Downgrading of the impact on the consumer wallet - Boston Globe


What does exactly standard & Poors?

The rating agency downgraded its class for the Federal Government's long-term debt from the highest possible mark, AAA, AA +. Yesterday, it the credit ratings of Fannie Mae and Freddie Mac and other agencies with long-term U.S. debt downgraded.

What does this mean for me as a consumer?

Lower credit ratings often lead it to higher interest rates for bonds - for a chance, are standard, buyers more take on the additional risk paid. Could the prices consumers on mortgage and car loans figures - both entered to Treasury bonds - rise due to a higher interest rates on government bonds. And, in turn to higher prices on just about anything, if the situation does not improve.

"Long-term, downgrade is inflation, to the effect," said Rob Lutts, President of the Cabot money management of Salem.

But how likely is more cost loans and other loans mortgage soon?

A downgrade of the credit rating does not automatically translates into an increase in interest rates. Government bonds are still among the safest and the most liquid assets in the world, so that even if the cost of borrowing increases, financial planners say that does not expect dramatic increases. In fact demand was so strong yesterday after Treasury bonds — investors sought refuge for their money interest rates on these bonds went.

"The Federal Reserve will do everything, keep interest rates low, and it has more influence than standard & Poors,", said Bill Driscoll, owner of Driscoll financial, a financial planning firm in Plymouth.

But Driscoll said that if the Congress Committee be appointed with deeper into account the U.S. credit rating operates budget cuts by the end of the year not provided, probably more, not only by standard & Poors, but also will be reduced by the other two rating agencies.

An error by Congress to deal with that "A more dramatic effect on the credit rating of the nation and the economy can have public debt on a large scale," said Driscoll.

As the stock market has fallen, so have oil prices. There is not a good message here - cheaper natural gas and fuel oil?

Crude oil prices are indeed at the lowest level since November, down from the conviction driven, that a slower wachsenden-or fleeing - economy will reduce demand for oil. So yes, can the gas and heating oil prices drop. But probably not for long - demand from the emerging markets, especially China, will eventually upward pressure on prices, even if the US economy sags.

With the stock exchange in full-speed, withdrawal and consumer spending below the - about the credit downgrade - are we in a recession "Double-dip"? If so, how bad it could?

Double dip recession is refers to the economy slipping into the back following a brief recovery. Cheryl Costa, Managing Director of the AFW wealth advisors, and a personal finance blogger for, said that the S & P downgrades not, itself, cause the economy to go back. But an emotional response to the bad news late - could the of investors and consumers taken by fear - building momentum down.

"The S & P downgrades uneventful days should have been", said Costa. "But what we saw in [yesterday] has drop is an overreaction." "Fear and panic have a way to feed themselves, and that's what happens here."

In fact, Costa said, many companies do well, and even the latest employment numbers "not so bad."

It advises clients, "turn off the TV and do something other than flat on the bad economic news."

If people start yanked their money out of the stock exchange, and hoard money rather than spending, because they are now taken by fear, "Costa, said" this could lead to a slowdown.

Should I my money somewhere to be moved before I lose even more?

Probably not, especially if it, long term - such as a retirement plan invested in is - you say financial planners.

"The downgrades have an emotional impact, a visceral, but it is unlikely that have the kind of impact, which requires dramatic action for the average consumer,", said Daniel j. Galli, principal at Daniel j. Galli & Associates, a financial planning firm in Norwell. "The S & P downgrade changes not the fact that the United States is the safest place for a large institutional investor money."

Even as yesterday's financial markets in free fall, were, said Driscoll, it was moved to dramatic financial the wrong time for the consumer.

He said "If you do not need the money, stick your weapons,". "This is not the time to change your strategy." "A down market is not the time to sell."

via:Top News Google

Downgrading of the impact on the consumer wallet - Boston Globe