Its a wonder to me that a privately owned financial organization called S & P could alter the way the world looks at economics, and pressurize governments of ( say the Eurozone) to take steps that could destroy their social systems and radically alter the lives, security and future of millions of people. Why would a downgrade by S & P radically alter currency values (especially the Euro). What do they know that others do not ? What do they know that the governments of the nations do not ?
After all in 2008 it was radically clear that no one knew. Almost everyone that understood capitalism in one way got it completely wrong. Capitalism turned tables on all known financial systems and showed that there is a time when the rules suddenly change, where the bubble suddenly burst and the flaws come bursting out.
There was a time when the World Bank policies were pushing developing nations to make decisions that in theory and paper looked great, but which from a huge social cost perspective were a disaster. Especially large infrastructure projects that not only caused huge human displacement, social injustice and trauma, police atrocities, and environmental damage. And in a cost/benefit analysis 10 years down the line, the only benefit turned out to be was to the corporations, politicians and middle men. Not the people.
Thankfully the World Bank does not wield that power (at least in India) or Indian financial systems would have been far more hit by the sub-prime crisis than it was in 2008. Not a deliberate path of ‘overlordship’ by the World Bank I think, but the Western Economic System was the only one that was considered valid then. It was the economic mantra taht failed. Post 2008 has been a lesson – the one which we are in danger loosing sight of again. A lesson that cultures often come into conflict with economic development models understood in , and imposed by other cultures .
Back to Europe, then. I wanted to know who owns S &P. Is it men in pin stripe suits in darkened board room ? Like the proverbial Gnomes of Zurich ? Here’s what I discovered :
S &P is owned by a series of banks and financial institutions that stand to profit by hugely by the movement of currencies, bond markets and financial markets if they has prior knowledge of downgrades from the very company they own. And for those that wonder if it such large multi nation manipulations can at all take place should remember the Asian currency crisis of 1978 where “market overreaction and herding caused the plunge of exchange rates, asset prices, and economic activity to be more severe than warranted by the initial weak economic conditions”. The crisis destroyed millions of livelihoods all across Asia, and some economies have still not recovered. From market speculation.
Is S & P completely above board ?
The good thing though is that the latest downgrade of European nation did not cause the market chaos that was expected. Speculators must have lost a lot of money. Thank God. And perhaps S & P has now ‘cried wolf’ too often and no body really cares
Or maybe, like everyone else, they just don’t know.