Euro prospects did not change. The week forecast.
Last week the U.S. market data eased the confidence of the market participants regarding the economic recovery start-up. Moreover, there appeared concerns about that it is just a temporary correction of the current recession bottom. I was a little bit glad, because people are beginning to realize that such crisis can not just stop and turn into “V” form. I had already written several times that the current positive statistics — is just a seasonal factor, and by the winter many countries\' economy may worsen. It\'s hard to say how bad will be the situation, may be the same as in this winter, may be worse. According to the Rosstat last findings, most likely that the economic situation in Russia will be worse the next winter, if our government doesn\'t take the right measures on time. In our country a psychological aspect regarding the downturn is rather essential. A small business moves due to the lending. As they need these loans, there appears a necessity to take them. Thus, the banks began to refuse credits to a great many of people, because of the second breakdown wave expectations. But it will lead to that people will land on the street level and small businessmen will put their business aside till better times. And people also have credits, which must be repaid, but there is no income to do it. So, these banks will have problems with non repayment. This is an endless circle. Amid these circumstances, the government can not make the private banks credit. Everything is more simple. In America the banks are ready to work «in the red» till the situation levels off, but in our country these «bourgeois» don\'t want to work even «in the black» (no profit and no losses) trying to gain in the current conditions. This is what should be sorted out above all.
Let me describe the revival after crisis as i see it. This will not be “V” or “U” forms for sure, most likely that it will be “W”, but without sharp rises, as in the “U” model with more moderate tickups. Probably, these moderate phases will take place in the spring-summer period. That is why i don\'t see the reasons for the dollar\'s tumble, worth reminding that the chances for the big diapazon 1,2330-1,4710 are good. The last week events showed how the bad statistics can make revise the attitude towards dollar. Nevertheless, the market is balanced now after positive weeks in the late June and at the beginning of July. Consiquently, the fundamental aspect is the same, as it was 5 sequent weeks.
Concerning the last week technical analysis, there are no significant changes at the chats, so my sentiment about the Euro prospects did not change coming in line with the previous outlook. With one difference that those who sold from the range of 1,4200 - gained around 1,4000, and those who sold at 1,4100 — are still looking for 1,3850, although, the current profit is acceptable too. Don\'t forget to set up the positive Stop rates. Thus, this week forecast remains the same, except the Britisher, which wound me around the finger. I can just add an interesting article with non-traditional minding to read. I agree with a lot of aspects of this article.
Here it is.
What does it mean the crisis of overproduction?
Crisis of overproduction — situation when there are more produced goods than it can be consumed. The most famous overproduction crisis ever seen in the world was the Great Depression of 30-s, which resulted to the World War II. As the capitalism can not exist without the overproduction crisises, among the scientists, economists and politicians appeared an issue: «How to avoid the crisis of overproduction?» What does it mean capitalism? Capitalism — is a free enterprise, when people decide by themselves which business and sector to invest in. Naturally, all are striving to invest in the most perspective and profitable sectors. There appears an activity surplus, overproduction and excess of entrepreneurs. Eventually, somebody has to go broken, somebody - jump out the window. Millions of people have to be on the street. But after the war the whole capitalism became social. And the social capitalism implies that the government can not afford itself millions of unemployed and let them land on the street level. Therefrom rises an idea: «In order not to let the overproduction crisis emerge in the future for increasing the consumer demand — it is necessary for people to have more and more money.» How to do it?
You can\'t just pay more money to people, it may lead to an inflation. In order to get rid of these there was invented the following thing: we (Americans, Europeans, Japanese) have a great many of property which we have. During the colonization period in the Europe and the USA was accumulated a lot of valuable property. Ports, railway stations, plants, houses and etc.
We can monetize all the property of the Western world. Monetize today to stimulate the demand and economic growth today. The last 60 years the USA, Japan and the Western Europe were converting the stock of wealth accumulated during the centuries, partly by its own forces and partly due to the colonial expansion. The Europe and later the USA had been collecting the means all over the world for centuries: from India, China, Latin America, Africa - from everywhere. A huge amount of accumulated property appeared. Moreover, not in written form: infrastructure, housing, technology, created brands, licenses, means of production and etc. It is a terrific wealth which can be converted into currency due to providing a collateral to a bank, which in its turn supplies money.
There is such a concept as a “credit multiplier”. If I bring 1000 rubles to the bank — it is a deposit. The bank can give someone 980 rubles as a loan. So, the economy gains 980 rubles more. In the USA this credit multiplier reachs 18, in the Europe — 13-14. The same 1000 rubles is deposited several times and given as a loan. The money supply increases many times more and more and becomes huge. Houses, ports, plants, real assets — all these was at pawn. In the 90-s the debt amount began advancing at the fastest pace. All current outpayments including the interest rate were been recovered by new amounts owed. The outstandings were growing as fast as it overcame the nation\'s physical stocks and penetrated into the other nations\' physical stocks. For example, the Chinese producing clothes or Russians which recover oil.
Few savings crisis
It\'s becoming evident that we are at the final. Almost all the physical property of the Western civilization is put in pawn. That is called a few savings crisis. We have taken not only that we have earned today but also for all the previous centuries. We\'ve converted it into currency and eaten away. The overproduction crisis was covered by this money. The last 70 years the global overproduction downturn was cut short by the world savings. There were spent all the Europe\'s money holdings, which were accumulated for the whole colonial history period. Also the savings of Americans and Japanese. We and the Chinese, the «second class» nations, also took part in this mess. Partly, we also suceeded to catch this idea about spending money today and thinking about the consequences tomorrow. In fact, we donated these funds to the Americans and Europeans purchasing their assets. For instance, when our oligarchs were collecting profit from the russian companies and invested it in «General motors» stocks, which later became a technical bankrupt. And the USA were backing its own current consumption at the expense of other nations. The same happened with the Chinese, Japanese, Malasian, Polish and etc. store of money. Today there is nothing to reserve the overproduction crisis with. According to my calculation, there is double production means surplus in the world, compared to the current earnings of people on the planet. The overproduction crisis — is the main problem of the coming day, year and the next 2-3 years. This is whar we got now. This can not be avoided or cut short. Finally, I suppose it will be realized not only by Medvedev and Putin, but also by the Europeans and Americans.
The world trading war
Therefore, the G20 events have no relation to what is happening. Presidents and prime ministers think of how to patch a hole in the banking sector. Actually, the question should be put differently: how to reduce the global production volume twice. Where to put all these businessmen and about 400 million workers (50 million people only in the USA).Think over a problem: double volume of overproduction. This problem has no solution. That means that in the nearest years will take place a total, terrible, unprecedented trading world war. The overproduction level will make all the corporations and nations fight above all for their internal market, thereafter, carry out a severe agressive expansion by all leagl and illegal means.
Around the corner is the time when at 2.00 a.m. we will hear the knock on the door from the «Mersedes» dealers offering to buy their automobile for 5.000 USD as a 50-years loan without interest. The issue of staying alive becomes №1 for the world companies. That, who will manage to tide over longer than others working at a terrible loss, will be the winner in the end, as the bankruptcies will be multigap. A new colonialism type. There is one more side of the current recession without a simple way out. After the World War II the colonialism did not end — it\'s just transformed. In 1913-14 a similar discussion had place: how will we live, as the colonial profit period comes to an end? How the Europe and States will finance their own development if we don\'t raise funds from the Chinese, Asian Indians and Latin Americans etc. There was generated a great decision with the financial assests. What to do if we don\'t have an opportunity to sell the buses to the yankees no more? We\'ll start selling the air! What does it mean a financial asset? This a contract on property and future profits appropriation. What is a share? It\'s a contract on property and future earnings allocation in the company. What means a debt warrant? It is a contract on allocation of your future profits, i.e. according to this document, you are obliged to give out a part of your future incomes including the interest.
At some moment, there shaped up the following situation: in the people\'s mind the financial assets have separated from the real assets and turned out into a self-maintained item. Let\'s say, there is the «General Motors» corporation, which costs 80 billion dollars. There are also the «GM» shares and its debt warrants — they also cost 80 bln.dollars. These concepts have separated in people\'s mind and «GM» has the value of 160 bln.dollars. This process was rolling on factorably along the exponential curve. Why they say that there is a low inflation in the USA and high one in our country? Actually, the U.S. inflation is giantlike high, it\'s just been taken up by the mass of financial assets. When the most part of people\'s and businessmen income is absorbed by stocks, CDO, CMO, futures on various goods or even on weather and different football teams victory. Today all this giant commodity stocks, a huge inflation, accumulated from the World War II, is concentrated in this financial hole. That is to say, the financial crisis is a result of overproduction, and on the other hand — of a new colonial model. The Americans and Europeans are not so involved in this financial pyramid as we. A colonial tax. How does it work? In 1992 they said to a simple Chinese or Russian citizen that they will lose their earned 1000 yuans or rubles, so they should invest it in the american shares. «Look how reliable they are. America was not at war with anybody within its territory. It has the most reliable assets. You money will be in safe and increased. You don\'t have to work, you just have to invest 1000 USD and in 10 years you will have 5000 USD». That\'s the way how it was. For the last 10 years this amount reachs about 19 trillion dollars.
They were «outsourced» from the Eastern Europe, South Eastern Asia, our country during the downturn period, China etc. These funds — is a tax. It can be called differently: colonial, post-colonial, neocolonial. This is a direct financial tax, when those who were colonialized are not protesting already being glad. They put up money in «General Motors» shares. Thereafter, they fall by 60 times — that happens and there is nothing to do with it... After that, the money resources were gained by the american shareholders. That also happens — don\'t be surprised. Those who were colonialized got 3 opportunities: 1. consume the metropolis goods. 2. Invest in metropolis. 3. Go to the metropolis. This also can be considered as a colonial tax form. America will save itself at someone\'s expense.
There is no way out. The post-colonial model swallowed up all the global savings. We have a total overproduction crisis. This slump has begun not in 2008, but in June or even in May of 2007.
The last money
The strategy which is now used in the States, Europe and Japan is to slosh the fire with the gasoline — a huge monetary inflow. In the USA are issued nice papers called «the government treasury bonds», they are sold to the Russians, Chinese etc. And they bring their money holdings to the State Defence Committee pyramid. Remember, in 1998 when in Russia the government was borrowing more and more. What was the outcome? Finally, the value of a week Committee service overbeared the possible volume that could be occupied in the market. The same will be in the United States. For the whole time they will manage to borrow not more than 4-5 trillion dollars. There are no more monetary sources in the world. Whatever you do - there are no funds! This end-point exhaustion will take place around the Q1 of 2010, 3-4 months plus or minus. Seems that the only way out — is hyperinflation.
If you have 120 trillion dollars of external and internal debt warrants, which can not be extinguished and you have no money to cover the gaps, how to settle the matter? We saw it in the Soviet Union and in Russia in 1992. When the system can not be extinguished, the most simple is to full it up it with the funds, monetize all the financial assets. But due to that there will be nowhere to borrow from the following is expected. A new managing consortium of the major american banks will be established. Most likely that it will be the Bank of America, J.P. Morgan, Goldman Sachs, City Group. May some more banks for which the Federal Reserve System (FRS) (in Russia — Central bank) will issue money and say: «Your purpose is to buy everything that is sold. We give you 45 trillion dollars for that. They will lead to a hyperinflation, but your debts will blow away. And you will gain the real financial assets all over the world». This allows to handle with the financial tangle,on the other hand — to make an advancing strike. What will happen if in the USA starts the hyperinflation? The European assets are tied up сlosely to the American. This will be a blast wave through the Europe. Here will start the same as in the States - hyperinflation. Some countries will begin leaving the Eurozone.
As an example, Germany will introduce the mark, Italia — lira. If Washington sets up the hyperinflation on time, it will go on at someone\'s expense. Why? It\'s not because there will be better after that, it\'s due to that the situation will worsen in other countries. Strengthening against others is possible by two methods: rally your positions or weaken others\'. As in the USA the old system deterioration is unavoidable then most probably that they will make it under their control. Hyperinflation — is the most reasonable way of writing off the debts including external. They owe nothing to anybody... The hyperinflation is to down the greenback\'s value by 5 times, according to the calculations and taking into account the budget, the pension system, the debts and the financial capacity which are carried out by people. Apart from this, the U.S. consumer goods output is absolutely unprofitable.
Have a nice week.
July 7, 2009