National Debt Clock

Friday, May 22, 2009

US May Lose Its 'AAA' Rating

For those of you who took finance classes, what happens when a company gets knocked down a rating? Well, it means that the company is now riskier or less likely to be able to pay back debt. Therefore, in order to entice people to continue buying the debt, the company must offer a higher rate of return. In the case of the US, they will have to raise the interest rate at which we pay those who hold government bonds. That means that we will be paying more and more money in interest payments on our borrowed debt. All this equals further deficits unless spending in Washington is curbed. Otherwise, future generations will be saddled with the burden of paying off wasteful government spending.

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