How The American Credit Downgrade Will Affect Everyone

The credit assessment of a country affects all citizens of this country in one way or another. A credit downgrade could destroy a business and raise interest rates to an average citizen must pay for their auto loans, mortgages, or both.

Standard & Poor has downgraded the U.S. credit rating. One view is that they did over the weekend to give them time to protect themselves from the Wall Street fallout that would occur. Sure enough, Monday, August 8, 2011 all markets on Wall Street took a beating.

USA will now have to pay a higher interest rate on any new debt. Because of this, the Treasury Dept have to charge banks a higher interest rate and those rates will trickle down to the average borrower. Yes, it's fair to say that interest rates tend to flow downhill. If the rates go too high, fewer loans being taken out by consumers, making it harder for banks to stay in business. In order to maintain their profits, they will have to charge higher fees, which will cut further into the cash amount that the average taxpayer has to fork out for auto loans, mortgages and other financial necessities. As you can see, this is something that the average Joe would feel in his or her wallet just as much as the big companies and banks.

Of course, one way to compensate for the higher yields on government debt is to raise taxes. But during af''gælden loftet''debat, lawmakers balked at such a solution. After all, the average American is taxed to the point of poverty as it is. The rich will fight new taxes at any cost, so how will tax increase comes from and at what price? Will public services should be cut instead? It's a scary thought, no doubt.

The current credit situation is really no fault of the sitting Congress, nor is it really the President's fault. It began several generations ago and could be the result of the apathy that most Americans feel towards the government together with a sense of entitlement. No doubt that a solution will be sought, but no one has an idea what to do. Whatever decisions are made, it is guaranteed that the disappearing middle class will bear the brunt of these decisions.



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