The Fitch ratings agency announced overnight that:
Fitch Downgrades Mexico to ‘BBB-‘; Outlook Stable
For those unfamiliar with rating agency nomenclature this means that Mexico’s debt is now just above what is called ‘junk’ status.
This is profoundly unhelpful. At a time when Mexico, like almost every Latin American country, is facing the challenge of coronavirus and a pile of US dollar debt over which it has almost no control as to cost, it is facing a rating agency saying that the cost of its debt servicing must basically increase through no fault at all of its own.
Well, no, it doesn’t actually say that. The cost of debt servicing is the coupon agreed at time of issuance. That’s not changed in the slightest.
The cost of borrowing more, that has risen, yes. But just because governments like to roll over their debt doesn’t mean that there’s not a difference between these two things.
This is argument that this can best be described as callous: Fitch is very clearly putting the interests of creditors above the lives of the people of Mexico.
It can also be described as profoundly unjust: developed country debtors will profit from the crisis at cost to a developing country.
It could be argued it represents a failed paradigm when governments are all that are now underpinning capitalism but are being downgraded in the interests of rentier capitalists, nonetheless.
But most it could just be called wrong. It is a symbol of all that is profoundly misguided, amoral and exploitative in the world of financial capitalism.
I suggest that the rating agencies be subject to enforced silence on government debt right now.
Or as this should be translated – I don’t like what people are saying so we must ban them from saying it. For that free speech thing is just so neoliberal, isn’t it?
In the real world Fitch’s downgrade will cause losses for those of Mexico’s creditors holding its market-listed bonds as the price of those bonds will go down. As Tim points out Mexico’s costs will be unchanged – unless it buys in some of the downgraded, hence cheaper, bonds prior to maturity thereby making a profit. Developed country *creditors* (the “debtors” is a typo) will suffer from the crisis.
Murphy has got it the wrong way round, as usual.
If being profoundly misguided were reason enough to close down an information stream, then should that also apply to terraced houses in Ely?
Besides which, if budget deficits are fine anyway, a higher interest rate won’t matter, will it?
Since the interest payments are unchanged by this what is he worried about? Is this an unsuspected conversion to the viewpoint of investors?
“developed country debtors will profit from the crisis at cost to a developing country.”
Does he mean developed country creditors?
“Developing country” has got to be the most obnoxious euphemism since we started calling window licking stupidity “learning difficulties”, and dark-eyed, quick-tempered Dwarven people “the Welsh”.
They’re developing, you see. Gonna be developed, any day now… pay no attention to the guys being beheaded by a cartel enforcer with a chainsaw. Developing.
So he is suggesting that the pension funds on which hundreds of millions of people depend for their retirement should not be alerted to the obvious fact that a deranged LatAm leftie (called AMLO in this case) is sending his country down the tubes? In this case so badly that even the FT noticed it in a leader yesterday?
Wouldn’t that rather nullify the point of a ratings agency?
Judging by the registration date and host (1&1), I guess this will be where Ritchie’s new project will appear: http://tacs.org.uk
Probably soon to be filed under the stunning successes of his other web “ideas”:
http://www.progressivepulse.org
http://financeforthefuture.com
http://t*xresearch.org.uk/Wiki/
https://enougheconomics.wordpress.com
http://fairtaxpledge.uk/
http://www.corporateaccountabilitynet.work/
“What did tax do for you today” – https://www.t*xresearch.org.uk/Blog/2010/08/22/what-did-tax-do-for-you-today-1-providing-nature-reserves/ (he got to #4 then gave up)
+ the FTM which isn’t quite dead, mainly because Ritchie doesn’t run it any more
I’ve probably forgotten some as well.
Isn’t he predicting the next financial disaster every 5 minutes?
How are those actions any more or less responsible than those of any ratings agency?
(sorry Tim, too many links in my post, probably in your spam trap)
He’s saying that the credit agencies should give a false report on their opinion of a country to repay debt?
I bet 10 years ago he was calling for their heads for giving an incorrect opinion on those dodgy A rated mortgage bonds (or whatever they were).
I suggest that the rating agencies be subject to enforced silence on government debt right now.
So evidently in Spud’s Brave New World markets function better with less information and more uncertainty. Who knew?
Fitch is very clearly putting the interests of creditors above the lives of the people of Mexico.
That’s the business they’re in. The world needs an Archewell Rating Agency to redress the balance.
Because markets always work much better when adverse information is artificially suppressed. NOT.
This is one of those 2nd order effects the Spud doesn’t think exist:
Mex (or any other) Govt: Hi markets, we’d like to borrow some money?
Markets: We’d love to but we’ve no way of valuing your bonds, so not thanks.
Mex Govt: But we really need the money.
Markets: OK, but your last rate plus, lets say, 20% to be on the safe side.
No doubt Spud will say he previously forecast the economic damage caused by Covid despite the fact he didn’t forecast Covid
Hey here’s a pile of barely coherent lefty wibble to get your teeth into. The author is on my personal list of academics who aspire to the intellectual rigour of Polly the donkey-lover
http://www.perc.org.uk/project_posts/the-holiday-of-exchange-value/
Diogenes,
I find myself at odds with you on that piece.
It is far from barely coherent.
It is incoherent. And, as usual, states opinion as real world fact.
One suspects that the author has never done an honest days work in his/her life.
He works at Goldsmiths College, so he used to be one of Capt Potato’s peers
Is there a Murphy’s Law?
You know, the one that says any pronouncements are going to be wrong, or arse-about-face.
How can this ignoramus be employed at Goldsmiths (unless as a janitor perhaps)?
@ BITIN
I disagree – there are coherent bits such as the claim that doctors are part of the impoverished working class; that the point of primary education is not learning the three Rs but competing against other children; that work can only be exchanged for money in physical proximity to the employer/hirer; that capitalist markets are united in agreement that …
Apart from markets being formed by people who differ – otherwise there wouldn’t be a market – all the things they are supposed to agree are just plain wrong because wages have (except where government influence things) been set by market forces and mutual agreement between workers and employers. The existence of unions should add to pressure to pay workers an adequate wage so the author presumably believes that unions are useless and the CWU has been striking for the wrong reasons. He’s never heard of working from home. He doesn’t want children to be literate and numerate.
Hmm!
John77
I fear we’re in violent agreement..
I was struck by this paragraph
Is he even wrong? I wish I knew more about alibaba because, on the face of it, it invalidates his point and yet…. Just how does alibaba work?
Delingpod 69, 15 April:
Hector Drummond vs Covid-19 Hysteria
https://www.youtube.com/watch?v=ga5IhhVmyR8
https://hectordrummond.com/
@Diogenes
Alibaba, Amazon, eBay etc allow the proles to circumvent State “trade deal” controls on what can be purchased from anywhere
At last, the worm turns and Peter Hitchens and I are not alone:
Pcar:
Yesterday: “Hancock needs to be emotional and weep to see he’s wrong? Twat
I said last week the rule was wrong and evil – no emotion or weeping involved, only some empathy & kindness”
13 Apr: I named him “Kindergarten Gruppenführer Hancock”
Today:
Deedes
and J SP
Meltdown:
“Health Secretary Matt Hancock appears on GMB to talk about the ramping up of coronavirus testing in the UK. Piers and Susanna question the minister on how and when the lockdown will end and whether NHS workers have the PPE they need to keep safe. Mr Hancock also reacts to Jacinda Ardern, the Prime Minister of New Zealand, taking a 20% pay cut to show solidarity with those on furlough and having financial difficulties”
https://www.youtube.com/watch?v=JxCI4odOYuY
He’s clarified on a downgrade:
“The owners of debt gain. Developing nations pay. I could not be clearer”
How can such an simpleton be let anywhere a university teaching role? He literally posts whatever comes into his head on his blog. Absolutely oblivious to his lack of understanding of anything.
?
Who set up the conditions whereby the ratings agency lost faith in Mexico’s ability to repay its loans?
Mexico, right?
The ratings agency is just reporting on its findings. The rating’s agency giving Mexico a shitty rating does not make the Mexican government a riskier investment. The Mexican government being a risky investment got the rating.
Shit like this is why no one in government – even the crazies in Labour – will listen to the dude. How in the hell does anyone credible still employ this man to teach?
He’s an open fascist and he gets basic cause-and-effect backwards.
I’m pretty sure Mexico is not lending money to the developed countries.
But even if they were – why the sudden shift to taking the side of the creditor now? Not too long ago he was talking about how landlords should be utterly shafted for the benefit of renters.
i thought governments could just magic up the money without any ill effects according to mmt. Mexico can just magic up millions of pesetas or set the printing presses to turbo max to pay off any creditors. Easy peasy.
The worm turns on Kindergarten Gruppenführer Hancock Pt II
– “Attempts to quiz the health secretary over criticisms of the government’s procurement of ventilators for coronavirus patients have descended into an outlandish spat on morning television.
The government’s request for ventilators which would stabilise patients “for a few hours” at minimum has been condemned as “no use whatsoever” by the UK’s professional body for intensive care practitioners, the Financial Times reported on Wednesday.”
https://www.independent.co.uk/news/uk/politics/piers-morgan-matt-hancock-gmb-row-argument-interrupt-coronavirus-a9467986.html
FT Front Page Article below
No surprise, I said weeks ago Dyson et al wasting time and money as approval would be delayed/denied. Think of those NHS/PHE seniors with early retirement and Director of Acme BioVent lined up. Then along come Gtech with a £10,000 not £1 Million ventilator
More on Kindergarten Gruppenführer Hancock
1 https://www.dailymail.co.uk/news/article-8225343/Four-10-Britons-believe-Matt-Hancock-QUIT-fails-hit-coronavirus-tests-target.html
2 https://www.dailymail.co.uk/news/article-8224981/Matt-Hancock-DISMISSES-calls-ministers-coronavirus-pay-cut.html
3 https://www.dailymail.co.uk/news/article-8224887/No-PPE-care-badges-Website-new-pins-CRASHES-hours-Matt-Hancock-unveiled-it.html
NHS/PHE Mgt: Private Sector bad
FT Front Page Article
UK’s new ventilators still awaiting regulatory green light
Exactly what I forecast: Dyson, GTech etc wasted their time and money. UK Formula 1 Project Pitlane realised hoop jumping imperative and had sample Pressurised Breathing Aid fast-track approved by MHRA before production