POSTED: Tuesday, August 9, 2011 - 5:00pm
UPDATED: Wednesday, August 10, 2011 - 6:45am
We all saw Monday the effects the US credit rating downgrade had on Wall Street…panic.
Now that they have settled down, we’re waiting for the other shoe to drop.
How will you be affected by the US debt rating?
“I think we’re teetering on the brink whether we slip into another recession or whether we move on out,” says Sam Dawson, President of Southside Bank.
The markdown of US creditworthiness is disturbing and controversial. But will it hit you personally?
OK, a couple of good things.
Gas prices are down. That’s because oil and other commodities dropped when the market went south.
Gold is through the roof setting new daily records hitting $1750 at one time today.
But the real worry is interest rates and consumer confidence.
“And that has a lot to do with how quick we come out of the recovery, consumer confidence.,” says Dawson. “And I think that one thing that we can say, is that there’s not been a lot of consumer confidence in the last 6 months or so.”
Dawson explained that the rates you and I pay for houses, cars and credit cards are tied to US Treasuries. If Uncle Sam has to offer higher rates on T-Bills because our credit rating is now more questionable, that eventually trickles down to the cost of buying that new car.
“We don’t look for them to jump up because of this event,” he told KETK. “They may come in 6 months, they may come in a year.”
The good news is the Federal Reserve today vowed to hold down rates for at least two years.
And our political gridlock over the debt ceiling wasn’t helpful.
“It was not good timing at all, not good timing at all,” Dawson laughed.
So for now, everyone is taking it in stride.
“The FDIC is still there,” Dawson concluded. “The government is still solid. ‘’we’ve got the same financial balance sheet, the government does, that they had two weeks ago when they had the triple-A rating. This is not a calamitous affair.”
Dawson told us that he knows rates will rise, but that it should take awhile.
One mitigating factor, the other two rating agencies have held us steady at Triple-A.