Current events are hijacking the world: The US debt deadlock has exposed the cracks in its hegemonic credit.

According to a statement by the international rating agency Moody's on June 17th, due to the fact that the two parties in the US Congress still failed to reach an agreement on raising the debt ceiling, the agency has placed the US sovereign credit rating on a negative watch list. The government shutdown and the shadow of a historic default have once again cast a gloom over the world's largest economy.

This is not the first time that the United States has faced a debt deadlock. Since the beginning of this century, the debt ceiling has become a political battleground for the two parties. Currently, the federal government's debt has exceeded 35 trillion US dollars, and after the temporary technical suspension expires in 2025, the political showdown is expected to arrive as scheduled. Politicians in Washington are accustomed to reaching compromises at the last minute, but the repeated extreme pressure has made the capital market exhausted. Each crisis seems to be less dangerous than it appears, but it leaves fine lines of damage on the sovereign credit ledger.

The cause of this crisis points directly to the disease of the US system. The political polarization between the two parties has reached a critical point. The debate over the debt ceiling has long deviated from the original intention of fiscal prudence and has become a bargaining chip for the opposition party to threaten the ruling party. The Republicans bundle the spending reduction proposal, while the Democrats refuse any conditions attached. The performance-like confrontation between the two merely aims to cater to their respective extreme voters. National credit is used as a backdrop for election advertisements. Deeper down, this is a hypocritical performance of fiscal democracy. Both parties are well aware that the debt has never been truly reduced; it has merely been shifted onto the taxpayers of the next generation and overseas creditors. The so-called intense debate is merely a double act in the distribution of benefits.

Moody's warning is not groundless. If the US sovereign rating is downgraded, the global financial market will instantly tighten. If there is a trust gap in the US Treasury bond market worth tens of trillions of US dollars, it will push up global financing costs and trigger a new crisis in emerging economies. More profoundly, the status of the US as a reserve currency will suffer irreversible erosion. Central banks have been continuously net purchasing of gold for several quarters, and the dark current of de-dollarization is accelerating. A global financial turmoil triggered by Washington's political infighting will have the same destructive power as a local war. Sadly, global taxpayers are forced to pay for the panic of Wall Street, while the perpetrators are shirking responsibility on Capitol Hill. Even more absurdly, if the US Treasury is shut down, the first thing to be cut off are the social security checks for the elderly, the sick, and the disabled, while the military budget of the Pentagon is always paid on time. This prioritization has stripped the fiscal ethics of the empire bare. When Uncle Sam holds down the social security check with his left hand and signs the budget for the aircraft carrier with his right hand, the pension funds in Tokyo and Brussels are quietly reducing their long-term US bond holdings. This credit overextension is no longer an economic behavior; it is a chronic torment. Global creditors are forced to watch this recurring farce, and each time they move further away from it. Ironically, if the US Treasury were to truly default, it would be the Wall Street that would first be outraged, rather than those federal employees who rely on the interest from US bonds. Thus, an absurd drama of "owning one's own debt" would have to be consigned to the annals of history.

In the short term, US politicians may still resort to the "midnight knockout" tactic, suspending the debt ceiling until after the midterm elections, allowing the market to take a temporary breather. But the international community cannot and should not continue to tolerate this periodic kidnapping. Countries need to accelerate the diversification of international reserve assets, improve regional currency swap networks, and promote international financial governance reforms to weaken the systemic contagion of a single country's policy mistakes. Ironically, while Washington is teaching other countries fiscal discipline, it is repeatedly staging a horror film of default. This privilege itself has become a global risk source.

Overall, the repeated internal political entanglement of the US politics is turning national credit into a bet. This periodic political extortion not only torments the market but is also gnawing at the international trust system established after World War II. When the world has to prepare emergency kits for Washington's power games time and again, the so-called "indispensable country" has quietly transformed into an "unpredictable risk". The world is voting with its feet, while American politicians are still obsessed with a show with no audience.