Credit agency downgrades France. But are these agencies that important?

For many years.... I myself have questioned the true value of Credit Agencies and the role within world economy. as over many years of studying these Agencies I have become to see there forecasts quite unreliable. as it was only last year that they downgraded the US economy and this had very little effect in the long term of the US economy. I wounder if it is not high time that we downgraded these credit rating agency and there importance within world economic picture. as all these reports and ratings do is turn world stock market's into free fall for two to three days with sort term damage and little or no real benefits to anyone.

WHAT'S YOUR VIEWS ON THIS ISSUE, AS IT WILL HAVE NO GREAT EFFECT ON EUROPE AT ALL IN THE LONG TERM.?

The eurozone debt crisis returned with a vengeance on Friday as Standard & Poor’s, the credit rating agency, downgraded France and Austria – two of the currency zone’s six triple A rated countries – as well as seven nations not in that top tier, among them Italy and Spain.
S&P, under political fire since it announced a review or eurozone debt in December, gave 14 of 16 countries – including France, Italy and Spain – a negative outlook, which it said meant a one-in-three chance for each country of a further downgrade this year or next.
The agency downgraded France and Austria by one notch to double A plus, while it cut Italy Spain and Portugal by two notches. Ireland held its rating.

The downgrades reignited fears about the fiscal sustainability of the eurozone and the knock-on effect on its rescue fund, which could now lose its own triple A rating, reducing its firepower or forcing eurozone nations to increase contributions yet again. S&P said last month’s European Union summit, which saw eurozone leaders agree steps towards fiscal union, had “not produced a breakthrough of sufficient size” to overcome a crisis which had already forced bail-outs of Greece, Ireland and Portugal.
Nonetheless, Germany kept its triple A rating, along with the Netherlands, Finland and Luxembourg. Germany and Slovakia, downgraded from A plus to A, were the only countries who were not deemed in danger of a further downgrade by the end of 2013.
http://www.ft.com/cms/s/0/78bf6fb4-3df6-11e1-91f3-00144feabdc0.html

RockOnBrother wrote:
Countries are not corporations. I believe these agencies are overrated.

you know I do too Rock. its a interesting one this. as there was a great deal said about the US at the time, but had very little effect on the US economy as a whole.

The best thing to send these countries to the top again is to make new deals - big deals.

Why not make a deal for three months worth of sample products to and from these countries? This always helps investment...

Credit Agencies have something in common with books of Etiquette.

You hate yourself for going along with them.

Governments and Company Directors have one thing in common - they like to have "cover" for their decisions. It's convenient to have an independent organisation that can be asked for a report that supports the desired action. Boards that want to reduce the numbers of staff they employ bring in a company such as McKinseys, who will do a "survey" which surprise, surprise, recommends redundancies. Alternatively, "The Auditors" will provide similar "advice".

Financial institutions can invest where they want to without criticism as long as there is a universal yardstick like the AAA rating.

Only the Almighty knows how a tiny Country like Iceland ever received an "Investment Grade" classification.

Only the Almighty knows how a tiny Country like Iceland ever received an "Investment Grade" classification

And they owe the UK millions of £s with no intention of paying it back!

Any default on a debt, in any club in this country would have said member rendered in "Bad Standing" and shunned by the membership, but not so in this financial case, why?

RockOnBrother wrote:

Stox 16 wrote:
… had very little effect on the US economy as a whole.

I agree, Stox. Dow Jones is skirting 12,500, fewer foreclosures, a few other signs of slow but steady recovery…

Cannot agree more with that Rock. yet too here the media talk you would think the whole world was about too fall in on the US economy. just goes to show how pointless they are too me

RockOnBrother wrote:
Because countries are not country club members. The likely US Rep. nominee seems to think otherwise.

God help you Rock if the US Rep get in. I hate to think what they would do. :affraid:

Institutional investors, including central banks and pension funds, use the ratings as guides as to what they can and cannot invest in. Certain types of funds, for example, are only allowed to invest in debt of a certain quality.

So even though a downgrade might be stating the brutally obvious, it can be the trigger point at which institutions are forced to sell an asset if they haven't already done so.

And, of course, the agencies' actions can make a panic worse. At a time when confidence and speed of reaction is a genuinely serious issue, communicating in this way isn't helpful.

If ratings agencies didn't exist, Greece and the euro would still have been in dire straits and the markets would still have been panicking.

In this case they've added to the noise, but they're hardly the root cause of the problem. Arguably, as Gross says, they are little more than a distraction that smart investors would do well to ignore.

Perhaps stripping the agencies of their semi-official status would help to increase competition in the sector and allow investors to make judgements based on the track record of an agency, rather than on how dominant it is.

Better yet, it might force investors to do their own due diligence and use their common sense before they pile into Greek debt, imagining that it's German.

Credit Rating Agencies would get a better Press if they didn't have that unfortunate track-record of running with the hare and hunting with the hounds.

There are many well-documented instances of them being paid for a favourable report.

Who shall guard The Guards?