Gerald Esptein, UMass Amherst economics professor and co-director of the Political Economy Research Institute, discusses the impact that the downgrading of the U.S. government’s credit rating may have on consumers in this Fox Business article. While the effects remain uncertain, if the move is perceived as an in risk, banks will likely charge more for loans but won’t pay more for deposits.
Epstein also warns that “The biggest long-term danger from the downgrade could be a bigger push for government austerity here and abroad, which could slow economic growth dramatically… ‘If (the ratings agencies) push each country individually to cut back on spending and cut their deficits, what they’re going to do is push the whole world economy down, cutting GDP all over the world,’ says Epstein. ‘It’s a self-defeating, self-feeding negative process.'” (FoxBusiness.com, 8/9/11)