Author Archives: Devin Smith

Credit Rating Agencies and Brazil: Why The S&P’s Rating About Brazil Sovereign Debt Is Nonsense

Felipe Rezende

So S&P has downgraded Brazil’s rating on long-term foreign currency debt to junk and lowered its long-term local currency sovereign credit rating to ‘BBB-‘ from ‘BBB+’.

First, what are sovereign debt ratings? Standard & Poor’s sovereign rating is defined as follows:

A current opinion of the creditworthiness of a sovereign government, where creditworthiness encompasses likelihood of default and credit stability (and in some cases recovery).

So that ratings are related to “a sovereign’s ability and willingness to service financial obligations to nonofficial (commercial) creditors.”

What does this tell us? To begin with, credit rating agencies have repeatedly been wrong. The same agencies that rated Enron investment grade just weeks before it went bust, the same people that assigned triple A rating to toxic subprime mortgage-backed securities are now downgrading Brazil sovereign debt. As the FCIC report pointed out “The three credit rating agencies were key enablers of the financial meltdown. The mortgage-related securities at the heart of the crisis could not have been marketed and sold without their seal of approval.” (FCIC 2011)

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MMT In Spain

To update our Spanish friends:

In an effort to bring MMT into the political debate in Spain, APEEP will be hosting Warren Mosler for his presentation of the Spanish translation of his  book “The Seven Deadly Innocent Frauds of Economic Policy” during a one-week tour through Spain, starting with a presentation in Madrid, on the 14th of September; Valencia on the 15th of September; and Vila-real on the 17th of September.

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More on the DOJ’s Prosecution Policy

William D. Cohan in the later part of his post “Justice Dept. Shift on White-Collar Crime Is Long Overdue” over at NYT extensively presents and supports NEP’s Bill Black’s views from Bill’s recent post “Now the DOJ Admits They Got it Wrong“.

MMT Primer in Italian

For all our Italian speaking visitors, our friends over at RETE MMT have undertaken the arduous task of translating Randy Wray’s MMT Primer into Italian. The project is a work in progress and not all posts have been translated as yet. As they add to their list of translated posts, we will update this list to reflect their accomplishments. The links will take you directly to the relevant post on RETE MMT.

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Teoría Monetaria Moderna – Kindle Version

For our spanish speaking (and reading) friends, the spanish version of Randy Wray’s book Teoría Monetaria Moderna is now available as a Kindle e-book. The details are available here.

Three UMKC Professors Among The Nine Who Predicted Eurozone Crisis feature includes recorded interview with Randy Wray and others regarding the current crisis in the eurozone. Randy explains that some economists predicted the problems with the European Monetary Union with an explanation of sectoral balances.

S&P threatened to downgrade Brazil to junk

By Felipe Rezende
Hobart and William Smith Colleges

S&P has issued a negative outlook regarding Brazilian sovereign debt. The S&P’s announcement stated that “Over the coming year, failure to advance with (on- and off-budget) fiscal and other policy adjustments could result in a greater-than-expected erosion of Brazil’s financial profile and further erosion of confidence and growth prospects, which could lead to a downgrade. The ratings could stabilize if Brazil’s political certainties and conditions for consistent policy execution–across branches of government to staunch fiscal deterioration–improved. It is our view that these improvements would support a quicker turnaround and could help Brazil exit from the current recession, facilitating improved fiscal out-turn and provide more room to maneuver in the face of economic shocks consistent with a low-investment-grade rating.”

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Ahead of their time?

Julie Verhage and Alex Balogh have published a piece over at Bloomberg about 9 people who saw the Greek Crisis many years before everyone else did. Several names you will recognize from NEP. Three are from UMKC plus Warren Mosler. They warned about the euro system and crises like Greece. You can read the article here.



It Simply Cannot Work

Pavlina Tcherneva discusses Greece’s Bailout with Richard Aldous on American Interest. You can listen here. She describes a deal that seems to contain more austerity than was initially proposed, and calls some of its economic incentives perverse. She discusses why the economic situation in Greece today is in some ways worse than was America’s Great Depression, and compares the decision to bail out Greece to Ireland’s austerity experience.

NEP’s Pavlina Tchernerva on RT discussing Greece

Pavlina appears on RT’s Boom Bust segment discussing Greece and austerity. She appears starting at 18 minutes.