This happened over the weekend, but was not covered at Daily Kos yet.
Remember S&P, that agency that - like its cronies - handed out AAA ratings to junk side-bets on subprime loans? Then last month caught some headlines and caused some headaches, with a suspiciously-timed first ever downgrade of the US?
If this track record has't led you to doubt S&P's credibility yet [btw: who rates the rating agencies?] - don't worry. They are hard at work again, trying to convince everyone that their words are indeed worthless: (emphasis mine)
Israel’s A+ at S&P Is No Relief for Shekel’s Biggest Decline in Two Years
Standard & Poor’s raised Israel’s credit rating for the first time in four years just as slowing economic growth and escalating tensions with Turkey spur the shekel’s biggest retreat since the global financial crisis...
“The timing is a bit awkward” for S&P’s upgrade, said Benoit Anne, the head of global emerging-market strategy at SocGen in London. “The future doesn’t really look bright for Israel from a macro perspective.”
Yes, awkward.
For a few months, the Israeli government's sales pitch for foreign investors was "an Island of Stability in the tumultous Middle East". It has always been bullshit; Israel-Palestine is one of the generators of instability in the region, not vice versa. Those who fell for this sales pitch - like S&P - are more credulous than people who buy from a telemarketer, or from the "3 flying blankets for only $20 + S&H" type TV ads.
But the way the bullshit has hit the fan this summer for Israel's economy has been pretty spectacular. Partial list for August and early September:
* The apathetic Israeli public erupted in the most-massive-ever wave of protests against the government's radical neoliberalism. The imminent clash between their demands and the government's agenda, does not spell "stability".
* Following a refusal to apologize to Turkey for the Flotilla killings, the latter sent nearly the entire Israeli embassy packing, and its PM is now actively building a coalition to isolate Israel in the region. Turkey is a pretty major trade partner to Israel.
* Out of the blue, a deadly terror attack took place at Israel's southern tip, prompting a blame game between the country's security agencies. Despite not really knowing whodunnit, they went on and bombed Gaza and also killed a few Egyptian soldiers on the side.
* The latter two events have caused angry masses to storm Israel's embassy in Cairo, and send this one home packing as well. This happened just as the sharp minds at S&P were crafting their credit-uprate statement.
* Next week, a UN vote recognizing a Palestinian state is looming. Despite its largely symbolic nature (on the ground there's nothing close to an independent Palestinian state; Israel still calls the shots), this might further isolate Israel and place it and many of its citizens and businesses, who profit greatly from the Occupation of Palestine, on precarious legal footings.
* Finally, at least some in the Israeli press point out that many large Israeli corporations have unusually large exposure to Greek debt. Greece is expected to default next month.
How did that funny dude say it? Oh, yes. Heckuva Job, S&P.
-----------------1 PM PDT, 3-PRONGED UPDATE -----------------------
BEHAVIOR
I don't know what's not to understand about the simple request from Markos for readers to behave themselves when addressing diarists. Especially readers who are hostile to the group where this diary is posted. It is high time diarists were given some protection here. The substance of the site is diaries, not comment threads. Comment threads can be of value, as long as they don't deteriorate into pure trash.
If your lens are so distorted, that all you can see in an Assaf diary or an Adalah diary, are "Anti-semitism" or "Israel-loathing" (both direct quotes from comments below) - then simply stay away from the thread. This is the new law of Daily Kos land. "Great-dark-spot", who thought he was smart by flouting and pissing on this law, is now banned.
Red Sox, be forwarned. Yeah, you. You know I don't usually name names in diaries. Please stop calling me names in the thread below.
In the same vein: it is the Diarist's call whether to write a 0.5-hour 500-word diary, a 5-hour 3k-word with refs and links, or a saga. If you know me (and the hostile commenters made it pretty clear they think they know me), then you also know I can tune myself to either level. I chose the former (a lot of good it did me; now this update is 2x than the original diary). I quoted Bloomerg, not some "anti-Israel" outfit, whose reporters raise a very clear eyebrow at S&P's upgrade. So stop premising your sniping comments upon the false insinuation, as if calling that rating into question is my own personal fantasy.
S&P ETC.
Of the 3 ratings mentioned in the diary (subprime junk, US, Israel), the most defensible is the US's AA+. However, that downgrade should have happened years ago, during the Bush regime. When a country indulges in two messy foreign occupations "off the books", i.e., without paying for them in the budget, this impacts their credit-worthiness. Wars are (if I'm not mistaken) the #1 cause for the collapse of national economies. If not that, then Katrina that exposed the rot and ineptitude at the heart of the Bush administration, and the lack of sufficient infrastructure to (say) evacuate the entire population in time.
This illustrates that economics and politics are intimately linked. No such thing as "purely economic", and S&P are political players. Bush was perceived as politically strong and menacing, so no credit agency took him to task. Obama is far more vulnerable, so now they feel confident to lay it on him.
ISRAEL, PALESTINE, etc.
A lot to say here, and I won't. Read the diary again. The issue of political stability as an economic indicator was not invoked by me, but by the Israeli government. This summer we saw that this "stability" was nothing but an illusion, both domestically and regionally.
The Palestine connection is very complicated. In a nutshell, there is no such thing as a separate Israeli or Palestinian economy. There's an Israel-Palestine economy, and given that it is controlled by an Israeli Occupation, the rules are strongly rigged to favor Israeli businesses and individuals. A lot of the "resilience" Israel's economy has shown this decade, is related to this structure and to the political backing it received from Bush. The UN vote might have interesting effects upon this structure, since it will openly delegitimize it, making it harder for international governments and businesses to turn a blind eye (like they've largely done till now).
In addition to my 6 points above, commenters have kindly added 2 more:
* (h/t Ptah the Great, in Ptah's words:) if S&P just downgraded the debt of Israel's ultimate guarantor, it seems to make sense that Israel's own rating might suffer as well.
But S&P went the opposite direction. Illuminating.
* (h/t PeterHug, quoting a link by Ptah:) Israel’s debt load is slightly more worrying; at 77% of GDP, it ranks 22nd in the world, which means a higher than average debt load.
The A+ ratings places Israel somewhere around 40th-50th from the top. Not quite where you expect to find a small turmoil-ridden country with the 22nd-largest debt load.
That debt might or might not be related to the fact that the Bank of Israel tripled its foreign reserves since summer 2008, from $30 billion to nearly $80 billion.
This unprecedented step was done mostly to manipulate the foreign exchange and evade the brunt of the crisis' impact. It has worked short-term. The medium- and long-term has many Israeli analysts jittery. Since Israel's trade balance has always been negative, just borrowing all these dollars to maintain a facade of "stability", costs billions.
I'll end here. Feel free to discuss, but not to flame. Thank you.