Editor's Note: It is mentioned with great gratitude that Mr Humayun Gauhar, a renowned writer who got it from his late father Altaf Gauhar in his genes has consented to contribute regularly to Opinion Maker.

By Humayun Gauhar

Last Sunday I joked that China had put the US on EBay. Was I wrong? By its debt and creditworthiness being downgraded for the first time ever, the United States of America has, for all intents and purposes, defaulted. What seemed unthinkable because of America’s clout became possible when Standard & Poor’s downgraded America’s rating from AAA to Aa++. Moody’s had downgraded it earlier to AAA minus. Fitch will soon follow. Now interest rates will increase, servicing debt will become more expensive, there will be greater public and private defaults, growth will decline further and fear of another downgrade will haunt.

The world is caught in this downward spiral caused by the crimes of the few against the many.

More damagingly, it is America’s global clout that has been downgraded. The US economy will decline faster and further causing more political hysteria and an even more mentally challenged leadership may emerge in a kneejerk reaction that could take the whole world down with it. We’re in for one hell of a roller coaster ride.

Perhaps formal default that was amateurishly averted by Congress at the last minute by a juvenile deal would have been better, for a formal default would have put America on the right path of not living beyond its means and creating a false aura of well-being. Only by demolishing a structurally dangerous edifice can you start building a new and better one.

This is worse than the defeats in Afghanistan and Iraq. For that excuses can be made. For this there are none. The reason is clear and simple: the incremental downgrade in leadership over the last five decades the primary cause of which is the progressive meltdown in US and western political systems. To be fair, this is a worldwide malaise, bar China. The saving grace is ‘The China Syndrome’ – when the cores of western


economic, political and military power melt down and go through the centre of the earth, they will emerge in China and the Far East. The pendulum would have swung for the second time in human history –back to where it started.

It’s human nature to hold forth on anything and everything with certitude most endearing without knowing the facts, much less understanding them. It’s not in human nature to say, “I don’t know” because its not in human nature to admit weakness much less fallibility.

So here are the facts. You will be amazed.

The figures that follow come from the CIA, Eurostat, the World Bank and the US Treasury. They are about three days old and are also reflected in the ‘Debt Clock’.

National Public Debt Outstanding or ‘Public Debt’ “represents the face amount or principal amount of marketable and non-marketable securities currently outstanding.” US Public Debt is $14.6 trillion, and rising by the second.

GDP is the acronym of Gross Domestic Product. It is the total value of all the goods and services produced in a country in one financial year.

America’s GDP is 14.8 trillion.

Public Debt to GDP ratio is “the cumulative total of all government borrowings less repayments that are denominated in a country’s home currency”. America’s is 78 percent.

Here’s the crunch. External Debt to GDP ratio is “the total public and private debt owed to non-residents repayable in foreign currency, goods or services”. US External Debt to GDP ratio a few days ago was 98 percent of GDP. It just reached 100 percent.

Thus per capita every US citizen is indebted to the tune of $46, 720 and every taxpayer to the tune of $130,000.

  Pak-US Relations: Need Reevaluation

All this is nothing compared to the US Total Debt of $55 trillion, and rising. I say again: US Total Debt is $55 trillion. In case you are wondering, US Total Debt “includes household, business, State and Local Governments, financial institutions and the Federal Government”.

What is there left to say? How in God’s name are they ever going to deal with this honestly? The fall of the American Empire will be far greater and more destructive than the fall of any empire before it.

Here’s more. US federal spending is $3.6 trillion while the federal budget is only $1.4 trillion, of which $703 billion goes to wars and defense.

The total US interest for 2011 is $3.65 trillion, which means that per citizen will have to pay $11,679.

Personal debt “includes all personal obligations: mortgage debt and consumer debt, which includes car loans and short-term revolving credit card debt”. US Total Personal Debt is $16 trillion.

Mortgage Debt of $13.6 trillion “includes single and multi family residences, farms, and non-farm and non-residential mortgages”.

Consumer Debt of $2.44 trillion “consists of all revolving and non-revolving personal debt: car loans and credit card debt.”

Credit Card Debt, which is $800 billion, is “unsecured consumer debt owed to credit card companies and banks.”

That means that Personal Debt per citizen is $51,403 i.e. Total Personal Debt divided by the population.

For comparison, look at the Debt to GDP ratios of other important countries. Of the so-called BRICs, Brazil’s Public Debt to GDP ratio is 60 percent and External Debt to GDP ratio is 18 percent; Russia’s 10 and 32 percent respectively; India’s 52.3 and 22 percent; and China’s 16.8 and 5.44. They are all much better off than America. China is

  Afghan prospects not necessarily gloomy

outstanding. The Chinese realized from the beginning that living off borrowed money, beyond one’s means, is to create a temporary mirage to give the illusion of economic growth and well being. One day the mirage disappears.

You must be wondering what Pakistan’s ratios are. Its Public Debt to GDP ratio is 43 percent and External Debt to GDP ratio 32 percent. Not so bad after all, when you compare it to America. Not bad at all.

Now look at Europe. The UK’s Public Debt to GDP ratio is 81 percent and External Debt to GDP ratio 388 percent. Come again. 388 percent? Believe it or not, it is. That’s nothing compared to Ireland’s ridiculous External Debt to GDP ratio of 1,110 percent, which dwarfs its Public Debt to GDP ratio of 129 percent. Spain was supposed to go first and trigger off Italy’s default. Now it’s happening the other way round –that’s how much the ‘experts’ who’ve dug this hole for us know. Both countries will go under any day now. Italy’s Public Debt to GDP ratio is 119 percent and External Debt to GDP ratio is 132 percent, while Spain’s are 70.3 percent and 169 percent respectively. Germany’s Public Debt to GDP ratio is 75 and External Debt to GDP ratio 119 percent.

France’s Public Debt to GDP ratio is 86.5 percent and External Debt to GDP ratio 208 percent. What are these two going on about?

That America’s Public Debt to GDP ratio is 78 percent is bad enough, but when you add to it External Debt to GDP ratio of 100 percent, the lights go out. The light that you see comes from the generator. Don’t be fooled. When the petrol runs out there may be no money to buy more.

Then what?