On a serious note, a question on the very wealthy and the downgrade

[hyphenate]

With Wall Street confronting an extremely volatile situation with the change in credit status, how does this affect those small businesses and larger corporations and the Repugs? Does this even make a difference to them? Will it affect the vote in '12 and who gets elected, especially on the right?

Middle class families, I assume, will be the ones hit with loss of assets--that much I can understand. The poor, like myself, can only be affected if there are direct cuts in things like SS, Disability, Medicare and such. But it is, to me, a mystery as to whether there might be a backlash against the stonewalling the 'repugs put Congress through, and perhaps make voters think twice about electing someone who compromised the country's standing.

Is this downgrading a serious incident? Or is it largely symbolical? Will repugs or Dems suffer more as a result, or will Obama be directly in harm's way for the election next year?

Seriously, economics mystify me, and I really do want to know what kind of legacy this is going to lead to, and whether people will look at Bush in a better light than Obama based on these sort of antics by the repugs.

Thanks for helping answer some questions!

[Yupster]

1. The downgrade is largely symbolic

as there is no practical difference between a AAA and a AA+ rating.

The $ 15 trillion debt and $ 1 trillion deficit each year is much more serious.

Of course it will hurt the President. He has all kind of quotes out there that will be used against him during the campaign.

How will it hurt the rich? Since they own most of the stocks, a stock market crash will hurt them the most. Interest rates rising will help them as they can move to decent paying cd's at some point.

[customerserviceguy]

2. If the downgrade means anything

it will mean a small rise in interest rates. That will affect anybody who is looking to go out and do any new borrowing, and will especially affect the housing market. On the other hand, perhaps some lending standards will be eased a bit, so that bankers can take advantage of the higher rates, especially on cars and big ticket items.

The interest rates we've seen for the last two years are way, way lower than historical averages, and simply cannot last. If we returned to the rates of the 1950's, we'd be closer to normal.