The EURO concept works well in theory...but any sort of collective approach such as this is doomed to fail.... It is failing as we speak: These countries will exit...and soon will use their own currencies again...and sooner than you think... Italy France Germany Switzerland Holland The reasons for that they got together in the first place...were not well served... There are so many obvious reasons that this type of theory will fail are so many...it would literally take up thousands of pages of text... Politics...local economics...and 2 to 3 generations of people are not going to vanish etc.. Furthermore after mentioning this many times...you cannot value a currency by its face alone...it has to be adjusted by the BCs short term rates...to get the real values to use...and oh yeah...every country...no matter how large or small has inflation , stagflation, and deflation issues.... This idea of appraoching everything in unison...quite frankly reeks of George Orwell's 1984........
Couldn't avoid it. Using the EU is going to fix the Brazilian economy? But, it ain't possible due to the ethnic differences?? LOL!! I'll use part of the statements posted to illustrate the fallacies involved in the currency solution: As the previous paragraphs from The Economist argue, even in the USA, the dollar could suffer a humongous 40% drop given the appropriate catastrophic economic conditions. How can SA assure us that the Brazilian economy with the EU will not drag the EU down under the same conditions? How can SA assure us that there will be no flight of capital, in EU, to better pastures? SA has brought our attention to the previous paragraphs where both of these unwanted calamities may occur in any economy. The Real on its own has nothing to do with Brazil's woes, adopting the EU would only reduce the latitude of the available alternatives to the Brazilian central bank. The Real's dismally low exchange rate is the symptom to a very sick economy, and surely not the cause. Or, let's look at things from the opposite angle, why don't we solve the problems of the economies of the world by all adopting the EU ?? Even, Mr. Greenspin is trying to dislodge the dollar from the Yuan, which will allow the US easier solutions. Think about it, The Yuan pegged to the dollar, is as good as the Real pegged to the EU...
Livermore wrote: Couldn't avoid it. Using the EU is going to fix the Brazilian economy? But, it ain't possible due to the ethnic differences?? LOL!! I'll use part of the statements posted to illustrate the fallacies involved in the currency solution: -------------------------------------------------------------------------------- Quote from southamerica: The Economist magazine issue of April 27th- May 3rd, 2002, also had a similar article on the US current-account deficit. It was called "The O'Neill doctrine". According to the British publication, "America's huge external deficit is an accident waiting to happen. (...) The International Monetary Fund says that America's current-account deficit poses one of the biggest risks to the world economy. (...) If capital inflows were to dry up, the current-account deficit would have to shrink, either through a slump in domestic demand or a fall in the dollar, or both. "A study by the Federal Reserve of large current-account deficits in developed economies found that deficits usually began to reverse when they exceeded 5 percent of GDP. And this adjustment was accompanied by an average fall in the nominal exchange rate of 40 percent along with a sharp slowdown in GDP growth. America is likely to move into this danger-zone by the end of the year." -------------------------------------------------------------------------------- As the previous paragraphs from The Economist argue, even in the USA, the dollar could suffer a humongous 40% drop given the appropriate catastrophic economic conditions. How can SA assure us that the Brazilian economy with the EU will not drag the EU down under the same conditions? How can SA assure us that there will be no flight of capital, in EU, to better pastures? SA has brought our attention to the previous paragraphs where both of these unwanted calamities may occur in any economy. The Real on its own has nothing to do with Brazil's woes, adopting the EU would only reduce the latitude of the available alternatives to the Brazilian central bank. The Real's dismally low exchange rate is the symptom to a very sick economy, and surely not the cause. Or, let's look at things from the opposite angle, why don't we solve the problems of the economies of the world by all adopting the EU ?? Even, Mr. Greenspin is trying to dislodge the dollar from the Yuan, which will allow the US easier solutions. Think about it, The Yuan pegged to the dollar, is as good as the Real pegged to the EU... ................................................................................................. Excellent...couldn't agree more... However if you think that dealing with a Brazilian..Hatian..American is the same...you're dead wrong... I know...I live it...talk is cheap... And by the way...Currecy/CB interest returns on some plays in some countries have blown away returns in any of the world's stock markets..bond markets... There always seems to be an opportunity or two.... ....................................................................................... What kills the best governments at times is this EU type thinking....
. Brazil and the Euro Part 6 Brazzi/Economy October 2002 Shock Treatment Brazil needs a major and radical government change to be able avoid an economic collapse similar to the one in Argentina. By: Ricardo C. Amaral In October 2002, Mr. Luiz Inácio da Silva (Lula) was finally elected president of Brazil. After so many tries (four in all), what put him over the top in this election? What made such a difference this time around for Mr. Lula to achieve his presidential victory? First, we have the catastrophic economic situation in South America; with various economies collapsing one after another, such as Argentina, Uruguay, Paraguay, Colombia, Bolivia, Venezuela, and Brazil. Second, the people in Brazil are tired of 1) the widespread poverty and despair of the Brazilian population, 2) a crime wave which is completely out of control all over Brazilârelated to the illegal drugs trade, 3) the mismanagement of economic resources by the Brazilian government, 4) the complete political apathy of the government to resolve the major economic and social problems afflicting the country. Third, also having a major impact on this mess is corporate and political corruption. Fourth, we had a very poor economic policy and performance the last four years by the current Brazilian government economic team. Since January 1999, the Brazilian Real lost over 60 percent of its value in relation to the US dollar. The country Brazil and the Brazilian population are getting poorer and poorer every day. Somebody has to do something drastic to improve the situation in Brazil, before Brazil falls into the same economic crisis and final economic collapse similar to the one in Argentina. The status quo has to go! Brazil needs a major and radical government change to be able to survive. Finally, we could list all the usual reasons to justify the economic collapse of South America, but the economic mess is already done. It is there for everybody to see. Please don't underestimate the power of greed, incompetence, and corruption; things still can get a lot worse for all countries in South America. Brazil is running out of time to take the only economic steps, which can save the Brazilian economy from total collapse. Brazil still has some economic reserves left and is still in a position to negotiate its way out of this economic mess. This is pretty much a last call for Brazil. If Brazil misses this last chance, then good luck when you enter into the economic black hole. After what has happened economically in Argentina and Uruguay, Brazil can become at this point, the laughing stock of the rest of the world, if the new Brazilian economic team lets this last opportunity slip through its fingers, without trying something drastic to save Brazil from economic meltdown. The new administration should move the Brazilian economy away from the direction demanded by the IMF and the rules followed by the Cardoso administration, because that is the direction to an economic black hole, meltdown and chaos. A Plan to Save Brazil The only way to avoid an economic meltdown in the near future in Brazil, similar to the one which destroyed the Argentinean economy, is for the new Brazilian president to implement immediately and adopt a radical economic plan as follows: 1) The first priority for the Brazilian economy is for Brazil to adopt the euro immediately as its new currency. The Brazilian government should first adopt the euro as the new currency and then they should workout the details with the European Union for a reasonable timetable for the Brazilian economy to meet the requirements for full membership in that club. Out of the 15 countries that comprise the European Union (EU), 12 countries also belong to the new European Monetary Union (EMU). The (EMU) country members adopted the new currency, the euro, as of January 1, 1999. The resulting euro market created an economy with more than US$ 7 trillion in gross domestic product (GDP). If Brazil becomes a member of the European Monetary Union (EMU) the Brazilian economy would add another 10 percent to the size of the (EMU); an increase of (GDP) to almost US$ 8 trillion. There are some (EMU) criteria established by the Maastricht Treaty, which countries wishing to join the (EMU) are required to meet before they are allowed to join the euro group. The criteria are as follows: ⢠Their inflation rate should be within 1.5 percentage points of the three best performing (EMU) countries. ⢠Their exchange rate should be stable in relation to the euro. ⢠Their government debt must be less than 60 percent of gross domestic product (GDP). ⢠Their government budget deficit must be below 3 percent of their (GDP). The short term sacrifices required from the Brazilian people to meet these requirements will be rewarded in a big way in the futureâwith monetary stability, lower interest rates, a sound economic environment for investments, and access to European money markets. With today's technologies in computers, communications, satellites, air travel, etc, distance is not an issue to stop any country from adopting the euro as its new currency. I want to bring to your attention the fact that the euro is the official currency of a country in South AmericaâFrench Guyana belongs to France and the official currency in French Guyana is the euro. After Brazil adopts the euro and it is protected by the power implicit in the value of the euro, only then the new Brazilian administration should take the second step of the economic plan. 2) The second step is for the Brazilian government to renegotiate its $ 250 billion dollar public debt to a more manageable longer term, and at a better interest rate. This is not a big deal as they make it to be in the press, since American companies in the US restructure their debt load all the time when they run into economic problems. The Brazilian government debt of US$ 250 billion is nothing today, when compared with the US$ 8 trillion debt of the US government. I am not suggesting a major program of defaults on debt payments to banks and investors. I am suggesting a restructuring of the debt for a longer term period at a more reasonable interest rate. It will be easier to restructure the government's debt after Brazil adopts the euro as its new currency, because it will give banks and investors the confidence that Brazil will be able to repay its debt in the future, in this new sound currencyâthe euro. Brazil would be renegotiating its debt from a position of strength implied by the value of the euro, also recognized as an international reserve currency. Stability and Prosperity Today, the fortune of countries can change very fast. As we look around the world we can see what happened to the Soviet Union, Malaysia, Indonesia, Thailand, and Brazil, just to give a few examples of countries with weak currencies. A strong currency such as the euro implies that the governments behind that currency will protect the value of the currency, in turn creating a safe environment for investments to flourish and grow. If you are a Brazilian, you know that to protect your assets you have to transfer them out of Brazil to a safer and more stable economic environment, such as the major countries of the European Union or the United States. The adoption of the euro by Brazil would stop this Brazilian and foreign capital flight and would provide a sound economic environment in Brazil, with a sound and stable currency which Brazilians and foreigners can trust. The benefits of such a move should be immediate for Brazil. The one major benefit is currency stability. Brazilians will not be afraid of losing all their savings because of major currency devaluations. Currency stability would give Brazilians confidence to repatriate to Brazil the over US$ 200 billion that they have stashed away in Europe and in the United States to protect these assets from currencies meltdowns. The other major benefit is that interest rates charged to Brazilian businesses and to the Brazilian population would go very lowâthey would get in line with interest rates charged in the euro countries. Another immediate benefit would go to the companies of the euro countries that have investments in Brazil. After Brazil adopts the euro, Brazil will have eliminated the currency risk between Brazil and the European countries of the European Union. Europe is a very important exporting market for Brazilian goods and services, and the elimination of the currency risk will help increase the volume of business between Europe and Brazil. Afterwards, the market place would make the necessary adjustments to the prices of assets in Brazil to reflect the fair market value of these assets in terms of the new euro currency. Part - 6 will continue. .
. Part - 6 continuation. Why not the U.S. Dollar The fact that I have been advocating in my writings that Brazil should adopt the euro as its new currency, has nothing to do with being anti-American. It has to do only with what is best economically from the Brazilian point of view. I believe that the Brazilian economy matches much better with the economies of the countries which comprise the European Monetary Union than with the economy of the United States. From a Brazilian point of view, it is more appealing to adopt the euro instead of the US Dollar, because of the US Dollar's vulnerability to the international monetary market system. The long term US trade imbalances have created a large pool of US Dollars in the hands of relatively few central banks around the world. These nations continue to run large trade surpluses with the United States, and they continue to increase the pool of US Dollars held by their central banks. It is estimated that today 70 percent of US currency circulates outside the United States. The major holders of this currency are the euro countries, Japan, China, Hong Kong, Taiwan, South Korea, Indonesia, and Singapore. Probably today, there is an oversupply of US Dollars floating outside of the United States. The U.S. government has a cumulative federal government debt of over US$ 6 trillion as of July 2002. The US government also has other borrowings from various funds which are not included in the above figure. These other U.S. government borrowings added to the debt another US$ 1.8 trillion as of July 1999, and included the following: Social Security US$ 845 billion, Medicare US$ 148 billion, Military Retirement US$ 140 billion, Civilian Retirement US$ 490 billion, Unemployment Compensation US$ 81 billion, Highway US$ 35 billion, Airports US$ 15 billion, Railroad Retirement US$ 21 billion, all others US$ 58 billion. When the numbers are adjusted to reflect all this other debt, then the new total of the US cumulative debt as of July 2002 is estimated to be around US$ 8 trillion. Since the US government will be running budget deficits in the coming years, it will not be long before the US government debt reaches a new astronomical total of about US$ 10 trillion. I wonder how much debt the US government can get away with, before international investors realize that the US has way too much debt. On top of this figure, 45 states in the US have another $ 50 billion in deficits to add to the debt burden. Eventually, the US government debt will catch up with reality, and the value of the US dollar will be adjusted accordingly in relation to other major world currencies. This is why Brazil should adopt the euro instead of the US dollar currency. It will be a major mistake for Brazil to adopt the US Dollar, since that would be the equivalent of investing in a company that is way over leveraged. The United States has a much stronger and powerful economy because it operates with one currencyâthe US dollar. The economy of the United States would not be as strong if California, New York and Texasâeach had its own currency. We have in the United States different economies operating under a single currency. Texas has its oil economy, California has its high tech economy, Nebraska has its agricultural economy, but they all operate reasonably well under a single currency, even though some times a change in the value of the US dollar would benefit the economy of one state and hurt the economy of another state at the same time. In the same fashion, the adoption of the euro by Brazil will help some Brazilian states at a certain time and will hurt other states at other times. I hope the new Brazilian president have the courage to make these radical decisions. Today, this is the kind of political leadership we need in Brazil, to guide Brazil for membership in Euroland and create a more stable economic environment for the country, and start the new millennium on the right path for growth and prosperity. Other Suggestions 1) Related to the Iraq war, Brazil should do the same thing that France and Russia are doing todayâBrazil should try to get as many business contracts as possible from the Iraqi government. The Iraqis have the oil revenue from authorized U.N. oil sales, and Brazil should try to sell to the Iraqis as much as possible to help the Brazilian economy. It seems to me that there is nothing new about Iraq's mass destruction weapons. If there was any sign of danger, then Israel would have taken care of the problem as they did in the past. The information that Saddam Hussein is a ruthless dictator is nothing new, and certainly is not a good reason to start a war in Iraq. According to an article on the front page of The New York Times of August 18, 2002; "the Reagan administration provided Iraq with critical battle planning assistance at a time when American intelligence agencies knew that Iraqi commandos would employ chemical weapons in waging the decisive battles of the Iran-Iraq war, according to senior military officers with direct knowledge of the program." A war in Iraq will be devastating to most economies around the world. I would be worried about Saddam Hussein if he was a religious fanatic, but he is not. Saddam is just a greedy and ruthless dictator; no different from many dictators that the US did business with and kept in power in the past. This ridiculous talk of war against Iraq is only a "wag the dog" tactic or a diversion by the US administration from the real economic problems facing the United States today. The administration should be doing something more productive such as finding a way to create new jobs in the US economy. The administration should show that they care at least about the American people by giving the people that run out of unemployment benefits an extension to their unemployment coverage until the economic situation improves in the US. 2) Related to the new World Court, Brazil should not give an exemption for Americans from the jurisdiction of the International Criminal Court. If the leaders of the US government act according to international law, then there is no reason for them to fear the new World Court. I know that many people thought that they could get away with murder and that they were above the law. Today many of these people are in trouble because of their past wrongdoings; included on that list are the following people to mention just a few: 1) The Serbian dictator Slobodan Milosevic is being tried by the War Crimes Tribunal at the Hague in the Netherlands. 2) General Augusto Pinochet has been having all kinds of legal problems related to his 17 year dictatorship of Chile. Even Mr. Henry Kissinger is afraid to leave US soil today, and recently he canceled a trip to Brazil, because he was named in legal actions over the Chilean coup that brought Mr. Pinochet into power. 3) The leaders of the repressive Argentinean military dictatorship that ruled Argentina from 1976 to 1983 also have all kinds of legal trouble today related to their actions during that period. They thought that they were above the law, but now they will pay the price for their arrogance. The lesson to learn from recent past history is that no country or any one can act above the law. You might feel arrogant and untouchable today, and believe that you are superior to everyone and that you will get away with it, but given enough time you will also have your downfall similar to the above examples. Any country or individual that acts according to international law will not need any special exemption from future prosecution from the World Court. Copyright © 2002 All rights reserved. By: Ricardo C. Amaral Author / Economist brazilamaral@yahoo.com .
. Brazil and the Euro Part 7 SouthAmerica: Here I am qoting from an article published in September 2002 - Countdown to Armageddon â I am quoting about 50 percent of the original article. Brazzil Economics/Politics September 2002 Countdown to Armageddon Now it is Brazil's turn to go through an economic meltdown. Brazil is traveling on the same road that other countries have traveled before their total collapse. By: Ricardo C. Amaral On September 7, 2002 when Brazilians commemorate their Independence Day, as a Brazilian citizen, I will be wondering if Brazil still is an independent nation or if Brazil has surrendered its sovereignty to the International Monetary Fund (IMF) in exchange for a few dollars. Who runs the Brazilian economy today? The IMF or the Brazilian government? My ancestors José Bonifácio de Andrada e Silva (the Patriarch of Brazilian Independence) and his brother Martim Francisco Ribeiro de Andrada (the first great Brazilian financier, Martim Francisco is credited with developing and implementing the financial plan, which financed the war effort for the Brazilian independence, when he was Finance Minister in 1822), would be very disappointed with the economic policies being implemented in Brazil in the last four years by the Brazilian government. José Bonifácio and Martim Francisco had a very good grasp of economics and finance, and they did not believe in borrowing money from foreign sources with strings attached. They believed in creating a domestic pool of capital to fund the development of the Brazilian economy. I am sure that both of them would be 100 percent against all these Brazilian government borrowings from the International Monetary Fund and from other international banking institutions. Disguised Bailout Is it a coincidence that the largest bailout ever given by the International Monetary Fund almost matched the amount of $27 billion dollars that U.S. banks have as claims on Brazilian borrowers as of the end of March 2002? This IMF loan was the largest loan given to any one country to date. The US$ 30 billion loan to Brazil was an amount higher than expected and surprised most people. Was this loan a bailout to Brazil or to the U.S. banks? The Wall Street Journal reported on August 8, 2002 that the major American banks, which will benefit from this bailout are as follows: Citigroup with $11.4 billion total exposure in U.S. dollars to Brazil, FleetBoston with $10.4 billion, and J.P. Morgan Chase also has a substantial exposure. On August 9, 2002 The New York Times reported that as soon as the loan package was announced the shares of Citigroup and FleetBoston jumped 6 percent each in response to the news. There is no question that this IMF loan was a bailout to the major U.S. banking houses. Reckoning Day Postponed Whom can you believe today when it comes to economic and financial news information? Most people have short memories, and they don't learn from prior experiences. Everything was wonderful with the Asian economies before they had the Asian economic meltdown. Russia was following all the instructions from the West on how to become a capitalist and open market state. Then there was the Russian economic meltdown. In the last ten years, Argentina was the new star and the showcase for free-market economics, economic restructuring, and government privatizations (the Argentinean government privatized everything in sight; including the zoo in Buenos Aires). It did not take long for an Argentinean meltdown, which is becoming also a Latin American meltdown. I used to believe in a free market economy, but today I am having second thoughts about this subject. Today, Brazil is that country which has been doing all the right economic moves as reported by the American press. The Wall Street Journal on August 8, 2002, in a written release by the Treasury Department quoting Secretary Paul O'Neil, said: "Brazil has the right economic policies in place to maintain stability so that the economy can continue to grow." Brazil has been following all the rules stipulated by the IMF (the string that comes attached to IMF borrowings). The IMF has the formula down pat on how to wreck a country's economy. We don't have to look further than Argentina, but if you prefer you can look at a number of examples in Africa. Please don't be surprised by the future economic meltdown of Brazil. This IMF loan package just moved forward the day of reckoning for the Brazilian economy. I know most people are naïve, and they don't act when they still have time to save themselves from the mess. It does not matter how many times the Brazilian population gets shafted; they still have that Brazilian attitude, and they say "deixa pra lá, meu" or "a gente sempre dá um jeitinho." The coming run on Brazilian banks I find it to be a sad situation when I see on the 6 o'clock news so many people banging on bank doors in Argentina and Uruguay, begging the banks to let them withdraw their own money. Most people in Argentina are seeing all their life savings going up in smoke and there is nothing that they can do at this point to recuperate their losses. The money is gone! The country Argentina is bankrupt and broke! Now, it is Brazil's turn to go through an economic meltdown. Brazil is traveling on the same road that other countries have traveled before their total collapse. The Brazilian government is also using that same old road map provided by the IMF, which leads a country to economic meltdown and chaos. The handwriting is on the wall; it is only a matter of time and we will have a Brazilian economic meltdown similar to the one in Argentina. The economic meltdown is right on schedule. Why? Because of the Brazilian government's economic policies of the last few years. In the last 3 and 1/2 years, the main culprit in this economic debacle in Brazil has been the Brazilian government policy of defending that moribund currency the "Real." The international monetary game changed completely with the birth of the "Euro" on January 1, 1999. The Brazilian politicians and government officials were still playing in the old currency game, and they did not catch on as yet that the rules of the international currency game have changed since January 1999. I am going to give you an idea of the mentality of the current members of the economic team of the Brazilian government and give you some clues as to how their reasoning process might work when they are trying to resolve a major economic problem. The only thing we can do is to sit back and have a good laugh. I find pathetic that senior members of the Brazilian government's economic team, at this stage of the game, are still contemplating the possibility of creating a new currency for South America. I believe one of the names that they are considering for that new currency is the "Bankrupt." I find that name very appropriate, when we take in consideration what is happening today to the economies of all the countries in South America. This loan package from the IMF is the last call before the economic meltdown. If you are living in Brazil and if you have any assets and brains, you should be converting most of your Brazilian assets preferably into Euros and transferring your assets out of the country. Let me clarify this last statementâout of the country to a country such as Switzerland, France, and GermanyâI don't mean for you to transfer your assets to another country such as Argentina, Colombia, Bolivia, Paraguay, and Uruguay. I suggest that you convert your assets into Euros instead of U.S. dollars, because I believe that in terms of investment the Euro will be a better bet for the future than the U.S. dollar. I know that most Brazilians will be caught by surprise when the run to the banks starts in Brazil. They will wonder what is happening when the banks are closed and their money is frozen in their accounts. They will blame the banks and the government for their predicament. They also will be banging with pieces of metal in the bank's outside wall and they will be using that same wall to write nasty comments about these banks, calling them crooks and so on. Brazilians have a short memory, and many have forgotten that not long ago their bank accounts were frozen by the Fernando Color administration. Brazilians are ready for another round of that bad medicine. They have forgotten how bitter the medicine tasted at that time. Today, the majority of the Argentinean population just can wish that they could turn back time about one year, for them to take some action, when they still had the chance to move their savings to a safer country in Europe or to the United States. Brazil's Achilles Heel When I wrote my articles about Brazil adopting the Euro as its new currency, I received many emails and letters regarding that subject. Some readers opposed my idea regarding the Brazilian currency, because in their view Brazil would be giving up its sovereignty as a country if it adopted the Euro. Since January 1999, the Brazilian Real lost over 60 percent of its value in relation to the U.S. dollar. If Brazil had adopted the Euro in January 1999, today the Brazilian GNP would be over US$ 1 trillion instead of the current US$ 558 billion. People don't understand how much damage has happened to the Brazilian economy because Brazil has this very weak currency, the Real. It is humiliating for Brazil when they have to crawl and go begging to the IMF in their pursuit of more money. This IMF money is very expensive to Brazil because of the strings attached to it. They have a profound impact on the country; not only economic impact but political as well. Part â 7 will continue. .
. Part â 7 continuation Some of the IMF requirements are that the Brazilian Central Bank keep interest rates very highâabove 18 percent. Credit card rates in Brazil for Brazilian customers are calculated based on the unpaid balance of their accounts and the interest rate charged to their accounts varies from 9 percent to 12 percent rate per month. These interest rates levels are ridiculous when we take into consideration that Brazil has been operating under less than a 5 percent annual inflation rate. The country Brazil and the Brazilian population are getting poorer and poorer by the minute. Since President Fernando Henrique Cardoso took office in 1995 the Brazilian government privatized over US$ 100 billion worth of government assets. The Brazilian government has been wasting all government reserves, the moneys received from the sale of government assets, and the moneys that they have been borrowing from the IMF in this absurd effort to defend this moribund currencyâ the Real. The second and final option It does not matter who becomes the next president of BrazilâLuis Inácio Lula da Silva or Ciro Gomesâthere is only one option left for the Brazilian government to avoid the coming economic meltdown and chaos in Brazil. The new president should have the courage of adopting the Euro immediately as the new Brazilian currency. The benefits of such a move should be immediate. The one major benefit is currency stability. Brazilians will not be afraid of losing all their savings because of major currency devaluations. Currency stability would give Brazilians confidence to repatriate to Brazil the over US$ 200 billion that they have stashed away in Europe and in the United States to protect these assets from currencies meltdowns. The other major benefit is that interest rates charged to Brazilian businesses and to the Brazilian population would go very lowâit would get in line with interest rates charged in the Euro countries. Another immediate benefit would go to the companies of the Euro countries that have investments in Brazilâtheir currency risk would be eliminated in Brazil. Until recently, I used to believe in a completely free market economy. Today I know there is a place for government regulations and government protection of its industrial base against foreign competition. Deregulation has been a disaster in the U.S. to the airline, the energy, and the telecommunications industries. For example; many airlines are on the brink of bankruptcy in the United States. Business Week magazine of August 5, 2002 reported that since the Telecommunications Act was passed in 1996 to deregulate the telephone industry, investors have lost over US$ 2 trillion as the stock prices tumbled 95 percent or more from their highs. The crisis could relegate the U.S. to second-class status in the communications industry in the future. I used to think that governments at all levels usually wasted lots of money, and that they were a very poor allocator of resources. I used to think that the free open market system was the best allocator of resources. Today I have my doubts about unregulated and a savage and destructive type of capitalism I have seen in operation since the mid-80's. It started with the savings & loan scandals and debacle of that industry in the 1980's and culminated with the latest string of company scandals on Wall Street. I believe that the government has a role in stabilizing the economy. For years, an overvalued financial market built on misleading and false information sent highly misleading signals to investors who eventually lost trillions of valuable national savings, which were misallocated to unneeded and wasteful investments. Investors lost over US$ 2 trillion in the telecommunications industry and over US$ 1 trillion in the dot.com fiasco. These investments are gone and will have an impact on many people's retirement plans in the future, since a lot of their pension money was invested in these promising areas. Is It That Hard to Get? Many people don't understand the idea that the Brazilian economy will be better off if Brazil adopts the Euro as its new currency, instead of continuing with the Real (which eventually will put Brazil in the poor house) or adopting the new currency the Bankrupt. I know that they can't grasp the idea but I will try one more time. The fact is that Brazil would benefit and prosper if it adopts the Euro. Let me give an actual example. In January 1999, the economies of Brazil and of California were very close in size; each economy had a gross national product (GNP) of approximately US$ 1.1 trillion. Today, California still has an economy that exceeds US$ 1.2 trillion, even though energy deregulation went out of control in California and almost bankrupted that state. California faces a budget deficit of US$ 24 billion; a figure that represents almost 30 percent of its total budget. If California were not protected by the value of the U.S. dollar, because the U.S. dollar is the currency of California, then we would have a different story. California is the largest state economy in the U.S. and the second largest is New York, which is about 70 percent the size of California's. If California were an independent country their economy would rank number six in the world in terms of GNP. If California had its own currency such as the Real, then their currency would be crashing right now. Their banking system would be in shambles as in Argentina, and Californians would be crawling and begging the International Monetary Fund for a bailout. Interest rates in California would be choking any possibility of future growth, unemployment would be exploding, businesses would be going belly-up left and right and California with all the strings attached from the IMF would be headed to economic meltdown and political chaos. Since Brazil does not have the same type of protection of its currency, you can see very clearly the result to each economy. In the last 3 and 1/2 years California was able to keep its GNP level even with all the economic adversities they had during that period. In contrast, Brazil lost half of the value of its GNP to about US$ 558 billion and its economy is on a free fall. I would risk to say that if Brazil had adopted the Euro in January 1999, even the crisis in Argentina may not be happening today. At least not as severe as the current situation. I also believe that the entire region of South America would be in much better shape financially today. The Iraq nonsense I wish the Bush administration would stop talking about this nonsense of attacking Iraq. Every South American nation should be against such an attack with the exception of Venezuela for obvious reasons. Many countries in South America are going through an economic collapse, a financial meltdown not seen since the depression of the 1930's. If the United States attacks Iraq and now there is talk in Washington of the possibility of the U.S. even take over Saudi Arabia's oil fields (according to an article on The New York Times of August 12, 2002), oil prices will skyrocket to between US$ 60 and US$ 80 per barrel. What does the Bush administration think the consequences of that act would be to South America? We already have a bad economic environment in South America, and that continent will not be able to absorb the economic impact of such an increase in the price of oil. At this point, the skyrocketing price of oil, on top of the current economic depression might trigger a major civil war in the entire South American continentâwith complete political and economic chaos in all the South American countries. â¦Slaves Financing Master On the other hand the United States needs to borrow about US$ 1.3 billion per day from foreigners to finance its current account trade deficit. The actual U.S. current account trade deficit for 2001 was over US$ 420 billion. As reported by Mr. Martin Wolf, a respected Financial Times of London journalist, on February 26, 2002, "In his assessment, one of the most likely sources of unrecorded funding for this U.S. deficit is capital flight from poor countries. In other words, precious resources from poor countries are being used to finance the bloated consumerism habits of the world's richest people." He also mentioned that, "At the end of 2000, the net international investment position of the U.S. was minus US$ 2,187 billion, a little over a fifth of gross domestic product. The estimated net international position was minus US$ 2,600 billion at the end of 2001. ...The IMF says that last year the U.S. current account deficit was financed by a European Union contribution of around US$ 210 and the balance by Japan, Asian developing countries, oil exporters and the capital flight from poor countries." Since the U.S. military budget of US$ 379 billion for 2003 is so close to the estimated amount of the U.S. current account deficit of over US$ 420 billion, we can make a connection and conclude that the people financing the U.S. current account deficit are the actual people who are financing the U.S. military expending. From another perspective, seems to me that the slaves are the financial backers of their master. They are financing the bombs that might be dropped on their lands if they get out of line in the future. Copyright © 2002 All rights reserved. By: Ricardo C. Amaral Author / Economist brazilamaral@yahoo.com .
. June 4, 2005 SouthAmerica: Since December 1998 I had a number of articles published regarding Brazil Adopting the Euro as its new currency. I received a lot of emails and letters to the editor over the years regarding these articles, and I also had the chance to talk to various Brazilian bankers and Brazilian government officials. Everyone seems surprised by my suggestions on these articles regarding the Brazilian currency including the Brazilian bankers that I had the chance to discuss the subject. Lately, I have been re-evaluating my suggestions regarding Brazil adopting the Euro and have made some adjustments to my current way of thinking based on the latest economic developments and trends affecting the Brazilian economy, and the new dynamic economic realities of globalization. On May 8, 2005, I did submit for publication to various newspapers, and magazines in Asia, Middle East, Brazil, Europe, United States, and Canada, my article - The Arab Summit, Brazil and the Future - By: Ricardo C. Amaral. Here I am quoting from what I said in that article as follows: â¦The New Economic Powers - BRICs On December 27, 2004 âBusinessWeekâ published an article â Four Countries You Must Own.â The article said: âOnce in a great while a trend takes hold that's so powerful, it transforms the entire global economy: the Industrial Revolution of the 18th century, the modern industrial nation in the 19th century, and the emergence of cheap computing and communications in the 20th century. The newest megatrend? It's the rise of the BRICs. That's shorthand for four dynamic developing nations with large populations -- Brazil, Russia, India, and China. ⦠While commodities are expected to remain strong, many global investors believe rising incomes and growing employment in the BRICs will make consumer companies golden. In a decade, say the Goldman economists, the BRICs' middle class will total more than 800 million, greater than the populations of the U.S., Western Europe, and Japan combined today. The BRICs' middle class now number more than 250 million, says Goldman, and those consumers are already spurring demand for cars, cell phones, and better food, furnishings, and clothes.â Early Last Year The American press did not give almost any coverage at the time, but early in 2004 President Lula of Brazil, started talking with various countries to form the Group of Five (G5); for them to have meetings on a regular basis. This new G5 group would counterbalance the economic power of the current G6 group. The G6 group more or less represents the past the new G5 group will represent the future. The original members of the new G5 group will be: Brazil, Russia, India, China, and South Africa. In the last 12 months Brazil has finalized extensive economic agreements with these four countries. I wrote about 10 articles in the last 6 years saying that Brazil should adopt the Euro as its new currency. But today the world economic landscape is changing so fast that we have to adapt to the new world economic circumstances. My suggestion then is that (the BRICâs) these four countries should consider the creation and adoption of a new currency similar to the âEuro.â I would name the new currency âThe Global.â But they should let the door open to other countries such as South Africa, Angola, Qatar, and Saudi Arabia just in case they also want to adopt this new currency. *** I mentioned on my articles over the years that in ten years the world would have 3 major currencies for all practical purposes: 1) Euro 2) US Dollar 3) Global (The new currency for: Brazil, Russia, India and China â BRICâs) Note: Other Asian countries also would be able to adopt the âGlobalâ if they decide to adopt the new currency - countries such as Japan, Taiwan, Indonesia, Malaysia, Korea, and also some countries of the Arab world.) PS: I still have to do some further thinking regarding âThe Globalâ before I make up my mind 100 percent about the proposal for this new currency. I am not sure if the same concept behind the creation of the Euro would apply to the creation a new currency - the Global. One issue that comes to mind is the impact the different make up of the religious beliefs of both groups would have in the currency. I am sure that there are many other issues and questions that would arise as the project further develops for the creation of the Global. Ricardo C. Amaral brazilamaral@yahoo.com .
Wow...lots of reading... SouthAmerica......... With all due respect....large currency transitions mean the acceptance by many differing societies a common resolve...void of local solutions... No blanket approach will resolve a cadre of countries issues... These countries must resolve most of their internal problems before any blanket approach can be applied... Otherwise...what lies beneath the blanket will always be the same... And true ethnicity will always be an issue...not resolvable...and naturally correct....there is nothing to resolve... Furthermore the issue of currencies is a mute issue...C+I will represent higher cumulative values...and lower cumulative values as occurs in any marketplace...Hard assets..labor etc..always will lag..but do move accordingly at times... One country will never pawn off its problems on the other one for very long...The ethnic society or the payee will not continue once they catch on to who is really paying.... The basic math of supposed total currency relative value movement is incorrect...thus the total hypothesis above is flawed... Albeit...much respect to you and your well meaning efforts...
Doesn't look good for the Euro. From news article: Tony Blair has given up on Europe as an issue worth fighting for, senior allies of the Prime Minister have told The Sunday Telegraph. A leading Blairite cabinet minister made the admission last night as the European Union descended into deeper turmoil, with doubts surfacing over the future of the single currency. Tony Blair: âAfrica is worth fighting for. Europe... is notâ Mr Blair, who will seek to shift the focus of his administration on to poverty in the Third World this week during talks with President Bush, has told his closest allies: "Africa is worth fighting for. Europe, in its present form, is not." The signal is an astonishing U-turn for a leader who said three years ago that the euro was "our destiny" and who announced a British referendum by proclaiming: "Let the battle be joined." But one of his closest allies said that Mr Blair no longer believed that putting Britain at the heart of Europe could be his legacy: "Europe is back to the drawing board. Africa will become more important." Mr Blair flies to Washington tomorrow to try to secure support for proposals to tackle poverty ahead of next month's G8 summit in Gleneagles. But the Prime Minister is unlikely to be able to divert attention completely from the chaos over Europe's future. President Chirac of France and Germany's Chancellor Schröder held a summit in Berlin last night after the No votes in France and Holland on the constitution. Yet the crisis widened beyond the document alone, with a media offensive being mounted to bolster the euro after German officials and an Italian minister openly discussed its possible demise. In the first rumblings of a call for the franc to be reinstated, Nicolas Dupont-Aignant, a member of Mr Chirac's ruling UMP party, said: "France, Italy and Germany would be in a better state without the euro. However, I don't believe we should ditch it now. "But either it is reformed, and the central European Bank kick-starts growth by lowering interest rates and pursuing a more American-style monetary policy, or the euro will explode in mid-air." The governor of France's central bank, however, rushed to the euro's defence. Christian Noyer said that the currency was "in no way under threat" following its fall in value since the No votes of the past seven days. He dismissed as "absurd" the idea of a temporary withdrawal from the euro by individual states. "The euro is a solid currency which brings us a lasting guarantee of stable prices and thus the maintenance of purchasing power for our wages and savings," he told Le Parisien newspaper. The markets have been slowly adjusting to the possibility of the break-up of the euro, with the spread between government bonds in different countries widening. Last night, John Redwood, the leading eurosceptic Tory MP, said: "You can't have a single currency without a single government. They are in a mess because they have only done half of it and they are now discovering in a painful way what that means." The No campaign in Britain will launch a campaign tomorrow demanding a referendum on any aspects of the constitution that leaders might attempt to salvage. It will also unveil 46 new business backers, including Stuart Rose, chief executive of Marks & Spencer. An ICM poll for the No group found that 81 per cent of voters say that it would be unacceptable to bring in any of the proposals without a referendum in Britain first. Additional reporting by Henry Samuel http://www.telegraph.co.uk/news/mai...ltop.html&secureRefresh=true&_requestid=22123