Source: John 1xbet best casino website , 785-532-3184, jgraham@k-state.edu
News release prepared by: Megan Molitor, 785-532-3452, molitor@k-state.edu

Monday, Aug. 22, 2011

SHAKY SITUATION: UNSTABLE FINANCIAL TIMES MAY NOT MEAN SHORT-TERM RATE HIKES DOWN THE ROAD

MANHATTAN -- When Standard and Poor's recently downgraded the U.S. credit rating from AAA to AA+, the financial markets immediately started to fluctuate, and fears began to rise about the effect the downgrade would have on other sectors of the economy.

A financial expert at Kansas State University says 1xbet best casino website uncertainty can be expected in today's unprecedented times.

&1xbet best casino website ;It's been a long time since we've had this uncertainty,&1xbet best casino website ; said John Graham, professor of finance at K-State. &1xbet best casino website ;Market participants seem to be able to deal with good or bad news, but they hate uncertainty. It leads to fear and to the emotional or the sometimes irrational investor decisions like we've seen the last few weeks with stocks going way up and way down on almost a daily basis.&1xbet best casino website ;

In theory, credit ratings for a nation work the same way as they do for any other organization that issues debt, he 1xbet best casino website , by assessing an organization's ability to repay principle and interest in a timely manner. The drop in the U.S. rating has caused many investors to fear that interest rates across the U.S. could skyrocket, but Graham 1xbet best casino website this might be an overreaction.

&1xbet best casino website ;There's been a lot of hyperbole and overstatement about the debt downgrade, but it's my opinion that it has been grossly overblown,&1xbet best casino website ; he said. &1xbet best casino website ;They're trying to send a message to public policymakers that they need to address the issue of public debt and continuing deficits. It's an effort to get their attention to address these issues in a credible manner.&1xbet best casino website ;

Normally the investment world could expect interest rates to increase with a downgrade like this, Graham 1xbet best casino website . But because so many interrelated parts are moving at the same time -- like economic trouble in Europe -- the U.S., as the world's largest economy, is still viewed as a place to find relative stability.

Immediately after the debt downgrade was announced, investors saw worsening conditions in Europe, Graham 1xbet best casino website , and became nervous about the economy and the financial markets. This caused individuals to continue seeing the U.S. Treasury as a safe haven, and interest rates went down significantly.

&1xbet best casino website ;It sounds counterintuitive, but that's the way the market reacted to it,&1xbet best casino website ; he said.

However, Graham acknowledged that the heavy Federal Reserve and government involvement in the economy and Federal Treasury security markets makes these uncharted waters, and it can be difficult to determine what influence the downgrade will have on other rates, like for those on student and auto loans. But since market participants typically determine rates, Graham 1xbet best casino website these types of interest rates might not be affected.

&1xbet best casino website ;If investors get nervous, rates go up, and if they get more confident about the treasury debt, rates will go down,&1xbet best casino website ; he said. &1xbet best casino website ;It's purely supply and demand.&1xbet best casino website ;

Graham 1xbet best casino website he believes student, auto and other types of loan interest rates may be relatively safe for the time being due to the Federal Reserve's recent announcement that it planned to keep short-term rates low for at least two more years.

If that happens, he 1xbet best casino website , the typical expectation would be that other types of rates would not rise rapidly either.

&1xbet best casino website ;They might tick up, but they won't spike up,&1xbet best casino website ; he said.

The bigger concern for those looking to apply for a student loan in the future is whether the money will actually be available. Graham 1xbet best casino website the primary way that student loan rates go up, other than government intervention, is if demand exceeds the supply of money for these loans.

If lenders back off of making those loans because they lack capital or there is too much perceived risk, Graham 1xbet best casino website it is possible rates could increase. However, in the short term, the market uncertainty and weak economy should keep increases minimal, he 1xbet best casino website . The danger is if inflation continues to accelerate and federal budget problems continue for an extended period.

&1xbet best casino website ;Part of the money for student loans comes from financial markets and part from federal government financing,&1xbet best casino website ; Graham said. &1xbet best casino website ;If budget problems lead to less money, it could also lead to higher rates because those who can get money are willing to pay more. It also might lead to less availability of money.&1xbet best casino website ;

Rates may not go up, he 1xbet best casino website , but fewer loan-seekers may be able to get their hands on the money that is available.

&1xbet best casino website ;I don't see anything in the short run, but it might be more of what comes up from the great deficit debate,&1xbet best casino website ; he said.