By Jamie Douglas
The ratings agency, Moody’s, one of the principal culprits in the collapse of first the U.S. and then the world economy apparently has now decided that Italy, Portugal, Spain, Slovakia, Slovenia, and Malta should be downgraded. At the same time they also warned that France, Britain, and Austria may lose their AAA ratings as well, adjusting the sovereign debt ratings of these EU countries to reflect their susceptibility to the growing financial and macroeconomic risks emanating from the European crisis.
Be that as it may, when Moody’s burps, the markets respond accordingly. But this particular ratings agency should not even exist. They should have gone down the tubes along with Lehman Brothers and Countrywide Mortgage Company. Countrywide originated those outrageous “Sign here Stupid” loans and then bundled them, and with the help of Moody’s, which promptly rated them AAA, the worthless “securities” received instant credibility. They were quickly sold off to unwary investors, who had come to rely on the various ratings agencies to grade everything under the sun. That is probably because they get their remuneration from the clients they grade.
How Moody’s reached the decision to rate those junk securities AAA will long be debated among scholars of financial malfeasance. The crimes of slack oversight that were committed rank right up there with Enron, the Iraq War, and the depravities of Bernard Madoff and R. Allan Stanford. But in business as it is conducted in the U.S., there is no accountability, none!
Why is the Securities and Exchange Commission not holding a full investigation? Where is the Justice department? The Attorneys General of all 50 states?
Some organizations received relatively minor fines, compared to the size of the damages they caused and the gains they made. But Moody’s is still out there, rating sovereign nations, downgrading some that should have been downgraded long ago, and then there are some that should be downgraded even further, like Italy and Spain. Greece should not even be rated. The Hellenic nation is unable to repay its debt as it stands now, and it should not be allowed to borrow more at higher interest rates. It’s like throwing the country a life ring made of lead! But not to forget, the lenders can buy insurance on that debt, there are derivatives, tertiary market bonds, and who knows, the Chinese might throw Europe a lifeline! (They will not, because they are not dumb.)
While the downgrading of Malta’s rating will not have any effect outside of Malta, most of the other nations, who are already suffering from crushing self inflicted debt burdens, will be more severely affected. There are hundreds of billions of €uros that need to be refinanced during the first few months of 2012 for the affected, suffering (of their own doing) European nations, and this certainly will only help the lenders and their insurers profit even more off this financial calamity. In the long term, one may look at what is currently happening in Greece yet again, with the people in the streets, throwing Molotov cocktails and rioting, destroying everything and anything they want. It’s called anarchy, and if the powers that be will continue to scale back on the social programs and force harsher austerity measures on its citizenry, it will spread like wildfire. When unemployment hits 25%, like in Spain, but the actual rate for those restless younglings is more like 40%, you have a formula for social chaos. Are you ready for that?
Jamie Douglas
San Rafael, Mendoza
I encourage you to write to me, jamie@expatdailynews.com with any questions or suggestions you may have. Disclaimer: I am not in any travel related business. My advice is based on my own experiences, and is free of charge. (Donations accepted). It is always my pleasure to act as a beneficial counselor to those who are seekers of the next adventure.
To read more of Jamie’s opinion articles, see Voices From Exile. You can also contact Jamie at jamie.douglas [at] yahoo.com
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