. It added that the ratings it imposed on British and US debt were “resilient”, but reserved its highest classification – “resistant” – for France and Germany.
Mr Darling will today present more detailed plans of how the Government intends within four years to halve the budget deficit from the near-£180bn it is likely to reach this year. However, some suspect that the Chancellor will stop short of announcing the large-scale spending cuts and tax rises necessary to bring Britain back to balance as fast as investors had hoped.
In what is seen as a coded warning, however, the Moody’s report said that any assumptions that truly ambitious fiscal plans would emerge only after the election next year “will have to be validated by actions in the not-too-distant future to continue to provide support for the rating”.
George Osborne, the shadow Chancellor, said: “The Moody’s warning is further evidence that Britain faces the disaster of having its international credit rating downgraded unless we get on top of our debts.”
The Conservatives have pledged to set up an Office for Budget Responsibility which would keep a check on their spending if elected. Mr Osborne said it would run as a shadow body over the next six months, overseen by former Treasury and Bank of England policymaker Sir Alan Budd.
The Chancellor is expected to cut his economic output forecast for 2009 to -4.75pc –the worst in peacetime history, but to leave the forecast next year unchanged at 1.25pc.
However, he will insist that the economy will be out of recession before the end of the year, an assessment supported by the National Institute of Economic and Social Research, which estimated that the economy grew by 0.2pc in the three months to November, and said fourth quarter growth was likely to be higher.
However, official figures also showed that the manufacturing sector failed to grow in October, indicating a weak start to the final quarter of the year. Output remained flat compared with September, while economists had expected 0.4pc growth, underlining the likelihood that any recovery is likely to be fragile.
Vicky Redwood, economist at Capital Economics, said the data were evidence that Britain’s manufacturing recovery is “struggling to maintain momentum”.
Consumer confidence also failed to pick up in November, with Nationwide’s monthly index unchanged at 73 points. Its economist Martin Gahbauer said: “Consumer confidence has lost some of the upward momentum evident earlier in the year.”