Credit Ratings Now Irrelevant To Bond Markets?
Jeff Nielson: In our fraud-ridden markets, trivialities like economic fundamentals are no longer a factor in pricing markets. Rather, instead of “fundamentals” we now have patterns of manipulation: the direction in which markets are being pushed/pulled by the Western financial crime syndicate.
In this respect, we look to the corporate media propaganda machine not for information, but rather for clues on if/when a new pattern of manipulation is about to occur in a particular market. Here we have Bloomberg tipping us off that a new paradigm of corruption is about to take hold in Western bond markets.
Previously, credit ratings mattered. Indeed, the knee-jerk reaction of lower credit ratings leading to higher interest rates on European bonds was the principal mechanism used by the Wall Street banksters in perpetrating the economic rape of Europe via its bond markets. Simultaneously, we were bombarded with propaganda that the “AAA” credit ratings of the U.S. and the UK was what set them apart from the “riskier” bond markets of Europe.
But that was then, and this is now. With the rape of Europe now a fait accompli, the bankers have customized a new crime paradigm for the bond market – one which takes into account that the absurd/fraudulent credit ratings of the U.S. and UK are about to decline to at least slightly more plausible levels.
Does this mean that U.S./UK bond-holders should be dumping the most over-priced bonds in the history of the world? Of course not, scoffs Bloomberg; because as any good propagandist could tell you (starting today), credit ratings don’t matter in the bond market.
…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.
Let me explain exactly what Bloomberg is saying here, so that readers will understand the true significance of what is being asserted. If bond interest rates move in an (expected) counter-direction to ratings upgrades/downgrades, this is known as a “negative correlation”. If bond interest rates moved with ratings upgrades/downgrades, this is known as a “positive correlation”.
However, when interest rates are equally probable to move in either direction after a ratings change (as Bloomberg asserts) this means that interest rates have zero correlation to ratings changes – i.e. changes in ratings are totally irrelevant to bond prices/interest rates. Thus, the claim Bloomberg is attempting to make is that for nearly 40 years, the credit ratings of the major credit rating agencies have been 100% irrelevant to bond market prices.
The first point to make here is that obviously Bloomberg has “cherry-picked” its data, or simply fabricated this statistic altogether. No one displays more contempt for the minimal level of brainwave activity in Western markets than I do. Yet even I would would not/could not believe that for nearly 40 years the credit ratings of the major ratings agencies have been 100% irrelevant in Western bond markets, but no one noticed.
Obviously if that level of manifest incompetence existed with these ratings agencies, they would have already been sued into oblivion – as complete and utter charlatans. So once we all finish laughing at the absurd, new crime paradigm which Bloomberg is attempting to create here; it’s time to ask a question. What is the motive of the propaganda machine in inventing a new, fictional paradigm for the bond market?
Fortunately, the propaganda machine is quite transparent with its agenda; and Bloomberg is kind enough to supply us with their motive in that same paragraph quoted above:
Bond investors [i.e. U.S. bond investors] needn’t worry that a rating cut will hurt returns…
What we have here is the propaganda machine attempting to stretch the parameters of plausibility even further with respect to the ultra-fraudulent, U.S. bond market. For several years we have witnessed manifest corruption, as the U.S. becomes less and less solvent with its $1+ trillion deficits – while U.S. bond higher prices soar higher and higher.
Despite this obvious plunge in solvency, the complicit ratings agencies have refused to downgrade U.S. debt – despite rubber-stamping downgrades on European debt every time some new tidbit of negative economic data comes before them. To call this a “double-standard” would be much too charitable, it is blatant corruption.
However, even with crime syndicates given carte blanche to manipulate markets, “all good things must come to an end.” With the propaganda machine ratcheting-up the panic meter on almost a daily basis about the “fiscal cliff” over which the U.S. economy is about to plunge, a reality is beginning to sink in.
Even the Sheep would have a hard time reconciling an economy plunging over a “fiscal cliff” while maintaining a “AAA” credit rating. It would be a contradiction much like asserting the “unsinkable” status of the Titanic – as it sank toward the bottom of the ocean.
This presents the Bond Parasites (and their messengers in the Corporate Media) with a prickly problem. How do they prevent some massive sell-off of the $trillions in U.S. Treasuries sloshing around in global markets when a ratings downgrade causes even the most-deluded Sheep to dump this grossly over-priced paper?
Simple. You proclaim to the world that not only are credit ratings irrelevant to the bond market, but (surprise, surprise) they have been irrelevant for 40 years. Here we must applaud the audacity of the propaganda machine.
The financial blood is still dripping from the wounds in European bond markets, after having been skewered for the past three years by ratings downgrades followed by immediate jumps in bond market interest rates. This is the mechanism which (along with manipulation of credit default swaps) has been totally responsible for the deterioration of these economies from borderline-insolvent to imminent bankruptcy.
Conversely, it’s only the rampant fraud of the U.S. bond market (in reverse); where near-zero interest rates are maintained despite the completely obvious insolvency of the U.S. which forestalls bankruptcy. If the U.S. was forced to pay the same interest rates on its own bonds as Wall Street has inflicted upon European bond markets, the U.S. would have already been pushed into default itself.
Here we have the second, parallel motive for the new crime paradigm which Bloomberg is attempting to pass off. Up until now, the U.S. government (with the help of the propaganda machine) has been able to prop-up the Treasuries Ponzi-scheme by counterfeiting U.S. dollars to buy up all of its Treasuries, while pointing to the fraudulent “AAA” rating of the U.S. to legitimize this fraud.
But how can this massive fraud be maintained after the U.S. has its credit rating cut? By telling the Sheep that credit ratings have never mattered to bond market prices – despite what they have seen with their own eyes across the Atlantic.
If I have learned one thing over the past several years, it’s to never underestimate the gullibility of market Sheep. So stay tuned to see if the propaganda machine is successful in selling another Big Lie: that credit ratings are (and always have been) totally irrelevant in the bond market.
Expect some “push-back” too from the credit ratings agencies. Presumably they won’t appreciate Bloomberg’s assertion that the ratings they have been selling to their clients for the last 40 years have been totally worthless – at least all of their ratings in the bond market.
Oh what a tangled web we weave.
When first we practice to deceive…
Jeff Nielson is from Canada and is a writer/editor for Bullion Bulls Canada www.bullionbullscanada.com. He has a personal background in law and economics. Bullion Bulls Canada provides general macro-economic and political commentary, since the precious metals markets are among the most complex (and misunderstood) in the world.
Bullion Bulls Canada also provides basic coverage of Canadian precious metals mining companies. Canada is the global leader in mining exploration, and Canadian-listed mining companies (on the Toronto Stock Exchange and Venture Exchange) are responsible for the majority of the world’s most-promising discoveries.