We really want to defend the ratings agencies. Really, we do.
But it’s really tough to establish their relevance with stories about how they’re finally getting around to downgrading California debt. It’s not that they’re wrong, and it’s not even that they’re late, it’s just that the market’s already figured this out, and the idea of anyone looking at a Moody’s rating and making a decision on it seems almost laughable.
Via Paul Kedrosky, here are some of Moody’s concerns, all of which a typical Clusterstock reader might be familiar with:
The difficulties the state is facing include the following:
* After enacting a budget for fiscal year 2010 in February, the economy has continued to deteriorate and the state is now expecting budgetary gaps for fiscal year 2010 of over $20 billion.
* Budgetary solutions are more limited now that the voters did not authorise the state to issue deficit bonds secured by lottery revenues.
* Without legislative and executive solutions, the state is expecting to run short of cash beginning in July.
To be fair, some of you may not have heard about the lottery thing.
Counterpoint: We’re writing this from Palo Alto, and it’s a lovely day. It certainly doesn’t feel like the state is on the verge of turning into Mad Max or Waterworld anytime soon.