Saturday, August 6, 2011

S & P Downgrades America's Credit Rating

Yesterday evening, it was announced that Standard and Poors had downgraded the credit rating of the United States from AAA or AA. Now, nations who wish to buy bonds can find bonds with a higher rating by buying them from Britain, France, Germany or from Canada. This is not in fact, in response to the US defaulting in any way with regard to its debt, but rather its continuing to spend with abandon following this weeks raising of the debt limit. Other decreases in the US credit rating are possible and even likely according to some sources, later in the year.
What are the implications of this ? It means, that the US will pay more to borrow money. It means also that the US will charge more to lend to banks. It also means that banks will have to charge more to lend money for homes, cars, college fees, and consumer goods. It means that an already floundering economy will see the losses of more jobs, and the closure of even more businesses, as they will not be able to sell their products to an already squeezed America.
Although our family has always been very careful with credit, we do owe some debt. University fees are expensive, and our children owe fees for their educations and we are continuing to help to pay for Matthew's education. We do have a couple of credit cards, which definitely will go up in terms of interest rates charges. The implications are mostly for our children. How will they ever by homes in a land in which the only real way to get ahead, where rent cannot be raised, is to buy your own home, maintain it, and eventually have the payments stop. This is the beginning of what we had feared.
We did not like President Obama's policies and direction before, but it appears that it is his intent to steer us into the Third World. This could have devastating effects on the Stock Market, and therefore world stock markets, and this could nudge us into, not just an additional recession, but the second Great Depression, S&P has said that additional credit downgrades for the US will likely follow.

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