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Investors are bouncing around like so many pinballs in a race to find safe-haven investments against the threat of a United States government default.
Gold... emerging markets... even the Swiss franc. The list goes on.
But what if they're all looking in the wrong direction?
Bucking conventional wisdom, I propose that in this high-stakes financial game, your best bet might just be the most familiar player - the U.S. dollar.
Why? Well, if we owe in dollars and suddenly there's a shortage, people are going to scramble for cash.
Let's take a trip down memory lane. We'll make two stops: 2020 and further back to the 2008 Lehman Bros. debacle. Remember how those froze up the global credit system? Yet, amidst all the chaos, the dollar saw a surge in value. Interesting, isn't it?
Our last big financial crisis didn't come with soaring inflation, so interest rates didn't budge. But in a government default, rates are likely to spike and boost the dollar's worth. And to those screaming that the dollar's value could be halved overnight-I don't buy it. Conjuring up an extra $32 trillion out of thin air? Not gonna happen.
So here's my bet: the dollar will hold its own for now. And if it suddenly jumps while other assets tumble, it's a rare chance to scoop up bargains. You could snap up undervalued assets like oil while the rest of the world is panicking about the debt situation.
Let's face it - there's no other global asset ready to take the dollar's place. Maybe the euro could step up, but let's not forget Europe's debt situation is a mess, too. The Chinese yuan? It's not exactly the world's favorite currency.
Despite all the drama, the dollar still has the crown. This could speed up the process of de-dollarization but don't expect that to happen overnight. A sudden flood of Chinese yuan isn't on the horizon.
Trying to guess how the rest of the world will react is like trying to solve a Rubik's cube blindfolded. Especially when our interest rates are likely to skyrocket, sending bond prices on a wild ride.
I don't have a crystal ball, but one thing's certain: having cash on hand is never a bad move, especially when that cash is likely to be increasingly valuable.
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The post Here's Your (Surprising) Best Bet in a U.S. Default appeared first on Midday Momentum.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.