by Marwa Yahya
CAIRO, June 13 (Xinhua) -- The periodically repeated U.S. debt crisis severely dented its image as world superpower, prompting a question that whether the hegemony of U.S. dollar overrides global stability, an Egyptian economist has said.
"The U.S. debt ceiling crisis is a result of a political impasse between Democrats and Republicans to reach a deal," said Adel Mahmoud, chairman of Cairo Forum for Economic Researches.
In January, the U.S. government hit its debt ceiling of 31.4 trillion U.S. dollars. Since then, the U.S. Department of the Treasury had been warning about the X-date, which is the day when the U.S. government can't afford its bills anymore.
"The ceiling puts a big burden on the U.S. administration domestically and abroad as reflecting a political standoff and the inability of the world's largest economy to pay its debts," Mahmoud told Xinhua.
If the U.S. government lags to pay its dues, it eventually wouldn't be able to pay other expenditures like social security, healthcare, and salaries of public employees, he said.
The U.S. Congress has approved a bill to raise America's debt ceiling after the Senate's passage on June 1, the 103rd time since 1945.
However, Mahmoud believes this crisis is set to happen again since the U.S. government has been living beyond its means and relying on borrowing to make ends meet.
"Putting the financial policymaking in the hands of polarized politicians not only harms America, but also sounds alarm bells about the U.S. shaking position in maintaining the global economic stability," he said.
Instead of resolving the debt problem itself, the United States has been exporting its domestic crisis to other countries by taking advantage of dollar dominance, according to the expert.
"Dollar hegemony hinders the functioning of global financial markets and will worsen the world economic slowdown driven by Washington's uncertainty of repaying its debts," he added.
He explained that the United States used to be considered a safe haven of assets, but the partisan debate among U.S. politicians and lawmakers will raise risk aversion sentiment among investors, who think the U.S. can not host risk-free assets anymore.
Investors are looking for new alternatives other than the U.S. currency and market, and shifting to other currencies would be a way out to prevent a new global economic crisis, he added. ■