Brahmason's Blog

Latest recent data confirms inflation at 5.3 %.

To say that this is high or low or adequate without further data is simply somewhat superficial .

Indeed it is important to know if inflation to demand is caused by an acceleration of consumption by a stable number of consumers or is caused by the increase of active population or extended reachness to bigger number of potential consumers .

If the inflation is caused by a better distribution of reachness and the increase of the active population the data has to be accepted as healthy .

If the inflation is caused by the acceleration in purchassing of a reduced number of consumers with extraordinary bursting of reachness , then the data is very grave because this situation is the one that forces increase of salaries to many millions of chinese workers thereby causing further escalating inflation

Besides it is good to remember that with China as the second world largest economy , inflation in China becomes the propeller of energy and raw materials costs accross the planet , affectting very negatively the world balance .

In conclusion is not subject to critics that China grows to approach the standard of living in the west , but the chinese growth canot be based in the extremely fast income of a few chinese millions at the expenses of the loss of reachness of many millions of chinese with limited salaries dented by inflation and the imbalances caused to the stalling of western markets worsened by the uncontrolled increase of commodity prices .

If chinese government officials reflect on this , they will have no difficulties to realise that for americans to be able to make a reliable plan to quench deficits it is inevitable that China controls all parameters affecting chinese growth first ,

Increasing of interest rates alone will not be enough to rein in inflation . It has to be complemented with a redesigning of chinese tax system .

Brahmason

-The GPD ( PIB ) has according to recent official info grown 0,2 % during the fisrt quarter of 2011.

-The latest inflation published by April is 3.8 % of which the biggest factor is energy , commodities and food .

That shows as repeatedly recalled by Brahmason , that economy is strongly stalled due to its estagflationist structure with a very poor added value that propells costs and deflates purchasse capacity of consumers .

The spanish economic officials though , insist in that the economy is "moderately recovering" ignoring the above data which shows that the net growth is highly negative with a tremendous loss of reachness increased by the continuous loss of added value of the GDP .

Exports which were stimulated a few months back as the only option to reduce inventories are finally getting exhausted because production is refraining and exports are reducing further the operative global results of companies due to low competitivenes on low added value products offered by low technology economies at very low prices .

Economies with a strong added value GDP are able to pay bigger average salaries as they are based in production and service companies offering high technology products and services employing engineers and other proffessionals specialised in latest technologies .

Spain’s GDP is predominantly based in light basic transformation products and services companies , with high need of raw materials , energy and low proffesional requirements badly paid .

The conclusion is that having to pay the imbalances created by the housing bubble which contribution to the GDP ( PIB ) has to be replaced by non existing alternatives , the spanish economy is unable to grow in quantity and quality at the minimum levels required to pay debts , reduce deficits and recover employment and purchase capacity .

Retail sales strongly connected with consumption are simply collapsing to confirm what we are here exposing .

The real problem is that polititians of every party are not accepting that the only way to cope with the situation is the change of the economic model to substitute companies employing construction workers by companies producing high technology products and services .

The massive exodus of engineers and other proffessionals in latest technologies also confirm what we are here exposing .

The government ignores all this and concentrates in denying the tremendous housing bubble that shows the biggest gap in Europe between prices and average salary , which is an unsurmountable burden to allow for recovery together with an unemployment figure double than european average , three times bigger than unemployment in Germany and five times bigger than unemployment in The Netherlands where net average salary is more than twice the net spanish medium salary .

Brahmason

As real economists know the life of companies is not eternal . The reasons are that sooner or later someone comes out with more advanced proposals or that the product or service of the old company is no longer in fashion or has become too expensive to the perception of demand .

With world big changes occurring so fast the old traditions and routines are no longer providing the expected answers to people getting fresh information that cause them to look for more advanced arguments that will help eliminate the tensions caused by the old routine or teachings in their confrontation with updated reality .

The answers to new challenges are rarely found in books . If you build up your future on what you read in a book , you will always be lagging behind those writing the books .

The answers in fact are inside yourself and depend on your capacity to observe the many options provided by the environment including ideas and opinions af all kinds .

That is only possible from an attitude of ecuanimity and perception based on intuitive direct thinking which finds out the logics of every attitude or event without being influenced by any kind of attachements .

Why do you think that the so called creative people are paid so much for their feedings ? Why do you think these people spend most of their time isolated in environments hardly in sinthony with the standard settings that we are familiar with ?

This works even at scientific research level . The most succesful scientist is the one that can perceive things as a function of the environment in time and space while ignoring obsessions of past logics which are only practical for final checking of matching between new and old realities .

As Alvin Toffler and many others advanced , the real problem of humans is to cope with the change of realities which demand sufficient updated education to assume without shocks and suffering the new coordinates of the space-time continue where our existence is occurring .

Brahmason

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