It must be triples all round in the Isle of Man as Moody's, the debt rating agency, issue an announcement that says:
London, 11 November 2010 -- Moody's Investors Service has today confirmed the Government of the Isle of Man (IOM) Aaa issuer and debt ratings. The outlook is stable. This confirmation concludes Moody's review for possible downgrade implemented on 21 October 2009.
Why was there that review in October 2009 ? Well, according to the Isle of Man some rascal called Richard Murphy engineered the loss of 25% of the Isle of Man's income. It is true for which I'm not sure I deserve the whole credit. I think HM Treasury had something to do with it as well. But let's accept the official Douglas line and and note that Moody’s go on to say:
"Today's rating announcement reflects the positive response of the government in meeting up to 25% cuts in the Isle's governmental revenues, caused by revised VAT sharing agreement with the UK, and the demonstrated flexibility of the island's budget in adapting rapidly to a changing environment. The tone of international debate with respect to entities regarded as 'off-shore' economies, which represents a threat to the Isle of Man business model, seems recently to have eased, although it could emerge again in the future", explains Thomas Amenta, Senior Vice President in Moody's Sub-Sovereign Group.
Ahhhh. So there we have it. Richard Murphy has gone away for the moment, but may be back soon.
And, as Moody’s say:
International pressures on the structure of the IOM tax system have not materialised, and the IOM has continued its pro-active efforts to meet international standards in financial regulation and information sharing for tax purposes and to engage on issues of tax policy. Whilst the tone of discussion with the IOM's trading partners has mitigated over the past year, national budgetary pressures in the UK, Europe and North America are likely to continue to raise the profile of -- and the need to effectively manage -- these issues above that of pre-crisis levels.
You bet . As every country realises that it is debt reduction programme is failing, the demand for extra tax will become enormous. Wait and see what happens then to the Isle of Man.
The amusing justification for the AAA rating will then look very silly:
The key drivers of the rating are the maintenance of highest quality financial profile, with tight control of costs and strong reserves, and the solid performance of the IOM's economy.
First, the custom have not yet had any real impact on the Isle of Man. so how do they know that costs are under control?
Second, the figures on growth in the economy are largely the consequence of restructuring of statistics. There is no clear evidence of any real growth - indeed despite the statistical shenanigans gross national income has declined.
And most amusingly double - there is no debt in the Isle of Man at present, so why the importance of rating? What are they buying it for? Wait until they have to borrow. Then the rating will change!
And do remember, Moody’s were people who rated sub-prime debt as AAA - just like they do the Isle of Man.
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Moody’s never rated sub-prime debt as AAA. It rated the most senior tranches of CDO’s of sub-prime loans as AAA.
It made a modelling error in assuming that the diversification between sub-prime borrowers and less than full correlation between impairment experiences would protect the value of these most senior tranches.
But Moody’s never doubted that the loans themselves were junk.
Funny how people don’t understand what an international credit rating actually means. So many think it’s an indicator that an economy is in good shape — it isn’t that at all.
All it means is what is the probability of an investor putting money into a business operating within that economy, of in government bonds offered by the government and being able to take the money and run before the economy takes a dive.
The Isle of Man economy is on a road to nowhere other than Carey Street in the long term. Certainly there will be money to be made in the short term by bouncing in and bouncing out but the fundamentals are all to hell.
An economy based on trading in a collapsing market (tax dodging) nothing coming down the track to make up the shortfall, and an absolute dependence on imports that have to be paid for by exports.
Bit problematic when what there is to export now that the invisibles from the crumbs from the tax cheats are drying up and will continue to do so at an ever increasing rate such that it is soon going to be insufficient to pay for even the essentials of life for them.
And especially when the whole dynamics of the Global Finance system is in turmoil and heading East as fast as its little feet can carry it to where the wealth has now gone.
I would give the Isle of Man a credit rating, but mine would need to be presented drawn on a graph. Today I would put it at possibly A+ (no higher) but down to junk within seven years – and in the form of a Pareto curve.
It looks like there is a God after all.
At least one that is. Nemesis, and I think he’s great!
Oh, methinks you over simplify things,and your obvious glee might be misplaced.If as now,the U.K. is responsible for the good governance of any Crown Dependency,would that not include the support of an economy which has “insufficient to pay for even the essentials of life for them.” to at least provide similar levels of health,education,welfare and public security as in the UK?
Well the Guardian is hardly so pessimistic. In an article headed:
“Moody’s affirms the ascent of Man” The article goes on to say:
The tone of international debate on offshore economies “seems recently to have eased”, according to Moody’s experts, ending a threat to the Isle of Man’s “business model”.
http://www.guardian.co.uk/business/2010/nov/14/andrew-clark-isle-of-man-rating
@Brian
What an interesting idea – the guarantee merely ranks the implicit guarantee
In which case are you saying the Isle of Man is but a charade?
@AlbieR
All newspapers have an unfortunate habit of reporting press releases
It’s why people release them
Brian writes
‘Oh, methinks you over simplify things,and your obvious glee might be misplaced.If as now,the U.K. is responsible for the good governance of any Crown Dependency,would that not include the support of an economy which has “insufficient to pay for even the essentials of life for them.” to at least provide similar levels of health,education,welfare and public security as in the UK?’
Real good governance of the Island would require it to be brought fully into the United Kingdom either as a new county or better a part of an existing county such as Lancashire. Or even one of the six counties of Northern Ireland.
At least the latter would provide for an increasingly horrible situation to be resolved for them without the indignity of becoming a part of the much hated England.
Come what may the present Manx tinpot government should be replaced with what would in essence be a local council or at most a single unitary council of some form to better accommodate the different needs of the various towns on the Island.
The open issue is when such help would be accepted. I’m afraid that things on the Island will have to get very much worse before such would be the case. On a positive note that will not now be long.
I submit that as far as the residents of the Isle of Man are concerned,they have good governance,but you would say it`s done,to put it simply,partly on other peoples money.
Ignoring your unnecessarily emotive language such as “horrible situation” and the even worse “much hated England” -really!! The “tab”would largely be picked up by the UK,if it became integrated with,for example,an English county,or part thereof-costing the UK taxpayer maybe more,as the advantages of a low tax area were lost,and investment fled and unemployment rose to I imagine,Cornish levels or higher.Modest farming,a few fishing boats and some tourists occasionally,would not sustain 80,000 people in “good governance”.
My best bet,if it came to it,would be to become part of Scotland again,where I understand that per capita government spending is higher than in England-now where did I put that saltire?
@Brian
First, it will almost certainly save the UK money to have the Isle of Man stop operating its abusive tax schemes.
Second, there will be 80,000 people when the Highland stops being a centre. Those who are free riding your system will leave. There are quite a lot of them.
Third, no Tory cried for the miners when their industry would shut down, so do not expect anyone to do the same for the offshore finance sector.
Brian writes — “I submit that as far as the residents of the Isle of Man are concerned,they have good governance,but you would say it`s done,to put it simply,partly on other peoples money.”
@Brian — No, I wouldn’t.
What I would say is that the Manx have coined it in by playing host to tax dodgers and businesses established to provide the wherewithal for tax dodgers and a government who simply did what they were “advised” to do by those with a vested interest in continuing the “Finance Sector” while at the same time “benefiting” from providing the Island as a place from which to operate. Hardly good governance. More a good racket.
Brian writes — “Ignoring your unnecessarily emotive language such as “horrible situation” and the even worse “much hated England” -really!! “
@Brian — The situation that the Manx people face really is horrible. As for England, it’s only necessary to read how we are referred to by the Manx to see the validity in my use of “much hated”.
Brian writes — “The “tab”would largely be picked up by the UK,if it became integrated with,for example,an English county,or part thereof-costing the UK taxpayer maybe more,as the advantages of a low tax area were lost,and investment fled and unemployment rose to I imagine,Cornish levels or higher.”
@Brian — Make no mistake, I have no desire to see my taxes being used to feed and cloth a population who have prospered on the provision of the ways and means for long billions of taxes being diverted from our treasury, but at the same time common humanity must have its place.
Brian writes — “Modest farming,a few fishing boats and some tourists occasionally,would not sustain 80,000 people in “good governance”.
My best bet,if it came to it,would be to become part of Scotland again,where I understand that per capita government spending is higher than in England-now where did I put that saltire?”
@Brian — It’s very true that without the tax haven income the Manx would be in deep trouble, and that is why I used the description “horrible” to describe the future situation they face if they continue to try to go it alone.
The question then arises what possible futures do exist, the growing “flag of convenience” income that is now being extended to aircraft will provide some income but nowhere near enough to cover the loss from the failure of tax dodging business.
It is worth note that in chasing the flag of convenience sector into the aircraft as well as the shipping sector once again the Manx government are chasing money from questionable sources.
Now on top of everything we see that the financial situation in Ireland is becoming fraught, and that’s putting it mildly. I just wonder if Manx based Irish banks fail, or need bailing out, we will see a repeat of the Kaupthing events. Or more likely worse things take place.
Life my not be looking rosy for the Manx but one thing is for sure, it’s going to be interesting.