Wealth Builder FX Blog

So… here we are again… facing another scenario in the financial markets where no one has a clue at what will really transpire if the United States defaults on its debt.

I did say in an earlier article in this very blog that the fundamental problems of the last GFC were not properly addressed and now things look like they have resurfaced in the form of an almost defaulting reserve economy. GREAT !!

The last GFC which pretty much started with the Lehman Bros collapse will seem like a joy ride compared to whats around the corner if the US actually defaults on its debt.

At the moment the US debt due for August is around $USD306billion and revenue is about $USD172billion, so they have to borrow more to keep things going.

So the world faces a unique moment in time as the Unite States contemplates its options.

What happens if they do default?
The possibilities include a complete collapse of the USD as a currency; the banking system will cease to function as treasury bonds become toilet paper, what follows from that is up to your own imagination as I doubt you’ll find an economist who is in any mood to guess at what might follow.

 One thing is for sure, it will get extremely interesting. I am sure everyone who matters in US politics will be doing everything they can to make sure they keep paying their commitments.

The problem we have now is that bankers and traders are realizing that the US is actually contemplating defaulting, we are truly in new territory and the answer is not in any text book. To realize we have got to this point is a mind shifter in itself.

The best scenario we can hope for is that the elected realize they have to act and NOT DEFAULT . This will further prolong a US recovery. But that’s a whole lot better than any alternative I can think of..