Western Credit-Rating Fraud Exposed -- Again

October 18, 2013

The “good news” is that the latest Act of “The U.S. Debt-Ceiling Farce” has mercifully ended, and the curtain has come down on this puppet-theater. The bad news is that it ended (absurdly) with a mere three-month reprieve – before we get literally an instant replay of this contrived posturing and puffery.

Apart from the outrageous irresponsibility of the U.S.’s elected representatives staging these contrived “crises” (instead of doing their jobs); these quasi “shutdowns” of the U.S. government do serious short-term harm to the already-crippled U.S. economy – meaning medium- and long-term economic consequences from this staged theater. Yet as the dust settles from the latest Act; we see essentially zero reaction in the international financial community (with one, small exception).

The world’s largest economy, sitting with the largest debts and largest deficits in the History of the World openly “debates” whether or not to continue paying its bills, it ends up (supposedly) only hours away from official debt-default, and there is no reaction? Having regularly used words such as “drones” and “parrots” to characterize the ever-vigilant minions of the Western, Corporate Media; this one event alone provides absolute vindication.

During the worst days of the “Euro Debt-Crisis” (so far); European governments received regular downgrades to their sovereign debt on only the flimsiest of pretexts, sometimes due to nothing more than the (fraudulent) manipulation of credit-default swap rates on that debt (i.e. the multi-trillion dollar bets made that these governments will default on that debt).

The “insurance market” (credit default swaps) for the debt of many European debtors is greater than the actual debts themselves. The Tail does “wag the Dog” in our crime-ridden financial markets. And by fraudulently manipulating credit-default swap rates; Western banksters can (and do) manufacture downgrades on Euro economies (or vice versa) – and by doing so, they can drive interest rates to literally any number they desire…but they don’t do this in the USA.

With the U.S. government a mere hours away from debt-default, and sitting with (in actual fact) more than $200 trillion in debts/obligations; the U.S.’s Teflon, “AAA” credit rating remains intact. An economy which the Chairman of the Federal Reserve has now acknowledged is a Ponzi-scheme, retains a carved-in-stone “AAA” credit rating.

The obvious question is: would/will the U.S. economy be “downgraded” at all after it defaults on its astronomical debts and liabilities?

For those comatose members of the general public who still snicker whenever they see/hear the word “conspiracy”; spend just two minutes observing the Ultimate Accomplices of financial crime: the Western credit-rating agencies. Right up until (literally) the day after the made in-Wall-Street U.S. housing bubble imploded; these credit rating Accomplices were rubber-stamping virtually all of the Bankster’s “securitized” mortgage-fraud products “AAA”.

This was ratings fraud: ratings agencies selling these (bogus) “AAA” ratings to Wall Street – which those Banksters then used to lure-in chumps for $trillions in securities fraud. And there wasn’t even any attempt made to hide the fraud. The ratings agencies openly acknowledged that they allowed their “clients” (the Wall Street Banksters) to tell them how to rate their fraud-products.

Not only did these (so-called) “credit rating” agencies not even employ enough staff to thoroughly/properly examine all the “products” on which they issued ratings; they openly acknowledged that they didn’t even understand some of the more convoluted Wall Street scams – and so they simply accepted the Bankster’s own explanations, essentially allowing them to “rate” their own fraud-products.

One obvious question arises: how do companies selling phony ratings on fraudulent financial products even remain in business? The answer to that question comes in the disingenuous legal defense which has been (successfully) used by these Accomplices when they have been sued over their bogus “ratings”: the small-print disclaimer at the bottom of all these constantly-hyped “credit ratings” dispensed by these companies.

It turns out that the credit ratings of the world’s most prestigious credit rating agencies are purely for entertainment purposes – and (supposedly) they aren’t intended to actually be used in conducting business (i.e. buying and selling the financial products these companies rate).

Investors (i.e Chumps) think they are obtaining some sort of “financial warranty” with these credit ratings, when (according to the ratings agencies themselves) their credit ratings have no more significance than attaching a Happy-Face “sticker”. Let me summarize the scam operated by the One Bank with its credit-ratings tentacle by providing a generic illustration of this scam in action:

THIS IS THE MOST-IMPORTANT RATING IN THE WORLD [credit rating]…

[fine print at the bottom:] Just kidding!

So (when it wants to) the One Bank uses these credit ratings as pretexts (or cover) for whatever market-manipulation it chooses to perpetrate – generally markets highly sensitive to interest rates; since those numbers can be fixed precisely through these bogus ratings. The rest of the time; these “credit ratings” are treated as what they really are: garbage.

Even the Corporate Media inadvertently blurted out the dirty-little-secret of these credit ratings agencies. For the last forty years; the credit ratings of Western credit ratings agencies have been totally irrelevant with respect to sovereign debt markets:

…Bond investors needn’t worry that a rating cut will hurt returns. About half the time, government bond yields move in the opposite direction suggested by new ratings, according to data compiled by Bloomberg on 314 upgrades, downgrades, and outlook changes going back to 1974. [emphasis mine]

Let me restate this to properly explain its importance. For the past forty years; there has been virtually zero correlation between Western credit ratings and the direction of interest rates derived from those ratings. They are treated as totally irrelevant junk, by companies which explicitly state that no one should ever rely upon their ratings, and by the marketplace as a whole.

Yet the same Corporate Media which compiled this data seemed to experience amnesia when discussing these very same credit ratings during the “Euro Debt Crisis” (and Wall Street’s economic terrorism that accompanied it). When the One Bank wanted to drive Greece into bankruptcy, and several other European nations to near-bankruptcy; the process was simple and repetitive.

First the credit-ratings tentacle would issue a “downgrade” on the debt of a particular Euro nation; parroted by a Corporate Media which treated (and continues to treat) these ratings as the Final Word on everything.

Then the Big Bank tentacle would use that downgrade as an excuse to manipulate credit-default swap rates much, much higher on this Euro debt. Then the Bond-Trading tentacle would use the (phony) credit rating and the (manipulated) credit-default swap rate as “justification” for demanding much higher rates of interest – via the bond-auction process.

When you are a financial entity which (by itself) controls 40% of the global economy – and thus all of the “moving parts” in this scam – perpetrating economic terrorism of this nature is Child’s Play.

This brings us to the U.S. Debt-Ceiling Farce, and the fraud-by-omission of these credit ratings agencies; the refusal to downgrade the U.S. after the non-deal which just took place. Only a totally Machiavellian propaganda machine could characterize the U.S.’s Political Puppets agreeing to disagree as a “deal”.

Because they couldn’t agree on anything; the two platoons of Puppets just postponed their squabbling for three months. And in order to do so; they simply (but only temporarily) erased the totally arbitrary/totally unnecessary “debt ceiling”. Yet here is how one of the One Bank’s credit ratings mouthpieces characterized this same Farce, in refusing to alter its phony (and irrelevant) “AAA” credit rating on U.S. sovereign debt:

Moody’s Investors Service struck a “glass half full” view of the U.S. political showdown, saying the last-minute deal to avert a debt-ceiling collision signals politicians will ensure the government meets its obligations to creditors…

In fact; this is exactly the opposite of what we see before us. The Hatfields and McCoys were nowhere close to agreeing on anything, but unlike previous Acts of “The Farce”; they only postponed the next Act by three months, instead of the usual 12 to 24 months.

In no possible world could this be interpreted as politicians acting in a responsible manner toward the U.S.’s multi-trillion dollar creditors. Rather; it shows an obvious intention to stage the next exercise in brinksmanship as soon as possible. And if the Puppets weren’t intending to take breaks to stuff themselves silly with turkey twice in the interim; the next “showdown” would have likely come even sooner.

Responsible debtors do not ever play “Russian Roulette” with their creditors when it comes to choosing to default on debt. None but the most-irresponsible of Debtors would ever schedule such games of Russian Roulette. And now with the Puppets scheduling their Roulette even more frequently; we have a nonsensical (and irrelevant) ratings agencies applauding their responsibility.

But there was one (as yet) quiet voice which did not sing along with the Western media’s fantasy-chorus. The discussion of the significance of that Dissenting Voice will take place in a sequel to this commentary.

Jeff Nielson

www.bullionbullscanada.com

Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.