Brahmason's Blog

There have been some readers asking about the feasibility and ways to implement an eventual write off of part of the american debt .

I perfectly understand that the simple idea of such a possibility clashes with the idea that most people have of the USA status .

Indeed it is the question of prestige and consequent future reliability that makes it most difficult to resort to that type of decission which no matter what , would definately help soften the dollar tensions . But at the point where we are in the world economic situation , this may not be so important if we accept as we should ,that what is happened to the dollar as a result of the enormous flood of liquidity in the american currency has only been possible with the fervorous collaboration of the rest of the world to keep the dóllar strong to favour USA imports from Europe and Asia , by buying no matter what amount of debt the americans have been forced to put in the market .

So right now either we accept to write off a certain percentage of american debt , or the americans need to adopt very radical measures on comsumption which no doubt will strongly affect the exports to USA from several leading economies of the world .

Of course a measure such as the write off of a percentage of the american debt would require a lot of pragmatism and consensus by all economic power centres involved in the process . But everyone should have clear that unless this is part of a plan to reduce the excess of dollars in the market , the world economy will continue to deteriorate till exploding occurs not so long from now after an unsustainable period of out – of -control volatility .

The write off of part of the debt should of course be conditioned to a plan concerning future debt to be issued plus a number of actions by american economic authorities to reduce defficits and a global agreement on currency exchange and investments .

In fact the whole thing should be set up in motion by the G8 plus China and India with the support of the IMF which is the right one to make the proposal .

Brahmason