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Relief From World as U.S. Avoids Debt Default - NBC4 Washington Government Shutdown 

Relief From World as U.S. Avoids Debt Default

By Joe McDonald 

The International Monetary Fund appealed Thursday to Washington for more stable management of the nation's finances as Asian stock markets rose after U.S. leaders agreed to avoid a debt default and end a 16-day government shutdown.

With only hours to spare until the $16.7 trillion debt limit was reached, Congress passed and sent a waiting President Barack Obama legislation Wednesday night to allow more government borrowing and reopen public agencies.

The debt standoff had rattled global markets and threatened the image of U.S. Treasury debt as a risk-free place for governments and investors to store trillions of dollars in reserves. Few expected a U.S. default but some investors sold Treasurys over concern about possible delayed repayment and put off buying stocks that might be exposed to an American economic downturn.

"World heaves sigh of relief as U.S. barely averts debt default," said the Times of India newspaper in a headline.

History of Government Shutdowns IMF managing director Christine Lagarde welcomed the deal but said the shaky American economy needs more stable long-term finances. The deal only permits the Treasury to borrow normally through Feb. 7 and fund the government through Jan. 15.

The Tokyo stock market, the region's heavyweight, gained as much as 1.1 percent Thursday. Markets in South Korea, Australia and Southeast Asia also gained.

Government Shutdown's Unexpected Effects 

In South Korea's capital Seoul, 26-year old college senior Lee Boo-gun said he thought the U.S. economy was going belly up and was relieved to hear that a deal was reached.

Earlier, China's official Xinhua News Agency had accused Washington of jeopardizing other countries' dollar-denominated assets.

It called for "building a de-Americanized world," though analysts say global financial markets have few alternatives to the dollar for trading and U.S. government debt for holding reserves.

Hennecke said he would advise clients to stop holding Treasurys.

"Why hold it?" he said. "There's no yield and inflation and interest rate risk are on the up."

