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This is WEEKEND EDITION from NPR News. I'm John Ydstie. For generations, the United States and its debt, sold in the form of U.S. treasuries, have been synonymous with security. Now though, the nation's sterling credit is tarnished. The ratings agency Standard Poor's has downgraded the U.S. from AAA to AA-plus, one notch down. Coming up, we'll ask an analyst at S to explain the agency's decision and respond to harsh criticism of the downgrade from the White House and Capitol Hill. But first, as NPR's Tamara Keith reports, there are big questions about what the downgrade will mean for investors and for the nation.

TAMARA KEITH: A few years ago, it was unthinkable that the United States would have its credit downgraded. But a lot of unthinkable things have happened since then, like the global financial collapse, the European debt crisis, and a fight over the debt ceiling that took the nation to the brink of default. Tyler Cowan is a professor of economics at George Mason University.

TYLER COWAN: What matters is that someone dared to downgrade, and it's a shock to American pride. It's a way of saying our government isn't working right now.

KEITH: In justifying the downgrade, S focused on political issues, saying it wasn't sure leaders in Washington were willing to take on the difficult task of truly addressing the nation's longer-term debt issues. Cowan says this downgrade could be an opportunity.

COWAN: What you need are people looking at themselves long and hard in the mirror and saying, I was partly responsible for this; how can I change? And until we do that, I think it's just going to get worse.

KEITH: What's not clear is whether the shock to American pride will also come with a financial shock when the markets open on Monday morning.

MARK ZANDI: The initial reaction may be quite negative.

KEITH: Mark Zandi is chief economist at Moody's Analytics.

ZANDI: But by the end of the day, certainly by the end of the week, I don't think this is going to have a major impact.

KEITH: Zandi says a lot of investors saw this downgrade coming. And he says it's important to note the other two major credit ratings agencies - his parent company, Moody's, and Fitch - are sticking with their AAA rating so far.

ZANDI: This is an opinion of one analyst committee at a rating agency. This doesn't change anything.

KEITH: He says the opinions of bond investors are what really matter. And as of last Friday, even as rumors of a downgrade swirled, they were still buying lots and lots of U.S. treasuries.

ZANDI: If there's any trouble anywhere on the planet, they come to the U.S. Treasury as a safe haven. And that's the most important vote, and that vote won't change - I don't think - by this opinion.

KEITH: The largest investors aren't making their decisions based on what S says. They do their own risk analysis. But the downgrade does create some complications. Many large institutional investors have guidelines that say their money can only go into super-safe AAA investments. Mohamed el-Erian is CEO of PIMCO, the big investment firm that manages money for U.S. pension funds and overseas investors.

MOHAMED EL: As I speak now, my colleagues are reaching out with a question to investors: What would you like to do? Giving them two options - one is maintain the holdings and change the guideline; second, sell the holdings.

KEITH: Those answers are still coming in.

EL: My sense is that most of them will say maintain treasuries for now until they figure out what they want to do. Because, let's remember, there is nobody out there who can step in.

KEITH: As el-Erian put it, the U.S. used to be the only clean shirt in the drawer. Now, it's the cleanest of the dirty shirts - not perfect, but the best option. Still, he says there are other ripples to consider - perhaps most significantly, the psychological effect of being a nation that's no longer AAA.

EL: We are at a fragile time for confidence, for business confidence and household confidence. And this loss of AAA, which was unthinkable, will erode confidence further.

KEITH: An erosion that can slow economic growth even further - the real danger of being a AA-plus nation. Tamara Keith, NPR News.

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