Moody's: Time running out to prevent "full-blown sovereign debt crisis"

First of all, I don't trust Moody's farther than I can spit. These are the same clowns who handed out triple-A ratings to the sketchiest companies and instruments in history over the last decade. Now they are joining the "tinfoil parade" as Johnny-come-latelies, suddenly confirming the wildest fantasies of ATS years later.

But I'm posting this not necessarily because the content of Moody's predicitons would be suprising to ATSers -- it won't be. What *is* surprising and interesting is to see a staid cornerstone of the financial "establishment" like Moody's barking and raving out on the lunatic fringe with the rest of us. This kind of statement from them would have been unthinkable two years ago.

My guess is that this is some kind of "revenge tactic" by Moody's. The rating agencies have become a target of a lot of finger-pointing on Wall Street by the governement, indivduals, and big banks alike. Yes, the ratings agencies share blame and fundamental change in this area is needed. But a lot of people who also are to blame are hoping to throw the ratings agencies under the bus as a communal scapegoat and looking to deflect some of the blame from themselves. Perhaps this is Moody's way of "lashing back" at critics..."you take us down, we'll take you down too," that kind of thing. However, the ratings agencies have no real power at the end of the day and they already sacrified their own integrety years ago.

Ho-hum, another pillar of rib-rocked Wall Street respectablity goes down in flames while the rats scuttle furiously for the lifeboats...

Time is running out for the West
The Great Recession has dramatically shrunk the time left for the big AAA states to prevent a full-blown sovereign debt crisis as their demographic time-bomb threatens, US rating agency Moody's has warned.

"Genuinely adverse debt dynamics were only expected to materialise in 15 to 20 years. The crisis has 'fast-forwarded' history, eroding all the time available to adjust, " said the group's quarterly Sovereign Monitor.

Moody's fears that the US will crash through its safety buffer by 2013 if growth falters (adverse scenario), with interest payments topping 14pc of tax revenues. The debt-to-revenue ratio has already doubled in three years to 430pc.

More at source:
www.telegraph.co.uk...

[edit on 8/19/10 by silent thunder]

Moody's still has a lot of power. A lot of people in the financial industry "believe" simply because it's their job. It's standard operating procedure.

As for integrity ... they can't be bought, but they sure as hell can be rented

reply to post by silent thunder


They're basically pointing out the obvious though.. the real, true debt crises isnt originating with the level of spending, but the lower level of tax revenue. Generally debt spending in recessions IS a good thing, as it spurs the economy, however the objective is that job growth and economic growth in the long run pays for the debt in the short term. By indebting ourselves with hundreds of billions while tax receipts continue decline.... is concerning. Not that we can't pay our debt, default is impossible, but that servicing such debts will take up larger and larger percentages of the budget.... thus less money to spend on other things, things which may employ people, require contracts etc.. it dampens economic growth in the long term.

REALLY what they are saying is: "The debt crises has accelerated because stimulus spending has failed to restart economic growth"

aka.... welcome to the Depression.

What is a "sovereign debt crisis"? Does this have anything to do with human beings who are regaining their sovereignty?

reply to post by area6


I wonder how much longer they will be given creedence by the industry, however. Its been hard to take their pronouncements with a straight face for a long time. I suppose you have a point about policy at various firms, etc. Doublethink...its not just for breakfast, lunch, and dinner anymore -- now its for between-meal snacks, too!


reply to post by Rockpuck



Yes, it is obvious...the question to me is, why now? Why would Moody's pick this particular time to "go on record" with the doom-y-est possible view after a decade of blowing sunshine up the industry's ****?


reply to post by Alethea


Long story short, sovereign debt = debt issued by government, rather than a company or another entity.

reply to post by silent thunder


Why now? Well.. first instinct is because the big banks and government leaders have started grumbling about why we even need "ratings agencies" .. to which I completely agree, they are useless.. some would say they are needed to help us invest in the most secure companies, countries and products but.. well .. you and I and anyone else with half a brain knows the truth: If a company is tanking, pay moodys, they will tell everyone your doing fine. Got a sovereign debt problem? Pay moodys, they'll keep it B average.. Got a product no one understands? Pay moodys, people will buy

I don't even want to think about insider trading associated with such agencies...

So perhaps this is Moodys getting back at the man for placing blame on them.

reply to post by silent thunder


I think the timing may have much to do with China. In the last week or two China has now become the second largest economy on the planet. A few months ago China was complaining about Moody’s AAA ratings for some western nations, mainly the US.
China down graded the US themselves and ignored Moody’s ratings. This may be Moody’s way of sucking up to the new bully on the block in anticipation of China becoming the largest economy after the American economy collapses.
I can’t prove any of this but logic points in this direction.

[edit on 21-8-2010 by murfdog]