Debt Downgrade to Up Pressure on Consumers

August 9, 2011  |  

(Wall Street Journal) — Cash-strapped Americans are bracing for a further squeeze following last week’s downgrade of U.S. government debt, as interest rates on deposits continue to fall and some borrowing costs edge higher. Consumers have already been struggling with high unemployment and elevated levels of personal debt incurred during a pre-recession spending binge. Now they are grappling with shrinking retirement accounts, as major stock indexes nose-dive and yields on U.S Treasurys touch new lows amid the market turmoil.”  “People are going to feel less rich and that will make them hold back on spending, which would be a further blow to the economy,” said Beth Ann Bovino, a senior U.S. economist at Standard & Poor’s. On Friday, the firm lowered its rating of government debt one notch to AA-plus, the first time the U.S. has lost its top-ranked standing.

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