Brahmason's Blog

If dollar is weak everybody is weak . If the american model relies mainly in speculation instead of direct investment in added value companies and ventures , the dollar is bound to collapse .

Is dollar weak ? Of course it is . Not only weak but really sick and probably in a state of non return .

It is so much sick that with the euro facing an unpredictable outcome because of european southern economies unsurmountable problems , the american currency is unable to recover closer to parity than 1 € = 1.30 $ .

The reason is that american economy is unable to produce GDP ( gross domestic product ) increases not just quantitatively sound but also with enough added value ( reachness ) to change the permanent generation of debt at private and corporate levels .

It reflects not only in the poor job recovery which needs around 280.000 jobs being monthly created and is far from that figure , but also in the continuous deterioration of private purchase power caused by the reduction of a work force primarily in the biggest added value segments .

It also reflects in the fact that despite the already substantial drop in house prices and mortgage rates falling below 4 % , the sale of houses  continues to remain at figures below 50 % of what they should be in a healthy market –

The situation is getting so bad that over 60 % of american sovereign debt being issued , has to be purchased by the Federal Reserve .

Japan is not doing much better and the panic to important losses by investors in japanese sovereign debt is beginning to show in the yen value once inflation caused by oil and other commodities surging prices , is forcing japanese authorities into new policies that should contend with strong potential inflation .

The weaker yen quote may be good to restore japanese external balance trend , but it will cause further dammage to USA external deficit already very ailing because of poor competitiveness .

Oil should consolidate its price increase trend once China shifts eventual international activity into domestic demand growth and the rest of BRICs plus Germany and France get back to somewhat better growth .

In addition to all that the oversizing of world banking force with cemeteries of captive liquidity plus huge amounts of liquidity not knowing where to go , guarantee a very dangerous volatility which will worsen any possibility of the already dying recovery potential of western and japanese economies .

All that of course has been caused by the concentration of reachness in very few hands with almost total crunch of world middle class .

Middle class is the main instrument of a healthy economy and needs salaries resulting from added value jobs created by companies and ventures other than housing , fast food and other distribution activity .

A good example of that is the city of Detroit with a population reduced to a third of what it used to be with currently very poor purchase power .

No , I do not see any possibility to prevent world economic collapse unless we start immediate overhaul of the present economic model that is favoring the concentration of money in a very reduced number of people .

Brahmason