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How the downgrade affects the national mindset

A stock specialist watches prices on the floor of the New York Stock Exchange on August 4, 2011. The Dow Jones Industrial Average plunged 4.3 percent Thursday, its worst one-day drop in more than two years, as global markets melted down over fears of another world economic downturn. The Dow was down 512.76 points to 11,383.68; the broader S&P 500 lost 4.8 percent to 1,200.07, while the tech-heavy Nasdaq Composite plunged 5.1 percent to 2,556.39. AFP PHOTO/Stan HONDA

JEREMY HOBSON: Well, markets aside, there is the question of the bruised national ego from this downgrade -- Marketplace's Jeff Horwich has that part of the story.


JEFF HORWICH: The same factors visible to S&P have been visible to everyone else: shaky economic recovery, political disfunction, growing public debt. Which is why former Fed Chairman Alan Greenspan said on NBC's Meet The Press the damage from the downgrade is mostly in our heads.

ALAN GREENSPAN: What I think the S&P thing did was to hit a nerve. And its hit the self-esteem of the United States, the psyche. And it's having am much profounder effect than I conceived could happen.

Well get over it. You know the expression, sticks and stones and all that. Analyst Greg McBride of Bankrate.com says the downgrade is kind of like a stone -- in the water.

GREG MCBRIDE: It's going to ripple out in in all directions. However we haven't exactly had calm financial seas over the past several weeks. So what's happened is we've dropped the rock into the water, but we've done it when waves are six feet high.

As for our pride, few things are more resilient than the American ego. But the downgrade is a harsh reminder of the reasons S&P decided to hurt our feelings: and those don't seem to be going anywhere.

I'm Jeff Horwich for Marketplace.

About the author

Jeff Horwich is the interim host of Marketplace Morning Report and a sometime-Marketplace reporter.
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There is Wall Street. There is Main Street. Main Street has never recovered from the great recession, Wall Street being far removed and disconnected from the grass roots economy, thought the recession was over years ago. They are coming back down to our level again.

Follow the money. Find out who made money from the downgrade, and you'll have answers.

I have to wonder why anyone pays attention to S&P as a rating agency. Aren't these the same folks who rated mortgage backed securities highly just before they tanked? Their downgrade of US government hasn't seemed to stop many from buying US Treasuries. I would rather hear from other rating agencies who don't get tangled up in making political pronouncements.

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