Brahmason's Blog

It was about time that someone made public officially the difficulties affecting the american sovereign debt . ( See S and P warning on ratings )

Does it mean that the USA will not pay pending debt at maturity ? Of course not . At least not during the next four years or so .

What it means actually is that USA capacity for creating reach is tremendously diminished and clearly unable to cope with debt , which in turn means that the USA will have to accelerate the printing of money . The obvious consequence will then be that the dólar value will further be lowered probably causing a spiral of costs inflation ( additional stagflation ) .

In this context it is important to recall that right now one of the biggest issues in american economics is the crucial debate being held by the american political forces , as regards the feasibility of allowing the Federal Reserve to increase or not the debt capacity of the budget .

Some of the most relevant investment funds has just cancelled positions in USA sovereign debt without anybody calling them traitors . We all have to accept that at least in that and many other aspects , americans continue to be an example of freedom and economic maturity .

Gold of course has also reacted to that with further strengthening and looks determined to reach 1600 $ before the end of the year .

As for the need to prevent too quick slides of the dollar that could cause real problems to Japan and peripherial european countries in particular , the only way to do it is letting mediterranean economies to frighten euro stability again in a more drastic manner now than in previous occasions .

Brahmason