S&P Downgrades Russia to Junk

Standard & Poors cut Russia’s sovereign debt rating to the junk level BB+ on Monday, below investment grade. S&P, acting as if this were a purely business decision rather than part of a coordinated act of financial warfare, said:

“In our view, the Russian Federation’s monetary policy flexibility has weakened, as have its economic growth prospects.”

Russian Finance Minister Anton Siluanov called the downgrade

“unreasonable, as the agency didn’t consider the country’s anti-crisis plan, and the strong economy with its large reserves and extremely low public debt.”

This “anti-crisis plan” was the subject of cabinet meetings chaired by Prime Minister Dmitri Medvedev and President Vladimir Putin over the past ten days. It includes a number of incentives for economic activity, coupled with budget cuts, but also the (healthy) abandonment of some of the extreme “more drastic than Maastricht” budget deficit targets of recent years. The plan does not, however, ameliorate the suffocating effects of the Russian Central Bank’s hiking of the prime interest rate to 17%.

A “Mahathir solution” of capital and exchange controls is being promoted by Putin’s advisor Sergei Glazyev, along with state-guided, effectively Hamiltonian credit policies for physical reconstruction and infrastructure, but it has not been taken up at the government level.

Glazyev’s Dirigist Plan for Sanctions Response

The Russian TV service RT quoted Paul Craig Roberts, former US Assistant Secretary of the Treasury, who identified the fact that

RT noted that even the US has acknowledged the crimes of S&P, imposing a $77 million fine on the rating agency last week for fraud in ratings it issued in 2011, and banning it from assessing a segment of the commercial mortgage-backed securities market (CMBS) for a year.