Not longer surprising how childish eonomists and analists can be

As Brahmason pointed out for the last few weeks, the apparent improvement in the USA labour market was a result of the seasonal jobs created by the administration for the updating of census and statistics,which by the way happens every year…

The housing figures were to be clearly affected by the ending of fiscal aids and the industry in general should inevitably show a more real trend once stimulus would fade.

I mean, for any sound marketing man, it is only too obvious that aid packages tending to regain activity usually produce only an advance of purchases that later on cause a deeper fall in the "natural" demand with a negative impact also in earnings.

For years now we have been signalling that after a bubble, demand inevitably goes into depression and the only way to recovery is by recovering the purchase power of average income ( in fact average salary ).

The problem is that a bubble means a singularity of high proportions that breaks the equilibrium offer/demand and recomposing the equilibrium requires paying up for a lot of non sold stocks under heavy deflation pressure and that causes a formidable delay in the pace of economy even more significant than the acceleration of the economy prior to the bubble.

The process in addition causes very strong handicaps such as unusually high unemployment that contributes further to the inertia of the economic slump.

Japan is still suffering from the brick bubble of late eighties despite showing a GDP composition of high added value.With the USA and other economies producing weaker added value GDPs, we may be led into a non return situation unless our political leaders show better capacities than those so far displayed.

The teaching should be that in the internet era with a global market fully open, changes ocurr at exceptional speed and therefore policies for today may not be good for next week except for speculators usually better prepared than governments.

Carry trades for instance can derail a national economy unless there is some regulatory consensus at international level to prevent the outcome of bubbles induced by such practice.


Published in: on junio 17, 2010 at 8:29 pm  Comments (1)