On 7th dec. morning , I found an interesting 'BELIEF' in 'The Economics Times' which is under the heading 'RATING AGENCIES CAN WORSEN CRISIS: NOYER' . Mr. NOYER, policymaker of European Central Bank believes that rating agencies can actually worsen the crisis.The question is , when everybody believes that rating agencies are in existence to protect the interest of investors by making them aware of the riskiness associated with the bonds issued by the government of some nation, by giving them some 'alphabets' or so called 'credit ratings' , why this man believes that these ratings would make the present economic condition even worse? Well I believe that this has something to do with the 'EXPECTATION' of investors . If an investor believes that investing in some nation's bond will fetch him returns , he invests in that nation's bond. But if there is somebody ( ofcourse the 'credit rating agency') that tells the investor that parking funds in this nation's bond is no more 'safe' , he might or most probably will change his decision of investing even if the economic fundamentals of that nation are strong.This happens because investor generally makes decision on the belief that ratings given by credit rating agency truly reflects the economic scenario and credit worthiness of the bonds offered to him which might not always be the case.
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