America declaring war on Europe - How should European countries deal with the American rating agencies' hidden agendas?

You’re being ridiculous, @mattbrowne. The credit rating agencies can be (and have frequently been) in error, behind the times and biased towards some companies and against others. But to suggest that they are politically motivated is simply absurd. Preposterous.

I’m sure if the US continues the way it’s been going, our rating will be junk. I think that our rating is still high because our debt is no where near Greece or Portugal, so we can at least still borrow.

They might have been wrong before @CWOTUS but the fact is there that some days ago when, i believe it eas Moody’s, declared Portugal close to junk the financial markets immediately responded.
Don’t ask me technicalities but from what i remember i read it wasn’t good news for the countries that are in trouble already.
If it is driven by a secret political agendas i don’t know but they are all three American companies, so i hope and i expect that there is some independent office that keeps a close eye on these ratings and their (possible) motives.

Anyone who gives any real-world credence in what these “credit rating agencies” say wasn’t paying any attention in the last few years. They’re emblematic of everything wrong with Wall St.

@rebbel

Because the ratings agencies don’t like to “stir up” panic, they tend to lag what is already pretty evident and well known in the marketplace before they make their announcements. That’s one reason why their announcements often occur after a crash has already happened.

As far as I know, anyone can open a credit rating agency, so if an Asian, African, Australian, South American or European agency were to set up shop, it’s not like the USA would invade its offices and execute those responsible.

Credit rating agencies are too powerful, but I don’t know what can be done to curb their influence. The ‘markets’ they represent are now bigger than most countries. There was an interesting article in the Guardian on credit agencies last December.

Yeah, it was pretty irresponsible of the rating agencies to spend more than they collected in taxes. Oh, no, wait, that was the governments of Greece, Spain and Italy.

I think it is shortsighted to presume that the rating agencies are pro-America. These are the same agencies that turned shit into roses by giving AAA ratings to mortgage-backed derivatives that were invested in heavily by US state pension funds, US 401(k) fund managers and the like. When that bubble burst, pension funds and other investment-based funds throughout the US were adversely affected.

I also think it is an ignorant argument to claim that citizens and even governments are morally responsible for not balancing their budgets without considering the reach and influence of economic colonialism and economic warfare. Countries are routinely driven into unreconcilable debt as a means of political control and seemingly justified resource extraction. The consequence for not playing along include covertly supported coups and falsely justified military action.

As far as what can be done, I suppose one first has to understand the problem and determine who is allied with whom. I don’t see this as America against Europe. I see it as capital against common sovereignty.

To answer the question, I suppose Europe could fight fire with fire, or people can awaken to the detrimental condition of the system we are tethered to and create something better.

I think everyone should ignore all credit ratings as soon as possible.

Matt, you are right except that the credit rating agencies usurp power from countries, companies, investors, and individuals that is undeserved and dangerous to any sort of democracy. Frankly, I would outlaw them. I would let them do market research and investigation but would forbid them from actually applying a rating to any business or country.

If is the responsibility of an individual investor to investigate where he wishes to invest. Credit rating companies take away that choice and make it easy for big time investors and hedge fund managers to move vast amounts of capital based on less than objective assessments and sure, some of them are politically motivated.

One of the main problems with the stock markets is the speed with which investment can be made and rescinded. I believe that we should slow down this process with very high capital gains taxes for very short term investments. I believe that futures markets need to be regulated, and I believe that capital gains made by hedge fund managers should be taxed as regular income. The rating agencies play in to all of this because they grease the system All a big investor needs to do is read their rating numbers and not bother finding out what they really mean. That is a dis-service to all of us. Today’s markets don;t have an allegiance to any country their allegiance lies with large international corporations whose only concern is their bottom line.

The idea that a Ratings Company could start a war is repugnant but likely and possible. It used to be said that the problem is that there aren’t enough dead lawyers. Maybe it should be changed to say that there aren’t enough dead bankers. A lawyer, on his best day, can ruin the lives of a few people, a ratings company an international banking can ruin the lives of entire countries. There should be a corporate death penalty. Corporations that harm millions of people need to be stripped of their assets, disbanded, and the corporation leaders need to spend the rest of their lives in jail where they can’t harm others.

Tell the Americans to abandon their military bases in Europe, and budget enough to take care of your own defense. It would solve alot of problems. Get on it!

Here’s one possibility from the Wikipedia page about the documentary “Debtocracy,” which is about the Greek case. The term to know is odious debt, and we are suckers of the first order if we think that debt is ours.

The documentary suggests the case of Ecuador as an alternative government reaction to the International Monetary Fund and the World Bank, sensitive to social justice, that saves the people from having to pay for a loan that didn’t benefit them.

In 2006, the Prime Minister of Ecuador, Rafael Correa reacted to the huge public debt that the country had, with a series of actions that aimed in the protection of the rights of the people of Ecuador. First, Correa decided that the funds from the natural resources of the country (exploitation of oil) would be used for public policy, and not for the payment of the debt. Second, Correa decided that only 20% of the annual budget should be used for the debt, instead of 50%. Third, he organized a committee to analyze the public debt. Despite the obstacles and the reactions to this, the committee was able to complete the analysis of the debt, and to find that it was illegal on the basis that the loans taken were used for projects that benefited only a “few”, the governments signed the contracts without informing the people, and the bankers were aware of this. In the end, Ecuador was able to save about $7 billion.

Solutions to the Greek crisis

The solution suggested for the Greek crisis is the formation of a committee for the analysis of the debt in a similar way that Ecuador did. If the analysis proves all or part of the debt to be odious the people should not have to pay for it and therefore it should be erased.

@obvek – Greece is in their situation because they could not say no and promised too much. They focused all of their jobs on the public sector, expanded their welfare state, and are extremely lax in collecting their taxes making it easy to evade them. Unfortunately for the Greek people, they will have to pay up.

The U.S. is almost in the same situation. We expanded our government (Obamacare, Medicare Part D), spent money on a “stimulus” that did not work, and went to war in two countries. So, yes, we will have to pay up too.

What should Europe do? Fix their troubled economies and get those ratings back. The agencies have agendas but their economies are truly in dire situation, hence the junk rating.

@cletrans2col, as long as folks such as yourself espouse the belief that “we” are guilty of overspending as opposed to examining whether such spending never, in fact, trickled down, because it was never designed to then I suppose that is true.

@cletrans2col The stimulus did work. Otherwise there will be no US economy to talk about.

@obvek sorry the post was not meant for you. : )

@mazingerz88, Yeah, I never said anything about the stimulus one way or the other.

@obvek – we elected the Congress that overspent, so yes, we are guilty.

@cletrans2col- Yeah. You missed today’s lesson.

@CWOTUS – The words I’ve used were meant to be thought provoking. Some people think of business as war (actually not my view), so I tried to summarize European sentiment right now. Politicians in almost all countries and all parties from left to right are totally irritated by what these dubious three American companies are doing here. Check the news in Europe. It probably hasn’t attracted a lot of attention in the American media world.

Why am I being ridiculous? These companies overlooked the greatest financial bubble since the Great Depression. Oops, sorry. How Greece and Portugal and Italy are now being treated in a ugly unfair way while the US looks wonderful is beyond words. Sorry, but I just don’t get it.

@obvek Your attempt at snark failed.

@CWOTUS – One more thing. I don’t this American politicians are behind this. I’m talking about the American financial industry. The rating agencies are not independent. They serve Wall Street. And Wall Street can make a lot of money betting against European countries in trouble. And collecting high interests with little risk are good for profits too.

It is precisely why many do not trust the motives of US companies, or any for that matter. Corporate globalization is an amazing money making opportunity for those who can play the game. That club will win regardless of the economic upturns or downturns. I would not be surprised though, if this debt ceiling fiasco is not taken care of soon, that the U.S will suffer a similar fate, albeit a small slap on the knuckles. But everyone knows a deal will in fact be made, so the scenario is unlikely to unfold.

I think the US administration is unaware of the serious damage inflicted by the three American rating agencies. It disrupts the trust between Europe and America. On the other hand, we lack European enterpreneurs willing to found a new independent rating agency. China took the totalitarian approach of course. The government simply created their own Chinese rating agency. This isn’t the solution of course.

@mattbrowne I have nothing to add because you are exactly correct, the best I could do is give you a couple GA’s.

Thanks @Ron_C ! By the way, do you know the author http://en.wikipedia.org/wiki/David_Korten ? I’m reading two books written by him right now:

The Great Turning: From Empire to Earth Community

and

Agenda for a New Economy: From Phantom Wealth to Real Wealth – A Declaration of Independence from Wall Street

@mattbrowne I haven’t read either of them. I’m an engineer and tend to work with scientific principles. Economics and Psychology are soft subjects, once you get past balancing the books, economics are more conjecture than science.

If I want interesting fiction, I’ll read your books.

This might be a stupid question, but what’s stopping the Europeans from creating their own rating agency? Surely they have the know-how.

Yes. And I hope this happens very soon.

I’m actually kind of surprised that they haven’t done this yet. I mean, Europe’s only had a functioning economy since forever, and the technological infrastructure has been in place for a while now. What is it? Self-esteem issues?

Until 2007 most experts in economists and the financial industry thought that the three existing US rating agencies had done a good job. This perception changed, especially in 2008 when Lehman Brothers declared insolvency. How could all three agencies overlook the financial bubbles created as a result of the inflated real estate market? Everybody suffered, not only Wall Street. But what’s happening now is different. Now it’s about making Greece, Ireland, Portugal and Italy suffer more than necessary. And the US still gets excellent credit ratings. More and more Europeans have come to the conclusion that the US is no longer a world leader and a reliable partner. No one understands over here, including all the conservatives, how a deranged movement like the Tea Party can undermine the credibility of the whole Republican party. The circus in Washington these days makes the US look like a banana republic. I can’t believe this is happening. A failure does not only inflict serious damage on US citizens, but the whole world. The repercussions would be global.

Eventually there will be a European rating agency.

@mattbrowne What is so “deranged” about the TP? We have an unbelievable amount of debt, the House wants to cut spending and hold Washington accountable, and Obama wants to stick with business as usual.

@cletrans2col – Extremism is never the answer to serious problems. The unbelievable amount of debt is partly due to G. W. Bush’s unbelievable tax cuts for people who can afford to pay taxes. And the unbelievable war against Iraq against the better advice of America’s friends. And the unbelievable lax financial regulations. And now the less fortunate Americans have to pay for this? The secretary of the hedge fund manager? So that her boss can buy his third yacht enjoying the fabulous tax breaks? Sorry, this in serious conflict with my value system. And that of most Europeans, including conservative Europeans.

@mattbrowne You do know that Barry has increased the debt more in his two years than Bush in eight, right?

@cletrans2col – It was Bush who supported lax financial regulation. It was greedy conservative Wall street bankers always lobbying for lax financial regulation who wrecked the whole world economy. To avoid a total meltdown of the financial system Barry had little choice. And he also had to borrow more money to pay for the war in Iraq which he opposed when Bush was in charge. It’s the neocons responsible for 95% of the debt.

@mattbrowne excuses, excuses. When will ya’ll stop? we are heading into year 3 of Hussein’s presidency, get over Bush.