In the end, America's legislators pulled back from the brink. But that was not before they did significant damage to the country's reputation and raised doubts about the United States' continued role as primary arbiter of global economic relations.
More to the point is whether the world ought not now to be in a search for an alternative and credible competitor to the US dollar as the global intervention currency.
Whether such an idea gains traction, and the urgency with which it is pursued, will depend, to a large extent, on what happens over the next three months, after which funding for the federal government will run out.
The point here is that America's military might and the fact that it is the world's largest economy gave it unassailable global status. But that economic and military power was underpinned by something far more potent: a moral authority that grew out of its democracy and sense of balance.
Ideological extremism, of any stripe, was not what you expected from the United States; there would be no political hostage, neither literally nor figuratively.
The rest of the world figured that it could trust the United States, which it did with their money by way of cheap loans to America's government.
In recent years, however, that confidence has been eroded with the rise of a radical element that has aggressively undermined the notion of consensus building on which the country's political process rests and which made it the envy of the world.
It is those hard-core, conservative extremists who, in 2011, brought the country close to default, triggering a downgrade of US bonds, by procrastinating over raising America's debt ceiling. Then, at the start of this year, the US came to the edge of the so-called fiscal cliff when the same extremists insisted on deep, if not particularly well-targeted, cuts in spending, and little by way of increased taxes to attack the fiscal deficit.
A fortnight ago, the same ideological crowd in the legislature, hoping to use it as leverage to ensure the gutting of President Barack Obama's signature health-care legislation, engineered a partial shutdown of the US government by refusing to allow the approval of the budget. That happened just as the US was moving to yesterday's deadline to raise the US$16.7-trillion debt ceiling to avoid default.
That would have been bad enough if its effects were contained within the United States. But not only does America owe foreigners loads of money, its dollar is the global intervention currency and its bonds are the benchmark for the pricing of most debt. Default by the US would likely create panic and crisis in the global economy. Good sense prevailed at the last minute.
Whether the extremists now appreciate the centrality of the US in the global economy will become clear as we move close to January 15 when funding for the government will end, and February 7 when its borrowing authority ends. If Washington's dysfunction continues, there'll be incentive to look elsewhere.
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