Brazilian President Accuses US and EU of Perverse Monetary Tsunami Against Emerging Nations

American dollar Brazilian president Dilma Rousseff criticized today the actions of the European Union and the United States concerning the international financial crisis. She called the current currency war going on a “monetary tsunami” waged against emerging countries in a perverse way.

Brazilian economic authorities went into action soon after the announcement that the European Central Bank will flood the market with 529 billion euros to succor that continent’s financial institutions.

It is feared that as with quantitative easing in the United States, a lot of the money will eagerly head toward Brazil where the country’s base interest rate is over 10%. Yesterday, the Brazilian government moved to tighten the screws on the dollars coming in.

On one hand, it was announced that the Tax on Financial Operations (“IOF”) of 6% involving exchange rate transactions (in other words, dollars) will be extended to cover all such transactions for a three year period as of today (March 1st) and expanded to include other transactions by foreigners who bring dollars into Brazil, along with operations outside Brazil in dollars – loans, especially (by Brazilians and foreigners).

The government is concerned that some “direct foreign investment” is going to Brazilian money markets.

It should be borne in mind that this is all part of ongoing efforts to halt the devaluation of the dollar because of a ripple effect. The cheap dollar makes Brazilian exports expensive at the same time imported goods are cheaper. The result is that the country’s manufacturing sector faces the possibility of becoming an endangered species.

The 6% tax, as part of the ongoing effort to stem the dollar inflow, was originally levied on operations for a  period of a year (360 days), then two years (720 days) – and now three years. Last year, the government put a tax on derivatives.

And the new measures announced yesterday (February 29) show clearly that the government is trying to close loopholes in the laws on dollar transactions, threatening to levy fines and charge interest on infractions. Multinationals are one of the targets; it is suspected that they get loans abroad at practically zero interest rates and invest in Brazilian financial markets.

On the other hand, the Central Bank has been very active on both spot (“à vista”) and future dollar markets (in other words, buying heavily) to halt the fall of the dollar and keep it above R$1.70.

ABr

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  • Lloyd Cata

    So, now you believe me….about how the Empire would “export inflation”?
    Several years ago(2004?), I discussed in this forum how inflation is “exported” by currency manipulation.

    First, the US prints $4 trillions. Yes, they were printing dollars like a Chicago paper-hanger, all the way back then. When they ‘really’ had to go full out on the presses, they gave it a formal name “Quantitative Easing”.

    Now, while everyone was predicting massive inflation in the US, first after QE-1, then after the massive QE-2, and anticipating QE-3….instead the next thing you know is that QE-3 is just the US printing operation moving to Europe(ECB)…and this will not be the last “grease” the Empire will apply to the backsides of the developing nations of the world.

    My time is limited right now, but can anyone tell me why the Empire insists that the Chinese are manipulating their currency? After all this -printing- in the US and Europe….all without significant impact on their dollar/euro valuation. This is unprecedented, but when your currency valuation is based on “In God We Trust”, and the Euro is a function of dollar transactions….well, you get the point.

    Perhaps Mr. Amaral will appear to explain these currency shenanigans, but when the inflation comes it will hit with the force of all those dollars and euros printed to “defend” the Empire. Then Brazil, and the rest of the developing world will feel the weight of all that funny money…

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