Wednesday, June 8, 2011

China wants more debt for the US

China warns U.S. debt-default idea is "playing with fire"

By Emily Kaiser
SINGAPORE (Reuters) – Republican lawmakers are "playing with fire" by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China's central bank said on Wednesday.
The idea of a technical default -- essentially delaying interest payments for a few days -- has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.
But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.
Li Daokui, an adviser to the People's Bank of China, said a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.
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Comment: The adviser to the the central bank of China gets something wrong here. He should know that increasing debt is playing with fire, while holding the debt ceiling in place means putting out the fire.

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