America's credit rating being downgraded is a crucial moment not just for the United States but for the world. The world’s most powerful nation and its President have been humbled in full global view. More fundamentally, the Western political class has been found sadly wanting in its inability to cope with a long-brewing crisis as the balance of global economic power shifts to Asia.
The interconnected nature of globalised economics and politics means there is no hiding place from the woes of the nation we have grown used to exercising leadership since 1945 and since the end of the Cold War two decades ago.
Even if we did not always relish it, America was there as an anchor for the world. Now the anchor has lost its moorings and the future has become more perilous for everybody.
Though stock markets may have discounted the downgrade, which by cruel coincidence came on the same day that US forces in Afghanistan suffered a terrible loss, and there may be some bargain-buying early next week, the fundamental problem remains.
After the experience of the past weeks, confidence in the political leadership has dropped sharply in America and is little stronger in the eurozone, given the unravelling sovereign debt crisis there.
Fund managers deploying the savings of individual investors and pension funds rush from one supposed safe haven to another as their antipathy to risk mounts by the day – last week, the rush into cash savings was such that a big New York bank was able to charge depositors interest on their money. Read More
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