The inevitable has happened. The US has finally been knocked off its proud perch by the Standard & Poor’s, the global credit ratings agency. The world will never be the same again. This is a true watershed and could transform the contours and character of the global economy beyond recognition.

Over the past few weeks, the world has held its breath as the US politicians sparred over their debt. At stake wasn’t just the future and standing of the reigning superpower. It was the global economy itself, hopelessly handcuffed to US economy as it is, that found itself dancing perilously close to the precipice.

If the US failed to raise the borrowing limit, the pundits warned, the world’s largest economy could lose its prized triple AAA credit ratings, sparking a global crisis. The greenback would lose its status as the money in which the world does its business, leading to chaos in world markets at a time when everyone is struggling to survive the persisting effects of the 2008 meltdown. Not surprising, then, it wasn’t just President Obama who was having sleepless nights over the Republican-Tea Party antics. There were jitters all around the globe, especially amongst those sitting on the piles of billions in US currency and treasury bonds.

With the Congress and Obama finally clinching the debt deal last week, we thought the bloodbath was averted. At least, that’s what everyone assumed–until the weekend shocker by Standard & Poor’s that it has gone ahead and done what the world has dreaded all along – downgraded America the Invincible.

What happens now? What happens to our dear old dollar to which all Gulf economies and currencies have been pegged all these years? What happens to the truckloads of US currency and treasury bonds held by countries around the world?

While everyone knows that China, with its mountains of US treasury bonds estimated to be well over a trillion dollars, virtually controls America’s purse strings, it seems Uncle Sam is also indebted to erstwhile enemies like Russia. Several Gulf entities also collectively have an estimated $1 trillion in US treasury notes and bonds. The Saudi Central Bank alone holds $497 billion in US bonds, as revealed last week.

The fact that the US has managed to resolve the credit crisis is of little comfort as the gulf between America’s earnings and spending has acquired frightening proportions. The credit ceiling deal has now been signed into law so America could continue to borrow to support its profligate ways.

Like those corrupt feudal lords we read about in history, Uncle Sam now has to borrow to maintain its obscenely ostentatious lifestyle. Had the credit deal collapsed, the government wouldn’t even have been able to pay the wages of its employees. No wonder an anxious US soldier in Afghanistan asked Admiral Mike Mullen: Will we be paid next month? Meanwhile someone came up with the gem that Apple had more money in its kitty than the US government. How the mighty have fallen!

No wonder Comrade Vladimir Putin, never one to pull his punches, thinks America is like a “parasite” living off the dollar-dominated global economy. The Russian leader also suggests an alternate global currency as a weak dollar threatens the world economy. China hasn’t been far behind. It has accused the US of “mishandling” its economy, bringing on this crisis. Beijing has backed Russia’s call for a new global reserve currency.

Amidst all this doom and gloom, few in Washington have time or patience to look for the clues to the current mess. How did the richest nation on the planet end up here? While the US has always lived large, this past decade will go down as the beginning of America’s end as the global economic hegemon.

What do you expect when you are burning billions of dollars daily to maintain the occupation of two complex countries at the other side of the world? There’s a limit to printing the dollar, even if you own it. The Republican fruitcakes, who increasingly talk about rising US debt and irresponsible government spending, forget it’s their wars, choreographed with Israel, that have bankrupted America.

While the US economy struggles, its war bill is multiplying by the day. According to the recent Cost of War, close to $4 trillion has been spent on the invasions and occupation of Afghanistan and Iraq. These wars account for 75 percent of the budget deficit.

Little has changed under the Nobel laureate president. America is in no hurry to pack and leave Afghanistan and Iraq. Indeed, it’s looking for new fronts, from Pakistan to Yemen to Somalia. Indiscriminate bombings of civilians, drone attacks, night raids, and assassinations continue as ever.

And the action isn’t limited to the Middle East. Last week, as Paul Craig Roberts pointed out, even as Americans were obsessing over their credit woes, there was talk of deploying US forces in Australia to check China. A day before the debt deal, news reports talked about the US expanding “operations” in Philippines. Next door in Mongolia, in China’s backyard, the US and NATO have been conducting military exercises. In Europe, the US is upgrading Polish warships for Baltic Sea and building military bases in Bulgaria. In Africa, it’s building “partnership stations.”

Already, the US military bases dot every corner of the world. And this is a country that is neck-deep in debt. The US has no resources to take care of its homeless and vulnerable, but it has enough money to splurge on loony wars in distant lands. It’s like throwing a party at Burj Al Arab while your home goes under the hammer.

When will America grow up? And when will the lust for power and military grandeur end? The economy is in red, unemployment is in double digits, and its once formidable social and economic infrastructure is falling apart. Yet today America spends on its vast military enterprise around the world more than it ever did when it faced a threat from Soviet Union. At $526 billion (without the Afghan and Iraq war costs), the 2011 Pentagon budget is higher than at any time since World War II. Why? What’s America trying to prove?

Instead of fighting each other, shouldn’t US politicians be pushing for an end to America’s military juggernaut around the world? That will be the simplest way of easing the dead weight of debt on Uncle Sam’s back. If America is to avoid the fate of the other empire which imploded under the burden of its numerous wars, it’s about time it dealt with its need-to-conquer-the-world syndrome. The whittling down of ratings is the first and loudest wake up call.