Global spillovers

What is missing in the month-long Washington partisan wrangling on an austerity deal is paying adequate attention to global investors' interest.

U.S. Treasury figures showed that major foreign holders purchased a combined 4.5 trillion dollars of U.S. government debt by May, nearly one third of the nation's debt.

International Monetary Fund Managing Director Christine Lagarde Sunday urged the United States to solve its debt ceiling problem in a timely manner to avoid negative global repercussions, given the weight of the U.S. economy in the world.

For his part, Mallaby said that countries are regarding the U.S. debt problem and the political system's clumsy handling of it as proof of "American decline."

Even if the United States can solve its debt ceiling problem, other countries may become increasingly skeptical of the inefficient U.S. leadership and the soundness of a global financial system with the dollar playing the pivotal role.