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Credit Reference Agencies


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Who are these agencies and why to they have such an influence on Countries debts. A couple of days ago an agency called Standard & Poor said tha thy might downgrade the US rating in the future, a comment that appeared to wipe billiobs from the worlds stock markets.

Who actually decides the credit ratings and how many of these agencies actually influence world markets - Ive heard of 2, Moody's and the aformention Standard & Poor.

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I think the answer might lie in analysts reports and what a UK television investigation report uncovered early last year. Apparently some of these analyst reports are that far out of date, or incorrect, they didn't even see a recession coming ;o(

But some people got even richer, while others have lost their jobs and worldly goods.

Perhaps referring to credit agencies in the public sense, we might have a look into those agencies or methods used to reject or approve your own financial status when applying for something like a loan. One will accept without a concern, while the other states - the computer says no or tooo risky?.

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These agencies are just firms, companies, businesses, that make their money selling their reports to others wanting to know if you are a good or bad risk to lend money to.

Personal (UK) agencies list that is used to see if you are a good or bad risk

As for the countries, Standard and Poor is a USA firm (Credit Rating Agency) that has been designated a Nationally Recognized Statistical Rating Organization by the U.S. Securites and Exhange Commission, according to the wikipedia webpage about them.

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These agencies evaluate the ability of countries to repay their debts.

The higher the perceived risk that a country may default on it's loans, the more it costs to borrow money.

For a heavily indebted country without the political policies in place to address their deficit, it's a downward spiral leading to ever more debt as the interest rate ratchets up.

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It was, of course, Standardand Poors who gave AAA ratings to CDOs which were proved to be basically worse than junk bonds and precipitated the credit crunch.

It has been suggested that all their expeienced employees had left in order to take jobs in casino banking where salaries and bonuses were a big attraction.

We have a situation in which bond dealers and ignorant politicians are talking down the credit worthiness of government debt, leading to a credit rating agency downgrading and an increased cost of debt followed by more profit for the dealers.

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