The United States looks like the "Land of Oz run by the Munchkins" after the shutdown which started Monday at midnight, according to Citi's global chief economist.
Willem Buiter warned in an interview with CNBC on Tuesday that the "embarrassing manifestation of U.S. political malfunctioning could become economic disaster" if the market gets spooked about the debt ceiling and the potential of a sovereign default.
He called Washington politicians "irresponsible" over the political deadlock which has held back the Affordable Healthcare Act—otherwise known as "Obamacare"—and led to some U.S. government functions closing down until the dispute is resolved.
(Read more: U.S. shutdown brings back risk aversion)
Buiter said that the most serious potential consequence of the current situation is that markets will become alerted to the "danger" of the approaching U.S. debt ceiling. However, he added that the current situation "need not be too serious".
He echoed comments made by ratings agency Standard & Poor's on Monday. The agency warned that if the warring Republican and Democrat factions don't reach an agreement by Oct. 17, the Treasury would probably miss debt repayments and default on the U.S.'s nearly $17 trillion national debt.
That in turn could lead to a downgrade of the country's rating. And the fallout would not be confined to the world's biggest economy.
(Read more: U.S. government shutdown unfolds)
"If the U.S. is to default on even a small portion of its debt it could pull the rug under the global economy," Buiter said. "U.S. sovereign debt is the linchpin of the global economy."
—By CNBC's Catherine Boyle. Follow her on Twitter