The US markets have had a turbulent run in the last few weeks, thanks to political wrangling in Washington over the budget and national debt, as well as a downgrade in the country’s credit rating by Standard and Poor’s.
A weak recovery to the global economic crisis in 2008 has not helped. A Cambodian economist in the US says that fear among investors could damage the economy further and may even lead to a double recession.
Duch Darin, a professor at Tallahassee Community College, in Florida, told VOA Khmer last week that the US loss of its AAA rating at S&P, which lowered it to AA+ for the first time ever, could cost consumers in the long run.
The credit rating determines how much interest the US must pay on the debt it uses to finance its government functions. The downgrade comes amid myriad woes for the US, which is struggling with high unemployment and a stagnant economy.
Interest rates for loans are very low, but Duch Darin said that may not be a good thing forever.
“In the short term, the interest rates for home loans and other loans are decreasing, but for the longer term, the interest rates will be higher for US consumers,” he said.
The US economy, which remains heavily dependant on domestic consumption of goods and services, could be at risk because when unemployment is high, fewer people are earning salaries or making purchases, while investors, which help build and grow businesses, are fearful to put more money in the stock market, he said.
And even though unemployment figures are gradually coming down, the future remains uncertain, he said.
“It will be hard to make predictions if the trend continues,” he said.