Island Life by David Slack

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Island Life: Credit where it's due

22 Responses

  • Standard-and-poors,

    I'm sorry, but if you do that you'll have your credit limit dropped to "C--, must try harder".

    I'd suggest you privatise the health system, implement an annual poll tax and introduce segregated schooling forthwith.

    Since May 2009 • 2 posts Report Reply

  • Ian MacKay,

    How about selling ACC, Telecom(Oops!) and NZ Rail. That will help a bit wouldn't it Bill?

    Bleheim • Since Nov 2006 • 498 posts Report Reply

  • Paul Rowe,

    Sell & lease-back the Beehive

    Lake Roxburgh, Central Ot… • Since Nov 2006 • 574 posts Report Reply

  • Kumara Republic,

    We have a blog post ready to go, but we can't post it here yet, sorry. The new protocol requires that we show it to either Standard and Poors or David Farrar first.

    The same Standard & Poors that's being investigated by the Securities & Exchange Commission?

    I'd suggest you privatise the health system, implement an annual poll tax and introduce segregated schooling forthwith.

    And then you'll have enough money left over to hire your Uzi-equipped bodyguards who'll chauffeur you in a bulletproof Hummer.

    The southernmost capital … • Since Nov 2006 • 5441 posts Report Reply

  • Captiver,

    Excuse rant BUT: This has been irking and intriguing me for some time, and I've written to a couple of blogs as well as biz sections of daily papers trying to get someone who knows something about this stuff to explain to me how come these ratings agencies -- the same ones whose fingerprints are all over the current capitalist collapse -- get to dictate things like budgets and policies to sovereign nations and, if they feel like it, to push them further under by downgrading their ratings. Yes, I guess they've been doing this to the developing world for eons (I assume so), but I find it incredible that, among other things, a small nation that is a victim of the global downturn that was in no small part caused by the ineptitude-slash-collusion of these agencies then gets to be pushed further under the waves because it's having economic difficulties by the very same agencies. There's something mighty phucked up about that and I wish MSM, e.g. NZH this a.m., would stop being stenographers for these people and ask some questions and explain what's going on here. The Europeans have said they're going to impose some oversight on the agencies, but I haven't seen what that will mean in terms of national debts (or even what it will mean in terms of corporates for that matter). So, is the bottom line that we just have to suck this up? To let the neo-cons use Standard & Poors as an excuse to impose their privatisation, etc. etc. agenda? Is there anyone out there who can explain who "elected" these people, how they get to keep doing this, why we all go along with it, especially in light of what they did in the U.S.? Anyone?

    Since Jul 2008 • 4 posts Report Reply

  • Belt,

    Hmmm, I've been waiting for the Telecom XT with the "real people behind it all". Tap tap tap... Anyone?

    Nelson • Since Nov 2006 • 49 posts Report Reply

  • Kyle Matthews,

    I'm not entirely sure what the topic of the post was when David made it, but I don't think Captiver 'captured' it.

    Since Nov 2006 • 6243 posts Report Reply

  • Gareth Ward,

    Well they aren't dictating anything directly. They simply rate a country on how stable it's finances are - this is then used by people looking to lend to that country as a guide to what risk is associated with lending to that country and price their lending appropriately.
    I think it is fair for people lending to a country to have a view on how risky that lend is, and that's all they're providing. Governments have to decide whether or not they care about the risk-cost associated with lending to them through their policies.

    I think there is a case to question the methodology these agencies use to make that rating though (as Oram put it on the weekend - S&P being overly focussed on Govt fiscal position when there are much broader economic issues to consider and which Moody's do take into account).

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Lyndon Hood,

    In this instance it does *look* like they're dictating - or rather that we aim to do what will please them - when they get their own little presentation on the budget before cabinet sees it.

    Colin Espiner: Who's writing the Budget?

    Wellington • Since Nov 2006 • 1115 posts Report Reply

  • David Slack,

    I'm not entirely sure what the topic of the post was when David made it

    What Lyndon said.

    Devonport • Since Nov 2006 • 599 posts Report Reply

  • Captiver,

    Fair enough Kyle M. I'm sure I didn't "capture" anything much either.
    Thanks Lyndon for the link to the Espiner piece, which I hadn't seen, and Gareth for the not-so-frothing-at-the-mouth-as-my-post explanation. Enlightenment comes slowly, if at all.

    Since Jul 2008 • 4 posts Report Reply

  • George Darroch,

    Sell & lease-back the Beehive

    Real estate is cheaper in the Hutt Valley. Come to think of it, it's cheaper offshore.

    Outsource Parliament to Bangalore. Essential functions will of course be retained at head office.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • Gareth Ward,

    An interesting article Colin - but it may still be slightly overstated. The only reason they can "dictate" spending is that English has decided that the only important thing is our credit rating and so is doing everything to maintain that. You can certainly argue that he should perhaps be considering a few other things, but our sovereign rating is at least one thing the MoF should consider.
    I share a feeling of disquiet that they are getting an early look though - that's just taking the obsession way to far.

    Oram's article in the SST was interesting too - our sovereign rating should be based on much more than just Govt fiscal position and S&P seems to be the only one that cares so exclusively about that. If they actually provide "investment" spending that encourages R&D, export development, savings etc then that spending would work to reduce our private deficits and would strengthen our rating position in the medium term

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • Gareth Ward,

    sorry, article BY Colin, from Lyndon

    Auckland, NZ • Since Mar 2007 • 1727 posts Report Reply

  • George Darroch,

    I share a feeling of disquiet that they are getting an early look though - that's just taking the obsession way to far.

    And to the point, that's what we have Treasury for. They're effectively outsourcing Treasury advice.

    It looks like I was not sufficiently ambitious for New Zealand in my previous post. Outsource the entire public service.

    WLG • Since Nov 2006 • 2264 posts Report Reply

  • stephen walker,

    i think Captiver captured it quite well, actually.

    S&P, Moody's and Fitch are at the very core of the credit default swaps (CDF) and mortgage-backed securities (MBS) meltdown. these people were the enablers. how could this possibly be in dispute? and yet, here we are, business as usual (BAU). fffff.

    please read this:
    http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom
    really, read it.

    But he couldn’t figure out exactly how the rating agencies justified turning BBB loans into AAA-rated bonds. “I didn’t understand how they were turning all this garbage into gold,” he says. He brought some of the bond people from Goldman Sachs, Lehman Brothers, and UBS over for a visit. “We always asked the same question,” says Eisman. “Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk.” He called Standard & Poor’s and asked what would happen to default rates if real estate prices fell. The man at S&P couldn’t say; its model for home prices had no ability to accept a negative number. “They were just assuming home prices would keep going up,” Eisman says.

    nagano • Since Nov 2006 • 645 posts Report Reply

  • Vaughn Davis,

    Excellent post. It's astounding this didn't get more than a mention in other media (open to correction on this). I admit I glossed over it too when it popped up in the Herald... I must have been fixated on the success of Getacross. But seriously... what if Mr Poors doesn't like what he sees?

    Mr P: "I'm afraid with that level of social spending you're only good for a B, Bill."

    Bill: "Does that say THREE new hospitals? That must be a typo. It's meant to say none."

    Mr P: "That'll do nicely, thanks. More dolphin sashimi?"

    Auckland • Since Nov 2006 • 21 posts Report Reply

  • Vaughn Davis,

    Oops. Standard and Poor's.

    Must remember to drink _after_ posting next time.

    Auckland • Since Nov 2006 • 21 posts Report Reply

  • DPF,

    I charge less than S&P :-)

    Wellington, New Zealand • Since Nov 2006 • 78 posts Report Reply

  • Sacha,

    As if English would need his dry-as-tinder arm twisted. He's been gagging to implement the orthodox solution since the last time he had control of the piggybank.

    Ak • Since May 2008 • 19740 posts Report Reply

  • Sofie Bribiesca,

    Why not throw the super city in too.

    here and there. • Since Nov 2007 • 6796 posts Report Reply

  • James,

    I reckon John Quiggin is essential reading on this topic. He's been carefully explaining the conflict of interest of the rating agencies for years.

    In 2003:

    Policies that specifically improve the position of holders of government debt will be viewed favourably by credit rating agencies even if they are harmful to the state as a whole.

    and in February:

    If financial markets functioned as they were supposed to, institutions with a record of failure like that of the ratings agencies would be out of business.

    His solution? Governments have enough power and resources to stop the outsourcing, and

    [replace] ratings issued by for-profit agencies with an alternative system, in which AAA ratings actually mean something.

    New Zealand • Since Feb 2007 • 34 posts Report Reply

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