Standard and Poor's lower the U.S long term credit rating. It is time to shoot the messenger.
S&P has anounced it is reducing the United States long term credit rating and media is in havoc, just as are investors around the world.
I just don't get the people being excited from this step.
Don't get me wrong - I'm sure the ladies and gentlemen of S&P reached their conclusion after an independent, objective, credible and transparent work.
Still, I just can't understand how anyone witnessing the crisis of 2008 would hold the opinions of credit agencies in any regard.
The problem is that the current Financial and Economic order is well to tied to rating agencies, despite their horrible blunder of the mortgage based securities, which was the basis for the crisis in which we all still live.
Instead of learning from past mistake and limit our exposure to the reason and professionalism of rating agencies, the world is still tied to these bodies. Too many financial institutions are forced by law to purchase only AAA class equities and bonds. Furthermore, another result of this downgrade will be the further downgrading of all entities depending on the U.S Federal government, at least by S&P.
But common sense will come - sooner or later. Even now, we should remember, it takes more than the opinion of the ladies and gentlemen of S&P to force the world out of the U.S treasuries, because the rating is averaged with other rating agencies.
And even if all rating agencies agree, there will come a moment when the world will have to stop and regroup. Look around: Do you see any alternative for the U.S treasury bonds at the moment ? EU ? China ? And by the way, did you pay attention and notice that at the end of the trading day last friday U.S treasury indexes ended Higher ?
However we look at things there is one crucial point that is repeatedly missed: The perspective of credit agencies is not broad enough. All you have to do is take a look at the historical data of the U.S debt as percentage from GDP (quoted from wikipedia), and realize that at times of a great crisis, the U.S has dealt with a significantly higher debt to GDP ratio, and was able to come out as the most thriving economy.
If S&P's notice will assist the U.S governance to make better decisions, by helping people work together, it may prove as a blessing in the end. But this, in my opinion, is its only merit.