国际英语新闻:Worries About Government Borrowing Stir Markets

Mark Goldwein is the group's policy director and he says this downgrade could be the first in a series unless Washington shows it can better manage both its budget and politics.

A credit rating downgrade means the agency thinks there is greater risk of default, or non-payment.  Credit rating downgrades usually mean investors demand higher and higher interest rates to make loans.  The higher rates are called a "risk premium."  Goldwein says each downgrade can raise the interest rate, which raises the borrowing costs, which makes the financial situation worse, perhaps leading to additional downgrades in a downward cycle.

But that is not what has happened to Washington.  Instead of interest rates on U.S. bonds going sharply higher, they have actually fallen.

That is because many investors still consider the United States to be the safest place in the world to put their money.  Finance Professor Walter Schreiber of La Salle University says low interest rates are a measure of that confidence. "I think you can tell from the rates that they are demanding, that people are very confident that the united states will pay them back," he said.

The current economic tensions mean there is a surge in the number of investors seeking out U.S. bonds as a safe place to keep their money until the economy improves.  With more and more investors seeking bonds, Washington can offer lower and lower interest rates to borrow the money.

Those same economic worries also affect the prices on the stock market.  But stocks are different than bonds.  Bonds are loans, with a promise to repay a specific amount of money at an agreed date. Stocks are shares of a company.  Stockholders are buying a part ownership in the company, with no promise that their investment will be repaid.  Stockholders make their investments in the hope that the value of the company will grow, and they can sell their stock at a higher price in the future, and make a profit.