IF the ratings agencies downgrade the US isn't that just a reaction to us keeping rates this low

[Skink]

for so long. Aren't we just manipulating our own currency?

[JDPriestly]

1. Yes.

When we bought our house interest rates were 9.5 - 10%.

They have gone down, down, down since then. That is great if you want to borrow money, but it is not good if you are a saver. And it encourages borrowing and discourages saving.

Also, it makes our goods expensive to people in other countries.

So whether it is overall good or bad depends on your point of view.

[A HERETIC I AM]

2. No.

It is a reaction to the increased likelihood of either an interest payment not being made on time or a bond not being redeemed on time and in full.

That is what all downgrades are about, just as the opposite is the case when a bond is upgraded.

[Yo_Mama]

3. No

The only reason for sovereign credit downgrades is an increasing probability that entities which lend money to that government will not be repaid in the future.

We will be getting downgrades because of our total debt in relationship to GDP.

As you say, low rates do encourage borrowing; they do tend to downgrade a currency in relationship to other currencies. But not always; consider Japan, which has both very low rates and a currency growing in value in comparison to ours.