German politicians make war on truth

Current Affairs, Economics, European Union

German politicians make war on truth

Published by Tom

July 7, 2011

Europe declares war on rating agencies – Telegraph.

Do Wolfgang Schauble and Heiner Flassbeck understand what they are saying? They want to "break", "dissolve" or "ban from rating countries" the independent agencies investors rely upon to rate investment risk.

Is this what Chancellor Merkel meant when she asserted the primacy of politics over economics?

If independent sources of information are suppressed, you arrogant fools, investors will not simply assume that your assessments of risk are correct. They will find other reliable data or they will assume the worst. Frankly, a politician furiously demanding the suppression of independent data sources is the best evidence yet that the EU bail-outs will not work.

Independent rating agencies, though they have erred (as all humans – with the apparent self-exception of German politicians – must) add to the overall value of financial assets by making risks more transparent and allowing comparison of rival investments on a consistent basis. Risks which are obscure must be priced on a worst case basis, diminishing value.

Germany's politicians are out of order here, and dangerously so. Not least when they indulge in such racial epithets as "anglo-saxon" to attack their perceived enemies. As a group, German politicians are ill-advised to raise the spectre of national stereotype.

h/t Samizdata, which makes the chilling point, in this context, that so far from being doomsayers, the rating agencies have a track record of undue optimism. Think about that, Wolfgang, as you bark your deluded orders to your imagined army.

10 responses to “German politicians make war on truth”

Suboptimal Planet

July 7, 2011

Well said, Tom.
“Is this what Chancellor Merkel meant when she asserted the primacy of politics over economics?”
She might just as well assert the primacy of politics over physics. In the long run, we may all be dead, but future generations will suffer the consequences.
And as much as politicians may wish to kick the can further down the road, I think they are fast approaching a brick wall.
Daniel Hannan has a good post on the same subject:
http://blogs.telegraph.co.uk/news/danielhannan/100095706/eu-leaders-blame-the-euro-crisis-on-american-credit-rating-agencies/
As he says, the truth “is that credit rating agencies were too optimistic about the euro zone, too ready to believe the Eurocrats. Their belated return to reality poses a massive problem for Brussels.”

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Single Acts of Tyrannny

July 7, 2011

Yes, and one wonders precisely how the fourth reich imagine they can stop someone behaving in a lawful way by correctly, if optimistically assessing reality?

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MickC

July 7, 2011

Well, the rating agencies certainly got it wrong on the value of bundles of sub-prime mortgages. The question is, did they err by mistake or deliberately.
There are those in the banking world who believe that there was no mistake and that effectively there was a conspiracy to off-load piles of US crap from US banks to Europe. This ties in rather nicely with the theory that the US wanted DSK out of the IMF because he was inimical to US interests in keeping the dollar as a reserve currency.
I’ve no idea what the truth may be, but certainly the public will not get to know-we just prop up the banks.

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j

July 7, 2011

It doesn’t matter if they got it wrong. What matters is that you do your own research.`

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FatBigot

July 7, 2011

It’s rather like the man-made global warming scam – only data and analyses supporting the (current) official version of events are permitted to be published.
These are just two examples of the worrying modern habit of governments prescribing the truth and refusing to deviate from that line even in the face of contrary evidence.

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Tom Paine

July 7, 2011

It’s not exactly a modern habit, is it? Control of information has been a central aim of government since the days of the Caesars. Had you pointed out to Julius that the over-sized and unusually sturdy captives paraded in his triumphs were hardly representative of the scrawny Celts, but rather selected to make his victories seem more impressive, he would have reacted just as Herr Schauble has done (though with more wit and eloquence). Indeed, certain Germans of the last century it would be unfair to name in this context were rather good at information management, as I recall. Until reality overwhelmed them, as it has a fortunate and ancient habit of doing (as Herr Schauble will soon be able to attest)

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MickC

July 7, 2011

Entirely agree with that, but the supposed financial geniuses in the City don’t, do they? They just go along with whatever is going to make them personally a profit now and the clients can go hang-which they have, and hung us into the bargain.

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MickC

July 7, 2011

Rather think the UK “Ministry of Information” was better at it-Dunkirk, naturally, being a “miracle”!
Reality took some time with us, but its getting here!

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Tom Paine

July 7, 2011

That’s true, though an Austrian friend claims his country is the true home of PR genius, having convinced the world that Hitler (born in Austria) was German and Mozart (born in independent Salzburg, before it was annexed by Austria) was Austrian.

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Charles_jsy

July 7, 2011

The problem with the rating agencies is that they’re paid by the issuers of securities, not the buyers – hence why they’re over-optimistic.
As for the “primacy of politics over economics”, Suboptimal is right. It’s a giant case of “I reject your reality and substitute my own.”
I understand the incentives for politicians to pretend they can fix everything, but is it actually possible that from extended practice of “the art of compromise” (and probably an unhealthy level of belief in The State) they now genuinely believe that if everyone just agrees to it, the problem will evaporate?

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