Debate Magazine

The S&P; Credit Downgrade: The Bottom Line for Americans

Posted on the 09 August 2011 by Legosneggos @LegosnEggos

Friday’s S&P; US Credit Downgrade: The Bottom Line for Americans and Our Generation R Children

Concerning Friday’s downgrade of the US’s credit rating by Standard & Poor’s from Aaa to Aa+, the bottom line is:.

…it’s all about perception.  The problem is that, if people start to lose faith in the “risk-free” nature of Treasury securities, borrowing prices will rise. In other words, investors could begin demanding higher interest rates to compensate them for the higher risk (real or perceived) associated with Treasuries…
…for consumers… The downgrade could translate into higher mortgage rates, putting further pressure on an already weak real estate market. The same goes for interest rates on car loans, credit cards, etc. So yes, you probably shouldcare about this, though it’s still unclear exactly how much of an impact the downgrade will have.  – .

And from another source (quoting Jessica Irvine):.

All Standard & Poor’s has done is warn investors that if they invest in US Treasury bonds (effectively lend money to the US government) there is an increased risk they may not be paid in a timely fashion, or, indeed, at all.

It’s a conclusion available to even the most casual observer of US politics and the reckless debate about lifting the US government’s debt ceiling. Indeed, conservative Tea Party forces openly advocate the US government should do just that, and default on its debts.

But even so, Friday’s downgrade represents the opinion of just one of three major credit rating agencies. Moody’s still rates it as AAA — the highest rating available — as does Fitch. Crucially, this means investors governed by investment rules stipulating they must only hold AAA rated assets are unlikely to be forced to sell their Treasury bonds and push up the cost of US borrowing…

So in the short term, the credit downgrade potentially means next to nothing.

However, from a longer term perspective, the embarrassing removal of the US government’s prized AAA rating says everything. It serves as a stark reminder that the situation is bleak.

The US economy is staring down the barrel of, at worst, another recession and, at best, a lost decade of sluggish growth and high unemployment.

Best summed up by

So: Pay attention, but don’t get too work(ed) up.

We should face it — our children will have it hard, and only after we do. This is a call-out for American culture to learn to live within our means. Perhaps it is high time the American Dream veer away from consumer culture (which ultimately works only for corporations and deep pockets) and return to James Truslow Adams’ definition:

The American Dream, that has lured tens of millions of all nations to our shores in the past century has not been a dream of material plenty, though that has doubtlessly counted heavily. It has been a dream of being able to grow to fullest development as a man and woman, unhampered by the barriers which had slowly been erected in the older civilizations, unrepressed by social orders which had developed for the benefit of classes rather than for the simple human being of any and every class.

Frankly, most of us working Americans in this generation do not feel we have the American Dream, as we are only making others rich and realize very few rewards or personal fulfillment.  I would say that corporations and big business are Americans’ barriers that have been erected in the last few decades, and these corporations do not benefit the classes but instead hamper us from realizing our rewards for hard work.  They give us goods and savings, but only after first ripping us off as much as possible, knowing when to stop just short of our realizing it. There is no trickle-down as there should be, as executives sop up into their fat pockets what should be freely spilling over.   

So what did our generation learn?  Work hard to become one of the corporate leaders so that you, too, can sop up into your pockets and decide what to share.  Is that really what we want for our kids?  Because it is not feasible for every individual to become a big fish, we must learn independence from it and innovation in securing our incomes.  Mom and pop shops need to make a comeback as communities learn to support themselves and fight corporate takeovers by retail giants like Wal-Mart and fast food franchises.

Better yet, what are we teaching our children, the new Generation R, in this poor economy?

Maybe the true American Dream needs to be revisited or even revised by our children to ensure their spiritual values and future fulfillment, and what many of us didn’t learn until now — saving and planning are necessary over a lifetime because your government will not take care of you in leaner times. Also, they should have a skilled trade to fall back on.  Let’s just take the hint to reconsider these hard economic times a check and balance on our priorities.  We do not have to dominate the world or its markets to happily exist in it.

I guess the bigger question is — do we buy what corporations are selling?  Is it possible for corporations to suffer economically in world markets and Americans manage to make it?  I wish we were not so entangled with them.  We did not have this large-scale problem when America’s economy was made up of Mom and Pop businesses, did we?  Again, I think we need to return to those.

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