On the face of it, it might seem wrong that the downgrading of the American sovereign dollar-denominated bond should have been such a sensation in the world. That particular experience is something Pakistan, for example, knows only too well. However, it reflects the power of the USA in the whole world, and the fact that that power might now be coming to an end. It should not be forgotten that the American currency is not backed by anything intrinsic, such as gold, and merely reflects the confidence of holders in the ability of the USA to produce goods and services which the world will buy. Because of that, the world has been ready to use the dollar as its reserve currency. The price of goods is quoted in dollars, to the extent that if other countries, like Pakistan and China, trade, they will quote prices in dollars, and will measure their mutual trade in that figure. The USA has parlayed that economic might into a virtually permanent trade deficit, in exchange for dollars, which have gone to settle transactions in international trade. Whereas if a country wished to import something, it had to earn the requisite dollars by exporting something, the USA found it could pay for its imports by giving dollars. Since the American government had the right to print dollars, this was considered legal. Of course, it was the only government which could do this. Anyone else doing this would be hauled up as a counterfeiter. But what would exporters do with that vast pile of dollars? Buy US Treasury Bonds, which meant lending to the US government. This meant that the US administration, whatever the revenue measures it employed, was flush with cash. This allowed it to engage in the military adventures of the war on terror. However, the ability of the USA to fund trade deficits this way led it to the present impasse. There is a certain upper limit placed on the amount of debt the US government is allowed to incur in the shape of treasury bills, and that upper limit is approved by the Congress. The government needed the debt limit enhanced not to keep up international trade, but to keep its own budgetary operations running. Though the downgrade followed that debt ceiling increase, there was also a demand by the Republican majority in the Congress that spending be controlled. The topic was raised, but not decided, of welfare entitlements. This development was not something new, and was in many ways predicted. The twin deficits, of the budget and of trade, had lasted for decades, and the USA had long been indebted. This had already caused economists to lead the increasing number issuing warnings, but those predicting that the USA would come out trumps were as numerous. There were also two further crises that the USA already faced. First was the spreading of the worst economic crisis since the Great Depression, across the whole range of whatever had been securitised, but originating with housing mortgages. That pulled down banks, and the largest American corporations. Another crisis that hit round the same time was that of Europe. Though the focal point is Greece, there are rumblings from what might be described as the soft underbelly of Europe, Italy, Spain and Ireland. This has threatened the euro project, of Europe putting its combined might behind a single currency. That means the best alternative for the world to the dollar as a reserve currency got into trouble around the same time as the dollar. It was perhaps thus no wonder that the stock markets, which are after all supposed to reflect confidence in how an economy might perform in future, were jittery worldwide. An American default was possible and would have happened if Congress had not increased the USAs debt ceiling. It is likely that it will still happen, because unless Washington can gain control of its spending, it will not be able to avoid a point where it will have to default. There is no real precedent for the sovereign default of a reserve currency country. The last time an economic superpower defaulted, Spain in 1575, was at a time when the Spanish currency was based on precious metals, and that too was then the basis of international trade. Incidentally, the Spanish default too was caused by an addiction to war, in the Netherlands, where Philip IIs dynastic claims were being pursued. The whole episode seems to reflect the crisis of international capitalism, of its failure to deliver. A cursory glance would show that it is based on too many people behaving in ways only a rare minority follows. With the inevitable failures to behave piling up, the crisis is bound to occur. Though there were other peoples failures in the background, the latest occurrences have thrown a lurid though unpleasant light on the American political process, which has been shown to be prone to blackmail by one party or another, and its unsuitability as a tool for economic decision-making. There has also been the likelihood that the way the American armed forces splurged the 'peace dividend from the cold war on its invasions of Muslim lands and its adventures abroad, played a major role in causing the current crisis. Apart from all else, the democratic principle, on which the USA prides itself so much that it wishes to export it, has been exposed. The decisions deeply affecting the economies of the whole world are shown as being taken by an assembly elected only by the people of the USA. That seems more like imperialism than democracy. It is also possible to see the American crisis, or rather the military spending that caused it, as behind the riots in the UK. Those are the result of spending cuts in civilian areas caused by the unreasoning UK devotion to all things American, including its wars. The UK cannot afford even these wars any longer. Yet these wars are essential to capitalism, so the expense will not stop. That only means that the crises will be repeated, and replicated throughout the capitalist world, not just in bank boardrooms, but on the streets. In the UK, the rioting has not been hung on any terrorists, Muslim or otherwise, and does not so much reflect a domestic as a foreign policy failure, even though the effects are to be seen in the domestic arena. The USA is far from finished. All it has done is suffer a downgrade, while Spain actually defaulted, and has survived to be on the verge of default more than four centuries later. However, the embarrassment to America has been immense, and it may not recover its international prestige now that it has joined the list of countries which have suffered a credit rating downgrade. It is likelier than not that it will maintain its prestige in Pakistan, mainly because its supporters here cannot see a successor. However, those who think that the USA is invulnerable should not forget that the British left, and that the Soviet Union fell. Therefore, if the USA was to fade out, it should be no surprise. It is also more likely than not that this fading will take some time, perhaps the active lifetimes of those presently active, but as parents, they should plan for future generations, who will probably have to look elsewhere. It might not be as simple as turning to another Western power, for the West may have run out of steam after the USA, unless the baton, which only recently crossed the Atlantic, is to go South. If it crosses the Pacific, the Pakistani leadership figures will have an inside track, but not necessarily for long as others, with greater advantages, scramble to make room for themselves. The writer is a veteran journalist and founding member as well as Executive Editor of The Nation. Email: maniazi@nation.com.pk