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If Congress delays raising the debt ceiling, how will foreign exchange markets be affected?

What would be the impact on foreign exchange markets if Congress takes too long to raise the US debt ceiling and some of the debt is in danger of default?

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What would be the impact on foreign exchange markets if Congress takes too long to raise the US debt ceiling and some of the debt is in danger of default?

If the congress takes too long to raise the US debt ceiling and some of the debt is in the danger of default, the result will be that several foreign countries will seek to reduce their reserved of the US dollar and the foreign exchange rate of the dollar will fall dramatically. Please consider this example: The Chinese government is talking about cutting its foreign exchange reserves (read $US and Treasury debt) in half and Syria has switched all foreign currency transactions from US Dollars to Euros. You are requested to think in the following terms:The pressure is increasing daily and there are NO signs of it letting up.

In these circumstances, the Gold "reverse barometer" has kicked in again with the spot future price falling from $US 572 on February 2 to close just below the $US 540 level on February 13 and 15. Then came February 16 and the Treasury's debt subject to limit coming hard up against its ceiling.

You may consider the following: Treasury debt is now "frozen". The US M-3 numbers are scheduled to be wiped off the map on March 20. Three days later on March 23, the Iranian oil bourse is scheduled to open - if there isn't a war going on between the US and Iran before that happens. The financial powers that be at the

You are encouraged to think in these terms: Treasury and the Fed are going to have to ...

Solution Summary

This solution discusses how, if the congress takes too long to raise the US debt ceiling, foreign use of the American dollar as a reserve currency may be impacted in 963 words.

Response is 1,012 words.

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