Isn’t it time somebody told Moody’s and Standard & Poor’s where to get off?
We have been working hard at escaping the grips of the global economic crisis – one these international rating agencies didn’t see coming – or said they didn’t. And, all they have been doing over the past two years is brandishing threats of downgrading in our faces, and holding us to austerity cuts.
How did we get here?
It was not by the Barbados Labour Party (BLP) Government’s overspending on the ABC Highway. Nor was it by the BLP Government’s BOLT arrangement on Dodds Prisons.
What did bring ill wind from North America and all of Europe into the Caribbean?
In August last year, the American Securities and Exchange Commission issued a report on the cause of the global financial crisis. It blamed the credit rating agency Moody’s for the financial disruption across Europe.
A United States congressional report concluded earlier this year that Moody’s and Standard & Poor’s had triggered the worst financial crisis in decades when they were forced to downgrade the inflated ratings they had slapped on complex mortgage-backed securities.
These worldwide credit rating agencies are now being sued in America for their alleged role in endorsing the bundling of bad debt for sale at AAA rating.
They sold Europe on bad debt, the story goes, and Moody’s continues to reduce credit ratings on European countries – unless they clear the bad debt that Moody’s and company sold them on! Moody’s would junk their credit rating. Is there a note of familiarity here?
Britain, with all its resources, is probably in a much worse state than we are in Barbados. Britain could lose its prized AAA credit rating if Chancellor of the Exchequer George Osborne’s latest growth forecasts prove too optimistic, Moody’s has already warned.
And the Brits are uneasy. Britain is literally staring upheaval in the face.
More than two years since the 2008 financial crisis, the United States has no impressive strategy for reversing its worsening economic situation, Standard & Poor’s is reported to have said. And Moody’s has questioned America’s credit rating. Yet neither of the two – nor Fitch – has seen it fit to strip the United States of its AAA rating.
With all this, we ought not to be unduly driven by any advice these agencies offer. There is nothing that says their economists and analysts are better than ours right here in Barbados. Who says any of them are superior thinkers to Tennyson Beckles, Andrew Downes, Clyde Mascoll or Owen Arthur – when he is not opposing for opposing’s sake?
Mr Arthur himself was minded to say that we should really not be intimidated by these rating agencies.
“We must not allow the fear of what rating agencies might or might not say to cause us not to do what we know we have to do,” he once said, or something to that effect.
There is little political point in Owen latching onto the recent downgrading of Barbados by the said Moody’s. The general election is less than two years away. Don’t panic!
Truth be told, Prime Minister Freundel Stuart is expressing no less a sentiment of Owen’s when he insists that in the circumstances Barbados is doing well in keeping its head above water – despite the gloom and doom others may seek to extract from the Moody’s report.
This is not an issue to be politicking over. We are all in the same circumstance, in the same boat, on the same rough sea. Capsize the boat, and we are all likely to drown.
It appears that across the political divide in Barbados we are agreed that it is not so much that the verdicts of the ratings agencies are perilous – because they have been proved to be often wrong – but rather that they are perilous because a nation’s life is made to depend so much upon them.