Justifying their Eurozone downgrades yesterday S & P said:
As such, we believe that a reform process based on a pillar of fiscal austerity alone risks becoming self-defeating, as domestic demand falls in line with consumers' rising concerns about job security and disposable incomes, eroding national tax revenues.
It's darned annoying when they get it right.
For two years austerity has been driven through to supposedly please S & P.
Now they say it's wrong.
It's a shame Ed Balls didn't wait a day to build this into his new strategy to be announced today - I hope the script writers have had time to change his speech to the Fabians.
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He got it into his interview this morning on Today so I expect they have.
Good grief, S&P… what were the ratings they were giving to complete trash back in 2006/2007? Oh yes, triple-A! Why is anyone bothered one way or the other by what they say now then?
They may be right on this occasion, but their actions will surely weaken those countries, let speculators bet against them and allow public services to be picked off by privateers for a song.
It should also be remembered that the rating agencies advice is only their opinion. Opinion that can be ignored!
Surely S&P is saying that austerity “alone” is counter-productive not that austerity itself is wrong.
Well not a lot else is happening, is it….
Perhaps given S&P’s considerable history of only being right after the event now is the time for a downgrading of S&P and the other credit rating agencies. I note that the BAsel rules still play considerable reliance on the credit ratings agencies.
Indeed!
But you tell only half the story. In the previous sentence, S&P realised that massive capital flows caused the Eurocrisis.
From Krugman.
I think the comments in the Klugman article have it right:
“Three-card Monte is an example of a classic short con in which a shill pretends to conspire with the mark to cheat the dealer, while in fact conspiring with the dealer to cheat the mark.
Standard and Poors acted as the shill in transactions between investors/pension funds and the Wall Street Banks in the runup to the financial crisis of 2007/08.
More specifically, S&P rated as AAA the CDO’s created by investment banks, thereby getting investors and pension funds to invest in CDO’s based on mortgages which were then led to staggering losses for the investors/pension funds. Indeed, S&P was paid huge fees by the investment banks and therefore had an incentive to hide the fraudulent nature of the CDO’s.
American lost trillion in their 401K’s and public pension funds became unfunded as a result. Millions of Americans cannot afford retire because of the three-card monte played skillfully by S&P.
In a just society, the top executives of S&P would join Bernie Madoff in prison. But ours is not a just society.
So S&P—yet another corrupt US institution—lives to sit in judgment over the European economies.
Why doesn’t Obama call for the prosecution of the top investment banking crooks and their cronies at S&P? Americans have a vested interest in restoring the integrity of its financial services industry”
Quite correct John, all the top personnel in these organisations should be facing charges of fraud and corruption. The fact that they’re not, here or in the US, speaks volumes about how our so-called leaders.
Krugman. Sorry.