Brahmason's Blog

Now , what is the amount of jobs that private non agricultural sector has to add to really being able to talk about real recovery ?

As long as the added private jobs do not surpass 280.000 and keep the upgoing trend for a long period I doubt anybody may really feel that things are progressing the way we would like them to progress .

Further more , real recovery has to show a bigger percentage of jobs in the industry rather than in the retail and leisure segments which in all probability refer to seasonal or short term precarious openings .

The jobs have to be connected with high technology industries and account for a bigger salary level which only companies producing added value goods and services can pay . That is the only way to creating reachness and consequently enable USA to match imbalances .

Securing strong purchase power through enlargement of the percentage of well paid professionals in advanced industries is the best to guarantee durable quality consumption. That of course will require some stimulous to money going into that kind of investments better than Q indiscriminate stimulous plans which can only promote the advance of purchasses or the promotion of a low added value demand which will worsen the future behaviour of the market .

Brahmason

Observe China and India and eventually Germany .

Demand goes up no matter what happens to interest rates as long as purchassing power holds on and reachmess is being built up without resorting to more credit than individuals or corporations should require . Debt has to be held within healthy limits .

What you get by acting on types is either holding inflation or accelerating it depending on whether you increase ot reduce types .

At the end of the day however reducing types or holding them low for a too long period , does not propell activity as long as purchase power is weakening . All you get is costs inflation which adds to the burden of the economy to grow and more specifically to grow creating reachness ( added value ) .

The bubbles created due to old speculative principles are leading the economy further into the mud from which right now is impossible to escape unless drastic measures are applied everywhere at all levels .

Brhmason

Contrary to what has been argued about the need for Japan to repatriate trillions of yens to cope with the investment local needs to rebuild dammages caused by earthquake , tsunami and nuclear leakage , we believe that the best option for Japan is to issue as much fresh debt as necessary for that task .

This would keep the yen low and allow exports to match loss of local consumption at a time when the dollar is also pressed to a lower rate because of the problems resulting from american restrictions caused by mounting deficits .

The negative aspect of this is its effect on the strengthening of euro and yuan unless chinese and europeans find the way to contain the pressure on their currencies .

Brahmason

14.29 trillones $ es el límite legal permitido . Pero ese dinero se termina según Geitner el 16 de Mayo como muy tarde y apenas una cantidad adicional que permitiría respirar hasta Agosto se podría habilitar sin transgredir la ley en vigor .

El plan de Obama para reducir 4 trillones $ de deficit acumulado en los próximos 12 años no parece ser suficiente para convencer al senado de la necesidad "imperiosa" de aumentar la capacidad de endeudamiento actual que el presupuesto necesita para manejar las "necesidades del estado americano".

Con esta situación y la política de relajación monetaria que no parece tener visos de cambiar en los próximos meses , el dólar se puede ir a 1 € = 1.60 $ y 1 $ = 78 yens . Lo malo de esta caída no es tanto el valor como la rapidez conque se podría producir . Japón y la Europa periférica serían las victimas más directas .

Brahmason

You canot just flood the market with extra money liquidity to compensate for money captive in bubbles .

If you ignore that and choose to flood the market with more and more money instead of promoting fast deflation of bubbles , your karma in the shape of stagflation will put you on your knees . Of course better than that is to prevent bubbles by estimulating investments in long term ventures with high added value .

Added value is not just profit . Sound profit is just a parameter of added value . If I put a quantum computer in the market everybody will agree that that is a real added value product because the ratio of energy and raw material consumption against the multiplying reachness effect of the product is very low .

In between , bright ideas from high qualified labour are the instruments with the necessary money investment to support the project in the initial stages . This money of course is the money that have to be stimulated .

As a society has behaved greedy enough to cause a bubble , there is no option but help fast bubble deflation to favour a "V" economic recovery through liberation of captive money as quickly as possible .

In fact liquidity is the judge .If you flood the market with more liquidity than necessary to match the size and quality ( added value ) of your GDP ( Gross Domestic Product ) you will cause escalating defficits that will require unsurmountable efforts via taxes and inflation ( loss of reachness ) during an extended period of time proportioned to your excesses .

Brahmason

Juzguen ustedes mismos la España actual .

El paro "publicado" hoy marca 4.910.000 personas más que duplicando la media europea y triplicando el paro en Alemania y quintuplicando el paro en Holanda .

La inflación avanzada hoy es de 3,8 % .

El crecimiento de la economía está estancado .

El poder adquisitivo por los suelos con salarios medios menos de la mitad que la Europa avanzada .

Los jóvenes que han tenido el coraje de estudiar una carrera en nuevas tecnologías se ven obligados a huir a países más civilizados donde existe un verdadero hambre de estos profesionales .

La vivienda al precio más alto de Europa debido a la burbuja especulativa impulsada sobre todo desde las instituciones .

Pues bien " El bolsín español en que se ha convertido la bolsa española manipulada por la douzaine afecta a las instituciones , sube como la espuma para "convencer" a inversores ingenuos de que España va bien " en la actitud más sinvergüenza de una economía occidental .

El drama es que la oposición que debería transmitir cierta esperanza , se limita a decir que el problema sólo es de la confíanza en el gobierno actual . que evidentemente no puede ni podría nunca con estos datos , merecer el mínimo de credibilidad y que deberá sufrir un correctivo en las urnas en el mes de Mayo .

Brahmason

In our post of April 1st "USA Economy showing promising signs" we praised USA companies for their investment in employment and inventories and postponed our conclusions till trade gap and consumption would be published this quarter .

The data is indeed very poor as consumption halfs as regards previous indicator , growth reduces to 1.8 % and inevitably trade gap deficit increases as imports to feed inventories increased and found no adequate response in consumption .

The frustration shows better in the increase of unemployed asking for subsidies which mounts up to 429.000 with an average of 408.000 per week during last four weeks . This is real bad because it confirms a dangerous upwards trend which would be in line with the ambiguity in Mr. Bernanke`s speech which for the sharp observer hints a future that will be far from satisfying markets . Specially if we recall that commodity prices continue showing a strong upwards trend that is becoming too much of a problem for the diminishing american average purchase power .

Stagflation is the word as we are continuously repeating , The loss of competitiveness and consequently added value of the american economy reflects in a significant loss of reachness of the USA society .

The country will have to lean on the improvement of exports helped by a lower dollar while housing bubble deflates and long term investments in added value producing companies recovers the lost pace .

By the way the gold always cool and attempt surges over 532 $ as anybody could have guessed .

Brahmason

More than just serving investors as safety temporary retirement for their money , gold is a relief valve for liquidity excess .

Markets indeed are very happy with as much liquidity as possible and in fact they know they are one of the main beneficiaries of an excess of liquidity .

It is because of that that markets are the strongest accomplices of imbalances such us the budget deficits .

The main problem of world economy is that most market speculators know very little about real economy and in their blindness are using the excess of liquidity to unconscioussly cause continuous bubbles that lead liquidity into captive cemeteries of money .

As this planet leaders would do anything but wait for bubbles to explode so captive liquidity is recovered , what they actually do is to print more and more money that adds to existing liquidity that sooner or later will make world economy to collapse .

This process of course needs inflation as main instrument and the consequence is a tremendous loss of purchassing power through salary contention and unemployment . The process is causing the continuous reduction of middle class without which , the necessary balance between offer and demand for a healthy economic evolution is simply impossible .

So , short of enough capable leaders gold suction of liquidity is the only wise instrument in the system .

Brahmason

No está mal que alguien oficialmente haya hecho pública finalmente la situación que afecta a la deuda soberana de EEUU . ( Ver la advertencia de S&P que pone la deuda americana en perspectiva negativa ) .
Eso no significa que quienes han comprado deuda estadounidense no vayan a cobrar al vencimiento . Por lo menos no en los próximos cuatro años digamos .

Lo que significa es que EEUU ya no es capaz de crear suficiente riqueza para amortizar su creciente endeudamiento y que no tendrán más remedio que acelerar la emisión de nuevas cantidades de dólares .

Eso por supuesto dará lugar a una ulterior depreciación de la moneda americana y casi con toda seguridad a una aceleración de la inflación de costos ( estangflación ) .

Conviene recordar en este sentido que recientemente algún gran fondo de inversión ha retirado su posición en deuda de USA . Por cierto sin que nadie se rasgue las vestiduras ni acuse a este fondo de traidor . USA sigue siendo un ejemplo de libertad y pragmatismo en este como en otros muchos aspectos , mal que pese a sus detractores a ultranza .

También conviene recordar que justo ahora las fuerzas políticas norteamericanas están debatiendo la conveniencia o no de atribuir a los responsables del presupuesto una mayor capacidad de endeudamiento .

El oro por supuesto ya ha reaccionado a esta serie de circunstancias rebasando ya los 1500 $ aparentemente con bastante determinación para llegar a los 1600 $ durante el presente ejercicio .

El mayor problema con la aceleración de la emisión de dólares y su inevitable tendencia a deslizarse más a la baja , es la influencia que el hecho tendría en las economías japonesa y periféricas europeas y para evitar que el deslizamiento sea demasiado brusco , la única herramienta disponible sigue siendo el susto al euro que la inestabilidad de las economías mediterráneas puede propiciar ahora con más fuerza si cabe que en anteriores ocasiones .

Brahmason