On the collapse of the so-called "super committee" of Congressional Democrats and Republicans tasked with devising a bi-partisan plan to drive down the US deficit, Fry said it was important to consider the context, particularly the Presidential election next year.
"We are within 12 months of a US presidential election and there's a lot of politics going on and the combination of high politics and economic crisis is a potentially toxic one," Fry said.
"Precisely because there are very big political issues (in the US) and there is a group in Washington who are determined to use the opportunity they have to make life as difficult as possible for the President," he added.
Fry said Obama's tough stance on economic reforms, including a warning that he will veto any attempts by Congress to block a $1.2 trillion spending plan, would work in the President's favor.
"Here a politician has decided that it's in his best interests to say: 'I reached a deal, this is important, we're going to deliver this and that's what I'm going to do,'" Fry said.
"It's being tough and I believe that's actually at the end of the day going to help him electorally," he added.
Europe: The Sky Will Fall In
However, Fry stressed that the economic difficulties of the US could not be compared to the sovereign debt crisis in Europe because the Federal Reserve still retains control over monetary policy, the dollar remains the reserve currency of the world and the US is the nation with the best prospects for growth in the Western — and wider — world.
"There is no doubt that the US economy remains the most powerful engine for growth, certainly in the Western world and I would argue, given the totality of the opportunity it has… the world generally," Fry told CNBC.
On the debt crisis within the euro zone, Fry was pessimistic, saying he believed a resolution was still a long way off and while European policymakers failed to make decisions, global markets would remain volatile and eventually "the sky would fall in".
"The market is reflecting the uncertainty within the European Union, that's what's going on here, the market is saying: 'Do you know what? We're going to feel good or bad, day-by-day, depending on what's going on, there needs to be a resolution," Fry said.
He added: "I wish I was saying it's going to happen soon… this is the longest running crisis in which people have been giving false dates, people turning up for summits saying it has to be resolved, nothing happens and people go away and the sky doesn't fall in… sooner or later the sky will fall in, I'm just not clever enough to know when it's going to be."
Fry claimed that the "sky falling in" would not necessarily spell long term disaster; referring instead to a "critical moment" when decision makers could no longer hold off reaching a resolution on the debt crisis and crucial reforms were enacted.
Fry said a lack of liquidity in the banking market was having a detrimental effect on small and medium sized businesses in Southern Europe particularly and with SMEs the key drivers of growth and unable to secure loans, peripheral European nations would continue to suffer.
"The truth is at the moment, the real problem with the banking system is there's just no liquidity and that is causing massive difficulties within the system for just general funding," Fry explained.
"It is absolutely the case that anybody who says that there is sufficient liquidity in the banking market… it's simply not true."