Quote from: CurbsideProphet on July 28, 2011, 07:20:11 PM

The US dollar will not cause a market crash. A default on or a downgrade to US debt is what may cause a collapse. Absolute worse case scenario is a default situation where interest is not paid on Treasuries. Odds of this happening are very VERY small. Even without an increase in the debt ceiling. A downgrade is much more plausible. A raise in the debt ceiling has a fairly good chance of happening. It would be a self-inflicted wound to do otherwise. However, S&P says they need to see cuts of $4 trillion over the next 10 years in addition to the debt ceiling being raised in order to prevent a downgrade. This may be harder to achieve as both plans in debate do not cut to this magnitude.

How do you protect yourself in a market crash? Keep your money out of the market. How do you make money in a market crash? Short the market, buy gold, buy treasuries, maybe even play the VIX.

As for inflation, I see no signs of "runaway" inflation at this time. In the end, I think Congress and Obama will just kick the can down the road.

Market prices are maintained by smarter people than who work at S&P. Their influence over the US borrowing rate will be less than their influence over Japan's, which was roughly zero.

Andris

Posts

Merits