A Rating for a Rating
Published in Rossiyskaya Gazeta
(Russia) on 10 August 2011
by Vladislav Vorobiev (link to original)
(Russia) on 10 August 2011
by Vladislav Vorobiev (link to original)
Translated from
by Olga Kerzhner.
Edited by Amy Wong.
Barack Obama's unsuccessful attempt to calm the market lowered his rating.
Three days after S&P lowered the credit rating of the United States, Barack Obama finally found something to say in response. Against the backdrop of dramatic market collapses around the world, the U.S. leader announced that, as it turns out, there is no reason to worry. Basically, Obama urged listeners to stop paying attention to the findings of the ratings agencies. The U.S. president advised the rest of the world to use the U.S. as an example in this endeavor. In a special statement to the press, Obama remarked, "[W]e didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction. [...] And we didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least."
But the more the U.S. president repeated (like a magic spell) that he and the rest of Americans do not need the rating agencies, the clearer it became that if S&P had not dared to lower the credit rating of America for the first time in many decades, Washington would have continued with non-constructive talks and refused to search for a balanced approach to deficit reduction. Moreover, the majority of key politicians in the U.S. still pretend that nothing happened. After the recess, they will quietly return to their favorite activity — a tug-of-war in the debate about budget items that need to be cut.
The behavior of politicians is understandable considering that even Obama insisted that there was nothing catastrophic about the recent conflict between the Republicans and the Democrats. Obama is certain that "the markets continue to reaffirm our credit as among the world’s safest. [...] [W]e’ve always been and always will be a AAA country." But Obama is only partly correct, at least because there is simply no serious alternative to U.S. Treasury bonds for investors around the world. This is the real problem of the world economy; it has become the main challenge for the G20 over the last few days.
Obviously, under the circumstances, Obama simply could not afford to make a different statement. Just imagine what would have happen if the U.S. president agreed with S&P's conclusions in his special press statement. Instead of the current decline of 5 to 6 percent, the markets would have instantaneously fallen by a disastrous 25 to 30 percent and maybe more.
On the other hand, saying that nothing bad has happened (in a situation where the lion's share of the experts are convinced that the world was hit by a second wave of the global crisis) means admitting your own inability to control the situation. This has become evident to (among others) American voters, 52 percent of whom, according to recent opinion polls, will not vote for Obama in the next election.
Now, it's likely that the U.S. president will be able to resuscitate his rankings only with extremely clear, tough and fast-acting solutions. But instead, Obama said, "Making these reforms doesn’t require any radical steps. What it does require is common sense and compromise." This is not surprising. In the current political situation, Obama has practically lost all wiggle room. The last month, up until the last moment of fruitless negotiations about America's debt ceiling, has proven that an absolute stalemate prevails in Washington. By lowering the credit rating of the U.S., the experts at S&P have first and foremost focused Americans' attention on this issue.
Meanwhile, American documentary filmmaker Michael Moore, who gained worldwide fame for his anti-Bush movies, demanded that Obama arrest S&P leaders. According to him, it's not America with its huge debt and the unwillingness to live within its means but the rating agency experts who are to blame for the crisis. Moore tweeted, "Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again."
Three days after S&P lowered the credit rating of the United States, Barack Obama finally found something to say in response. Against the backdrop of dramatic market collapses around the world, the U.S. leader announced that, as it turns out, there is no reason to worry. Basically, Obama urged listeners to stop paying attention to the findings of the ratings agencies. The U.S. president advised the rest of the world to use the U.S. as an example in this endeavor. In a special statement to the press, Obama remarked, "[W]e didn’t need a rating agency to tell us that we need a balanced, long-term approach to deficit reduction. [...] And we didn’t need a rating agency to tell us that the gridlock in Washington over the last several months has not been constructive, to say the least."
But the more the U.S. president repeated (like a magic spell) that he and the rest of Americans do not need the rating agencies, the clearer it became that if S&P had not dared to lower the credit rating of America for the first time in many decades, Washington would have continued with non-constructive talks and refused to search for a balanced approach to deficit reduction. Moreover, the majority of key politicians in the U.S. still pretend that nothing happened. After the recess, they will quietly return to their favorite activity — a tug-of-war in the debate about budget items that need to be cut.
The behavior of politicians is understandable considering that even Obama insisted that there was nothing catastrophic about the recent conflict between the Republicans and the Democrats. Obama is certain that "the markets continue to reaffirm our credit as among the world’s safest. [...] [W]e’ve always been and always will be a AAA country." But Obama is only partly correct, at least because there is simply no serious alternative to U.S. Treasury bonds for investors around the world. This is the real problem of the world economy; it has become the main challenge for the G20 over the last few days.
Obviously, under the circumstances, Obama simply could not afford to make a different statement. Just imagine what would have happen if the U.S. president agreed with S&P's conclusions in his special press statement. Instead of the current decline of 5 to 6 percent, the markets would have instantaneously fallen by a disastrous 25 to 30 percent and maybe more.
On the other hand, saying that nothing bad has happened (in a situation where the lion's share of the experts are convinced that the world was hit by a second wave of the global crisis) means admitting your own inability to control the situation. This has become evident to (among others) American voters, 52 percent of whom, according to recent opinion polls, will not vote for Obama in the next election.
Now, it's likely that the U.S. president will be able to resuscitate his rankings only with extremely clear, tough and fast-acting solutions. But instead, Obama said, "Making these reforms doesn’t require any radical steps. What it does require is common sense and compromise." This is not surprising. In the current political situation, Obama has practically lost all wiggle room. The last month, up until the last moment of fruitless negotiations about America's debt ceiling, has proven that an absolute stalemate prevails in Washington. By lowering the credit rating of the U.S., the experts at S&P have first and foremost focused Americans' attention on this issue.
Meanwhile, American documentary filmmaker Michael Moore, who gained worldwide fame for his anti-Bush movies, demanded that Obama arrest S&P leaders. According to him, it's not America with its huge debt and the unwillingness to live within its means but the rating agency experts who are to blame for the crisis. Moore tweeted, "Pres Obama, show some guts & arrest the CEO of Standard & Poors. These criminals brought down the economy in 2008& now they will do it again."