Currently, I’m writing a new book on critical thinking skills for business people and students (‘Lifting the Blindfold’ – how’s that for a shameless plug?). I have the television on in the background – a wallpaper of sound around the room beyond the computer screen. According to the ever-breathless TV news presenters, a major story is the continuing consequences of America’s credit being downgraded by the Standard & Poor’s Agency from AAA to AA+ during a tumultuous time in the stock markets.
Yet the whole world is listening to the wrong people, perhaps. The situation reminds me of all those ex-players and managers on the weekend sports programmes. These football (or soccer for my American followers) pundits seem to spend quite a bit of time after a game explaining in no uncertain terms why certain features and incidents were inevitable. They just happened to say the opposite in pre-match expectations earlier in the day…..
It seems to me that the hugely influential international credit ratings agencies have a similar role as pundits of the business world. After all, these agencies were giving the highest AAA ratings to complicated mortgage loans when US banks were, in effect, handing over vast sums to a particular set of homeowners who were less likely than most to afford repayments. Enron received the highest ratings to within a few days of its final implosion as the world’s biggest corporate bankruptcy in humankind’s entire industrial history up to that point. Fannie Mae and Freddie Mac were in the clear according to the credit agencies despite near-empty coffers as it later emerged. Both ended up in public ownership, becoming examples of the business equivalent of patients on life-support.
And even now the unquestioned punditry continues. The USA may have been downgraded by Standard and Poor’s yet the two other international rating agencies (Moody’s and Fitch) maintain its AAA status. And very few people have noticed, let alone commented upon Japan’s rating by the same agencies. The international supply problems and global layoffs following the earthquake and tsunami earlier this year only emphasise the discrepancy between proven demand for Japanese manufactured items (ie secure income sources) on the one hand and its lower credit rating as AA (below the USA) on the other.
The truth is that pundits express decisive opinions to large and high-status followings but that doesn’t mean they are right and cannot be ignored. They can – and quite safely, it seems. Pundits can live in a world of their own. We just shouldn’t let them affect ours.
For the full, enlightening article on this subject go to:
Critical thinkers have another name to follow and to thank: the article’s author, Alex Brummer.
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