H-CENTRAL COAST

Aug 8, 2011 9:46 PM by Ariel Wesler

Credit downgrade could have local impacts

Many Central Coast residents are wondering how the trickle down effects from the U.S. credit downgrade could impact them. California's treasurer says there's no reason the ratings downgrade of the federal government should have an immediate effect on California.

As the numbers take a dive on Wall Street, what does that mean for those of us on Main Street? We went in search of answers and found John Ross, a financial adviser in Santa Maria.

"They might notice some higher interest rates in the longer term, especially if we get downgraded again, but in the short term, probably not," Ross said.

It's the first time the U.S. has lost its AAA credit rating from S&P. Ross believes politics drove the agency's decision, not the country's ability to pay it's debt.

"They're basically saying that they don't like the deal that was cut in Washington," Ross said.

Two other credit agencies have not downgraded the U.S. So far, Ross says he hasn't received many phone calls from concerned clients.

"It's so new. Nobody really has any terrific feeling for the direction of the markets or how this will play out over the next few weeks or months," he said.

What is going up is gold, shooting past $1700 an ounce and bringing business to local pawn shops.

"I didn't expect it to take that jump from Friday to today," said Bonni Diamond, one of the owners of the Diamond Jewelry and Loan in Santa Maria.

She says from gold jewelry to watches, customers are looking to cash in at her pawn shop.

"They're seeing us and they're coming in. People who have never come into our store before," Diamond said.

Gold is typically seen as a safe bet. It's nearly doubled in price since the beginning of 2009. Ross says if you are concerned about your specific investments, contact your financial adviser.

California and Illinois share the lowest state credit rating, but California has been stabilizing in recent months.

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