US , Eurozone and Japan economic problems . February 2013 .

The US has a mounting private and sovereign debt problem which in short is the result of a strong loss of competitiveness and consequently added value and purchase power substantial losses , deriving from the shift of investment to Wall St from long investment technological ventures since about twenty years ago .

The purchase power loss has come through inevitable unemployment increase specially in areas of great added value because of relocation of long term investments in faster growing economies with better returns .

Under the circumstances US can do better with a relatively lower quoted dollar , while tax policy is changed to stimulate investments back in highly added value areas using well paid workforce . The higher petrol costs should be largely compensated by bigger external trade competitiveness and bigger consumption of american made goods and products while stimulating foreign investments in US .

Europe and Japan economies highly relying in high added value exports are very sensitive to US demand and replacing that demand by China’s is rather complicate .

The clearest beneficiary of China’s growing demand should be Germany and eventually also the US . Japan’s exports to China are very much conditioned by politics .

Currently the yen is exceedingly undervalued far from the currency balance needed for US and Europe to cope with the overall reduction of demand and that will show in an extraordinary currency volatility during 2013 and …?

Investors and governments across the planet should understand that the stock exchange is not the real economy and that as long as steps to recover a wide and healthy middle class are not taken , the world economy will continue to slide down the hill . Because demand and consequently consumption necessary levels canot be maintained by a minority .

An added problem is that both Japan and Europe are very sensitive to petrol price which should inevitably mount up to 1.30 $  as China returns to 8.5 % GDP growth( the BRENT ) and with a low yen and a low euro stagflation will be promoted in both economies and if the problem is confronted with continuous injections of liquidity without parallel tax and rates measures we will see a strong outburst of inflation .

And if this were not enough Japan’s sovereign debt spread among local institutions ,companies and private investors , plus the euro mediterranean partners epidemic deficits , condition not only future growth but also the possibility of introducing higher interest rates because of the domino effect that it might have on debt holders .

The political pressure is so strong and investors seem so much distracted of global economy risks that I do not see any possibilities of avoiding a tremendous collapse of economy .


Published in: on febrero 7, 2013 at 11:08 am  Comments (3)