The US economy and the nation’s credibility have already been damaged by the debt ceiling crisis even if a deal is struck next week, and “reform is now urgently required”, affirms the CEO of one of the world’s largest independent financial advisory, asset management and fintech organisations.

Nigel Green of deVere is speaking out following reports that Republican and White House officials are edging closer to an agreement to raise the debt limit and cap federal spending for two years.

“Tuesday is being reported as the likely day for a House vote on raising the US debt ceiling. Although this is not definite, and it might come right down to the wire and happen just hours before Treasury Secretary Janet Yellen says her department could run out of money.

Regardless of whether a deal is done, and a default is avoided, which is the hope, the “US economy and the nation’s credibility have already been damaged,” says Nigel Green.

“This is evidenced by Fitch, a credit rating agency, late on Wednesday putting the US government’s AAA debt rating on ‘negative watch’ as a result of the political brinkmanship between the White House and Congress over raising the debt ceiling.”

He continues: “Using the country’s debt as a political weapon, undermines confidence of investors in the US government amid concerns about the government’s ability to properly manage its finances.

“This loss of confidence will mean that it becomes more difficult for the US government to borrow money in the future, which could lead to higher interest rates and weaker economic growth.

“The debt ceiling drama also erodes some of the current global reserve currency’s credibility and reputation as a ‘safety asset’, which could have far-reaching repercussions for the US.”

The deVere CEO also recently argued that the debt ceiling crisis was the “ultimate gift” for America’s major geopolitical rival, China, which is seeking to promote the internationalisation of its own currency and to position itself as a more stable and attractive investment option, in order to attract more international investment and capital inflows.

“Whatever happens in debt ceiling talks this week between Democrats and Republicans, China’s massive PR machine is already spinning the narrative that the US is a declining power,” he noted.

With talks on a knife edge to contain this crisis, Nigel Green says that should this current situation be resolved, reform is “urgently required.”

He says: “I’m in favour of debt ceiling reforms that take away the threat of a US government default and all the implications of that, and reforms that make lawmakers in Washington truly accountable by automatically triggering spending cuts should the ceiling be reached.”

The deVere CEO and founder concludes: “We hope and expect a deal to be done to avoid a default. But it should never have got to this stage in the first place, as damage has already been done to US economic credibility.

“This must serve as a catalyst for reform.”