Article ... commodity pricesIf this were to happen -- it would be smart investing to own a company that focuses on coal, oil, gas, copper................
UBS expects soaring commodity prices in the event of US default
https://www.goldmoney.com/gold-research/ubs-expects-soaring-commodity-prices-in-the-event-of-US-default.html
The fourth consecutive meeting between leading Democrats and Republicans did not result in an agreement to boost America´s $14.3 trillion debt limit. The rating agency Moody’s Investors Service warned the country´s government this week that it may downgrade America’s credit rating – currently rated at AAA – if an agreement between the two parties isn’t reached soon.
The political negotiators are running out of time. According to Obama’s Treasury Secretary Timothy Geithner, the government could not fulfill the country’s financial obligations and would have to announce a default if Congressional leaders of the Republican Party are not willing to compromise on the question of possible tax rises (which Democrats favour, and Republicans are for the most part dead against). In contrast to the Democrats, Republicans also prefer deeper public sector spending cuts twinned with reforms to entitlement programmes as a means of cutting the country’s deficit.
Jamie Dimon, CEO of JPMorgan Chase, yesterday warned that any kind of default by the US government would likely result in a catastrophe in global financial markets, and criticised the country’s leading politicians for acting irresponsibly. A default would shake confidence in bonds and stocks markets, and could send the dollar plunging.
The US government’s largest external creditor, China, is also expressing misgivings about the situation. Yu Bin, renowned economist and economic adviser to China’s communist leadership, said that he was surprised at how slowly the US economy is growing. Moreover, he points out that the outlook for the US economy seems to be getting worse, not better.
Yu and other Chinese officials are also very concerned about the prospect of the US Federal Reserve resorting to more quantitative easing. This would weaken the dollar still further, hurting the value of China’s vast dollar holdings in its official currency reserves. Commodities priced in US dollars would also soar in price.
John Kowalik, head of Commodities and Marketing at UBS also argues that a US default will likely lead to a surge in commodity prices, as people flee bonds and currencies and bid up the price of tangible assets.