Thursday, 3 July 2014

Our Aristocracy

Ontario's credit outlook has been downgraded by Moody's, one of the key players in the global economic meltdown. The agency, which gave over half of the toxic mortgage-backed securities that collapsed financial markets their highest "triple A" rating, thinks that Ontario isn't paying down its debt fast enough.

Moody's is considered one of the "big three" ratings agencies along with Standard & Poor and the Fitch Group, each of which played their own role in destroying the global economy so that a few already stupendous rich people could get even more rich. Various government have already launched lawsuits against these ratings agencies for essentially defrauding them and the public. The ratings agencies are based on a conflict of interest - they are paid by the same people whose securities they are supposed to rate. A whistleblower came forward in 2011 to say that not only does Moody's alter its ratings to suit the interest of these "clients" but that at least one senior executive of the company had lied under oath in the hearings into rating agency conduct during the meltdown.

So I'm extremely upset. Not upset that Moody's changed their outlook on Ontario's credit, but upset that I even know about it. If a schizeophrenic homeless man thought Ontario was in credit trouble I wouldn't hear about it, but we should probably value his opinion higher than the opinion of this rating agency. I am not exaggerating in any way. Anyone who puts even the slightest faith in the ratings given by rating agencies is at best delusional. If you think that ratings agencies give us useful information the only two possibly explanations are that you are irredeemably dogmatic or profoundly ignorant. If you really, really need to know whether to invest in something and your only source of information is Moody's, flip a coin.

If you hired a company to redo your roof and they removed the roof of your house, replacing it with nothing, would you hire them again and recommend them to your friends? If you got sick after eating at a bakery and an investigation showed that the baker was intentionally poisoning customers, would you continue to buy your bread there? If a financial advisor took money from a business to tell you to buy into that business's extremely risky assets, causing you to lose all your money, would you continue to rely on their advice?

Wait, that last one isn't even an analogy, it's just a precise description of what happened, and amazingly the answer for governments, banks and many businesses is, "Yes."

Normally I have to think about our drug laws to get into an apoplectic fit about how we are governed by complete morons, but this ratings agency stuff is even worse. We are running our financial system on the idea that if we are mugged we should kindly ask our muggers to do it again. What is the justification for this - are they are the right kind of people or something?

Now these self-serving aristocrats are trying to punish Ontarians for their choice of government. If I were running the province right now I'd be looking for a way to retaliate and quickly, even if it were just some choice words for the agency and anyone stupid enough to still listen to them. If I were president of the US I would strongly consider adding their boards to the extra-judicial kill list.

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