About USA Economy

In 1971, when the USD was weak and was getting cheaper with every day, the financial minister John Connolly paid attention to the whole world with the words “Dollar is our currency and your problem". Thirty years later when the US Dollar was stronger and didn’t stopped to increase, the financial minister Robert Rubin told “Strong Dollar is a good for America”.
Today the US Dollar is again in situation from 1971, and analyzers expected the American positions and economists to pay attention to the words of Connolly, but in spite of that they repeat the phrase of Rubin. The problem is that as much as you claim that you care about American Dollar, when it is decreasing every day, means that you have an interest the situation to be in that way. So the American economists, repeat without words the phrase of Connolly.
The president of European Central Bank, Jean-Claude Trichet, finally began to comment, how dangerous can be the hard and uncontrolled currency movements. The banker is pressed from the production sector in Europe, to make an attempt for stopping of the hard running EUR. For the last month, the Dollar lost nearly 8% toward the EUR, and for the last year, the losing is more than 20%.

Robert Solow about the difference between FED and ECB

Robert Solow, the Nobel's laureate, explained in interview for Handelsblatt, why the politic of FED is better that those of European Central Bank. The scientist is also talking about the users' confidence of ECB and the decisions of the same institution.
Handelsblatt: Mr. Proffesor, according to the monetary theory of Milton Freedman, the active politics of federal reserve of USA and the pack of economy stimulates of US government are a devil's trap.
Solow; Neo-classic theory and the related over it theory about "real business cycle", which is keeping a serious for the economy movements technology shocks, is comming from unreal premises. In these models is not taking under attention, that there are people with different, competing purposes, consumators, ivestors and workers. That is why, the results and the politic advices, which are comming from neo-classic models and in all the time are claiming for "les fer", and not strong enought.
Handelsblatt: What will happen, if there are more realisitic admissions?
Solow: Then we should calculate with unchanged prices and unchanged working sallaries, with calculating of market force and the restricted time horizons of actors. If this is done, you will see, that the monetary and financial politics are working instruments.

The price of the credit

We are witness of hard shocks in the world financial markets, which not little watchers are defining like unique. Supported low interest levels from FED and other leding central banks in the world after the terrorist attacks in the Autumn of 2001, as a anti-action of the affraids for global economy damage gave expected results in economy plan, but created the serial financial phenomenon. The investors found a decision of their problems with the profitability with investing in real estates. The population prefered also to invest in real estates, in stead of staying with zero profitability of financial markets with depositing the money into banks. The ballon inflated and with normalizing of the processes broke. When it reached its final point started its turning back. This turning opened other processes and started the fully global restructure
The leading Central Banks in the world activated their work. The medicine is the same - agressive monetary politic, which is act against the possible economy recesion. In 2002-2003 the interests of FED decreased with record low levels, even on some periods less than 1%. From the beginning of 2004 started their low increasing and primary credit rate reached even the top level of 6.25%. The work was broken quickly in the second half of 2007, when for less than a halg year was erased the work of 2 years.

The worth of American Properties

The way in which the Americans are "fastening seatbelts" had changed much more in the last years, which is important index for future assessment of financial markets. In the days in front of breaking of real estate ballon in USA, unsolvent citizens made their best to keep the property over their houses. Of this had no result, they stopped the loan of the car and finally reached the option - mortgage. In todays conditions, the list of priorities turned down, commented Reuters.
Maybe the real estate is not so important for Americans, mostly as its price is falling continuously. We may see soon Americans that first will sell their property, then the can and just finally the LCD TV set. This is the new question "To be or not to be", and even the idea about it is terrible.
In all cases, the credit ballon was created in result of the mortgage crisis in USA, which was followed by negative developing in automobile credits and finally came the problems with credit cards. According to datas of Federal Reserve, the expiring of the debt of credit cards with more than 30 days had grown with 4.55%, which is the highest level from 2003.
As a difference from the last bank crisis from the beginning of 90s, when the credit cards were hit before the mortgages, now the situation turned down. But it is difeerent now. In the last some years, on the first plan in USA came secondary mortgages, which gave possibility of people with bad credit history t get loans for buying of property. Also the first payments got almost to Zero, and the combination from the two gave the possibility of almost every American to be approved for getting a credit. This crashen the financial discipline of the population, for which the property has no worth, and mostly heaviness, which can quickly be thrown, when the price goes down. That is what happened.

Not so dangerous increasing of petrol price

The price of petrol passed the psychological border of 100 USD per barel, and the European investors are overloaded with problems of capital markets. They still don;t feel more serious pressure from that. Harder searching of goods from developing markets, expenssive EUR and lower meaning of the petrol crude oil from the European countries, is restricting the effect from the record price, commented Reuters.
The petrol reached the top level ever, with the price of 105$ per barel immidiately after the rejection of OPEC to increase the daily productional rates in Wednesday, which is almost 5% more expensive from the beginning of the year. For 2007 the petrol got nearly 57% to its price. The middle price of the petrol this year will be nearly 90$ per barel, while for 2007 it was 72.30$ per barel.
All this should bring to terrible pressure over some industrial groups, from heavy chemistry to producers of building materials. Worst thing will be if the more expenssive petrol may bring to taking away from the users from the market, and we know that the expenses of homes in USA are resposible for more than 70% of growing of gross Domestic Product of USA.

The investors' advices

Between the attainments of the fund market and its glint in the press-realeases always had back proportionally dependence. Very often, different specialized magazines (Fortune, Money, Barron's), which are reflecting the world markets,had given recommendations (to buy or sell) on the wrong time. Just when you read this issue, which promises to you to make millions from real estates, is just the wrong moment to invest in them. And the opposite, when all issues are againt some niche in economy and finances (just like American Dollar right now) is the time for buying it.
We commented that the predictions for growing of the value of USD for 2008 is making the dollar more expensive and the time for buying is now. Also some analyzers, think that will have a little bit decreasing of the USD price in the next month. The lowest border is almost reached, and if you want to earn money from investing on the financial market, that is the time in spite of all publications of USA Economy recesion.
In the summer of 2007, in spite of our understandings that so big growing of prices and shares cannot be kept in long term, analyse brought to conclusion, that should be more active in Bulgarian stock exchange and to increase the invests in Bulgarian shares, but happened the other thing - Bulgarian stock exchange felt a large correction and big decresing of the prices.

The world Inflation and Currencies in 2008

While the world is trembling from the possibility about recesion of the American economy, the inflation in global view is growing too fast. In this circumstances, the exit may bring to depreciation of the European currency and growing of Asian money, commented Reuters.
America Dollar will start to getting stable after more than 2 years weakness. In the last month, the American currency is signing seriously increasing in comparison with European one, because of darker predictions for future of European economy.
In the previous week, the EUR lost 2% from its price toward the USD, which was the hardest weekly correction from June 2006. The markets started to attune for the first interest level decrease from the European Central Bank. The interest was kept higher, to fight with inflational risks. Unfortunately, the strategy is not giving the right result and in the moment Eurozone will be in front of the possibility for developing of stagfation (low economy growing followed by high inflation).
In China, where the national currency is controled by the country, there are other kind of difficulties. The Chinese dilemma is connected with keeping of the higher economy growing and low inflation, and finally yuan will be let to grow. In the moment, the inflation in the country is with 11 years top, which is embarrassing more of economy analyzers from the whole world.
In moment, when the global economy growing is slow, and the prices are raising fast, the increasing of the currency will raise the buying possibility of the population. According to standart understanding, the countries with weak currencies (Dollar and Chinese yuan), will cope more easily with the getting wider inflation in 2008.

Russian economy raising

The period of economy raising is to its end, when the hole world is in front of hard reality of weak growing and high inflation. In USA and Europe, the recesion is making a hard problems, after the burned mortgage crisis and distressed financial sector.
Developing markets, still have high economy raising, and the only affraid is the world inflation. During the previous year, Russia signed increasment of Gross Domestic Product with 8.1%, and in the first months of 2008 the level is the same., in spite of comming recesion in USA. And everything sounds good. But what to tell about Russian inflation, which for the year of 2007 was 7.4% and for January 2008 is the extreme 12.6%.
The higher inflation level is not so bad in developing economies, which quickly should reach the level of richer countries. Calculated in US Dollars of its current value, real growing of Russian Economy had been 27% yearly in the period of 2000-2007, in spite of its net growing of 7% yearly. The difference from 20 points is because of adding of inflational meaning to the nominal raising of the economy.
The inflational level in Russia is because mostly of the huge currency excesses, which increased the reserve of the country of nearly 500 billions US Dollars.