The United States doesn't deserve Asia's money, not with half of its government in financial jihad mode, damn the global consequences.
The biggest economy has long taken its reserve-currency status for granted, but the events of recent days raise Washington's hubris to entirely new levels. Chinese President Xi Jinping didn't mention Ted Cruz, John Boehner or the tea party last week when he urged major developed economies to adopt responsible policies that avoid negative spillover. He didn't have to. Their shutdown of the U.S. government and the specter of U.S. default were written between the lines in bold type.
The United States is playing with fire here in ways it might not recover from.
American politicians should be particularly worried about a conversation Xi had lsat week in Jakarta with Indonesian President Susilo Bambang Yudhoyono. Xi proposed creating a regional bank to invest in infrastructure in Southeast Asia and pledged funding from China. Asia is also gradually building a neighborhood International Monetary Fund. Where will all this cash come from? Asia's $7 trillion in currency reserves, much of it currently in dollars.
Asians aren't panicking just yet. Many here think U.S. lawmakers aren't crazy enough to default on their nation's debt, no matter how much they despise President Barack Obama's policies. They will bicker, close the government and embarrass the U.S. on the world stage by forcing Obama to cancel visits to the Philippines and Malaysia.
But come Oct. 17, when the U.S. runs out of money, politicians will avert disaster. America's banker, Asia, is betting bond guru Bill Gross of Pacific Investment Management Co. is right that the risk of the U.S. reneging on its debt is zero.
A rational view? I'm not so sure. It's a bit surreal being an American journalist abroad these days as the tables get turned at interviews. After a few questions from me, the interviewee will inevitably ask some variation of: What, oh what, is going on in Washington? What disturbs officials here the most is that this battle is over providing health care to Americans. How, they ask, could half your government take a stand against what other developed nations view as a basic human right? The very nature of this question is what bothers me.
This battle really is a political jihad, and congressional Republicans may very well think a default is a reasonable price to pay for stopping the Affordable Care Act, which they view as the end of Western civilization. Doing that would surely accelerate the end of the dollar's linchpin role in global commerce. But just as it takes a village to get big, history-making things done, Cruz and his friends in Congress may decide that it will take a crisis to get their way.