Paying too much attention. I am not planning to comment after the event on the downgrading by a US ratings agency of several European Union countries' debt because there have already been umpteen reactions (see below in this newsletter), so adding my pennyworth would be pointless. It is rather the reactions themselves that I would like to comment upon. My first remark is that too much attention and too much importance is being given to the rating given by Standard & Poor's. For several years now, the behaviour of S&P has been slammed for making serious errors of judgment and other mistakes, yet its opinion is being placed on a pedestal as if it had been given by the Gods, making front page news in the broadsheets and dominating all news bulletins as if it were some kind of objective assessment. It is nothing of the sort.
Timing of this feeding of greedy speculators. My second remark is about the profits made by speculators and market operators as a result of billions of dollars changing hands as soon as the downgrade was leaked - hints and rumours were enough to generate storms of profits. Whenever their mistakes and falsely leaked information are pointed out, ratings agencies sometimes apologise but the damage has been done and they have achieved what they were after - filling speculators' pockets.
My third comment is about the timing. New eurozone regulations are almost ready to roll, financial markets were reacting positively and a return to the proper level of confidence in the European market was clearly under way - and the ratings agencies' masters wanted to destroy all that.
Moreover, rating agencies' downgrades amount to self-fulfilling prophecies. For example, Italy has been downgraded to BBB+, which means that vast pension funds and some types of life insurance bonds in the United States and Asia have to sell up their investments in Italian bonds because the funds' rules and regulations do not allow them to invest in anything rated lower than A. But insufficient access to funding from abroad was highlighted by Standard & Poor's as the very reason for downgrading Italy's debt!
Prophetic vision of one of the creators of the euro. More and more people believe that the aim is in fact to destroy the euro. Just before this latest attack on the euro by Standard & Poor's, one of the creators of the euro, Valéry Giscard d'Estaing, published in French newspaper Le Point on 12 January, a prophetic warning: “Europe has been besieged for two years now by international financial speculation that is trying to destroy the European currency and the very fabric of the European project (…) These speculative attacks are not coming from countries that one might believe to be hostile to Europe culturally or ideologically, but instead are violent, negative attacks from the deregulated markets in the West (…) This is breeding doubt in some of the population, who are starting to ask whether it would be better to return to the old currencies. But this is totally unrealistic because dropping the euro would send a tsunami over Europe, leading to a tempest of devaluations, of currency values being slashed and national currencies hitting rock bottom.” Giscard d'Estaing wonders why “after three years of the bank crisis and two years of the currency crisis, we are still casting about for solutions”; arguing that the reason for this is due to “the institutions not being set up the right way and the weakness of the leadership”, recommending root-and-branch reform of the way the EU is managed, with a clear separation of eurozone countries from the rest of the EU. I will be returning to this.
What is really behind all this. I quoted Giscard d'Estaing because his comments came before Standard & Poor's had the nerve to downgrade the debt rating of nine eurozone nations in one fell swoop. Reactions to this, after the event, did not take long. The United States will now not agree to the setting up of a reserve currency other than the dollar; the eurozone downgrade comes at a time when other countries were investing in eurozone bonds again and economic growth in the EU was picking up; S&P did not explain exactly what its ratings are based on; I get the impression that its real aim is to stymie the anti-debt crisis initiatives taken in Europe; ratings agencies are a weapon used by world finance in its world so divorced from the real economy, a weapon it uses to bleed the real economy dry through speculation, even in Europe; behind all this is the aim of ensuring that the EU never becomes a political entity, a political power.
This brings us full circle to the comments made by Valéry Giscard d'Estaing ahead of the downgrade, and I will return to this.
(FR/transl.fl)