You know the story of last month’s rating downgrades. This graphic may make the idea a bit stickier:
Here’s the source article entitled "Downgrade Hurts Euro Rescue Fund" from the January 14th issue of The Wall Street Journal.
Here’s an awesome interactive graphic with a chloropleth map from the same day from a piece entitled “Europe Hit By Downgrades.” Additionally, this shows all 3 rating agencies ratings for each country, side by side.
Lastly, here’s a completely different interactive graphic. This one shows the amounts that different countries are supposed to contribute to the EFSF. That emphasizes why the downgrade of France was such a problem: they are giving the second most money.
One thing to note from that last graphic: Greece is rated lower than Portugal, but Portugal is paying higher rates. This is a bit odd. What it reflects is that Portugal’s ability to repay their debt isn’t great, but they are not swamped with it, so it’s at least possible. Greece has so much debt that it probably isn’t possible at this point. What investors are thinking is that if they get in now (which drives the price up and the rates down), they may be part of bailout deal which will erase some of that risk.
In class on Friday I couldn't find the other graphic that I thought I'd linked to.
ReplyDeleteThere's a bit of a trick to it. You have to go back to the source article itself. The link I have to the article in the post is actually to the one interactive graphic which I discussed in class. Now I want to go to a second one, and I can't link to it directly.
Now go down to the 7th image from the top on the left side (it looks like a bar graph), and click it. This is the graphic that shows 1) ratings versus rates, and 2) ratings versus monetary commitments to the EFSF.