Interest rates across the board may be set to increase despite what Uncle Sam may want.
On July 11, 2010, China's new credit rating agency Dagong Global Credit Rating Co. downgraded US debt to AA with a negative outlook.
Just like regular consumer borrowers, the US also must pay a higher interest rate due to lower credit worthiness.
Whether Moody's and S&P follow suit, no one knows but if they do, the Government will start to feel pressure to increase the rate it pays for treasuries to compensate investors for increased risk.
The cost of money will likely trickle down to the consumer – interbank loans, home loans, car loans and business loans will all have an increased rate.
Hopefully when rates increase, they will also increase for money market accounts, savings accounts, and CDs.
