Russia, China liken US to a 'parasite' and 'time-bomb'

The US debt ceiling crisis that's been temporarily resolved was pure political theatre, with both the principal political parties resorting to elaborate posturing and grandstanding, even as the US was sliding towards a ruinous default.

Sure, they averted a crisis to the global economy with a last-minute deal, but by dragging the US to the edge of that cliff, shortsighted US politicians have tarnished America's reputation to such an extent that it's now open season for anyone who wants to take a potshot at the US.

And from all accounts, there is no dearth of those who would like to take a swing.

Russian Prime Minister Vladimir Putin has likened the US to a parasite that is feeding off the world. "They are living beyond their means and shifting a part of the weight of their problems to the world economy," he said on Tuesday. "They are living like parasites off the global economy and their monopoly of the dollar."

More from World

From the other end of the world, China, which has often been at the receiving end of criticism from US lawmakers over everything from an undervalued currency to human rights abuses, is demonstrating that it can give as well as it can take.

China's very own sovereign rating agency, the world's first "non-Western" agency, has downgraded the US rating, noting that the debt ceiling deal hasn't quite resolved the larger debt problem that the US faces.

Dagong Credit Rating Co said it has cut America's credit rating from A+ to A with a negative outlook. Leading Western rating agencies, including Moody's and Fitch, said overnight they were reaffirming the US's top-notch Aaa rating for now, but will continue to review its standing.

[caption id="attachment_53122" align="alignleft" width="380" caption="Russian Prime Minister Vladimir Putin (L) has likened the US to a parasite that is feeding off the world. Sean Gallup/Getty Images"][/caption]

So what's Dagong's game here?

Dagong (which means 'Big Justice' in Chinese) is also playing a bit part in the grand political theatre. It's rating, which no one takes seriously for now, is intended solely for domestic audiences to feel good that China is talking down to the US. When it debuted last year, Dagong effectively trashed the US, the UK and Japan as being bigger sovereign risks than China.

A commentary in the Chinese news agency Xinhua on Wednesday built on that talk-down rhetoric, criticising the "madcap farce of brinkmanship" and noting that US politicians had effectively ended up drinking poison in order to quench their thirst.

In language that will resonate with a domestic audience, the commentary said: "Should Washington continue turning a blind eye to its runaway debt addiction, its already tarnished credibility will lose more lustre, which might eventually detonate the debt bomb."

In the days and nights of endless political games in Washington, China, which is overinvested in US dollar assets, was watching warily. Economist Stephen Roach noted that "the Chinese have long admired America's economic dynamism. But they have lost confidence in America's government and its dysfunctional economic stewardship."

Senior Chinese officials, he added, were "appalled at how the United States allows politics to trump financial stability." He quoted one high-ranking Chinese policymaker as saying: "This is truly shocking... We understand politics, but your government's continued recklessness is astonishing."

China's predicament, as well as Russia's, is of course largely their own fault. As Cullen Roche notes on Pragmatic Capitalism blog, they're hardly in a position to complain about the US.

"Countries like Russia and China enjoy the benefits of investing in American securities by virtue of the fact that they enjoy millions of jobs due to the fact that they choose to do business with American corporations. If they do not want to hold American securities then they just have to tell their corporations to fire all of those workers who are employed due to their relationship with American firms.That way, they can stop importing dollars and they won't have to complain about this...'parasite' anymore."

But whereas it is easy today to dismiss China's fulminations and Dagong's red rag, there's a risk in underestimating the likely consequences of Chinese disquiet. That's because, China is moving simultaneously to deepen multilateral ties with the emerging world, and is the major sponsor of the Chiang Mai initiative to oversee a currency swap arrangement among Asean members, China, Japan and South Korea.

In other words, China is in the process of building a parallel financial infrastructure, one which could rely increasingly less and less on the US and perhaps even begin to share the worldview that sees the US as a "parasite" and a "time bomb."