A pledge to Obama , Merkel , Jintao and Noda .

Economy to our shame is an essential instrument of modern humans.

Equilibrium is the most important aspect of the universe as we know it and has to be the essential aspect of economy .

We are suffering from the obvious trauma resulting from a financial bubble caused by speculation which is always the result of the allocation of resources in areas presumably providing quick and exceptionally high returns of investment . Most of the time these areas of investment are very low added value producers .

Added value of course is not the benefit of investment alone . This is only a definition used by speculators .

Added value is the result of an activity which requires long term direct investments which basically require high doses of latest technology and consequently high skill labour that will obviously have to enjoy reasonable high incomes and will therefore be in a position to keep up a good level of quality and quantity consumption .

In other words added value ventures are those ventures creating reachnes for the whole society and not for just a few .

The equilibrium of economy is very simple . Is the equilibrium between offer and demand .
The actors producing goods and services through well established companies , are the same actors that have to consume those goods and services .

If the production is affected by inflation or the reachness produced is strongly concentrated in the hands of a few investors , the board or share holders , leaving the work force with insufficient income , obviously consumers will be unable to buy the output of companies and the only way to keep an apparent equilibrium between offer and demand will be the credit .

Credit as an endemic solution ends in a bubble .

Bubbles can also be caused by inflation in its different forms . The rupture of the equilibrium between prices and purchase power leads also to the need of excessive credit .

The tools in your hands to prevent imbalances between offer and demand are simple . Taxes applied in an intelligent manner which will have to adapt continuously according to circumstances and credit conditions used also in a discriminate manner .

Taxes and credit should be responsible to stimulate investments in the convenient direction while refraining speculation .

Mrs Merkel , gentlemen , we are as we are because political leaders have failed to understand what I am hereby explaining or because the lack of determination to implement it .

Currently you are discussing ways to recover from our present misseries and that is good . But remember that if you try to recover with traditional stimulus while forgetting to clean first the cemeteries of liquidity caused by the speculation and exaggerations of last twenty years , what you will get is a double bulk of the same type of problems and believe me , there is hardly any margin left for traditional mistakes .

Cleaning the cemeteries of speculative money will mean burning a part of the overwhelming excess of dollars in the market and that of course will cause a strong reaction by some of financial actors at world level , but you simply have no option .



Published in: on mayo 20, 2012 at 11:19 am  Comments (4)