Babylon's Bankers

SPEAKING OF MR. PUTIN: RUSSIA PASSES NEW LAW ON CREDIT RATINGS ...

Yesterday, you'll recall I blogged about Mr. Putin's remarks to his national Security Council in which he seemed to outline two fundamental and long range challenges to the two central dogmas of Western finance capitalism: the dogma of the obscolescence of the nation-state, and the dogma of the ability of multinational corporations, trusts and cartels, to manage world affairs, politics, and culture, more successfully than nations and traditional sytems of alliances and collective security. These dogmas, as many suspect, have been behind the whole post-World War Two structure of the western world.

The effects and results of these dogmas in operation are visible for all to see, and have been particularly in evidence in all the use of all the instrumentalities of "soft power": credit ratings and their agencies being one. If one does not appreciate their role in the mess, consider again only the recent example of Greece, the role of Goldman Sachs, and more importantly, the role of Deutsche Bank and its ratings system.

Russia, too, has felt the influence of these institutions and corporations, and has acted accordingly:

Putin inks law on rating agencies’ activities in Russia

There's a key point here, however, and one that indicates that Russia (and for that matter, China) are thinking about more than just their domestic ratings, and that this is perhaps far more than just a defensive measure:

Non-accredited rating agencies will also have the right to operate in Russia, but the law implies referencing only to accredited rating agencies. The Central Bank has also the right to establish the usage patterns of assigned credit ratings that are registered outside Russia.

The rating activity is recognized as exceptional and may not be combined with other activities, according to the law. The rating agency should ensure independence of its activities from any political and economic influence, prevent and detect conflicts of interest. It cannot withdraw the ratings assigned by the national rating scale based on the decisions of foreign states or international unions.
(Emphasis added)

This is, to my mind, a crucial point, for the law is recognizing the role of the credit ratings agencies as instrumentalities of the West's soft power, for it is recognizing two things:

  1. It recognizes the role of these agencies in their interface between western governments and financial interests, and hence, that the agencies' touted "neutrality" is not actually the fact; far from it; and,
  2. It recognizes therefore that these agencies have acted in concert with the financial interests of the West versus the geopolitical and financial interests of Russia, and hence, under the new Russian law, cannot be seen as engaged in any way in any form of financial activity other than rating itself, a stricture that will be very difficult for those agencies to meet.

So herewith my high octane speculation of the day: the new Russian law and the joint Russo-Chinese efforts to establish their own parallel ratings agencies, will perhaps be used by those countries and their own corporate interests to challenge not only the ratings of the principal western agencies, but their underlying philosophical and financial assumptions.  As I noted yesterday, Mr. Putin's remarks to his security council indicated a willingness to challenge the entire cosmology of the western oligarchs and Eurocrats. A parallel system of ratings could conceivable do that, if over time, that agency's ratings were more reliable than those of the West.

Time will tell, of course, if this speculative hypothesis bears out and has any merit, but the mere existence of the possibility, in the context of Mr. Putin's other remarks, indicates that Russia understands the sweeping nature of the current ideological conflict, and is prepared to take whatever steps it can in order to address them. This is not, therefore, a struggle that will end any time soon. it's a very long range view of things, and how it plays out in detail over the next few years and decades will be interesting to watch.

8 thoughts on “ SPEAKING OF MR. PUTIN: RUSSIA PASSES NEW LAW ON CREDIT RATINGS ...”

  1. johnycomelately

    If reductionist materialism (aka science) is the new religion then rating agencies are the theological schools judging the soundness of ones adherence to the globalist (economic rationalist dogma) faith.

    Imagine the middle age version, “His Orthodoxy has an A++ rating let him through, this other fellow has a C rating quarantine and isolate him.”

    Clearly Putin is a modern heretic trying to creat his own religion and we know how the West treats heretics.

  2. Well having access to credit in hard currency is the thing that’s important.

    Sure enriched Russian oligarchs in the 1990s, didn’t they wonder where those western bankers were getting the monies to fund their abusive transition to a “market” economy?

    Sorry Vlad, but this reads like “I’m shocked to find that gambling is going on here.” “Your winnings sir.”

  3. I am reading Yanis Varoufakis’ “The Global Minotaur.” On p.6, he specifically talks about the phenomenon of “Regulatory Capture” and its role in the 2008 financial debacle. This includes both government regulators and the *private* rating agencies (did you know they were private?). “With these facts before us, it is not hard to come to the conclusion that the Crash of 2008 was the inevitable result of granting to poachers the role of gamekeeper.” Enlightening section.

    (On a side note, at p.39 when Varoufakis talks about the “War of the Currents” back in the 1900s, he prominently writes about Edison and Westinghouse but does not mention Tesla once. Not once. Grrr.)

    On the effects of Corporatism: I just read an article in “Aviation Week” about the retirement of Boeing’s ten-year CEO. He was lauded in the article for doubling Boeing’s return-on-investment. In a macabre way, he got this acclaim for union-busting & union job-avoidance, major shipping of Boeing engineers’ jobs overseas, and outsourcing production of huge structural airplane segments to foreign companies. But, the shareholders made-out, big time. Anything wrong with this picture?

    1. Yes it was known that the ratings “agencies” are private for profit companies.

      Warren Buffett is a big investor in Moodys I believe.

      What’s less known is the big rule change in the 1980s. Until then the buyer of the bond paid the fee for the rating. (Like an engineer looking over a big building up for sale or a mechanic looking at a used car.)

      But Reagan et al allowed the seller of the debt/bond/derivative to pay the fee.

      So for profit companies’ business depended on giving out good scores to bad investment vehicles. Nothing to be concerned about here.

      As for stock price, that’s been sold as the only value of companies like Boeing since the 1970s by B school idiots, it’s a lie, and oft means a company won’t be around in 5 years. But it enriches “investors”.

  4. Sticking it to the international loan sharks-protection-extortion racket. I hope the Russians and the BRICAS can pull this off in time to prevent Earth turning into Slave World.

  5. Since it has been obvious for some time that the West has become a fascist oligarchy, the so-called “ratings agencies” are nothing more than pointmen charged with identifying the ability of alien (i.e., foreign) corporations, peoples and countries to resist the depredations of the Vampire Squid.

    To put it more concisely, these ratings “agencies” identify their prey’s weaknesses, and their ratings allow the aforesaid parasitic cephalapod to gauge the necessary levels of financial pressure and market-disruptive toxins to release to render its prey immobile and sufficiently predigested for it to begin sucking its lifeblood dry.

    So, as Russia decouples from the West, they need to replace the pilot fish (the ratings agencies) of the Vampire Squid (aka Golden Sacks) with viable counterstructures. Though I’m hardly a disciple, it’s fascinating that Edgar Casey had predicted as much.

  6. Robert Barricklow

    On many fronts…
    in the Cold War 2.0 is being fought.

    The GMOs on the “food” war front.

    The “credit ratings” on the financial war front.

    The…

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