Indeed, Treasuries are not selling well abroad. In the first seven months of this year, total foreign holdings of U.S. government bonds were virtually stagnant. No wonder the Federal Reserve is purchasing $45 billion worth of Treasury securities every month that the rest of the world seems unwilling to buy.
That is a good example of how much Washington's current drama is a high-risk game for a country which needs to import this year an estimated $500 billion worth of foreign savings, and whose currency is still trusted enough to account for 61.9 percent of world reserves.That trust is precious.
(Read more: US Treasurys extend losses after supply)
Sadly, though, it is in increasingly short supply. The dollar share of world reserves has declined sharply from its most recent peak of 71.5 percent in 2001, indicating a steady erosion of confidence in the greenback as a transaction currency and a store of value.
Searching for "safe haven" alternatives, world central banks have even been accumulating growing amounts of Australian and Canadian dollars.
Clearly, what the French call America's "exorbitant privilege" – paying its bills with a currency it prints at will – won't last much longer if confidence is lost in America's ability to run sound money and a stable economy.
A replay of the massive loss of confidence in the U.S. dollar during several episodes in the 1970s and early 1980s could be devastating for the slowly convalescing U.S. economy.
(Read more: Bipartisan back pay bill passes, but shutdown goes on)
That experience had shown that credible and sustained interest rate increases were the only way to stabilize the sinking dollar. The consequences of something like that happening now are too dire to contemplate.
Too far-fetched? I hope so.
But it is clear that for much of the world that Washington's political stunts have dealt a severe blow to the credibility of American political governance.
When prestigious conservative media of some of our closest European allies run headlines that "America is politically bankrupt," or that Washington's "self-destruction" inspires "ridicule… concern… pity" – it's time to take notice.
Here is one more European example of what Washington has done to the country's image: rumors have been reported in the media that the European Commission was ready to pay for the trip of American trade negotiators to Brussels to discuss the trans-Atlantic free trade agreement next week. Luckily, that trip, too, was cancelled.
(Read more: Europe stocks close higher; US deadlock drags)
I don't know whether, and much less when, the Republicans will be able to extract enough concessions to emasculate the Affordable Care Act (a comprehensive healthcare program known as Obamacare) to end the government shutdown, but it is heartening to hear that their leadership won't allow a bankruptcy of the United States.
It is also not clear whether, and when, the American people will summon the president and the Fed to take charge of the country and the economy. But one thing is certain: It is time for the Fed to stop debasing the dollar, and to go back to the Clinton era mantra of "a strong dollar is in America's national interest."
Otherwise, I am sure we can count on those friends and allies in the Asia-Pacific to accelerate their dollar dumping. And, who knows, they may even start a general trend.
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Michael Ivanovitch is president of MSI Global, a New York-based economic research company. He also served as a senior economist at the OECD in Paris, international economist at the Federal Reserve Bank of New York and taught economics at Columbia.