主题：【原创】新年政治经济展望之四：金融资本（一） -- 井底望天

let me put some facts here.

1. First, the bubble was not created by rating agencies per se. One of the main contributor is actually Federal Reserve with its easy monetary policies.

USD/Euro is global reserve currency and Fed/ECB low rates actually create a low-rate environment for all nations. China is one victim too.

Therefore, the real estate bubble of 2002-2008 is global--in US, UK, Canada, Spain, Italy, all Eastern Europe... esp., in China.

You can not blame China bubble on raters, because there is none.

2.Rating agencies mainly provide three ratings: corporate ratings, sovereignty bond rating, structural finance product ratings.

During this crisis, corporate ratings proved to be reliable--because rating agencies already have 100 years and at least 10 business cycle experience to improve its models.

For structural finance products, rating agencies have only 20 years of data (two small recessions) to rely on. And the housing price fluctuated most dramatically during this 1997-2007 cycle--the volatility has never been so high before. Please google Case Schiller housing index.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1115323

This article also gives very good insights.

Rating agencies should be shy away from structural products for which their expertise is not great enough. I do not think raters intentionally created this bubble--lack of competence, model problem, lack of historical data are main reasons.

If you live in Europe or North America, you will know that credit ratings have been used in all kinds of gov. regulations, fed/state law, fund bylaws, private contracts, bank loan contracts...

If you totally eliminate credit rating industry, then who can provide independent service to investors in the fixed-income securities? FI market is actually 2 times the size of stock market! How to regulate all those pension/mutual funds/banks? The whole Basel II regulations were built on rating-based capital charge.

Keep in mind: it is easier to destroy an old imperfect world, but it is difficult to build a better new world without imperfection. At this stage, Congress really have no idea how to deal with those rating agencies. The debate has been going on ever since 2001 and nobody knows what is the best solution at all.

新的再差不会把金融衍生物垃圾RATE成好东西吧。

所以再差也不会比现在差了。

--you never know. It is an empirical question. Obama promised "change" before 2009. One year passed, I saw no positive change at all.