US default, USD collapse: which currency to do best?

johnnn

Member
55 2
In the event of a US government default and the collapse of the USD, which currency will do best, in the very short term?

CHF?
EUR?
something else?

John
 

Purple Brain

Experienced member
1,613 179
My response was almost 100% serious. A US default would be bad, but wouldn't lead to a collapse of the USD (as a reserve currency). Whereas a collapse of the USD itself would lead to sheep, chicken etc. scenario

But there is virtually ZERO chance of a default for the simple reason all US debt is denominated in the reserve currency, which happens to be US dollars. They don't need to export one single extra barrel of oil or ask for special terms. They just invent more money. It really is as simple as that. More debt at the press of a key.

When they do do that, I imagine the dollar will likely surge across all other majors.
 
L

Liquid validity

0 0
If the debt ceiling hurdle is overcome before Oct 17,
it only removes the issue temporarily.

2008 - debt ceiling was around 10 trillion.
At the current rate of increase, its quite likely to hit 20 trillion
within the next few years.

Much more of this and they really will lose control of the printing press
effects, thats if they haven't already.
The only answer they have to pay that debt is to print more money.

Given the current state of affairs, regardless of the right or wrongs,
Obamacare should be dumped now.
They simply cannot pay for it.
 

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johnnn

Member
55 2
My response was almost 100% serious. A US default would be bad, but wouldn't lead to a collapse of the USD (as a reserve currency). Whereas a collapse of the USD itself would lead to sheep, chicken etc. scenario

But there is virtually ZERO chance of a default for the simple reason all US debt is denominated in the reserve currency, which happens to be US dollars. They don't need to export one single extra barrel of oil or ask for special terms. They just invent more money. It really is as simple as that. More debt at the press of a key.

When they do do that, I imagine the dollar will likely surge across all other majors.
If the USD collapses, I don't fancy the chances of the other major currencies, but in the first day or two the speeds of fall might differ significantly. Which isn't to say that moving into any paper would be safe or even sensible. But they say never to let a crisis go to waste :)

Breaking the debt ceiling and defaulting can both be done at the press of a key. The USD can't stay in pole position when the US hardly produces anything. Bubbles burst. Most of Britain's debt in 1932 was denominated in sterling, but the country still defaulted. If the US does default and the USD collapses, China's reserves go out of the window, as does its main market, and a collapse of the Eurozone, the UK, and Switzerland would be likely. Maybe the NZD would hold up for a few days?

CHF, NOK, and currencies like that. Def not EUR.
I'd be scared of going into CHF given the weight of banking in the Swiss economy.
NOK - good call. Loads of oil, which could be redenominated.
Zimbabwe shows the way forward? :)
 
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random12345

Established member
793 280
I came back from Parliament Sq tonight to find myself short 10 million on the E/U into the close - I haven't traded through the weekend in many years and this was an algorithmic 'incident' so I suddenly have an interest in this situation being temporarily resolved. Judging by the news this evening, I may just get lucky. All proceeds to charity if so...
 

johnnn

Member
55 2
I didn't answer the OP question first time, so as well as the other suggestions, consider USD index futures, along with gold and oil (both will still be priced in USD for the foreseeable, even under default conditions).

With oil, the foreseeable may not be very long, if the US stops being able to pay its servicemen and military contractors. Gold may be good; common sense says so, but I'm not sure how to read the scale of the rise since Lehman's; haven't lots of small and unwise investors moved in, e.g. in places like India?

Thanks for everyone's suggestions!

John
 

Pat494

Legendary member
14,564 1,549
How will bit coin come out of the Washington fiasco ?
Will it go down if the $ plummets ?

or

miraculously stay with the same purchasing power ?

I am inclined to think the local currency issued by a few cities and towns may be a better bet. And why ? Because they will have the same purchasing power as before. But it will cost more $ or £ etc. to purchase 1 local ???
 
L

Liquid validity

0 0
With oil, the foreseeable may not be very long, if the US stops being able to pay its servicemen and military contractors. Gold may be good; common sense says so, but I'm not sure how to read the scale of the rise since Lehman's; haven't lots of small and unwise investors moved in, e.g. in places like India?
Gold has been influenced quite a bit by fed intervention, once the option
of intervention is removed and USD weakens, I'd be surprised if that didn't
provide some upside momentum with gold.
Other infulences are due to come into play as well:
http://www.trade2win.com/boards/com.../179184-gold-weak-vulnerable.html#post2189632

In fact it could be argued that China's increased gold reserves (unofficial) are a pretty good
hedge to the USD debt they hold.
If America defaults and USD weakens, I can't see what the Chinese would stand
to gain by keeping gold reserve levels secret, in fact, I think this might
be their intended ace up the sleeve in anticipation of this very event.

So as far as small and unwise investors jumping into gold goes, that may well
be true in some cases.
I wouldn't class the PBOC as small or unwise though.
I don't see gold as a bust bubble, far from it, not compared to previous bubbles:
http://www.macrotrends.net/1300/gold-at-3000-only-if-bubbles-repeat
As ever though, no one knows for sure.
 

Pat494

Legendary member
14,564 1,549
I've always had at the back of my mind, over the last few years, of buying a bit of gold just in case the politicians allow everything to collapse. The hyper-inflation in Germany and Zimbabwe wasn't all that long ago. But knowing my own failings I am likely to buy too little too late.
Which raises the question of - in what form should one keep it ? Gold coins under the bed or what ?
 
L

Liquid validity

0 0
I've always had at the back of my mind, over the last few years, of buying a bit of gold just in case the politicians allow everything to collapse. The hyper-inflation in Germany and Zimbabwe wasn't all that long ago. But knowing my own failings I am likely to buy too little too late.
Which raises the question of - in what form should one keep it ? Gold coins under the bed or what ?

As far as some sort of physical holding or backing:

Physical:
http://www.valcambi.com/products-and-metals/combibarTM/au/50-x-1-g/50-x-1-g-gold-combibarTM/
http://www.bullionbypost.co.uk/gold...-krugerrand/?gclid=CNPV69_EvbcCFUfLtAod6WQANw

Physical secure remote storage
http://www.bullionvault.com/

Gold backed ETF:
http://www.spdrgoldshares.com/

Obviously there are others ways that aren't physically backed:
http://www.ig.com/au/ig-shares/spdr-gold-trust-us-GLD-US
Or just plain spot gold with pretty much any broker.
Goes without saying you are merely betting on the price of gold then.

For the time being at least, a debt ceiling deal would more than likely
cause a short term dip in gold.
No deal by Oct 17...
For the time being at least, I doubt the U.S. will default if they can help it.
I think its much more likely they will continue to increase the debt ceiling until
the point where the option and illusion of control is removed.
Unless they can somehow get the debt under control.

Given the increase in debt since 2008, at this point I think the best they can hope for
is a Japanese style lost decade.
The alternative to that is a replay of 1929 (currently on ice due to printing) or Weimar (if they lose control of printing).
 
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