Moody’s Blues, Poor Standards, and the Debt
The invaluable Mike Konczal tells us the truth about the rating agencies and public-sector debt: not only do they constantly make mistakes, they do so in a consistent direction. Namely, they hold public-sector borrowers to vastly higher standards than they hold private borrowers.
And who says this? The answer is, their own analysis.
It’s hard not to see this as essentially ideological: the rating agencies just treat governments as potential deadbeats, by definition.
Let me just top off Mike’s discussion with the last time the raters downgraded a major economy’s government. Here’s the 10-year bond rate in Japan:
See the downgrade? (It was in 2002).
The point is that when S&P or Moody’s speaks, that’s not the voice of “the market”. It’s just some guys with an agenda, and a very poor track record. And we have no idea how much effect their actions will have.
And who says this? The answer is, their own analysis.
It’s hard not to see this as essentially ideological: the rating agencies just treat governments as potential deadbeats, by definition.
Let me just top off Mike’s discussion with the last time the raters downgraded a major economy’s government. Here’s the 10-year bond rate in Japan:
The point is that when S&P or Moody’s speaks, that’s not the voice of “the market”. It’s just some guys with an agenda, and a very poor track record. And we have no idea how much effect their actions will have.
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