The late lamented newspaperman Frank Haden once reportedly
castigated a subordinate for presenting to him the
predictions of an economic forecaster: "You'd do better
reading the entrails of seagulls, just like the Romans did,"
he is supposed to have said, dismissing the foresight of all
such seers with his scathing mix of ascerbic exuberance and
One of New Zealand's most prominent veteran journalists and
editors, Mr Haden would surely be revolving rapidly in his
grave at the revelations now emerging from the world of
global economics, and international finance, and the manner
in which they have been and are being reported.
Much attention has focused on the failure, particularly in
the United States, by mainstream financial journalists to
reveal the scandalously shaky foundations upon which global
finance's house of cards has, in recent decades, been built.
As has been pointed out by, among others, Professor Eric
Alterman in The Nation magazine, it took a couple of stand-up
comics - The Daily Show's Jon Stewart, and Stephen Colbert -
to begin to sheet home some of the inadequacies of
contemporary US business reporting - in particular the extent
to which some television networks, and CNBC especially,
allowed themselves to evolve into "an unpaid PR service for
the same CEOs whose financial shenanigans and deceptions
brought us economic catastrophe".
That a couple of comedians are being compared with a bygone
era's great defenders of fearless journalism and an
independent fourth estate, Edward R. Murrow and Walter
Cronkite, is of course no laughing matter.
It only emphasises the complacency and incompetence of the
commentators who served as little more than cheerleaders for
the banking and financial services sectors for so long.
We can be thankful that we have been much better served in
Those investors who have lost their life savings in the
collapse of various finance companies might argue, but it is
generally accepted that our banks and financial services
industry by and large kept away from the stampede to gorge on
the market for specialised "financial instruments" - which we
now understand to be a glorified high stakes game of "pass
the toxic parcel".
Likewise, we still have a number of well-informed and
independently-minded business, financial and economic
commentators and, Mr Haden's reservations notwithstanding, it
was an economic forecaster who last week demanded attention
to an ongoing anomaly in the global credit industry on the
business pages of this newspaper.
Berl's Ganesh Nana was cautioning the Government on being
overly concerned about credit ratings downgrades, making the
point that the credit ratings industry was complicit in the
crises that have overtaken the world financial systems.
"Put bluntly, the credit rating agencies have blood on their
hands. They gave positive ratings to the collateralised debt
obligations and other instruments that are now sitting as
toxic assets on the balance sheets of many financial
instituttions," he said.
"That officials and commentators here and across the globe
continue to value the pronouncements of these agencies,
Dr Nana was talking about agencies such as Standard &
Poor's, Moody's, and Fitch, whose pronouncements, upgrades
and downgrades can significantly affect national economies.
Downgrades increase the cost of raising funds and can be
taken as a signal to investors to shy away from such
New Zealand is particularly vulnerable as it considers how to
balance fiscal stimulus packages against a burgeoning
Dr Nana's point was the standard Keynesian view that the
middle of a recession is not the time to embark on a
"balancing the books exercise", and he is far from alone in
Gerald Epstein, Professor of Economics and co-director of the
Political Economy Research Institute at the University of
Massachusetts, is equally scathing of the credit ratings
agencies both for their part in enabling the crisis, but also
for their "credit warnings" to governments over increasing
"Yet, increasing spending and fiscal deficits in the short
run is exactly what these governments should be doing," he
"And now, after helping to cause the crisis, the credit
ratings agencies are blocking the way to the solution. The
actions by Standard & Poor's are therefore profoundly
misguided and potentially destructive."
Naturally, there will be counterviews, not least from the
agencies themselves, but as the events of the last 18 months
and the almost unheralded gobal financial crisis illustrate,
a degree of straight-talking and transparency on such matters
is long overdue - and as such it is to be commended.