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Nuke 'Em, Duke 'Em Propaganda Machines - Goldman Attacks Fitch For Downgrading Mexico
As we pointed out previously, a Fitch downgrade of Mexico was only a matter of days (S&P - not so much, as the agency is back to its operational sweet spot in the middle of a Fed-enforced bubble). Sure enough, earlier today Fitch dropped Mexico's rating to BBB, citing “The global economic and financial crisis and falling oil
production have accentuated weaknesses in the sovereign’s fiscal
profile. These weaknesses
limit Mexico’s fiscal maneuverability in the face of future oil
income shocks." Yet the hilarious response to this somewhat prudent action came out of scandal-ridden Goldman Sachs, which openly derided Fitch for its action: "We differ from Fitch, because while far from ideal, the 2010 revenue
budget delivered a non-trivial fiscal adjustment amounting to just
under 2.0% of GDP. To be sure, the tax hikes and expenditure cuts could
have been deeper and structurally stronger. However, given the
magnitude of the contraction experienced by Mexico in 2009, few to no
countries adjusted fiscally this year. On the contrary." Subsequent to his report, attached in its entirety, Goldman analyst Paulo Leme continued the Chuck Norris routine: "Everyone else in the
region is experiencing deterioration in the fiscal accounts.
Mexico adjusted. Were the efforts Nobel Prize-winning public
finance? No. But they did a lot."
So there you have it: not only is the NY Fed openly encouraging rating shopping for TALF, but now rating agencies have to be concerned about angering a sleeping octopus, which as we all know, has every right to be morally indignant when others dare to promote an objective reality that may or may not align with Goldman's prop trading interests.
Full text of Goldman analyst Paulo Leme's decyring the rampant injuctice in this world:
Mexico: Fitch Downgrades Mexico One Notch to BBB – Stable Outlook
Today, Fitch Ratings downgraded the UMS to BBB (Stable Outlook) from a previous BBB+ with negative outlook. The local currency internal debt rating was also downgraded to BB+ form A-. The country ceiling was also downgraded to A- from A.
According to the statement from Fitch, the main reason for the downgrade was the reduced maneuverability of the Mexican fiscal accounts resulting from the decline in oil revenue (as production declines) and the hits to growth on the non-oil revenue base which, according to Fitch, narrowed. Another important reason was the forecast that Mexico’s general government debt ratio to GDP will rise to a projected 37% of GDP, which exceeds the BBB+ median. Fitch cited the unfavorable growth performance compared with its rating peers and limited ability to implement sustainable countercyclical fiscal policies as other reasons for the downgrade.
While Fitch acknowledged progress on the tax front as steps in the right direction, the rating agency said that more measures are required to address structural weaknesses of the public finances, particularly in light of lower oil production.
In its statement, Fitch also noted the need for Banxico to bolster its net international reserves position, using as an example the strains in the FX markets when derivative structures unwound with losses last year.
Finally, Fitch said that the prospects for deeper revenue-increasing tax reforms in Congress are not bight, because the opposition party the PRI controls the Lower House. The report added that the 2012 elections will render reforms and political agreements more difficult.
Comment: Negative.
In our opinion, the downgrade is harsh, but fair in the context that it was not for the lack of warning to politicians that a strong 2010 budget and fiscal reforms capable of materially boosting non-oil revenues were key for Fitch to maintain the rating.
We differ from Fitch, because while far from ideal, the 2010 revenue budget delivered a non-trivial fiscal adjustment amounting to just under 2.0% of GDP. To be sure, the tax hikes and expenditure cuts could have been deeper and structurally stronger. However, given the magnitude of the contraction experienced by Mexico in 2009, few to no countries adjusted fiscally this year. On the contrary.
Paulo Leme
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How soon before NY State gets downgraded?
Moodys got a call from Geitner... so everything's on hold.
Gee willikers. Fitch or GS? GS or Fitch? Which one is the best guide to steer my investments? Oh boy I can't make up my mind. Maybe I should check with Moody's.
that's okay, the crappier something is, the greater the ascent right? Mexico should be parabolic before Thanksgiving.
The further from reality one drifts, the more desperate one becomes to reject reality which, oddly enough, becomes destabilizing. This has everything to do with perception and nothing to do with reality.
Insanity takes on many forms and functions.
Imagine UN troops in Juarez:
http://www.bloomberg.com/apps/news?pid=20601086&sid=arWUkOtFzPjk
Of course GS is unhappy with a downgrade. It might interfere with their business here in Mexico. Or maybe annoy their buddies over at Banamex/Citigroup, who are currently charging about 75% on their Mexican credit cards (that's if you don't miss a payment; if you do it goes up over 100%).
S&P Rating Services foreign currency rating, which is what Fitch is referring to in its report, has been BBB+ on negative credit watch.
Nuke Copenhagen Climate Summit on December 7th. Climate Gate is the big story. Only Alex Jones knows the magnitude of this story. Nuke GS and Soros for their participation in the biggest science fraud in history.
http://www.infowars.com/alex-runs-down-man-made-climate-change-hoax-exposed-in-cru-emails/
GS is a PIG! They are scammers! Release the Hermitage.
Of course and very logical. Any invitation for fiscal restraints and prudent investment(which will not lead to a downgrade) is looked at as suspect by GS. One has to understand that they sell papers in return for money,and hence they get annoyed if their papers decline in value(never mind the tirllions of dollars worth of paper currently circulating around the world. They need to sell more to keep the money flowing in).
Press Release from the GS Cartel
With Global Warming confirmed (hot air growing in New York) we recommend going long of wheat futures as our friends in Iceland start planting for the spring. Oh, Yeah, and we are offering this insight without our thumb(s) on the scale.
Blah. blah, blah... Gad, these crooks make me want to puke...
I'm not worried about Mexico. I'm worried about Switzerland.
UBS 5x Switzerland GDP
BBVA, UBS Among Banks With Weakest Capital, S&P Says
The average risk-adjusted capital ratio for large international banks, excluding those in China, was 6.7 percent as of June 30, S&P, UBS' was 2.2
http://www.bloomberg.com/apps/news?pid=20601085&sid=a4jcEUPqCUkw
Fitch is fixin' to downgrade 20 States. Mexico is just a warmup for their transformation to " Bad Cop ". Besides, they know Cali will soon legalize marijuana as an economic necessity......a devastating blow to the Mexican economy.
Reefer is already Cali's #1 cash crop. Gubmint gettin' none of it.
Fitch is right on target. Finally, they see somethin' comin.
In all of these ongoing disasters, I strongly feel that the first ones to step up to bat and start doing the right thing will be the ones who will start healing and getting back on some kind of track. If our gov. just owned how bad it was and just let capitalism do what it does, we could take our lumps and get out of this sooner than everyone else. They all have the same problems we do.
Think about it, would you be more interested in investing in a country that told the truth and started leading the way out of this mess, or one with its head in the sand (all of them right now)? Or worse, outright lying?
We are missing an opportunity. But maybe Fitch is a test case.
So I'll keep going here. I am hopeless. I was in a meeting Friday regarding budget issues. The agenda, how and where to make cuts. We come up with levels of cuts and have each in the hip pocket to respond to what comes at us, budget wise.
I ask, stupid me, why not assume the worst and make the most cuts, without sacrificing personnel? Answer? Because if our unit comes up with all those cuts, the other units will say "thanks" and not cut at all. So we can't just do our best and make all out cuts on the front end. It becomes strategic action, even though we really need communicative/cooperative action.
Every word out of my mouth, how bad I think it is, citing how tax revenues are down, citing what is going on in other states, I am a crack pot. No one can be a leader under these circumstances. They won't listen to you until it is overtly in the shitter.
I am sad to report, this is happening with your tax dollars.
I feel really hopeless.
"Losing all hope is freedom" In this case I think this quote is 100% true. In my experience I lost all hope a few months ago. For me knowing that the system is corrupt and damaged beyond repair was somehow comforting. It was the feeling that when things collapsed it would not be my fault for not fighting hard enough, and when things start to go down I can leave the US. I would have never have thought about leaving the US before that, but staring into the Abyss, that black hole of infinite debt, scared me. It told me it would consume all in it's path scaring nothing and no one. That black hole is centered in DC. I can't wait till I'm out of grad school and I can scurry to another nation to wait out the collapse.
MsCreant you sound like a very smart person with solid solid credentials, there are nations in the world that would welcome you with open arms! We always have options in life even when having a seemingly hopeless situation. BTW tanks for trying to save us some money. Having talked about budget concerns with school officials at a major university I know they can't wait to waste money.
I don't see this as only a USA thing but global. IMHO there is no place to run and hide. There are simply worse places to be. And no real way to really know where those places are unless you're talking about living down under in the desert.
Completely agree that this is a global crisis, however I expect the US to take a really bad hit and descend into failed state status. It may be that the US is not objectively worse then other locations but I think that the cut in standard of living will drive the people crazy. After all, people will get pissed when they lose something they perceived to be theirs. I respect your analysis of human nature so I would like your insight. When the dollar does crash and the wealth of America literally goes up in smoke what will be the social consequences here in the States? Will we have a new renaissance of morality and ideas, will we descend into a bloodthirsty mob, or something in between?
I'd like to believe that other nations are not quite as insane with currency destruction or other insane economic policies. Maybe you're right about it being a gamble to move, but sometimes you have to take a risk specially when you know if you don't take a risk you will lose. I just can't see America coming out of this well. What does America have to offer the world? I remember reading in a novel, Snow Crash, that America only did 3 things better then the rest of the world: 1. Movies 2. Pizza 3. Micro-code. Sadly this is not far from the truth today.
"When the dollar does crash and the wealth of America literally goes up in smoke what will be the social consequences here in the States? Will we have a new renaissance of morality and ideas, will we descend into a bloodthirsty mob, or something in between?"
The world, not just the USA, is rapidly slipping into authoritarian rule and when I chose to be honest with myself, I believe we are already there. The facade of Democracy will be maintained and trotted out for public display and consumption for as long as its usefulness remains.
As long as We The People wish others to do the work reserved for us by the constitution (acting as involved and proactive citizens rather than slaves/consumers) we will submit to whatever is dished out. We're for all intents and purposes a Corporatistic (Corporatism) state now, a more accurate term for Fascism.
http://en.wikipedia.org/wiki/Corporatism
Most people, when facing the pain of cognitive dissonance, will retreat and withdraw back to what they think they know. Because of this, I expect things to grow steadily worse from the point of view of the human condition. But there are many variables involved and I would be dishonest if I didn't say I really don't know what will happen.
Thanks for the responses. I have to agree with you that we are already a fascist state here in the US, and that people are blinded by the circus sideshow of Red vs. Blue politics. At least some people I know started to wise up when they saw the Blue team adopt the same stance on most issues as the Red team as soon as they were fully in power.
As to the world, I would have to agree that the world seems to be slipping into authoritarian rule, some places worse than others but that is the current global trend. It is quite remarkable that the trend is towards centralist authoritarian rule at the same time when all the pundits and commentators talk liberty and democracy. One must wonder if they are deluding themselves or if they see the truth and chose to lie to their fellow humans.
Also have to agree about cognitive dissonance, most people cannot accept the fact that they are wrong, or that they were fooled. It was one of the most enlightening moments in my life when I accepted that I could be wrong and deceived, and began questioning the world around me. However most people choose not to do that, the majority of humans are intellectually lazy. I personally see that is why people cling to the concept of hope. It's extremely negative in the metaphysical sense because it psychologically allows people to endure conditions that should force them into action.
Even religion facilitates this--> look to the afterlife for your reward in heaven. Hope.
I also agree that it is global, but the US is actually a union of 50 states, some of which will emerge far better off than others and some that will manage to prevent famine better than others. I would head for a state with mild climate, ample water, industrious population, and resources. How about Oregon?
Personally, I live in Switzerland, and I have no doubt that the government will keep a lid on everything even in the worst case scenario. However, that doesn't mean there won't be famine.
Hi,
Wanted to take some time to respond to you. We have talked before on this blog about what seems to be stages of grief that we drift in and out of. I am always surprised I am not as firmly in acceptance as I had supposed. Illusions come and go. The mind does not want to go where it must to take in the enormity of what we have been sold as true, versus what is really happening. As much as I do not like admitting this, the current system seems to have met some of my more base needs while simultaneously blocking my ability to meet other needs. I know I am not alone. In being "captured" by the lifestyle, we are cut off from other life chances. This is true of any choices, but the illusion of safety is sooo addictive. This system falling apart is waking a lot of us up to is the fact that we never were safe, we never were being taken care of. We feel betrayed when really we were simply deluded.
I know I have a better self that would love to be born. I can hear the call. I bet the same is true for many others, including those you wouldn't expect it from. Chaos will sharpen the senses and force us to take less for granted. What is important will soon become very clear, provided we can find a way to not cling to what was before.
Good luck in grad school. Hope you have a major that is useful to this world (that is one of my problems, I am not sure mine is anything more than a giant ponzi scheme at this point) and that inspires you!
That's just it, the illusion is comforting and we have a bias to all the information we receive. Hell I saw this downturn coming in 2005 and didn't properly plan for it. It thought it would be a correction in the housing market and the Fed would blow another bubble and that would be the end of it. Figured they would just push off doomsday till social security and medicare popped. Didn't count on the banks opening a window into the black hole of debt to scare the pants off everyone.
I went through the stages of grief myself, for the longest time I was stuck in anger and raged against the dieing of the light. I went from depression to acceptance almost instantly though, we all go at our own pace.
We are all tied to this system, the whole world is. I used to tell my friends years ago that the United States economy is the biggest religion in the world. It needs everyone on earth to believe in it to work, from the poorest child in Africa to the richest banker on Wall Street and everyone in between. Once that belief erodes the system erodes. I agree as long as the system stands we, and the whole world, will be in some way tied to it, for better or worse. It's been my experience that being able to see the system we live and finally accepting it for what it is gave me a lot of peace. Not because I like it but because finally the world made sense, the pieces fit together. That in some way being able to see the world for what it is gives me a level of freedom, even while still trapped in it.
Sadly no my grad school education is both expensive and worthless, law school. Got a lot of pressure from my family to go and they pressured me into staying after I realized it was an economic dead end. I deluded myself into thinking "Well sure there will be a downturn but in bad economic times people sue each other..." The job market for lawyers was always bad but is now is nightmarish. I watch my classmates who are mired in 120k+ school debt with no job skills or options face a grim future, and I'm in a good Tier1 school. I'm almost debt free because I worked like a slave in undergrad and saved every penny I could(scholarships helped too). But then I have always had an intense hatred of being in debt, and the feeling that I owe someone something. The debt I have now I took out to buy gold and silver, got to love using subsidized student loans to hedge against inflation!
I'm lucky in that I have other job skills like computer programming, which is how I'm supporting myself now, and what I plan to keep doing after getting my law degree. America is full of lawyers, but near as I can tell the world is still in need of programmers. So in some way the downturn has already forced me to be a better person...to stick with computer programming and not become a lawyer :)
In many ways you're talking about an insurance concept called adverse selection, where people will select against (or for) you if you're a first mover or adopter. For example, if you provide a better selection of benefits, the people who would use those benefits would select you as their insurance company and thus use more benefits, thus forcing you to raise rates, which drives away the healthy people in the plan who don't use the benefits as much, which causes you to become unprofitable.
To avoid this everyone must move at the same time but won't because they don't wish to give up their inherent advantages as they see them. So it requires a regulatory body to compel everyone to provide the same set of (increased) benefits, which allows everyone to remain in place and no one to give up ground. If the insurance companies can influence the regulatory body not to enact the law or regulation, everyone remains frozen in place where they are now with their profit margins intact.
It's not just people who hate change. If you have just one person or entity in a group who doesn't act in the best interest of the group, then from every persons or entities point of view, it's suicide to go first. This is why no one company can make real changes that are intended to be for the greater good without committing professional suicide. Someone has to make sure everyone plays nice in the sand box or nothing gets done. If one company has a distinct advantage, it's in that person or company's best interest to freeze the system in place to preserve market share, profit margin or any other advantage they deem important to maintain.
This is what we get for basing our culture on competition rather than cooperation.
Cooperation needs to be seen as profitable, I guess. Sucks. This is how localization could save the day. When a disaster first hits, everyone just runs out and helps everyone, no thought of getting paid or profit or resentment. We are at our best during these times. My one hope I hold onto (and it may be silly) is that as things get worse, this instinct will be awakened. I have both helped and been the recipient of this kind of help. Strangers become friends, bonds are forged, and the memories are sweet. We are capable of better, know it in my gut.
"Cooperation needs to be seen as profitable, I guess."
There it is in a nutshell. And I firmly believe it can be made so and just as firmly believe it won't until and unless the imagined and expected pain of change is finally seen by the masses as less that the pain currently experienced to remain in this insane economic system that pits me against you and my brother and mother and friends.
Only then will we seek the courage we all have inside to take that leap of faith into a brave new world. We are most certainly capable of better. We simply need to believe we are and then act like we are. It's coming MsCreant, of that I'm certain. The only question is how much damage and destruction we will tolerate as the 1% in power hold onto their advantages. They will not let go willingly.
GS sales are pushing Mexico credit versus the rest of LatAm over the last 2 weeks (sell Mexico CDS, buy Brazil etc). Any commentary contrary to their pitch is an annoyance to them and slows down their trading desk's ability to get short Mexico by taking the other side of the client trades.