Why on earth is New Zealand in danger of getting a “Credit Downgrade”???

May 27, 2009 by
Filed under: Banks, Economics 

I just don’t get it. Now maybe it’s just cos I’m still a bit thick when it comes to economics and high level finance – but on the other hand – maybe it’s the system that needs a bloody great kick up the backside.

So what is the deal?

Well, there’s this agency called Standard and Poor’s. They research financial institutions and stocks, and then publish their findings. They also run Stock Exchange Indexes (you may see something called the S&P500) where you can invest in what they consider the top 500 shares. As far as the ratings are concerned – if S&P give a bank or investment a AAA rating then you are supposed to be able to invest with a large degree of confidence – whereas if they rate it a C then you need to worry.

It seems S&P also run Sovereign Ratings where they rate Government bodies, higher education, and housing sectors round the world. Right now they rate New Zealand as AAA and Stable for both Local Currency and Foreign Currency – which sounds good and healthy. However they have said that the outlook is Negative for New Zealand as a Foreign currency, and we are at AA only. This means we are not a good place to invest in from abroad all of a sudden.

Well – thhbt I say to that.

Standard and Poor have a bit of a cheek rating anything right now – on account of their ratings of hundreds of companies and investment products which turned out to be complete and utter rubbish. OK – so S&P dropped the ratings – but only after everyone had lost everything – by which time even a monkey could have said the investment was a bit dodgy. But S&P by giving these investments (and that included the CDO’s behind the Sub Prime mess that started this recession) gave them a respectability that they should not have had. People trusted them – and lost everything.

Standard & Paws - we noze what we is doin, right?

So how on earth do these people get to say that New Zealand should be downgraded??? For crying out loud – we are doing so much better than other countries during the recession.

Apparently – they will reserve their final decision until after the budget on Thursday. I am so glad they are taking the time to consider their verdict on us!

If anyone is interested – despite the total cock-up of the UK financial services – and a budget that involves the UK government borrowing more money in the next year than has been borrowed in the history of the UK Parliament – they still get a rating of AAA (Negative) – for home and foreign currency. What a bloody joke! Lets be clear on this – the UK government has taken over nearly all the banks – and is about to bankrupt the next 10 generations of Brits and yet they are still rated AAA. We are a small blip on the bottom of the world – not one of our major banks is about to go under, and are in fact still making revoltingly big profits. And while it is likely that our Government will borrow an awful lot of money to get us through the recession – it is not likely to be the gobsmackingly stupid sums that Gordon Brown is grabbing.

Why on earth are these bozos even thinking of downgrading us??? Why is anyone giving these bozos the time of day??? They have proved they are pretty bloody hopeless.

And if I wasn’t offended enough – if these people in their “wisdom” decide to downgrade us – then apparently our mortgages will go up. So while the UK goes to hell in a handbag and mortgages are at almost 0% already – we are doing reasonably well, already paying 6% on our mortgages and these twits are going to be responsible for us paying even more.

I need a drink!

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Comments

3 Comments on Why on earth is New Zealand in danger of getting a “Credit Downgrade”???

  1. Hubby on Wed, 27th May 2009 8:36 pm

    2. Also have a listen to this one from March 2009.

    http://itunes.apple.com/WebObjects/MZStore.woa/wa/viewPodcast?i=51172064&id=73802620

    -> S&P – trust us – we only right royally fucked up once plunging the world into total chaos. Chances are it might not happen again, fingers crossed. It’s not our fault really.

  2. Mike on Thu, 28th May 2009 12:33 am

    3. Maybe they are looking at the drop in exports and how much NZ relies on that income to finance- everything. I don’t think NZ is in that great of shape and if anything happens to say– the dairy industry– thats 27% of GDP. that’s a lot of eggs in one basket. I don’t feel safe having all my money in NZ dollars.

  3. Hubby on Sat, 30th May 2009 3:52 pm

    4. Hi Mike, thanks for the comment.
    It’s a very fair point, and I think something similar could be said about lamb/beef exorts, tourism (as an export) etc.
    I think the buffer, compared to other 1st world countries, is that many of our exports are basic things – like milk & meat. People aren’t going to stop eating all that soon. However there is a finite market for plasma TV’s and new cars.
    Cheers

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