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  • USD: What If US Defaults? - Nordea

    From efxnews.com

    The following is the expected impact of a possible US default this week on the USD and the FX market in general as provided by Aurelija Augulyte, a senior FX analyst at Nordea Markets: What if – US default? With the USD holding a large liquidity premia (discount), with the panic spreading to global financial markets (even on just expectation) the USD should be bought. In particular, the “lower tier” G10 (from CAD to Scandies) and Emerging Market currencies (especially MXN) would suffer on widening liquidity premia (money destruction). And yet, I would argue the rebound of the USD against the major European ... (full story)

  • #1
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  • Oct 13, 2013 5:54pm Oct 13, 2013 5:54pm
US will be defaults but first they need to sell the $ to everyone and once this done ....the great $ melt down will start..my conclousion any way
  • #2
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  • Oct 13, 2013 6:16pm Oct 13, 2013 6:16pm
Summation of this, If US defaults -> Buy EURMXN on liquidity flows between safe and EM
  • #3
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  • Oct 13, 2013 6:26pm Oct 13, 2013 6:26pm
The US will never default, this is just political brinkmanship, designed to extract the maximum number of votes for the parties invovled.

There will be a deal just before the deadline, everyone knows that.
"Where you want to be is always in control, never wishing, always trading.
  • #4
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  • Oct 13, 2013 6:44pm Oct 13, 2013 6:44pm
Default or not, Fitch and Moodies MUST downgrade USD.....if not, any remaining credibility in the rating agencies will be gone.......
Doing what you like is Freedom. Liking what you do is Happiness.
  • #5
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  • Oct 13, 2013 6:57pm Oct 13, 2013 6:57pm
  •  Trader#5DDA
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Quoting Spec_And
There will be a deal just before the deadline, everyone knows that.
Everyone already knows the US will never Shutdown (before 1st october) and since : Shutdown D+14...

Hope the end of dollar every day, hope we don't need one or two more years to see is death.
  • #6
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  • Oct 13, 2013 7:13pm Oct 13, 2013 7:13pm
Quoting Guest
Everyone already knows the US will never Shutdown (before 1st october) and since : Shutdown D+14...

Hope the end of dollar every day, hope we don't need one or two more years to see is death.
Govt shut down is nothing, fyi this is not the first time the US govt has shut down.

Govt shutdown is nothing compared to a default, no lawmaker will dare risk it, this is nothing but political brinkmanship.
"Where you want to be is always in control, never wishing, always trading.
  • #7
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  • Oct 13, 2013 7:14pm Oct 13, 2013 7:14pm
  •  Trader#26E7
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This is political brikmanship. Everyone knows the USA will not default on its debts! The charts even say so at the moment! look to buy pullbacks on the risky assets. The yen crosses are ready for the big and perhaps final push before a good retracement can be found. Gold will suffer more. that's all
  • #8
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  • Oct 13, 2013 8:19pm Oct 13, 2013 8:19pm
  •  Trader#70EA
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A lot of dollar bears on this site. Pathetic. There is no alternative reserve currency and will not be for MANY decades.
  • #9
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  • Oct 13, 2013 11:16pm Oct 13, 2013 11:16pm
Quoting Guest
A lot of dollar bears on this site. Pathetic. There is no alternative reserve currency and will not be for MANY decades.
Tend to agree, vis-a-vis a *viable* alternative reserve currency.
  • #10
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  • Oct 13, 2013 11:27pm Oct 13, 2013 11:27pm
could someone explain something to me. If we don't increase our debt ceiling why will we default? Don't we already have money to pay off our correct interest payments or are we in that bad of shape that we have to borrow just to pay off current interest payments?
A woman drove me to drink, and I forgot to thank her
  • #11
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  • Oct 14, 2013 12:11am Oct 14, 2013 12:11am
If the USA could go to WAR the problem can be solved as they can generate money by investing in their own industries. Unfortunately they planned to have WAR with Syria but it backfired when Russia supported Syria.
  • #12
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  • Oct 14, 2013 12:37am Oct 14, 2013 12:37am
Read here

http://www.forbes.com/sites/igorgreenwald/2013/01/09/why-the-debt-default-is-coming/

I fancy a default !!
  • #13
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  • Edited 12:58am Oct 14, 2013 12:58am | Edited 12:58am
Quoting simpleguy
could someone explain something to me. If we don't increase our debt ceiling why will we default?
The way Obama puts: if the limit is not increased the current pace of government spending could not continue. Pensioners, receivers of social assistance, private contractors who supply/work of gov agencies etc will have payments cut or delayed.

The way Republicans put: the treasury gets about 250B a month just from income tax and that is more than enough to pay the interests. So, no question of defaulting. Obama just has to prioritize the spending.

The bottom line is: the treasury will need money to keep the spending. If the debt limit is not raised, it will have 'trouble' paying some parties. You might call that a default or not
  • #14
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  • Oct 14, 2013 3:03am Oct 14, 2013 3:03am
  •  Trader#56FD
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Quoting alamgir99
The bottom line is: the treasury will need money to keep the spending. If the debt limit is not raised, it will have 'trouble' paying some parties. You might call that a default or not
That's what I call "selective default" and not that Greek haircut BS
  • #15
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  • Oct 14, 2013 3:36am Oct 14, 2013 3:36am
Quoting realjumper
Default or not, Fitch and Moodies MUST downgrade USD.....if not, any remaining credibility in the rating agencies will be gone.......
Too late. All remaining credibility was lost.
  • #16
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  • Oct 14, 2013 3:41am Oct 14, 2013 3:41am
Quoting Guest
A lot of dollar bears on this site. Pathetic. There is no alternative reserve currency and will not be for MANY decades.
I mostly agree. I'd substitute "a couple" for "MANY" though. There is no other instrument that there is enough of. Not enough renmimbi's, euros, and unfortunately not enough 1300/oz. gold. Now IF gold were $25000./oz, there would be plenty of gold to run the world economy. Hmm..
  • #17
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  • Oct 14, 2013 4:06am Oct 14, 2013 4:06am
US will not default even now congress ha been planning to raise the debt-ceiling. so don't be panic
  • #18
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  • Oct 14, 2013 4:23am Oct 14, 2013 4:23am
Quoting wlarimer
.... Now IF gold were $25000./oz, there would be plenty of gold to run the world economy. Hmm..
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #19
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  • Oct 14, 2013 4:36am Oct 14, 2013 4:36am
Quoting simpleguy
.... Don't we already have money to pay off our correct interest payments or are we in that bad of shape that we have to borrow just to pay off current interest payments?
The problem is that the govt. has to roll-over the debt. That means it must redeem a load of T-bills (or whatever) and issue new ones. Normally that process happens without fuss and a bit of interest is paid to keep things sweet.

Roll-over requires that the lenders are happy to accept new debt issues. Imagine the situation where the market says 'no thank you, I just want my money back'. The treasury does not have enough money to redeem the instruments that are coming up for roll-over in October. Not by an order of magnitude at least.

There are some seriously myopic people in the US government. They are unaware of the global impact of what they are doing. You only needed to listen to the type of questions that Treasury Secretary Lew was fielding in the senate the other day. He was pretty blunt in his responses.

A short-term light on the horizon is that the FED could buy/assist-with the government debt. A sort of QE5. That however has limited use because it would rightly be seen as the government printing its own money, as tried in the past by other countries with ultimately disastrous consequences...
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #20
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  • Oct 14, 2013 5:10am Oct 14, 2013 5:10am
I know intuition tells us that if we default on our debt, then people will dump their dollars and the currency will collapse. But mathematically speaking, since every dollar out there is in fact debt; if there is a default wouldn't those dollars extinguish from the system, creating a shortage of currency that would dry markets and in itself drive the demand for dollars up?
  • #21
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  • Oct 14, 2013 6:25am Oct 14, 2013 6:25am
The major holder of the US debt is the Federal Goverment itself. Like Social security 2.6Trillion, Federal Reseve(FED) 2.1Trillion, Federal retirement ans Disability 1Trillion and State and Local Govermnet, State and Local Govt pensions and some others also holds Us debt..

US Domestic holders of US debt- Individuals, Brokers, Corporations and other 1Trillion
plus others (Insurances and so on.)

Foregin Holder of US debt. China 1.3 Trillion, Japan 1.1 trillion, othe countries 2.6 trillion. Carabian Banking senters and Oil Exporters some billions.

So who might dump their USD. The foregin holders China? Doubt it. They need USD. And they need a sound US conumer market for their goods.

Fed dumps 2.1 trillion treasuries and sell USD. Doubt it.
Social security? No hardly.

US debt downgrade. Cool cos the risk is hardly really higher, but yields might go UP. Socila security earns more money, China earns more USD and all the rest, too.
And the FED keeps buying.
  • #22
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  • Oct 14, 2013 6:32am Oct 14, 2013 6:32am
@Ca2m ...they would not dump dollars particularly, they would dump the US govt. IOUs. Assuming that was possible, there would then be a mass of dollars washing around some of which would be converted to other currencies. The net effect would be to push the dollar down against other currencies.
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #23
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  • Oct 14, 2013 7:02am Oct 14, 2013 7:02am
The most important payments from the perspective of global markets is Oct 31. when investors are next due to collect interest on Treasury bonds.
  • #24
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  • Oct 14, 2013 8:02am Oct 14, 2013 8:02am
Quoting smashtheŁ
The most important payments from the perspective of global markets is Oct 31. when investors are next due to collect interest on Treasury bonds.
Thx. So what happens on 17th?
Carbon-Dioxide: the gas of life! https://youtu.be/ttJBdr6eBuo
  • #25
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  • Oct 14, 2013 8:29am Oct 14, 2013 8:29am
Good point, if we move passed the 17th then this may become the next focus date for the MSM to concentrate on.

Quoting smashtheŁ
The most important payments from the perspective of global markets is Oct 31. when investors are next due to collect interest on Treasury bonds.
"The meek shall inherit the earth.." Yeah right, good luck with that shit..
  • #26
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  • Oct 14, 2013 8:36am Oct 14, 2013 8:36am
17th is the day the treasury reaches the debt ceiling. After that day they cannot take up more debt. But they will have 30bn USD cash +tax revenue to pay bills.
  • #27
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  • Oct 14, 2013 8:57am Oct 14, 2013 8:57am
Quoting simpleguy
could someone explain something to me. If we don't increase our debt ceiling why will we default? Don't we already have money to pay off our correct interest payments or are we in that bad of shape that we have to borrow just to pay off current interest payments?
The US has been this way for some time now.
Having to borrow around 50% of every dollar it spends is indeed not in good shape
Come with me if you want to live....
  • #28
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  • Oct 14, 2013 1:02pm Oct 14, 2013 1:02pm
I'm prepared for default. Are you? It won't happen. The President and congress are pusses.
  • #29
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  • Edited Oct 15, 2013 7:57am Oct 14, 2013 8:24pm | Edited Oct 15, 2013 7:57am
Just kicking the can further down the road......the rest of the world is gearing up and making trade deals with other countries to be settled in other currencies other than the once mighty dollar? I would be concerned about that........Large supply of dollars with less and less demand which would in effect lower the price and purchasing power. It's like the "too big too fail" syndrome has taken over the country now.......the government bailed out the banks but who will bail out the government?
Move Money !!!
  • #30
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  • Oct 14, 2013 9:06pm Oct 14, 2013 9:06pm
It's not my fault. I mean, it's not my default.
"If The Fool persists in his Folly he will become wise." - William Blake
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  • Posted: Oct 13, 2013 5:43pm
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     eFx Newz
    Category: Fundamental Analysis
    Comments: 30  /  Views: 10,102