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Guest Post: AAA Rating or Not - Crowd Sourced Wikirating Values Your Input

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Submitted by Toni Straka of The Prudent Investor

AAA Rating or Not - Crowd Sourced Wikirating Values Your Input

Recent downgrades of European government and bank debt have fuelled the discussion on the establishment of a new European rating agency. This will bring no relief, as long as Euro politicians will be eager to exert influence in such a new entity, can be concluded after their accusations that S&P's move on January 13 was politically motivated.

Undisclosed rating processes on a 10-step ladder from AAA to D, salted with '+' and '-' signs, facilitate criticism about an opaque procedure that ultimately costs public borrowers billions in additional future interest rate payments.

Setting up another ratings agency along the same conflict-laden model will be futile as long as this economic down cycle is with us on a global scale. The strongly growing chaos in the Eurozone cannot be upheld by a new entity that follows old guidelines as this has shown the lack of effective transparency, efficiency and neutrality in an outdated system.

World Map Sovereign Debt Ratings by Wikirating

Click to enlarge

After Wikipedia and Wikileaks shone light on science, history and politics, Wikirating may bring open source financial transparency to the web. Attempting to iron out structural problems of traditional rating procedures, Wikirating is open source, fully transparent and retrieves its results from participants input.

Initiated by Austrian mathematics Dorian Credé and and finance whiz Erwan Salembier, ratings are derived from weighted user input. They stress to point out that their model will improve with rising user input who also have a say in improving the formulae used.

Wikirating's methodology can be found online.

The Sovereign Wikirating Index (SWI) is a very simple process and includes economic indicator plus indices on human development, corruption perceptions abd political (in)stability. SWI ratings tend to underscore the ratings of Fitch, Moody's and S&P and align more to Chinese Dagong agency. Find a comparison table of the SWI and the other agencies here.
The SWI uses these criteria, using official data sources:

  • GDP growth rate — 10% weight

The resulting value is adjusted by multiplying it with a Scaling factor, which is composed by the 

Based on data and user input since October 2011, sovereign ratings at Wikirating tend to be slightly lower than at the other agencies. This proves the widespread criticism that conventional ratings are downgraded too slow. It is obvious since the onset of the crisis in 2007 with the implosion of subprime market that these ratings were not reliable and that rating methods needs to be drastically improved and controlled.

The exaggerated power and influence of the credit rating industry has strongly motivated the idea of Wikirating. The analyses on credit worthiness of countries and governments issued by the rating industry have been too long over rated, and whereas governments are trying to regulate the rating and assessments activities, Wikirating offers a platform where anyone can contribute for better, open and more transparent credit risk assessment.

A country list shows far fewer AAA ratings and sees most major nations one or two notches below their established ratings. This is well reflected in this graph of rating distribution based on 102 countries.

Only 2 countries retain their AAA rating with Wikirating, Hongkong and Luxembourg.

 

Find a complete table of rating comparisons with the other agencies here.

I recommend to surf their website that lists more information on such delicate issues like user influence and also provides links to become a member.

 

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Thu, 01/26/2012 - 12:22 | 2099787 jcia
jcia's picture

People that still believe in downgrade ratings is beyond my comprehension.

Thu, 01/26/2012 - 12:23 | 2099788 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

USA=junk

Thu, 01/26/2012 - 13:04 | 2099938 Manthong
Manthong's picture

So how long before they Megaupload this one?

Thu, 01/26/2012 - 14:23 | 2100292 DoChenRollingBearing
DoChenRollingBearing's picture

@ Mr Lennon

I would not go that far.  Best I can see, PERU is rated the same (or better?) as the USA.  And Peru is not junk (yet).

Thu, 01/26/2012 - 12:30 | 2099817 SheepDog-One
SheepDog-One's picture

Ratings seem to be utterly meaningless. US downgrade kicks off all-time record runup in stocks and bonds...OK! I guess the next time they need a market rally, just unleash another S&P credit downgrade.

Thu, 01/26/2012 - 12:25 | 2099798 stocktivity
stocktivity's picture

Ha Ha ...If you don't like your ratings from the rating agencies just kill the messanger and create your own rating agency. Then just put in whatever figures you want so the ratings will always be AAA. Rally on!

Thu, 01/26/2012 - 12:25 | 2099800 Flakmeister
Flakmeister's picture

And Lo! There was cloud of dust as the denizens of the Hedge descended on the Wiki site and frantically shouted and entered CCC

Thu, 01/26/2012 - 20:56 | 2101360 New World Chaos
New World Chaos's picture

That's exactly what happened.  Site currently down, but I did get a brief view of the map.  America went from green to orange (BB-).  Hmm.  "Corruption perceptions"?  Would be great if we also saw crowd-sourced ratings on how much evil the bondholders will become responsible for.

Thu, 01/26/2012 - 12:26 | 2099804 TheSilverJournal
TheSilverJournal's picture

Since bonds are payed out in fiat, they should all be junk. The entire global fiat ponzi is going down which was built on the FED counterfeiting gold notes by printing more notes than gold exists, and then exporting those counterfeiting notes to the central banks of the world through the Bretton Woods system.

TheSilverJournal.com

Thu, 01/26/2012 - 12:33 | 2099830 SheepDog-One
SheepDog-One's picture

Thats the common sense reality reading of it all, yet irrelevant for today, or tomorrow, as all-is-well.

Thu, 01/26/2012 - 12:27 | 2099807 Everybodys All ...
Everybodys All American's picture

Web site closed in 5, 4, 3, 2, 1.

Thu, 01/26/2012 - 12:28 | 2099808 granolageek
granolageek's picture

Did anyone else notice that the figure was last updated _next_ September?

Thu, 01/26/2012 - 12:31 | 2099821 Sanksion
Sanksion's picture

As the figures are all cooked, who cares about the date?

Thu, 01/26/2012 - 12:58 | 2099912 OutLookingIn
OutLookingIn's picture

Bingo! DING. DING. DING...

Junk in = junk out.

Thu, 01/26/2012 - 17:11 | 2100852 Matt
Matt's picture

Not only is the chart from September 26, 2012, but their data lags badly. Hong Kong is rated as AAA 100 points perfect score, but they use numbers from 2007 thru 2009 as the basis of the score, with the objective of targeting creditworthiness 3 years forward.

In 2008, Iceland probably didn't look so bad if you use numbers from 2002 thru 2005 to base your decision on. Before I lend someone money, I want to know how solvent they are now, not three years ago.

Thu, 01/26/2012 - 12:31 | 2099824 A Lunatic
A Lunatic's picture

I fail to see the relevance of information predominantly provided by the OWS crowd.

Thu, 01/26/2012 - 14:01 | 2100204 jplotinus
jplotinus's picture

" A Lunatic
I fail to see the relevance of information predominantly provided by the OWS crowd."

Is the failure to "see relevance" brought on by devotion to one or more of:

Fox News
Republicans
Democrats
TeaParty

OWS caused neither the 2008 financial collapse, let alone the banksta fraud, nor the banksta bailouts. However, OWS might be sufficient to bring down the fraudulent, crony corporatist system that has engulfed us.

Thu, 01/26/2012 - 12:32 | 2099826 Caviar Emptor
Caviar Emptor's picture

As a severe punitive measure as well as a show of independence, Moody's upgrades USA with a very sharp moral downgrade and a nationally televised roll of the eyes from the CEO 

Thu, 01/26/2012 - 12:38 | 2099827 GeneMarchbanks
GeneMarchbanks's picture

Wikirating is a terrible idea. We need to get rid of rating agencies not open them up to rumor trading.

O/T: This needs a little attention:

http://www.bloomberg.com/news/2012-01-26/credit-suisse-senior-investment...

Thu, 01/26/2012 - 18:14 | 2101021 bank guy in Brussels
bank guy in Brussels's picture

What of course is wrong with all this 'Wiki' stuff is shown in the CIA's most successful propaganda project ever, Wikipedia ... so successful that it even fools ZeroHedge and many ZeroHedge readers. Even fools Tyler Durden!

Sad to see even Tyler Durden duped, heaping praise on this CIA project to deceive, even murder innocent people.

The key issue is what government - intelligence agency - corporate group - hijacks the moderating, controlling, and editing of these Wiki sites.

Our political refugee from the US in Brussels, was one of the earliest journalists writing on, and proving, the CIA control of Wikipedia. He has shown me how it all works.

And of course Google Inc. (also CIA-seeded) now blocks all of this guys  websites, 'erasing' his journalism from search results, most especially his journalism on Wikipedia.

The game is that 90 % of Wikipedia is fake 'neutral', supplied by the duped general public, while another 2 % - 10 % is managed by CIA and Mossad, focusing on political targets where the general public will use Wiki for their primary 'perspective'.

The Wikipedia 'politburo hive' of controllers often have criminal backgrounds, and they have been caught sending e-mails from CIA contractor e-mail addresses, like Dynacorp - Dyncorp. They have ZERO interest in 'knowledge, and several of them have sent hate mails of abuse to our Brussels refugee journalist who wrote about the CIA - Wikipedia connection, taunting him with how they spread hoaxes about him.

Jimmy Wales founder of Wikipedia, was a mafia pornographer in the 1990s. He is involved in crimes against children ... Wikipedia lawyer Fred Bauder has a history of molesting women ... Wikipedia 'leaders' are involved extortion, threats of murder ... and so on. Only criminals need apply to the upper Wikipedia clique - they can't be squeamish about spreading hoaxes to help the US regime kill its victims.

And of course these crooks get to erase their own crimes via the dominance of Wikipedia on Google search. Criminal Jimmy Wales becomes 'Jimbo Wales'.

In fact, Jimmy Wales, fanatic Zionist extremist, is a close personal friend of the President of Israel, thanked for his role in using Wikipedia to help slander and murder Muslims, and to slander and destroy the Jews who are non-Zionist ... who used to be the Jewish majority before 1940.

Answers-com is a Mossad site, HQ in Jerusalem, repeating Wikipedia of course.

Google's censoring of the refugee from the US (whose avatar I use as a way of honouring him) - censoring the websites that long ago showed Wikipedia is CIA:

Live Photo: Google Inc. Caught Censoring EU Search Results (for USA - CIA)
Google Internet Censorship - Censure d'Internet par Google - Internet censuur door Google
http://www.flickr.com/photos/22325431@N05/6100668211/in/photostream

Current case: Wikipedia and Google in the attack on Europe, trying to murder European citizens criticising the USA:
Report to the EU Parliament and the Commission of the European Union
Anti-Competition Crimes of EU Internet Monopoly Google Inc. (with CIA) and Wikipedia (with CIA), to Erase EU Journalism, to Slander and Murder EU - Polish Citizen, Writer, Journalist,  Non-Zionist Jew, and Harvard graduate
http://www.indymedia.nl/nl/2011/07/77181.shtml
Original in pdf format:
http://eureportsnonzionistjews.hostfile.nl/file/0zndj5ea3v/410/nzjd-eu-r...

'Ex-Agent: CIA Seed Money Helped Launch Google', retired intelligence agent Robert David Steele interviewed by Paul Joseph Watson, and speaking of the CIA's Dr Rick Steinheiser and his connections with Google:
http://www.infowars.com/articles/bb/google_cia_seed_money_launched_googl...

Thu, 01/26/2012 - 12:34 | 2099837 Yousif
Yousif's picture

Well, I'd be very interested to see a crowd-sourced silver/gold fix.  That might put the LBMA in its place.

Thu, 01/26/2012 - 12:37 | 2099838 falak pema
falak pema's picture

Well, you can't be worse than these S&P, Fitch, Moody shills. I love the corruption index weighting system. It should be further refined and all key players in economy, Potus and alikes downwards in pecking order, the more the better, should have attached to them an INDIVIDUAL personal rating to be weighted in to overall country rating. Then we know, not only what's what, but who is who! 

Yahoo!

Thu, 01/26/2012 - 13:42 | 2099848 Mercury
Mercury's picture

The marketplace is the original crowd source.

Wouldn't it be best to just cut out the middleman completely and advocate for an accessible, centralized, and transparent market?

Some debt doesn't/can't really trade that much but who thinks that price discovery isn't the best mechanism for and aggregator of multiple, disparate inputs?

That plus a competitivley alpha seeking and appropriately regulated professional manager should be all the tools you need.

Just maybe (God forbid) the weakest link here is actually the narrow minded, bureaucratic, compliance culture which mandates that certain types of accounts can only hold certain (amounts of) securities with a particular rating by certain agencies.

Thu, 01/26/2012 - 12:40 | 2099853 semperfi
semperfi's picture

The Establishment isn't going to like this a bit ;P

Thu, 01/26/2012 - 12:40 | 2099855 Dr. Engali
Dr. Engali's picture

How can you rate anything based on economic numbers if they are all a lie?

Thu, 01/26/2012 - 12:44 | 2099863 nyse
nyse's picture

This will (could be) cool once there are more votes, particularly for individual companies. 

Thu, 01/26/2012 - 12:44 | 2099866 mc_LDN
mc_LDN's picture

Ugh. That map makes Australia and New Zealand stick out like a sore thumb. That makes me nervous. Watch the vultures descend.

Thu, 01/26/2012 - 13:15 | 2099890 slewie the pi-rat
slewie the pi-rat's picture

 

 

 slewienomics ratyng systym

A   are you kidding me?
B   beware!
C   crapitoilet
D   dismal doggyfood
e   exponential potential
F   for BiCheZ only!

Thu, 01/26/2012 - 12:54 | 2099900 jimijon
jimijon's picture

This does go along with my writings on my blog about Socialocracy!

Have regulatory bodies be disbanded to the people and keep government strictly on enforcement. The thing it really does the best.

cheers

jimijon.blogspot.com

Thu, 01/26/2012 - 13:00 | 2099918 marcusfenix
marcusfenix's picture

can't get it passed into law via legislation? just sing a treaty instead-

Months before the debate about Internet censorship raged as SOPA and PIPA dominated the concerns of web users, President Obama signed an international treaty that would allow companies in China or any other country in the world to demand ISPs remove web content in the US with no legal oversight whatsoever.

The Anti-Counterfeiting Trade Agreement was signed by Obama on October 1 2011, yet is currently the subject of a White House petition demanding Senators be forced to ratify the treaty. The White House has circumvented the necessity to have the treaty confirmed by lawmakers by presenting it an as “executive agreement,” although legal scholars have highlighted the dubious nature of this characterization.

Under the provisions of ACTA, copyright holders will be granted sweeping direct powers to demand ISPs remove material from the Internet on a whim. Whereas ISPs normally are only forced to remove content after a court order, all legal oversight will be abolished, a precedent that will apply globally, rendering the treaty worse in its potential scope for abuse than SOPA or PIPA....

so I guess SOPA and PIPA were just misdirection, a little sleight of hand after all.

Thu, 01/26/2012 - 13:11 | 2099967 Yousif
Yousif's picture

ACTA is a seriously dangerous agreement.  Thanks for bringing it up.

There is awareness, however, so SOPA and PIPA haven't really covered anything up.

http://www.youtube.com/watch?v=citzRjwk-sQ

Thu, 01/26/2012 - 13:04 | 2099935 Tristan
Tristan's picture

I like this fresh idea.

Thu, 01/26/2012 - 13:04 | 2099936 Goatboy
Goatboy's picture

Last update 2012-9-26 LOL

Is this according to Mayan calender?

Thu, 01/26/2012 - 13:24 | 2100016 mantrid
mantrid's picture
Only 2 countries retain their AAA rating with Wikirating, Hongkong and Luxembourg.

 

hahaha! Luxembourg having external private debt to GDP c.a. 3443% http://www.zerohedge.com/news/uk-debt-infographic-all-you-need-know

once Juncker helps his masterbankers out, they'll need the whole alphabet for the rating scale.

Thu, 01/26/2012 - 16:34 | 2100747 earleflorida
earleflorida's picture

Luxembourg, the interior-landlocked P.O. Box economy - such is reality

Thu, 01/26/2012 - 13:25 | 2100023 Random_Robert
Random_Robert's picture

What is going to happen to this world when the stupid can no longer compel the smart to work for them without increasing the transparency of their stupidity...?

Historians have declared the Renaissance as a "creative revolution" that led to the rise of the Artisan

The "industrial revolution" led to the rise of the Worker

They call the Internet the harbinger of the "Information Revolution" , so it seems that the benefactor will be those who are best equipped to handle information, and filter the wheat from the chaff...

The rise of the "common intellectual" will be the result - and exposure of the secretive, intellectually evil and corrupt will be the end benefit to society...

There will be no end to human society at the end of this year, but there will be a common emergence and profound understanding of the simple, basic fact that our species is rapidly becoming too stupid (in aggregate) to sustain itself much longer...

We will face a choice - become smarter (in aggregate), or continue to destroy ourselves via the willful destruction of our habitat, and each other...

 

 

 

 

Thu, 01/26/2012 - 13:36 | 2100080 Derpmonger
Derpmonger's picture

Which one is more profitable?

Thu, 01/26/2012 - 13:53 | 2100169 InconvenientCou...
InconvenientCounterParty's picture

"We will face a choice"

The idea of a choice in the context of an aggregate of humans is a fallacy.

Try stimulus/response characteristics of a bacterial colony.

Thu, 01/26/2012 - 15:49 | 2100612 Random_Robert
Random_Robert's picture

"The idea of a choice in the context of an aggregate of humans is a fallacy."

- I disagree. It is certainly a statistical improbability, but it is not unprovable by an inverse condition as a true fallacy is.

"Try stimulus/response characteristics of a bacterial colony."

Bacteria only have one goal - to consume and reproduce. Humans have not been degraded to such a primordial state (nor do I think they will be).

Your position suggests that the power of forward thought and choice are subservient to the power of primitive instinctual drive... I think the experiment that will prove (or disprove) your thesis is already well underway...

You assume the Joker is right ("These civilized people... will eat each other")

I assume that Batman is right.

Time will tell. 

 

 

Thu, 01/26/2012 - 13:43 | 2100117 ucsbcanuck
ucsbcanuck's picture

Hahaha - can see Chinese prison farms being used desperately to keep China's rating up! "Green, green. Now!"

Thu, 01/26/2012 - 13:57 | 2100185 rsnoble
rsnoble's picture

F.

Thu, 01/26/2012 - 14:39 | 2100369 jm
jm's picture

Where's Dick Darlington when you need him?

Thu, 01/26/2012 - 14:40 | 2100376 BobPaulson
BobPaulson's picture

Not that Chile is a bad place, but I would take a second look at a system that seems to put it on top. Again, if you are from Chile don't flame me. I'm guessing they have a low debt, which is making this number high.

I also think this index is mixing apples and oranges by putting in the HDI. Is this a measure of creditworthiness or a way for expats to decide where they want to live? In many ways Chile and Australia look like great places to live, so for that the index seems to work well.

Thu, 01/26/2012 - 15:11 | 2100484 Archduke
Archduke's picture

+1MM. Brilliant. It's about time. Absolutely brilliant.

 

Thu, 01/26/2012 - 15:23 | 2100520 Esperanza Y Cambio
Esperanza Y Cambio's picture

The only rating agency in the world to have Argentina ahead of ... Canada! Lookout Canucks!

Thu, 01/26/2012 - 17:00 | 2100820 thomcat00
thomcat00's picture

Wikiratings, is this like a Groupon Deal for sovereign credit?

Thu, 01/26/2012 - 18:37 | 2101076 1984
1984's picture

I don't understand why we'd need ratings at all.  Why not let market prices determine, *gasp*, market prices?  Why do we let arbitrary pronouncements from ppl with no skin in the game, or worse yet, with conflict of interest or ulterior motives, drive market prices?

Thu, 01/26/2012 - 20:46 | 2101373 Irrational number
Irrational number's picture

Greece has a fat B rating according to them:)

I think CNBC are better fortune tellers:)

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