Thursday, March 18, 2010

Moody Predictions

It has been something of a conspiracy theory but the call to end the legitimacy of the Federal Reserve banking system has been gaining ground. Replacing the Federal Reserve with a government controlled central bank seems a hard sell in an age when Government is viewed by the masses as less likely to support their interests than corporations. Perhaps we shall see a movement dedicated to the breakup of the monopoly that gains the ears of Congress but it doesn't seem likely.

On the other hand, as far as i know, there is no underground movement to subvert the power and legitimacy of the bond ratings agencies, even though the various recent bubbles have shown Standard and Poor and Moody's to be lackeys of the people who supposedly hire them to investigate their corporate value. Without a Triple A rating a bond gets to cost the issuer a ton money in interest supposedly because Standard and Poor, Moody's or Fitch (in London) have studied the corporate entrails and come up with an idea of how risky the investment is likely to be, Fat chance. It used to be a pretty boring job, regulated by national financial watchdogs like the Securities and Exchange Commission in the US. The the great derivatives fiasco upended everything financial, including ratings agencies when they got involved in essentially issuing fake ratings for vast profit. I mean, think about it: slices of US investments were offered around the world with AAA ratings and they were based on NINJA supported mortgages (No Income, No Job, No Assets = NINJA) and people were buying these Triple A investments...and lost their shirts, unless they were too big to fail in which case we lost ours supporting their crap investments.

Yet these ratings agencies got a free pass with a brief apology and continue on giving investments their imprimatur. Weird huh? But it gets worse (it always does!) because these sell-outs also rate government debt. To be allowed to continue to play in the European sand pit with it's neighbors Greece needs to sell bonds to pay down debt and keep functioning. Anything lower than Triple increases the interest Greece will have to pay back anyone who buys their junk bonds (the fee paid to the private interests that market these bonds is not refundable. Nice job if you can get it). If your grandfather bought bonds issued by the Czarist government of Russia they would make attractive dust catchers on your wall but no way was Lenin going to meet those obligations after he kicked Kerensky out. They became junk bonds.

So we still have these ratings agencies calling the shots and in order to keep investors aware of what they are thinking they issue reports from time to time. Moody's just issued a doozy suggesting "social unrest" is just over the horizon. If you live in the US, UK, Spain, Germany and France, Moody's suggests that "tough choices" may inflame the people and cause them to express dissatisfaction publicly. If you live in the US you read this and start oiling your guns, elsewhere you stock up on spray paint and cardboard and start writing large rude comments about financiers and tycoons and make a date to meet in the street.If you are the object of Moody's speculation you start figuring where to place your bets.

The beauty of being truly wealthy is that life becomes little more than a casino, and most likely you have the bank in your pocket to some degree making your bets all the sweeter. What Moody's is suggesting is that countries need to reduce total debt and reduce their deficits at the same time and the only way to do that (they say) is to cut social service spending (screw the poor) and cut wages (screw the employed) and raise taxes (ditto). If you are reading Moody's to try to figure where next to place the odd billion you start shorting bonds issued by the countries in question. In other words you bet against the countries in question being able to sort themselves out which increases the likelihood of them doing just that. And you pocket another hundred million. Cool huh?

I read the Moody's report and wonder what our social landscape will look like with half the teachers we have now, with government union jobs paying less and less, with permanent unemployment and underemployment at 25% and Moody's people figure it's a good bet we are going to get pissed off. And as I hope I have explained, it's not in their interest to change the path of destruction. They make money and increase their power anyway.

Please feel free to disagree, but I am oiling my guns.

6 comments:

Anonymous said...

I love your thoughtful and entertaining prose... but riddle me this: For someone skeptical of the central Govt's ability to run anything effectively (e.g. currency in this blog) - you support giving them control of your body via health care "reform"... believe me, I'm not standing up for the status quo where the insurance companies have de-facto control, but Batman save us (!) if we give our lives to the cabol in combination... just sayin'.

Be fleet of foot.

Conchscooter said...

Funnily enough this contradiction has been bothering me too! Not only what you point out so clearly,but consider this: how do we fund this expansion of government spending?
Give me a few days and next week I will try to tackle my lack of consistency.

Danette said...

I don't think it's a true inconsistency. Or maybe it is and I am misunderstanding your point Conch- but in the first place it is not a gov't takeover of healthcare. As much as Rush Limbaugh would like us all to believe it is, it is an attempt to regulate an industry that should not even be an for profit industry. (and it isn't going anywhere near far enough at that, but the dems can't not pass this now) As Dennis Kucinich said today, "Healthcare is a civil right."

On the other hand- where the Feds are concerned, you have big business in bed with the government and it's as though the foxes are watching the chicken coop. They don't regulate their own. We need an overhaul of government so that government does what a government should do, not what big business wants it to do. As far as funding-- if we weren't giving the wealthiest so many tax cuts and tax outs, then we might find we have the money for the programs we need. Just a thought...

But I think there is a question that we should be asking--how do we get people to trust the people in government when there has been a systemic failure of government? We no longer hire the best and the brightest for government jobs. We haven't for a LONG time. George Bush was just the creme de la creme- the ultimate example of what Republicans think about government- which is that any dope can do it. And you should hire dopes because it reinforces the idea that government fails and is full of idiots. Self-fulfilling prophecy. How do we change that without a complete overhaul? I do have one idea that would really revolutionize the way we elect people: make political commercials illegal.

Anonymous said...

I'll admit my mind glazed over like a well worn stair tread with all the conflicting arguments about "health reform" - so appologies for not having Kuchinich's intimate grasp of the subtle nuances of a 1500 page bill... but in all the dialogue I DON'T hear much (if any) discussion about challenging the insurance companies control over economics of health care... I've heard endless talking points about how we (you and I) are going to PAY for it....

The mantra of "tax the rich" or "Bushie gave breaks to his rich buddies!" is a nice sound bite, but only for those unwilling to do the heavy lifting of actually researching facts. In 1990 the richest 1% of Americans paid 25% of all taxes. In 2006 they paid 40%. Raising rates further is pinned to the false belief that capital is "tied" to this country. Make it uncompetitive to earn / hold capital in this country, it will fly out of here at the speed of a mouse click - leaving the whole country like Detroit.

I'm trying to find the dialogue on how we're going to control the COST of health care - so normal folks can afford it. Train more Doctors (taking on the AMA union)? Tort reform so Dr.'s don't pay 40+% of their earnings to insurance co's and order unnecessary CYA tests? Require a published price list of services in advance - so patients can compare the cost of a tetanus shot at Walgreens vs. one at the Mayo?

I suggest we focus on the underlying disease - not the symptoms. Just sayin'

May your lights be green....

Conchscooter said...

Goldman Sachs paid 47 billion in bonuses and 14 million in taxes. Yup, I think the IRS can do better for us if we had fewer loopholes for coproate pirates.The concentration of wealth is upending this country.
Danette- in one paragraph you have pretty much answered the question of my inconsistency.

Anonymous said...

Danette - How is having the wealthiest 1% of the population carry 40% of the tax load " ...giving the wealthiest so many tax cuts and tax outs, then we might find we have the money for the programs we need"

What's enough? Maybe we should just take it all, and in return provide a stipend to the citizens... or did someone try that?