Quote:
Originally Posted by Migrant_Coconut
And yet governments often cave into pressure and pull a 180 to get their rating back up, and the indexes know they have this influence and often take advantage of it. I'd count that as a "say."
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Lenders and rating agencies don't care what the credit rating is. Lenders are not begging British Columbia to axe health care spending in order to get a higher credit rating and lower rates. Why would a lender want lower rates on a safe investment in the first place?
Lenders decide what financial risk an economy has and decide the rates they're comfortable with based on those criteria.
If the lending industry decides to raise rates to an appropriate risk adjusted level, they're not trying to "punish" or "bully" the government into enacting "conservative policies" or whatever this talking point is. It's just emotionless financial calculus. Lending rates are set at what the market believes the financial risk is.
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