{"id":17084,"date":"2012-01-23T12:58:13","date_gmt":"2012-01-23T12:58:13","guid":{"rendered":"http:\/\/www.transcend.org\/tms\/?p=17084"},"modified":"2012-01-23T17:39:06","modified_gmt":"2012-01-23T17:39:06","slug":"those-poor-moody-standards","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2012\/01\/those-poor-moody-standards\/","title":{"rendered":"Those Poor, Moody Standards"},"content":{"rendered":"

What are the three credit rating agencies, Standard & Poor’s, Moody’s, and Fitch–95 percent of the rating “industry”–about?\u00a0 Not very transparent, yet “Standard & Poor’s: silent but deadly” (El Pa\u00eds<\/em>,<\/span> 16 Jan 2012), stimulates some reflections.<\/p>\n

The agencies are US, which goes well with the tendency of the USA to sit in judgment of other countries.\u00a0 It also goes well with something more dangerous: the tendency of other countries to take that judgment seriously.\u00a0 The new prime minister of Spain said he needed no lecturing (from the agencies) on the Spanish economy; but the downgrading shook Spain.\u00a0 Why does Europe not have its own agencies, rating all 50 US states, for instance, like US agencies rate EU members? \u00a0An internationalization exists; that is what the IMF is all about, advising the World Bank what to do and what not.\u00a0 But their thinking comes out of the same basic mold, neo-liberal.<\/p>\n

Second, these agencies are for profit; they make money doing the rating.\u00a0 Clients approach them, ask for a rating, and pay for the services, which sounds normal.\u00a0 There are numerous specialists around the world doing this, having clients subscribing to a newsletter, etc.\u00a0 But these agencies make their downgrading public, possibly making the prophesies self-denying, but also self-fulfilling.\u00a0 Some of the clients are governments, lifting the activity from the corporate world market to inter-state geo-economics, and hence geo-politics.<\/p>\n

This is dramatic.\u00a0 It means that sectors from one country have a de facto monopoly on a way of intervening in world politics.\u00a0 It is like the agencies used and paid to influence the flow of news that reaches the media, like Hill & Knowlton.\u00a0 It would be interesting to know who the clients are.<\/p>\n

Now, on the other hand, corporations, like banks, funds and governments contemplating giving credit to a country, have a right to know the chances to get their money back, with interest.\u00a0 Credit may be used for bail-out and-or stimulus; to help the finance economy or the real economy in some country.\u00a0 That sounds like an act of solidarity.\u00a0 But good money poured on bad may easily turn bad. There is a risk involved, and the creditor is there to make, not lose, money.<\/p>\n

And that raises, of course, the question: Is downgrading a method to ensure higher interest on the credit?\u00a0 The lower the grading, the higher the interest the government has to pay on its bonds to attract buyers.\u00a0 Many governments are today in deep trouble.\u00a0 Governments in less trouble may be interested in an “objective” outside agency doing the job of publishing, worldwide, donwgradings that will raise the rate.<\/p>\n

German banks offer credit to Irish banks so that they can pay back earlier credits at higher interest.\u00a0 Is that a reason that we do not have a European agency; the American ones do the job?<\/p>\n

We take note that the new prime ministers of two deeply troubled countries, Greece and Italy, and the new head of the European Central Bank, combine being economists with having worked at some time for Goldman & Sachs (good job, G&S!).\u00a0 Not only a profession, but an organization, on the casual side of the whole issue in top positions.\u00a0 And even if they are not on both sides of the table, their ideology probably is.\u00a0 Thus, from the agencies we never hear a word about reducing the military budgets.\u00a0 Greece seems to have the highest percentage in Europe, 3 percent, and Spain is acquiring arms by many held to be not only costly but also unnecessary–and, of course, mainly from the USA.\u00a0 The agencies focus on social, not military expenditure.<\/p>\n

Myriam Fern\u00e1ndez de Heredia, head of S&P ratings for Europe, Middle East and Africa, says, “We follow a prescribed methodology. We don’t just act on a whim”. <\/em>Two analysts propose a rating to a committee of senior analysts. They, anonymously, five or seven persons to avoid a draw when voting, communicate by video conference or telephone.\u00a0 And the criteria?<\/p>\n

She says: Five factors, political, economic, external liquidity, fiscal and monetary, each given grades from 1 to 6.\u00a0 The final rating, assessing potentials to meet debt payments, ranging from AAA to junk bond, is based on this scoring.<\/p>\n

Of course, this information in a newspaper interview is insufficient to assess the assessments.\u00a0 Thus, one wonders, under “policy”, how do they rate the apparently successful policies by Argentine and Iceland, to a large extent self-reliant, refusing to fall into the debt trap?\u00a0 A debt to one’s own citizens, like US World War II debt, people buying bonds, or Japanese debt today, is less dangerous.\u00a0 But debt bondage to foreigners is; look at the Third World (EU is in-between).<\/p>\n

There is credit squeeze, corporations and governments in default.\u00a0 But what produced the credit squeeze?\u00a0 The rising inequality, with decreasing buying power for the bottom 99%, and oceans of money at the top for irresponsible speculation.\u00a0 Stagnant real, galloping finance economy.\u00a0\u00a0 China also has enormous inequality, but the bottom is lifted up, with a huge domestic demand increase, not sinking further. Do such factors enter in their assessment?\u00a0 How professional are they?<\/p>\n

Democracy is transparency-dialogue, not just elections.\u00a0 World democracy does not have elections, making transparency and dialogue even more necessary.\u00a0 We need more insight, but can do without agencies with questionable methods and agenda.<\/p>\n","protected":false},"excerpt":{"rendered":"

What are the three credit rating agencies, Standard & Poor’s, Moody’s, and Fitch–95 percent of the rating “industry”–about? Not very transparent, yet “Standard & Poor’s: silent but deadly” (El Pa\u00eds, 16 Jan 2012), stimulates some reflections.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[],"class_list":["post-17084","post","type-post","status-publish","format-standard","hentry","category-editorial"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/17084","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=17084"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/17084\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=17084"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=17084"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=17084"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}