Tuesday, October 8, 2013

US Foreign Creditors Uneasy

After getting off the phone with our contacts close the source of some vital information I am headed back to the trading floor in order to order some trades which we need to get on our books as well as off our books. Trading the USD has been a bit challenging with the idiotic US government shutdown which thanks to the lack of leadership has occurred for the first time in 17 years; sad enough that it is not the first time ever.

The lack of leadership in the White House and from the socialists in power led to this lock-down as at least Tea Party Republicans had enough of uncontrolled spending on moronic programs which have weakened the US further. On top of that the red pest which has infested the White House and over half of the Senate wants to continue to seek ways to raise taxes on all Americans.

While it has failed to legally steal more from the wealthy, the Dumbama administration did succeed in raising taxes on the middle class by about 2% while wasting time with his Dumbamacare health care reform which opposed by almost 60% of the population.

The US has been essentially bankrupt by every accounting standard and if the US government would have been a middle class citizen in the US every single bank would have laughed at their request for additional lines of credit. Unfortunately plenty of foreign governments where tricked into the American illusion.

With the ongoing US government shutdown, top foreign creditors warn the US on a debt default which could become reality on October 17th if the debt limit won’t be raised. Given the ongoing mismanagement of the US, sooner or later a catastrophic event needs to occur in order to force the US to live within its means which means severe adjustments.

Unlike popular opinion, global financial markets will not derail as a result of it. There will be necessary turbulence in order to get the global financial system back to reality which is roughly 90% below where it is now. A US debt default plus the fallout from it is a requirement at this point as it will force necessary change.

Forex traders should be aware that countries like Brazil, Russia, India, China, South Africa as well as Japan and the United Kingdom will shift their asset allocations as the USD is by no means a reserve currency. The USD is worthless and creditors of the US which is are the sole reason the US was able to create this illusion of power are fed up with it.

It may not happen this month, but sooner rather than later creditors will stop throwing their good money after a terrible country from an investment stand point. While China and Japan have increased pressures on the US to resolve their political impasse, it is no secret that all creditors are preparing for fallout from the collapse of the US.

Of course there will be a ripple effect from a US default and yes it will be larger than what happened after Lehman Brothers collapsed, but it is required in order to weed the bad influences out of the global financial system so that we can move forward. Prepare for some nice volatility ahead.


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