We have been informed by the media that the US S&P credit rating agency has downgraded nine European Government Economies. This is the same rating agency that rated the infamous Credit Default Swap (CDS) junk bonds before the Credit Crunch as triple A. Would you buy a used car from such ‘credible’ salesman?

Why does anybody listen to such junk pronouncements?

Credit ratings are used by investors in the same way punters use tipsters to justify their uncertain bets, issuers to up-value their so called securities, investment banks to promote their iffy securities, broker-dealers to sell the same, and governments to sell their government bond issues so they can pay off their corrupt borrowings (I call them corrupt because they are the result of promised spendings, by the politicians, to the electorate, so they will get re-elected i.e. bribes). One has to remember that Stock Markets are basically overblown gambling dens and they need tipsters to point the punters in presumed secure directions—and these tipsters, in this case, are called rating agencies.

Investors in volatile equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc. have only one objective, that of turning a quick profit. Issuers develop, register and sell misnamed securities for the purpose of financing their own operations and lining their own pockets. To sell, they need a provenance for their so called securities—and the rating agencies provide that provenance. Investment Banks promote individuals, corporations and governments in raising capital by underwriting the issuance of so called securities, again the rating agencies provide the provenance for those so called securities.

Who are these ‘Big Three’ rating agencies that pronounce on governments credit:

• Standard & Poor's (S&P) is a US-based financial services company. It is a division of McGraw-Hill that publishes financial research and analysis on stocks and bonds. Would anyone say that this company can be impartial? Any US company is under US political influence—it’s a sine qua non of being based in the US.
• Moody's is a bond credit rating business and used by the markets to rate the bonds market.
• Fitch is a majority-owned subsidiary of FIMALAC, headquartered in Paris. Fitch Ratings and Fitch Solutions are part of the Fitch Group. FIMALAC was created by Marc Ladreit de Lacharrière in 1991. He is the CEO, and holds 100% of the shares of the FIMALAC Group. This is a French rating agency that has tried to play the Wall St game, and failed. It usually follows the two US agencies.

Personally I would rate the ‘Big Three’ as C, and any country that takes any notice of them deserves all they get. Mostly it’s the silly media that pushes them for the lack of any better material to publish, having abandoned serious ‘news’ reporting.

The US politicians have long wanted to undermine the EU by demanding the EU allow Turkey to join, making the European borders a laughing stock as European, and adding 90 million Muslims to a Christian enterprise. Why would the US politicians be so vindictive—because the EU market is by far bigger than the US and the Euro is replacing the dollar as a world currency. The Eurozone crisis is largely made in the US—Goldman & Sachs helped fiddle the Greek figures so they could enter the EU. US banks encouraged Greece, Ireland, Portugal, Italy, Spain to borrow and borrow and borrow yet again, until they sink under their own debt, the way the US is sinking under its own $15 trillion debt.

One of the weapons in the US armoury is clearly the Rating Agencies. By S&P downgrading the nine EU economies, the US throws another spanner into the machinery of the EU.

THE EU IS A BIG BEAST AND WHO KNOWS WHAT WILL SINK IT?