The dollar is looking less almighty. It won't remain the world's reserve currency if Washington can't get its act together.
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, Abbott Laboratories and AbbVie, La Monica does not own positions in any individual stocks.
The United States dollar may still be like Leonardo DiCaprio in "Titanic." It's the king of the world! But if politicians keep acting like toddlers, the greenback may eventually suffer the same fate as that not-so-unsinkable ship.
Now don't get me wrong. The dollar remains the world's reserve currency. It's what most people around the world use as their benchmark for trading, investing and other financial transactions. And there is no viable alternative at this time.
However, confidence in the dollar may gradually erode as Congress does its best impersonation of Italy. That's not a compliment. My ancestral homeland is famous for great food, wine and art. But a normal, functioning government? Not so much.
It's getting harder for investors to write off the problems in Washington as isolated events. The current debt ceiling drama is the third time since the summer of 2011 that lawmakers and President Obama have brought the country to the brink of a fiscal disaster.
Andrew Milligan, head of global strategy for Standard Life Investments in Edinburgh, Scotland, used a soccer (football for those of you outside the 50 States ) analogy to describe his concerns about the dollar. He joked that the United States is in danger of being demoted to the second division of governments.
"The U.S. is not as dysfunctional as Italy. But it's moving south fast," he said.
The value of the euro has moved higher against the dollar for the past decade (albeit in bumpy fashion) ... despite the enormous debt crisis that's gripped the European continent over the past few years.
What are the implications of this? Milligan stressed that he does not think the U.S. will actually default on its debt. And it does look like there was some "progress" in Washington Thursday ... if you consider kicking the can down the road for six weeks progress.
But that almost doesn't matter anymore. Milligan feels that many foreign investors are starting to grow tired of the partisan games in Washington.
He does not think the dollar is going to lose its reserve status overnight. It's a process that could take many years. But he believes the dollar won't be the world's preeminent currency forever. And the decline has already begun.
"It's only marginal for now. But over time, the political problems will undermine the willingness of international investors to buy U.S. dollars and dollar-denominated assets. What's happening in Washington is happening too frequently," he said.
Other countries are already voicing their displeasure with the kookiness on Capitol Hill.