.Austerity Doesn’t Pay as Debt Markets Ignore Rating Cuts – Bloomberg 06-18-12

Salient to Investors:

Bloomberg study of 314 upgrades, downgrades and outlook changes since 1974 shows interest rates moved in the opposite direction 47 percent of the time for Moody’s and for S&P. IMF studies show prices moved in the expected direction 45 percent of the time for developed countries and 51 percent for emerging economies. For outlook changes, the ratios were 67 percent and 63 percent.

Professor John Hund says the ratings have more potential to do harm than good, and are of little value.

Professor Paul Krugman says the austerity policies prized by the rating companies have the global economy on the brink of renewed recession, worsening fiscal prospects in an endless downward spiral.

The IMF has lowered its forecast for every EU country since last year.

NYU’s Richard Sylla said the SEC in 1975 foolishly increased the monopoly power of Moody’s and Standard & Poor’s and Fitch.

Chris Rupkey of Bank of Tokyo-Mitsubishi UFJ said the rating agencies are doing the world a huge disservice by frightening financial markets.

Read the full article at http://www.bloomberg.com/news/2012-06-18/austerity-doesn-t-pay-as-debt-markets-ignore-rating-cuts.html