“Imagine an 18 year old college student getting a credit card with a $100,000 debt limit. Imagine there are no such things as government student loans and he blows through that $100k with a year and a half of courses to go (and slim chance of getting a good job in this economy). Would the credit card company raise his “debt ceiling” so that he could keep on borrowing? Of course not. Unfortunately that same logic does not apply to Barack Obama and our shamefully irresponsible Congress.” (http://www.whitecivilrights.com/?p=5826)
Here is an interesting video on how the downgrade will affect you. Expect interest rates to go up on student loans, credit cards, and mortgages. You could see a double dip coming as a result of this, especially when interest rates go up on borrowing; more people will default. (http://abcnews.go.com/International/standard-poors-anxiety-grows-us-credit-rating-downgrade/story?id=14249747)
This is the first time in U.S. history that the U.S. lost its AAA credit rating status. Someone needs to tell Obama and the rest of Washington that you can’t continue to spend money you do not have. Obama by the way, more than doubled Bush’s national debt, no wonder why we are finally downgraded. ( http://www.washingtonpost.com/business/economy/sandp-considering-first-downgrade-of-us-credit-rating/2011/08/05/gIQAqKeIxI_print.html).
The sad thing is that Obama’s approval rating remains relatively stable after this. I honestly believe United States is doomed with the current policies that both the Federal Government and the Federal Reserve Bank pursue. The United States is implementing similar policies to what Japan practiced in their recession. For example, both of them used stimulus packages, low-interest rates, and quantitative easing. Printing more money up does not generate more productivity or create more wealth. This policy negatively affects the common people the most. Inflation means a dollar today is worth more than a dollar tomorrow. This gives no incentives to save and invest money, and instead encourages people to spend more money, especially for taking on loans that they can’t afford.
The biggest problem with continuing to pursue policies, such as policies that create debt like this one, is that it pushes you closer to bankruptcy. You pay interest on top of your debt, and the more you spend and then have your credit rating downgraded, the more likely you will not be able to make your interest payment, that will cause you to default. If you default, you are unable to get approve for more loans or rack up more debt as no one wants to loan to you, because you have no money to pay off those loans.
This could happen to the United States if they do not change their policies. They are most likely to do so, because economists do not believe debt means anything. Probably, because debt is not built in their models that they analyze, thus they ignore it. I am skeptical that United States will ever recover from this financial crisis unless they change their economic and monetary policy, which is unlikely to happen.
The sad thing is that people like Alan Greenspan believe that United States will never default, because they have a printing press and can print their way out of it. A printing press can work with public debt, however, with external debt it is a different story. You can not inflate your way out of external debt. Interest rates will be raised as a way to control for inflation making it more expensive to pursue, such a policy. Also, the more you print money, the more likely bond holders will be to dump their bonds as they see their asset devaluing. What is worse is that people like Alan Greenspan do not care that they are making it more difficult for the masses to live, as the masses are hurt the most from this. The omnipotent government just abuses its power to collect more taxes from the docile taxpayer, whose standard of living decreases so some government bureaucrat can sustain their standard of living.