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Why do people think a downgrade in our debt rating will lead to higher borrowing rates for the government?
when it has been proven time and again that a simple downgrade does little to affect interest rates;
Look at when Japan was downgraded, their rates barely moved. Same with China, Australia and Canada.
Why when it has not affected large economies in the past do people think it will make our treasury rates shoot up? Remember treasury rates are based more on how safe you look compared to other investments than any rating, and we still look safe compared to anywhere else.
@Spock: It does not apply in this case, basically investment in uncertain times flows to the perceived safe bet. There is nothing out there in any better shape than us.
@this killed: This is not a lower credit in what one company perceives might happen in the future.t score, this is a downgrad
@Adrian: Yes they will but not because of this, we are at almost historical lows.
3 Answers
- SpockLv 610 years agoFavorite Answer
Consumer Interest rates are inversely related to credit score. Do the economic rules not apply to the government?
Gold and Food have never been worth zero. Our money does not have intrinsic value or consumable properties. See "Wiemar Republic" for a case study.
- Anonymous10 years ago
because a lower credit score means a greater risk, and higher interest.
- Anonymous10 years ago
Interest rates will rise
