Eurasia Review: Crisis: Are Rating Agencies To Blame? – OpEd


February 20, 2013

By Sergey Duz

The United States is suing Standard & Poor’s for $5bln in damages allegedly caused by the agency’s biased assessment of America’s creditworthiness. Why S&P, and not any of the two other big rating agencies whose manipulative tactics fanned the global economic trouble?

In interviews with The Voice of Russia Wednesday, analyst of the Solid investment company Mikhail Korolyuk and head of the Neokon consultancy Mikhail Khazin called attention to the fact that S&P was the only one of the Big Three, which also include Fitch and Moody’s, to downgrade its rating of American bond issues.

Dr Khazin also had this to say:

“Suing a global rating agency spells putting paid to the very system that fattened the American economy for 30 years before 2008. The ratings were high, the prevailing economic mood in the West, including the United States, quite buoyant, and credit, dirt cheap. And cheap credit, in turn, fuelled demand. The Big Three are privately owned, which means their main driver is profit. Their economic allies received favourable ratings from them, and their economic foes, unfavourable ones. And a favourable rating always attracts investment. Everything is this simple.”

Solutions on offer include a spectrum of rating agencies and an unbiased international rating agency operated by independent experts in at least 10 big economies on all continents.

Rating agencies, however, are no more than indicators of the economic situation. Putting the global economy back on track requires deep structural reforms, rather than limited improvement in gauging methods.

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