The relatively muted reaction to the UK’s downgrade bolsters the argument that rating agencies simply get too much attention.
Moody’s doesn’t have a souped up Delorean hidden in the basement; it’s simply working off the same indicators and forecasts as everyone else.
Except a trader or fund manager can take a decision, and execute it, a lot faster than an agency typically manages.
Vince Cable, business secretary, dismissed the downgrade as ‘largely symbolic’ yesterday – which was certainly not the tune Osborne has been singing for years (Labour provide a round-up here). But supporters of the chancellor say he managed to protect the AAA when it mattered most.
Back in January 2012, my colleague Aditya Chakrabortty wrote perhaps the definitive take-down of the cult of the rating agency: Time to take control of the credit rating agencies.
Why should S&P and Moody’s earn such vast sums? Certainly not for their oracular genius – the agencies have as much foresight as Mr Magoo. In my working life, the credit-rating duopoly has failed to warn investors about the Asian financial crisis, Enron, the subprime crisis, Lehman Brothers – and Greece.
My particular favourite, Moody’s report dates from December 2009 and is titled “Investor fears over Greek government liquidity misplaced”. Six months later, Athens received a $147bn rescue package.