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Richard Koo Says Rating Agency Sovereign Downgrades Could "Destroy The Global Economy Again"

Tyler Durden's picture




 

Those poor idiotic rating agencies can never catch a break. Despite doing their fair share of hiring as many prosimians with a single digit IQ (not to mention a penchant for spreading inside information to preferred clients, see Deep Shah) as they can, thereby keeping the labor pool sufficiently susceptible to BLS manipulation, it was they that, according to Koo, destroyed the global economy the first time around, after keeping every toxic CDO at a AAA rating. Now, the Nomura economist, whose obstinacy in his views at times makes even such distinguished voodoonomic shamans as Paul Krugman seem like docile little lambs, is convinced that "these same agencies are once again attempting to interfere with governments that are trying to do the right thing in response to the economic crisis (ie, the balance sheet recession) triggered in part by these agencies’ actions. In spite of the fact that fiscal stimulus is the only effective measure during such a recession, the rating agencies are making it more difficult for governments to spend money by implicitly threatening downgrades." Yeah ok, the right thing is to fight debt with more debt. And more debt with morer debt. And so on. We wonder if that is the case, why doesn't Dictator Bernank just tell his Jeethner lackey to print $100 trillion tomorrow? After all that is the NEF's target for debt in 2020. That way we should grow world GDP by about 100% overnight, and save ourselves ten years of deleveraging misery. But stop there? Why not print $1 quadrillion, $1 quintillion, $1 decillion... After all debt is wealth remember? Because try as hard as we can, we just can't spot any faults with this argument which derives straight from Mister Koo's supposedly irrefutable logic.

Full note for those who still foolishly don't believe that the only response to infinite debt, is infinite+1 debt.

 

 

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Wed, 02/02/2011 - 23:26 | 929835 LostWages
LostWages's picture

Rating agencies won't destroy the economy, The Bernank beat them to it.

Of course a good arguement could be that The Bernank is just finishing with a bang what The Greenspan Bubble machine got going.

Thu, 02/03/2011 - 00:15 | 929989 dlmaniac
dlmaniac's picture

You the S is about to HTF when honesty is considered a threat to humanity.

Thu, 02/03/2011 - 01:41 | 930150 flacon
flacon's picture

In order to save the world, we need to tell BIGGER lies and NEVER have the truth exposed.

 

Lie #1: John Maynard Keynes invented the perpetual motion machine in economics.

Lie #2: John Maynard Keynes did not have sexual relations with that boy Duncan Grant.

Lie #3: 'In order to save the world, we need to tell BIGGER lies and NEVER have the truth exposed.' 

Thu, 02/03/2011 - 07:30 | 930362 Cash_is_Trash
Cash_is_Trash's picture

What does it matter, in the long run we'll all be slaves.

Road to Serfdom myah niggaz

Thu, 02/03/2011 - 03:23 | 930250 Akrunner907
Akrunner907's picture

I don't think you need a rating agency to tell you how screwed up the sovereign debt is - it is pretty obvious. If people are still relying on ratings to determine whether or not to hold debt securities, they need to change their brand of crack they are smoking.

Wed, 02/02/2011 - 23:29 | 929843 Caviar Emptor
Caviar Emptor's picture

why doesn't Dictator Bernank just tell his Jeethner lackey to print $100 trillion tomorrow?

That's a start. Then we can convene the Central planning Committee on Debt Management and scrap all plans to reduce. No. The new plan is increase the debt in a planned stepwise progression. We can hire quants and rocket scientists to make it look legit but here's the big picture: Switch to the Log Scale for national debt. Every 5 years we go up by 1 increment. On the Log scale. 

There! It evens sounds less ominous ("we're only increasing by one step at a time!") 

Wed, 02/02/2011 - 23:42 | 929878 umop episdn
umop episdn's picture

Increasin' your debt, one order of magnitude at a time. Or is that an 'odor' or magnitude?

Thu, 02/03/2011 - 01:45 | 930162 flacon
flacon's picture

I'm sure a young soon-to-be Nobel Laureate from Princeton will invent the new 'Keynes-Scale' where increases are shown as decreases. 

Thu, 02/03/2011 - 06:14 | 930310 slewie the pi-rat
slewie the pi-rat's picture

.

Thu, 02/03/2011 - 06:08 | 930315 slewie the pi-rat
slewie the pi-rat's picture

caviar! GREAT idea!

a log scale for the budget growth we shall need to continue to thrive as a nation and remain the single, most luminous, beacon on the hill for humanity.

let's get these pesky M2, US debt, and total US bony maronie charts to fit on the wall!

someone would hafta be a total asymptote to abject to THIS!

plus, with one step at a time, we could put the entire NATION on a 12-step program to fiscal sobriety.  we could rehabilitate tony robbins and have him encourage us to sacrifice anything and everything, especially our children, to stick to these GOALS!

we NEED a log scale to handle the needs of our public servants, already, so this will be just the ticket to keep our society healthy and enable us to "grow the economy"--a phrase which has, unaccountably, caused me to grind my teeth since the first time i heard it from slick "end glass-steagall" willie, who certainly knew wtf HE was talkin about!

we be loggin'!

 

Wed, 02/02/2011 - 23:33 | 929851 Michael
Michael's picture

The war mongers on TV will tell you to fear Muslim ideology and Israel is in danger. I’m getting sick and tired of this BULLSHIT!

Let me set you straight right now on that issue.

NO COUNTRY IS GOING TO INVADE AND DESTROY ISRAEL EVER UNLESS THEY WANT A COUPLE DOZEN NUKES SHOVED UP THEIR ASS.

ISRAEL HAS 300+ NUKES OF THEIR OWN AND WILL USE THEM IF THEY NEED TO. STOP SENDING ISRAEL US FOREIGN AID NOW.

Egyptions should make lots of signs and get them on TV that say;

ISRAEL HAS 300+ NUKES! DON’T FEEL SORRY FOR THEM!

Thu, 02/03/2011 - 00:53 | 930065 e1618978
e1618978's picture

They had those nukes in 1973, didn't stop the arabs from invading then...

Thu, 02/03/2011 - 01:35 | 930142 Michael
Michael's picture

Be aware of the American MSM brainwashing tactic and conditioning you TO REPEAT WHAT THEY ARE SAYING WHEN OUR TIME COMES.

On every channel they are repeating over and over again;

WHERE IS THE MILITARY? WHERE ARE THE POLICE? WHY DON'T THEY STEP IN TO BREAK UP THE PROTESTS?

THIS IS SURELY A SOCIAL ENGINEERING TACTIC THEY ARE USING ON YOU. All the networks are doing it to you.

Thu, 02/03/2011 - 04:24 | 930272 blunderdog
blunderdog's picture

300 plus nukes in '73?  Really?

I thought it was more like a handful of lil'boys, which couldn't be used except as suicide bombs because...

a) a good chunk of the enemy military was already on Israeli soil, and
b) a limited war with Egypt/Syria would've become a regional all-out free-for-all after the mushroom clouds showed up, and there was no way to hold off a few hundred million Jihadists with the current stockpile.

(Regardless of any nonsense I tend to favor, if you have any credible source of info on this, I'd like to learn more.)

In any case, it's a waste of time to focus on the nukes.  What Israel needs is obviously more ratings agencies.

Thu, 02/03/2011 - 06:26 | 930335 Michael
Michael's picture

Carter says Israel has 150-300 nukes

http://www.youtube.com/watch?v=bj8DNbcSiHA

Wed, 02/02/2011 - 23:35 | 929852 Atomizer
Atomizer's picture

That is the big picture Tyler. All one can do is try to lead the horse to the watering hole, no one can force the horse to drink.

Keep up the good work. Very soon, the general populous will have the "I could of had a V-8" moment.

 

Wed, 02/02/2011 - 23:34 | 929855 PPMazzini
PPMazzini's picture

And these are the same rating agencies that were convinced that tossing a bunch on subprime mortgages into an SPV could achieve AAA, based on 1.8 years of historical performance?  Forgive me, but I'm highly skeptical of any theory that relies upon rating agency competence/non-cooptedness as a triggering mechanism for anything.

SemperParatusInc.blogspot.com

Wed, 02/02/2011 - 23:45 | 929884 Misean
Misean's picture

Silly, you don't "acheive" AAA ratings, you buy them. Law says that ratings are obtained by the seller from a government cartel.

Thu, 02/03/2011 - 06:06 | 930312 Zero Govt
Zero Govt's picture

precisely you "buy them". CRA's are crones for hire, like accountants, and sugar coat turds. Both professions are not independent but 'on hire' and need to be recognised for such (ie. worthless)

Wed, 02/02/2011 - 23:39 | 929866 Oh regional Indian
Oh regional Indian's picture

Interesting if you put this story and the Irish bank run together.

As the downgrades cascade (and they have to, for the rating agencies to have any credibility), money will run, chasing lower risk.
Until it spirals into a hyperinflationary crap out for Benbabwe's overloaded 0 key on his moneygram.

This is clearly a symptom, trailing at that, not cause at all.

ORI

http://aadivaahan.wordpress.com/2010/06/16/time-faster-now/

Wed, 02/02/2011 - 23:39 | 929867 PulauHantu29
PulauHantu29's picture

I pray Koo keeps talking...keep The bernank printing more...much more.....so my gold will hit $5,000 sooned then later....

 

...so Oil wiull hit $200 per barrel sooner then later.

Wed, 02/02/2011 - 23:47 | 929890 Dr. Porkchop
Dr. Porkchop's picture

It's rock, paper, debt. I thought the rules were clear.

Wed, 02/02/2011 - 23:57 | 929923 Atomizer
Atomizer's picture

Watch these fuckers hit the wall.

Market Outlook: Indian markets are expected to open on positive note

And again..

REC likely to form SPV for pvt banking licence

 

Rural Electrification Corp on Monday said it may form a special purpose vehicle, which would apply for a private banking licence along with state-run Power Finance Corporation (PFC) and an international bank.

“If we can get a go-ahead from the Reserve Bank..together with PFC...we can apply for private banking licence,” REC CMD JM Phatak told reporters here.

He added that SPV is likely to be formed for the purpose and an international company may also join the endeavour.

“The SPV would apply for the banking licence and a global bank may also be roped in...however, it is at a nascent stage,” Phatak added.

The company said it would raise $500 million through a bond issue in Europe, Singapore and HongKong markets. “We would raise $500 million via a bond issue in Europe, Singapore and HongKong in November or January,” director (finance) REC HD Khunteta said here.

Paw-kee-Stawn is the next country on the skids

 

Thu, 02/03/2011 - 00:18 | 929996 prophet_banker
prophet_banker's picture

the rating agency's were'nt honest before, and I don't expect them to change

Thu, 02/03/2011 - 09:53 | 930545 johnnynaps
johnnynaps's picture

And, it's amazing that they continue to exist! Even more amazing that people continue to "invest"......oh, I forgot it's the "inside" crowd that continues at the pumps.

Thu, 02/03/2011 - 00:19 | 929998 ak_khanna
ak_khanna's picture

Last year we saw countries like Greece, Ireland facing bankruptcies due to increasing deteriorating financial position and increased borrowing costs. They had to be bailed out by the ECB and IMF. These problems are likely to spread to bigger countries and the tipping point would be when one too big to bail out country defaults on its debts. This would start a chain of defaults which all the governments and central bankers in the world put together cannot reverse pushing the world economy on an extended path of slow or negative growth for years.


http://www.marketoracle.co.uk/Article24581.html

Thu, 02/03/2011 - 01:11 | 930107 QQQBall
QQQBall's picture

No... if italy gets into trouble Ireland, Spain and Portugal will buy their debt... and then if Spain gets in trouble, Italy, Ireland and Portugal will buy their debt.... and France and Germany too. What are neighbors for?

Thu, 02/03/2011 - 00:27 | 930006 potatomafia
potatomafia's picture

Oh fuck!  The patient is blaming the doctor for the HIV he just told him he has..  Even thought the patient has been running around rampantly butt fucking the taxpayers without protection!!

 

"you just told me i have HIV!!  Thats gonna make it awful hard for anyone to want to sleep with me..  Please dont tell anyone!!"

Thu, 02/03/2011 - 00:45 | 930054 gwar5
gwar5's picture

Good Lord, another economic Armageddon. I give.

Thu, 02/03/2011 - 00:45 | 930056 LehmanRefugee
LehmanRefugee's picture

Even if we buy his argument that private savings are spiking so the Govt needs to step in and spend that money. Applying it to the US, private savings have spiked by 2-3% of GDP. In aggregate Obama's stimulus has spent about 15% of GDP. That is an order of magnitude difference.

Thu, 02/03/2011 - 00:47 | 930061 Sizzurp
Sizzurp's picture

The real way to spur credit growth is for the Federal Reserve Bank to allow every US citizen to borrow from the discount window at 0%, just like the banksters, and with unlimited leverage so they can buy all the sovereign debt in existence for the ultimate carry trade action.  Yep, that would certainly get things rockin.

Thu, 02/03/2011 - 00:53 | 930066 Dan The Man
Dan The Man's picture

-------

Can you at least try NOT to start off every article with a gigantic runon sentence?

Thu, 02/03/2011 - 03:46 | 930257 faustian bargain
faustian bargain's picture

It's pretty much mandatory, now that we're living in the sequel to Tale of Two Cities.

Thu, 02/03/2011 - 04:30 | 930274 blunderdog
blunderdog's picture

Despite doing their fair share of hiring as many prosimians with a single digit IQ (not to mention a penchant for spreading inside information to preferred clients, see Deep Shah) as they can, thereby keeping the labor pool sufficiently susceptible to BLS manipulation, it was they that, according to Koo, destroyed the global economy the first time around, after keeping every toxic CDO at a AAA rating.

Awkward and wordy, but not a run-on.  Count the dependent and independent clauses.  Did he fix it just for you?  How precious. 

Thu, 02/03/2011 - 01:16 | 930111 lewy14
lewy14's picture

Richard Koo Says Rating Agency Sovereign Downgrades Could "Destroy The Global Economy Again"

Promises, promises.

I would have been happy with global economic destruction a few months ago.

Now I want that, and a "fan's home visit" from Maria Osawa.

And a pony.

Thu, 02/03/2011 - 01:45 | 930163 KickIce
KickIce's picture

So it's not the crappy fundamentals or lack of consumer demand, it's the rating agencies.

Thu, 02/03/2011 - 04:43 | 930281 sodbuster
sodbuster's picture
Richard Koo Says Rating Agency Sovereign Downgrades Could "Destroy The Global Economy Again"

That's kinda like blaming the spoon for making Rosie O'Donnell fat.

Thu, 02/03/2011 - 11:58 | 930941 viahj
viahj's picture

not the spoon but the scale

Thu, 02/03/2011 - 06:09 | 930318 walcott
walcott's picture


Washington D.C. is an affront for Tel Aviv. 

Israel will prove to be the most oppressive and murderous country

and people ever on this earth. Enough is never enough. 

Modus Operandi -

First they try to kill your spirit and identity. If that doesn't work

they just kill you. And they kill with impunity over and over again.

Thu, 02/03/2011 - 09:53 | 930543 eddiebe
eddiebe's picture

Well duh, they have every right as Gods chosen!

Thu, 02/03/2011 - 06:23 | 930330 Bagbalm
Bagbalm's picture

When they made debt money they THOUGHT they made debt wealth. It was going to be a gotcha moment...I change the rules so I can make all the money I want and you have to use it. You never catch up and eventually I hold all the play money by inflation and zing! - you owe me a zillion dollars! Reality is...What the hell do you mean I destroyed the economy and you can't pay? Another effort by over-educated simpletons who reasoned their way beyond the edge of reality. We've seen them try to do it with every aspect of life. Art that is random and ugly - child raising by Dr. Spock that would ruin a puppy - and money that depends on the honesty of politicians restraining themselves...All unnatural.

Thu, 02/03/2011 - 06:26 | 930336 Jack Sheet
Jack Sheet's picture

"Firms such as PIMpCO with large credit staffs of their own can bypass, anticipate and front run all three (rating agencies) benefiting from their lack of timidity and lack of common sense...."  

"S&P rating for Spain = AA just downgraded one notch from AA+,...Ooh, so tough.... and believe it or not Moody's and Fitch still have them as AAAs; Here's a country with 20% unemployment, recent current account deficit of 10%, has defaulted 13 times in the past 2 centuries, and whose bonds are already trading at Baa levels..."

Bill Gross, Investment Outlook May 2010

Thu, 02/03/2011 - 06:56 | 930346 Quintus
Quintus's picture

Yeah, there's no doubt that calling bankrupt sovereigns bankrupt could cause the end of the world.  Truth is the enemy!

Thu, 02/03/2011 - 07:40 | 930368 Cash_is_Trash
Cash_is_Trash's picture

We must ramp-up our efforts on the War on Truth.

Fact and evidence have entered the theatre of the War on Terror.

Thu, 02/03/2011 - 08:34 | 930387 AccreditedEYE
AccreditedEYE's picture

Millions of dollars spent on research, gathering resources + intelligence and these idiots still can't figure out that 1-1=0. Of course, if it were in their interest to do so it would be a different story.

Thu, 02/03/2011 - 08:43 | 930400 Rockfish
Rockfish's picture

is english.aljazeera.net down, or is it just me?

Thu, 02/03/2011 - 09:46 | 930518 DavidC
DavidC's picture

So Koo thinks it's a Balance Sheet recession and a lack of understanding of same? Hmm, can't help feeling he's missing something there.

DavidC

Thu, 02/03/2011 - 09:51 | 930536 Fiat Money
Fiat Money's picture

Have to agree with Richard Koo on this one - Koo is absolutely correct, the Golddamn-Sachs, Lehman, Bear and other swindler banks could NOT have sold their TOXIC dung heaps, WITHOUT that precious "AAA" rating to CON gullible pension & other  fund managers.    (Some of whom were in on the take, and needed cover; others were just chasing ROI numbers to look good to their investors.) 

  Tyler's mistake is to CONFLATE  _MORE MONEY FOR BANKSTERS_ with KEYNSIAN economics. 

 It is quite amazing how the Neo-Con propaganda meisters have convinced not only the sheeple, but ENTIRE SWATHS of accounting, economics, political, and press-media professions  http://www.huffingtonpost.com/2009/09/07/priceless-how-the-federal_n_278805.html  that  "bailouts" (or back-door bailouts like 'liquidity injections', Quantitative Easings, backstops, loan quarantees, toxic asset purchases, etc. etc. etc.)  are "KEYNSIAN" or "STIMULUS" spending.

     We all now know that money to bankers is THE OPPOSITE of "STIMULUS" -  their "free money" is everyone else's DEBT, and they use it to go on a COMMODITY BUYING BINGE, so they can EXTORT "profits" out of everyone else's essential business, which leads to COMMODITY PRICE INFLATION, higher costs, and DIMINISHED economic activity for everyone else.

 (Here's a textbook pre-bailouts example of Commodity Price Inflation caused by banksters with cash - this particular example SUCKED the LAST DOLLAR of "DISCRETIONARY SPENDING"  _OUT_  of American consumer pockets, CONTRACTING economic activity at non-essential businesses (like restaurants, tourism, etc.), $5 gas in summer of 2008 was the last straw, the direct, proximate cause of the Sept. 2008 market meltdown.)  http://www.forbes.com/forbes/2009/0413/096-sachs-semgroup-goldman-goose-oil.html )

  Here's some textbook post-bailouts examples of how FREE MONEY for BANKSTERS leads to HIGHER PRICES... = DIMINISHED economic activity - for EVERYONE else!

http://www.ritholtz.com/blog/2011/02/how-u-s-income-groups-get-squeezed-by-food-prices/

http://www.zerohedge.com/article/whirlpool-feels-full-wrath-rising-commodity-prices-operating-profit-plunges-61

http://www.bloomberg.com/news/print/2011-01-28/conservative-austerity-idea-is-failing-commentary-by-david-blanchflower.html

  Remember:  KEYNSIAN economics is about STIMULATING the economy, NOT contracting it! 

  The answer to how to genuinely "stimulate" the economy is easy: how America won WWII - DIRECT GOVERNMENT PURCHASES of goods and services, with LOW overhead on sales fees and interests for those BIG GOVERNMENT SPENDING purchases... you know, Uncle Sam BUYING, not paper shares of FRAUDULENT bank "securities," but instead  tons upon millions of tons of big ships, airplanes, tanks, trucks, railroads, flight schools for pilots, and the food and material to support all those GI's etc... all at the same time!

  btw, Paul Krugman may have been a "liberal" Keynsian economics for the entire time Bush, Cheney, Paulson, Bernanke, & other Republicans were wrecking the economy with tax-cuts-for-rich (in time of war!)  &   LICENSE for ENRON FRAUD "deregulation" no financial oversight  from 2000 to 2008, but once the "Democrats" won the White House in late 2008, Krugman changed his tune, and started WHITEWASHING his pal Ben Bernanke's collusion with GS, JPM, and the other member/OWNER banks of the Fed to defraud the American economy.   Not only are Krugman & Bernanke both members of the bought-and-owned Economics profession from Ivy League Princeton U,  but it was Helicopter Ben who recommended Krugman for his cream-of-the-crop NY Times sole economist column gig. 

  When was the last time you saw Krugman write an article on the TRUE "bailouts" cost?    Again,  FREE MONEY to corrupt bankers, is the DIAMETRICAL OPPOSITE of  "stimulus" spending. 

Thu, 02/03/2011 - 09:59 | 930569 eddiebe
eddiebe's picture

When the assholes see guillotines set up in front of their ivory towers, they'll understand about ratings and currency swaps and rates of diminishing returns etc etc.

Thu, 02/03/2011 - 10:08 | 930590 Hondo
Hondo's picture

Koo is an idiot...what do you do then, pretend these countries are not bankrupt???  Bring them down..it's the only way to clense the system.

Thu, 02/03/2011 - 10:22 | 930640 partimer1
partimer1's picture

The rating agency is part of the problem, not the solution.  Koo is wrong too. If you have a balance sheet recession, which we probably agree by now that we are having, you have to reduce the balance sheet.  No body wants to suffer, therefore, we pretend we are getting somewhere.  just like everyone wants to go to heaven, but doesn't want to die. 

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