London house prices are a better guide to how the world sees us than Moody’s ratings

‘There are two superpowers in the world today,’ said the American columnist Thomas Friedman in 1996. ‘There’s the United States and there’s Moody’s bond rating service. The US can destroy you by dropping bombs, and Moody’s can destroy you by downgrading your bonds.’ Well, not any more. Last Friday’s removal of triple-A status from British government debt may have made for a tense weekend chez Osborne and provoked short-selling of sterling by traders who thought it an obvious bet at a time when the Bank of England would clearly prefer a cheaper pound to boost exports. But even Ed Balls had to admit that ‘it would be a big mistake to get carried away with what Moody’s or any other credit rating agency says’, given their culpability in the subprime boom, in which they awarded triple-A ratings to all manner of mortgage-backed trash.

The downgrade was widely expected, brackets us with the US and France, and has had little immediate impact on gilt yields — which for shorter dates are fractionally lower than they were a year ago.