- Mathieu Provencher
Currency Speculation... missed opportunity
A fairly important politician (I think he's republican) said that the USA would absolutely not default on their debts (the debt ceiling is coming on this week), which gave some confidence to the markets. It would have been much better for currency speculators if the government would not have agreed to raise the ceiling, which would have sent the markets in panic mode.
I am fairly convinced that the Fed (Central Bank of the USA) would have disregarded the debt ceiling and/or would have still paid these debts, bringing back confidence in bonds from the USA. Can you guys explain how a currency speculator could have made a profit if the events I described actually happened?
A person answered:
The speculators would have bought american dollars when it depreciated, which would have happened if the US hadn't raised the ceiling. People around the world would be discouraged to buy the USD because of their economic situation and demand for USD would go down a lot so prices would go down a lot too. The speculators would buy dollars at this time. Then, the Fed would pay the debts back, confidence would go back up, which would lead to an increase in demand of USD and price AND THEN speculators would sell the dollar again and win tons of money smile emoticon