Brahmason's Blog

Now that fiscal stimulus is over in the U.S.A., americans are going to feel the squeeze in this sector and thereby in the global growth.

The currently "strong" dólar is not going to help this area of the economy because foreign or local potential buyers with euros or yens to spend,will find investment in american housing rather a looser investment under the circumstances.

Not in vane with hardly any arguments that might justify it,the dóllar is beginning to loose steam since last week.Apart of course from the inevitable reflexion that the external commercial deficit will be getting worse and worse while american factories remain as little competitive as they presently are.

See the trend of the last three days if you have any doubts.

In fact many of the investors that changed euros for dollars during the last few months might find soon in a difficult spot, because while it is true that euro quotes are subject to strong volatility caused by irresponsable handling of mediterranean economies it is yet much more evident that debt,deficits and bubbles in the USA are a potential factor for the dollar to slide clearly into the mud.

The only possibility to prevent the west from an economical chaos, is to find a certain equilibrium between both influences and that is not just something that can be "agreed " by the governments involved.They have to set up a policy that should satisfy the market while refraining speculation impulses.

Any solution will have to consider that present and future demand is being relocated in Asia and that that demand, will cause in turn a more rapid than desirable increase of oil prices and other commodities with a very strong effect on production costs in the west, which with the weak demand expected on both sides of the Atlantic,may turn into a very strong stangflation.

All we have seen so far in this respect is some dose of good will ,but we are beginning to fear that perhaps that is all we can expect from the capacities of our beloved political rulers.

Brahmason