Saturday, February 16, 2008

The real terrorists still operate at Ground Zero

While many Americans may be busy celebrating the anniversary of Britney Spears shaving her head, or preoccupying themselves with Roger Clemens', uh, testimony at a Congressional hearing, Moody's has been making a move of its own:
On January 10 Moody's, in concert with the other main bond rating firm, Standard and Poor's, gave the United States its top AAA credit rating. The terrorist blackmail threat came in the form of a demand by Moody's that the U.S. government "reform" Social Security and Medicare: "In the very long term, the rating could come under pressure if reform of Medicare and Social Security is not carried out as these two programs are the largest threats to the long-term financial health of the United States and to the government's Aaa rating."

Steven Hess, Moody's top analyst for the US economy spelled it out even more explicitly to the London Financial Times: "If no policy changes are made, in 10 years from now we would have to look very seriously at whether the US is still a triple-A credit. The US rating is the anchor of the world's financial system. If you have a downgrade, you have a problem."

US interrogators torture men in secret prisons seeking to catch those members of Al Quaeda still at large, starting with Osama bin Laden and Aiman al-Zwahiri. Yet here's Moody's man calmly threatening to destroy the US government's credit ranking unless it follows his agenda, and he strolls around Lower Manhattan unmolested, even if his threats could add up to the financial equvalent of a thermonuclear device planted under the Statue of Liberty.

Moody's runs a protection game. It issue credit ratings, (in 2007 no less than 39 percent of the global credit rating market by revenue, according to Bloomberg) based on public data and private information made available by those clients that have "voluntarily" retained their services. The price of not volunteering can be high. As vividly described by Alec Klein in his excellent 2004 series in the Washington Post on the credit-rating giants, the giant German insurance corporation Hannover declined repeated Moody's offers to rate its credit, at a time when the latter was trying to extend its reach in the European Community. Moody's promptly issued an unsolicited and adverse rating, then--just like a small time mobster after hurling a brick through the window of a liquor store--went back to Hannover and reissued its invitation to offer protection-by-rating. Hannover's top man said he wouldn't surrender to blackmail and so between 2001 and 2003 Moody's steadily reduced Hannover rating all the way down to Junk. This cost Hannover a great deal of money in paying the higher risk premiums on money it borrowed.
Yup...the real terrorists aren't hiding in mountains somewhere in Afghanistan or Pakistan, but rather occupy the office buildings that define the Manhattan skyline. You want to really stop the terrorists? Here's an idea: stop giving the ultra-rich tax breaks, and ditch these idiotic attempts to colonize Iraq (hell, let's go further and get rid of the rest of the trappings of empire in the process, such as the 700 plus military bases that are scattered all across the globe). Voila! Those pesky deficits would go away pretty quickly. A lot of lives would be spared in the process.

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