Credit rating agencies are important, since large institutions (pension funds, insurance companies, etc.) are prohibited from investing in governments or corporations that have low credit ratings. Also, low credit ratings will result in higher interest rates to compensate for the risk; that is the essence of bond market discipline.
During the financial bubble of the mid-Aughts, the dominant American credit rating agencies are "credited" with being the enablers of a thoroughly corrupt and reckless financial system. They gave "everybody" AAA ratings.
In order for a credit rating agency to do its job, it must be independent of political or institutional pressures. Based on what we've seen with the dysfunctionality of Moodys, Standard & Poors, and Fitch, the world should be working harder at finding alternatives.
Lately Dagong Global Credit in China has been making headlines for some independent and assertive ratings that it has given out, even to the United States government. Doesn't it make sense that the credit rating agencies should be based in creditor countries (East Asia), rather than debt junkie nations like the USA or the Mediterranean?
I wonder if something like this happened in the early part of the 20th Century, when the reserve currency was shifting from Britain to the USA. At any rate nothing would please me more than to see Moodys and Standard & Poors fall into the ash bin of history.
During the financial bubble of the mid-Aughts, the dominant American credit rating agencies are "credited" with being the enablers of a thoroughly corrupt and reckless financial system. They gave "everybody" AAA ratings.
In order for a credit rating agency to do its job, it must be independent of political or institutional pressures. Based on what we've seen with the dysfunctionality of Moodys, Standard & Poors, and Fitch, the world should be working harder at finding alternatives.
Lately Dagong Global Credit in China has been making headlines for some independent and assertive ratings that it has given out, even to the United States government. Doesn't it make sense that the credit rating agencies should be based in creditor countries (East Asia), rather than debt junkie nations like the USA or the Mediterranean?
I wonder if something like this happened in the early part of the 20th Century, when the reserve currency was shifting from Britain to the USA. At any rate nothing would please me more than to see Moodys and Standard & Poors fall into the ash bin of history.
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