Standard & Poor's monopoly or a necessity?

Drew Booth60 said:Honestly, why should I care?🙄
Why are you even putting these questions on me??
The only thing I don't get is why everyone is suddenly acting so shocked now, especially since most of the countries in the European Union have already had their ratings slashed.😕
Where was everybody before this happened?

In the past, we weren't seeing credit rating agencies flip-flopping so wildly, giving out assessments that are the complete opposite of what they were saying just a year or two ago.

At its core, this is a question of credibility. How can a single credit rating agency decide a country's credit rating is trash when they were calling it nearly top-tier just last year? It's not like all those loans and debts just popped into existence overnight!

James Nguyen13 said:In the past, we weren't seeing credit rating agencies flip-flopping so wildly, giving out assessments that are the complete opposite of what they were saying just a year or two ago.

At its core, this is a question of credibility. How can a single credit rating agency decide a country's credit rating is trash when they were calling it nearly top-tier just last year? It's not like all those loans and debts just popped into existence overnight!

I’m with you there—these agencies have failed miserably. They should have been lowering the ratings for the USA and various European Union nations way sooner.☕
The fact that China has a weaker rating than the United Kingdom, France, or the USA... well, anyone with half a brain can see the issue there.☕ ☕

But honestly, what I want to know is why nobody was making this much noise back when the Americans were getting their ratings slashed... everyone stayed quiet then, and they certainly weren't asking these kinds of questions, even though they absolutely should have been.☕

Drew Booth60 said:I’m with you there—these agencies have failed miserably. They should have been lowering the ratings for the USA and various European Union nations way sooner.☕
The fact that China has a weaker rating than the United Kingdom, France, or the USA... well, anyone with half a brain can see the issue there.☕ ☕

But honestly, what I want to know is why nobody was making this much noise back when the Americans were getting their ratings slashed... everyone stayed quiet then, and they certainly weren't asking these kinds of questions, even though they absolutely should have been.☕

Maybe it's because the downgrade for the USA wasn't massive. It's wild when you think about how some countries can plummet from AA to junk status in just three years.
It really makes you stop and wonder who's actually running the show here.

James Nguyen13 said:In the past, we weren't seeing credit rating agencies flip-flopping so wildly, giving out assessments that are the complete opposite of what they were saying just a year or two ago.

At its core, this is a question of credibility. How can a single credit rating agency decide a country's credit rating is trash when they were calling it nearly top-tier just last year? It's not like all those loans and debts just popped into existence overnight!

What kind of argument is that? Circumstances change in a single year.

James Nguyen13 said:In the past, we weren't seeing credit rating agencies flip-flopping so wildly, giving out assessments that are the complete opposite of what they were saying just a year or two ago.

At its core, this is a question of credibility. How can a single credit rating agency decide a country's credit rating is trash when they were calling it nearly top-tier just last year? It's not like all those loans and debts just popped into existence overnight!

Look, if they couldn't manage to sell a single bag of rotten potatoes in that year, then yeah, it’s perfectly normal for their rating to take a dive—nobody's going to want to dump money into their sinking ship.

Robin Hernandez4 said:If you actually want to learn how this stuff works, head over to the economics subforum where some of the sharper folks can point you toward the real deal. Don't just come in here dumping your total nonsense about some global conspiracy involving Masons or the Illuminati.

In theory, capitalism runs on free market principles where the price of goods—and money itself, via interest rates—is set by supply and demand...

If that were true, why do central banks exist to intervene and mess with those principles, even though maintaining their independence is basically the holy grail of neoliberal theory? Why isn't money lent based on the aggregate expectations of all potential investors regarding yield and risk, but rather based on the "wisdom" of credit rating agencies, as if they hold some divine Knowledge?...

Why didn't those same agencies warn anyone about the risks of subprime mortgages when they kept handing out top-tier ratings? How is it possible for a country to fake having 300 billion euros in debt without the experts at the rating agency noticing, while that same country keeps getting rated as perfectly stable?...

To me, this doesn't look like a world running on liberal capitalism, but one ruled by "independent regulators"...

Commenters are just competing to see who can talk most about the crisis of liberal capitalism. What a spin. In reality, we’re seeing a crisis of managed capitalism, driven by subtle methods of controlling the money supply and its market price, guided by forecasts from those expected to "know better" through labels like AAA or BB+...

Scott Hall39 said:What kind of argument is that? Circumstances change in a single year.

My point is that their forecasts from a year ago were mostly just guesswork and wishful thinking—much like they are today—meaning they lack any real substance.

It's something a relevant news outlet finally managed to point out:

The credit rating agency business is a joke. Their projections aren't worth the paper they're printed on.

James Nguyen13 said:My point is that their forecasts from a year ago were mostly just guesswork and wishful thinking—much like they are today—meaning they lack any real substance.

It's something a relevant news outlet finally managed to point out:

The credit rating agency business is a joke. Their projections aren't worth the paper they're printed on.

What a load of nonsense. Just look at the interest rates on Greek bonds a few years back compared to where they sit today. Four years ago, the market priced those bonds almost exactly like German ones. You see the same pattern with banks, mortgage-backed securities, and everything else. The landscape shifts. Credit rating agencies aren't some exception to that rule. New data changes the sentiment for both the markets and the agencies themselves. I don't know what you expect from them. Credit assessments are done by people—flawed humans who are right sometimes and wrong others. It’s become incredibly trendy lately to insist that their ratings are always incorrect, but I haven't seen anyone else in the market claiming to have a better grasp on reality.

When it comes to downgrading the credit ratings of several European nations, the market already moved on long ago. Those credit rating agencies were just lagging behind. It’s highly likely they were simply too afraid of the pressure they’d face—which is exactly what’s happening now. You have the French getting worked up, the Italians losing their minds, and the entire Eurozone teetering on the edge of collapse. But according to them, it’s all Standard & Poor's fault.

Scott Hall39 said:What a load of nonsense. Just look at the interest rates on Greek bonds a few years back compared to where they sit today. Four years ago, the market priced those bonds almost exactly like German ones. You see the same pattern with banks, mortgage-backed securities, and everything else. The landscape shifts. Credit rating agencies aren't some exception to that rule. New data changes the sentiment for both the markets and the agencies themselves. I don't know what you expect from them. Credit assessments are done by people—flawed humans who are right sometimes and wrong others. It’s become incredibly trendy lately to insist that their ratings are always incorrect, but I haven't seen anyone else in the market claiming to have a better grasp on reality.

When it comes to downgrading the credit ratings of several European nations, the market already moved on long ago. Those credit rating agencies were just lagging behind. It’s highly likely they were simply too afraid of the pressure they’d face—which is exactly what’s happening now. You have the French getting worked up, the Italians losing their minds, and the entire Eurozone teetering on the edge of collapse. But according to them, it’s all Standard & Poor's fault.

The "market" clearly valued those Greek bonds incorrectly, and they did it by following the exact forecasts provided by the rating agencies! The grades they handed out to Greece, Ireland, Italy, Enron, Lehman Brothers, and so on... they were wildly, spectacularly wrong.

I honestly expect them to just sit tight and stop guessing, since that's really all they seem to do. They act as a bottleneck for how a market should naturally function. Their "forecasts"—which aren't even forecasts, just high-stakes guessing games—mess with the natural flow of business because they are constantly either overshooting or undershooting the mark.

The real issue is that the market isn't valuing anyone's credit anymore; instead, the agencies are setting the price, and investors follow them blindly as if they possess some kind of prophetic power.
We need to pull back the curtain and show everyone that they are just making educated guesses without much basis. We have to convince investors that these predictions are just as hollow now as they were before this recession, back when they were giving Greece the same rating as Germany, or handing Enron an AA+ right before they went under. Do you realize how massive of a mistake that is? If a company has a top-tier rating today, it could still go bankrupt tomorrow based solely on the "assessment" of these agencies.

Their ratings amount to nothing. They simply don't know how to assess risk. Personally, I'm fed up with these "economic analysts" who only exist to explain to us tomorrow why the thing they predicted yesterday didn't happen today. People keep asking them questions, they stay relevant, and investors listen to them like they're gospel, but in reality, they just obstruct the smooth operation of the market by spouting nonsense.

So, you're telling me if the rating agencies hadn't stepped in, the market would have somehow spotted the collapse of Lehman Brothers and Enron on its own? What, by magic? Which agencies are actually pulling the strings and dictating their moves? It’s apparently so magical that they can trick an investor into dumping their own cash into something they don't even believe in.

We've already seen just how much influence these credit rating agencies wield, look at the interest rates on US, Japanese, and European government bonds. The market barely blinked.

Honestly, it's delusional to expect the world's top investors to always be right—let alone agencies that feel pressured to take a stance on everything, staffed by people working for a paycheck. Surprises are inevitable.
Agencies will exist as long as there are clients willing to pay for them. Right now, they clearly have plenty.

This whole angry backlash is just because the rating agencies finally—and incredibly late—admitted the emperor has no clothes. Politicians can get as mad as they want, but that won't change the grim reality facing many European Union members.