A Poor Standard of Value

In an article by Louise Story in the New York Times- U.S. Inquiry Eyes S.&P. Ratings of Mortgages (http://www.nytimes.com/2011/08/18/business/us-inquiry-said-to-focus-on-s-p-ratings.html?_r=1&nl=todaysheadlines&emc=tha2) the mishandling of the rating of mortgage securities by Standard & Poor’s is outlined like it’s breaking news. The fact that the ratings agencies had a major part in the financial collapse seems to have gone unnoticed in the media glare of the fall of some of the US’s biggest banks and their overlords.  In fact the spotlight has even been directed away from the ratings agencies to some extent as the US Federal Government continues to hound banks in the courts for misrepresenting the value or quality of their mortgage bundles in order to get government insurance. All of that seems to have changed now that S&P’s have downgraded the US credit rating from AAA to AA+ and now the Federal Government is no longer friends with the ratings agencies so I imagine that Moody’s and Fitch will soon be in the government’s sights for a grilling too.

To put it in a nutshell, now that we have the benefit of hindsight it has come to light that the ratings agencies may have overlooked the high number of unsustainable mortgages in bundles of mortgages that were used to back securities that got the AAA stamp of approval. This meant that investment firms like superannuation companies poured their money into these securitized bonds under the impression that they were rock solid investments. When the bad mortgages began to tank in significant numbers the value of these bonds disappeared and the investors lost their shirts. The whole sordid business is lucidly explained in Michael Lewis’ book The Big Short in far greater depth than I can give it here but this leads me on to my next point- the questionable ratings must have been known about over a year ago by the government so why is it news now? And, how much value is there in these ratings anyway?

The only reason that these ratings agencies have acquired so much power and influence in the first place is because of the way that money is created from debt. In order to give currency a semblance of value the bonds that are issued by central banks are rated for their quality as an investment. AAA bonds supposedly offering the safest and most lucrative investment. How these ratings are arrived at exactly is a “secret” that is closely guarded by the agencies but seems likely to come under much closer scrutiny into the near future. Essentially though, these agencies are in a very close relationship with the banks for their income stream, whilst the banks rely on the ratings agencies for their stamp of financial approval. This means that the issuance of loans and their rating as a viable investment are controlled by two exclusive institutions that are keen to be mutually beneficial to one another- almost the dictionary definition of a cartel.

The world’s money problems aren’t going to be fixed by throwing a bunch of accountants and bankers in jail for fraud (even though we all might feel a bit better for it) but it is a good enough place to start. More important than a witch hunt through the worlds of high finance to find those responsible for the last collapse is to look at what we did to get into such a mess in the first place. Whilst the inquisition is looking for those guilty of taking us down this road to financial ruin perhaps they should look at the politicians that spent the money that they didn’t have in the first place. Maybe our debt backed currency has finally shown itself not to be worth the paper its printed on. I fear though, that as usual, all that will happen will be another round of court appearances before we return to business as normal.

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About dgmattichakjr

D G Mattichak jr was born in 1963 in Syracuse New York and immigrated to Melbourne Australia with his family in 1972. He was educated in one of Melbourne’s exclusive private schools before studying art at Preston Technical College. D G Mattichak jr has been a student of the occult arts since the early 1980s and has become well known in Australian magickal circles and, in recent years, around the world due to a string of essays on a variety of occult subjects http://www.scribd.com/dmattichak/shelf . He discovered the “key to the order & value of the English alphabet” from Aleister Crowley’s Book of the Law in 1983 and has since used this English Qabalah to unlock the secrets of Thelemite magick. Success in these methods admitted him to the highest levels of attainment in various Hermetic disciplines and until recently he has been passing on his knowledge to private students, many of whom have gone on to become notable occultists in their own right. After almost three decades of study and development D G Mattichak jr has finally been able to distil his knowledge of magick and Thelema into a book- A Comment on the Verses of the Book of the Law, the first in a planned series of books on Hermeticism and Thelemite magick, revealing, for the first time in over a century, the secrets of magick that have been hidden in Crowley’s magnum opus, the Book of the Law. D G Mattichak jr currently lives in Melbourne Australia with his artist wife Michelle and their two cats. He has had a long career as an al a carte chef in Melbourne’s vibrant hospitality scene and now spends his time writing blogs on cooking, writing and, in the guise of Master Ankh af na Khonsu, about magick. He is also one of the founding members of the Mt Franklin Annual Pagan Gathering and regularly contributes to its official website http://mountfranklinannualpagangathering.blogspot.com/ as both an administrator and as an author. D G Mattichak jr’s first book Loot was released in 2009. His books are available through amazon.com at http://www.amazon.com/s/ref=nb_sb_noss?url=search-alias=stripbooks&field-keywords=D G Mattichak&x=13&y=20 .
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5 Responses to A Poor Standard of Value

  1. You show a brilliant understanding of the mechanics of that part of the marketplace.

  2. Ed Hurst says:

    I’ve been reading a lot about this. You can reliably predict who will blame whom on the whole issue. Most of it is meant to confuse things, with simplistic posturing on all sides. The US government investigating S&P is a sham, because an honest rating of the US credit rating would be much worse. We will default; it’s only a matter of time. You have correctly targeted the real issue, which precious few have addressed. Good job.

    • Of course they will blame everyone EXCEPT the banks that are actually at the back of the whole shit storm. The whole issue is so confusing (on purpose as you say) just so most people will never be able to fathom its important details. I work with the “public” and so I have come to ascribe to the 80-80 rule: 80% of people have an IQ of 80. On that basis the government (which perpetuates this level of public ignorance through its manipulation of the education system and then blames it on teachers- don’t get me started on that topic!) can feed the media whatever it wants to and 80% of people will buy it. If those 80% were to find out the truth (or when they do?) there would be revolution.
      Thanks for the encouragement Ed. I have followed your blog (religiously?) for a while now and I know that you too see the essence of these things so a pat on the back from you means something mate!

  3. Pingback: The Color of Money | Dgmattichakjr's Blog

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