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  • Mathieu Provencher

Another missed opportunity

As I mentioned in my Macro class last week, and last semester as well, the debt-ceiling problem of the USA is coming back fast. Their deadline is the 7th of February.

Now, for those that would like to make a big safe bet, here's what would be the best for you (I don't expect it to happen but I'll have a lot of fun if it does): the government of the USA is due to vote on an increase in the debt-ceiling, which will let the government borrow more money (as if they didn't have enough to pay back) in order to be able to pay, amongst other things, their bond obligations.

SO, if they don't agree on time, the USA will technically be in default. However, the Central Bank probably has enough money to last the whole rest of the month if that was to happen. For speculators with a bit of Economic knowledge, the best situation would be if the government does NOT agree on that point when the deadline comes and then takes a few more weeks (up until the reserves almost run out) to finally agree to increase that ceiling (which they will... or at least that's my professional assessment).

However, I find it very unlikely that they indeed go that far. The political consequences were pretty awful last time around (in October of 2013) and it seems unlikely that they want to shoot themselves more in the foot (then again, the Americans are not so strong on logic it seems).

Remember the simple rule of Arbitrage people: buy low and sell high... nothing more simple! Take care all and let me know if you hear anything on the subject!


on the 12th of February, I wrote:

Too late... the government of the USA decided to burst our experiment and agree on an increase to the debt ceiling (for one year, let's see then). We can see that the value of the USD increased (appreciated) right after that event... which was not such a big movement after all since uncertainty had not build up as much as last time. Well, we can try to make a fortune on the next big event. That's why it's very difficult to understand the Macro-Economy, things keep changing all the time (we are unable to do controlled experiments, as opposed to real science)!!!!!

I expect the value of the USD to keep getting stronger and stronger from now on. We have good economic data from the USA and the unwinding of the QE (quantitative easing for those that remember) is hurting the value of currencies of less developed countries, which means it is helping the value of the USD (everything is relative, as you all probably remember *cough* **cough**)


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