The international community is fortified for financial gyrations of market reactions to the downgrading of the US credit ratings, but what commercial power will buttress the global economic backlash in the wake of Washington's comprehensive deficit reduction deal, ponders Gamal Nkrumah In an unprecedented admonition the People's Republic of China warned the United States to "live within its means". In the past it was Washington that chided China to improve its human rights record and democratise. Now it is Beijing that is castigating the global powerhouse of capitalism. "The days when the debt-ridden Uncle Sam could leisurely squander unlimited overseas borrowing appear to be numbered," read a Xinhua, China's official daily, editorial. It is Beijing and not Washington that now calls the shots. The downgrading of America's credit ratings heralds the beginning of the political demise of the US as a global superpower and the ascendancy of China as the world power, a notion that has been steadily gaining currency since the turn of the century. Beijing beckons triumphantly. The question uppermost in people's mind is whether China could use its immense financial clout as the biggest US creditor to weak havoc on the US economy. Close to half of Chinese government savings or the equivalent of 20 per cent of the Chinese economy is composed of Chinese holdings of US Treasury bonds. China has $3 trillion in foreign currency debts which take the form of US Treasury debt. Washington's indebtedness and now the humiliating downgrading of the US credit rating only curtail its capitalist credentials further. It is ironic the world's most populous nation run by its own homegrown Communist party is now called upon to come to the rescue of capitalist America. Joseph McCarthy's rapid anti-Communist crusade and "Red Scare" have come to naught. McCarthy, and not Mao Zedong, is turning in his grave. China might pull the plug on its US Treasury investments. Washington, as Beijing dictates, must now curb its military spending. However, the downgrade could intensify global concern about the future prospects of the international economy. It is not in China's interest for America to slip into a recession. Communist China would like to see a prosperous capitalist America. After all, China is a "social market" economy and not strictly-speaking a communist one. China needs the US economy to boom and the US dollar to strengthen to stay economically healthy. Beijing needs Washington as much as Washington needs Beijing. It is in nobody's interest to witness an American economic meltdown, least of all China with its immense holdings of US Treasuries. China, likewise, would like to see a more economically vibrant Europe. By investing in European economies China strengthens its other most important export markets and makes it less dependent on the US. Eurozone policymakers, like their American counterparts, are wrestling with their own debt crisis. Emerging economies and in particular China hold the key to staving off an economic crisis of global proportions. Asian stock markets are meanwhile falling sharply in knee jerk reaction to the downgrading of the US credit ratings. The jittery Asian stock exchange markets increase the volatility of the global markets even though in terms of underlying servicing capacity US Treasuries continue to be among the safest obligations internationally. Still world markets took a hard hit on Monday in reaction to the cut in US credit rating. Washington's fiscal policy is in question but the more serious concern is the social repercussions of the downgrade. Within hours of the US losing its triple A credit rating last Friday Democrats accused hawkish Republicans of causing the downgrade. "I believe this is without question the Tea Party downgrade," declared Senator John Kerry, the Massachusetts Democrat and chairman of the Senate Foreign Relations Committee. Naturally, the poorer segments of the US society will bear the brunt of the cuts and especially Blacks and Hispanics. People of colour, the darker races, at home and abroad are widely expected to be the biggest losers. Some 42 Americans, mostly Black and Hispanic rely on government food handouts. And, downgrading US credit rating is bound to reduce federal food aid drastically leaving the most vulnerable segments of the American society at the mercy of the finance officials who are supposed to get the global debt crisis under control. Investor fears of the global market turmoil have hit the main trading partners of America in Europe and the Americas hardest. Investors throughout the world are keeping a wary eye on equities. Equity markets have become the focus of financial policymakers. The debt crisis is a grim reminder of previous tricks played by policymakers to deflect attention from the creditworthiness of the world's largest economy and its close trading associates and immediate neighbours Canada and Mexico. Long-held certainties about the US economy and American lifestyles are fast crumbling. Fiscal policy is at its core a policy process and American policymakers are all too aware of the fact. Faith in the invincibility of the American dream is fast fading. Foreign policymakers are now equally conscious of American makers' shortcomings. The influential China Daily described the US debt ceiling deal as a "double-edged sword for China." Chinese officials have stressed that the US downgrade must remain in the international spotlight. Though the China Daily claims are inflammatory, it is not alone in seeking to revise the worldview of America's financial faux pas. There is also the fact that foreigners are as determined as critical American policymakers to highlight the political nature of America's debt crisis. The sudden exigency of the creditworthiness of the world's largest economy is re-adjusting the global economy towards the East, and away from the regressing West. America's credit rating downgrading is a world-transforming trembler that leaves the emerging economies of the East in two minds about adopting the dubious consumption-fuelled capitalism of the rapacious West wholesale.
