04/22/11 Leblon Beach, Rio de Janeiro – We’re a bit foggy-headed this morning, Fellow Reckoner. We blame the locals. Unlike their Argentine cousins who, despite growing some of the best wine in the world, barely drink, the Brazilians really know how to party. Not that they don’t have good cause to…
Brazil is on top of the world these days. And the whole world is coming to its cities to catch the view. They’ll host the soccer World Cup here in a few years, and the Olympics a couple of years after that. Head down to Ipanema Beach on any given afternoon and you’ll quickly discover that the whole country has taken to the running tracks and the volleyball courts. Everybody is in training. They must think hosting the Olympics means everyone gets to compete in it! Well, at least they’ll all look good in the grandstands…something the impossibly beautiful people here don’t have too much trouble doing.
Oh yes, and their economy is booming too. Their currency, the real (BRL), goes from strength to strength. Offshore oil discoveries are coming online thick and fast. And, on the world stage, the Brazilians are carving out a larger slice of the geopolitical pie, pressing hard for more favorable trade deals alongside their “BRIC” brothers and sisters. Just this week the four emerging juggernauts – along with newly christened member, South Africa – agreed to begin transacting more in their own currencies, shunning the once mighty dollar.
“If China buys up Brazilian soybeans,” explained Addison in The 5 a couple of days ago, “or Brazil buys finished goods from Russia, such as they are…the countries have unilaterally agreed to transact their deals in real, yuan, or rubles…and now rand…bypassing the greenbacks you have stuffed in your wallet.”
Addison’s takeaway from the deal? “Get used to it.”
Yes, Fellow Reckoner, the world is turning. The “mighty” are fast becoming the “once mighty”…and the “once fallen” nations are registering growth figures the developed world can only dream about.
That’s one of the reasons we love to travel. There’s something about being in a country with real growth, with real economic expansion and activity that you just can’t read about in the pages of a magazine or see on TV. It’s real…and it’s exciting. You can feel it in the air and hear it in the people’s voices. They know that better days are to come, that every sunrise brings with it a new opportunity, a new day to seize. That’s not to say there aren’t bumps and hurdles along the way, of course. But they are the kinds of bumps and hurdles that one scales on the road to a bigger and better future…not the kind that precede a fall from great heights…to even greater depths.
The world economy today is a tale in two parts. One is the story of the weakening, faltering developed world. It is a tale familiar to readers of these pages, one mottled with debts and deficits and all that goes along with political chicanery and bumbling bureaucracy. It is a story, increasingly, of frustration and despair. The other gives cause for hope and optimism. This is a tale of graduating middle classes, rising wages and living standards and opportunities for the tens of millions who are daily striving to capitalize on them.
Thanks to the age we live in – where one can be in Buenos Aires for breakfast and New York for dinner…where individuals can transact with others anywhere in the world with the click of a mouse – we have an opportunity, largely, to choose which story we wish to take part in. You can invest your money – and your time, your life – playing a part in a “first world” tragedy…or a “third world” rags to riches story.
Joel Bowman
for The Daily Reckoning
Joel Bowman
Joel Bowman is managing editor of The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
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The southern hemisphere always seems to be in a different financial season than the northern hemisphere. The last time the U.S. was in this much trouble (without the debt overhang we have now) was in the 70′s. That was another time when capital flight went south for the winter, just as today.
At the end of the day, the U.S. will shake off its current problems (only after near-catastrophic inflation) and capital will return. Brazil will be left in the same slump that it was in the 80′s.
Capital always goes to places like the BRICS when it has few alternatives. They are commodity driven countries. Money doesn’t want to be in commodities, it’s a place of refuge.
The Brazilians won’t see it this way. They think a new era has dawned down there, instead of a momentary, transient one that will pass in a few years.
Brazil will follow the usual pattern, bankrolling huge projects based on future long term tax revenue that will never materialize, resulting in a dramatic slump. Places like Brazil don’t have long term healthy grown, just short bursts every so often. The idiot they just elected will help put an end to this one.
It’s wonderful people like yourself (and you do like yourself) who benefited from the American system and now you pump the BRICs and slam your own backyard.
You are the reason why western countries are weakening, since you find pleasure in seeking profit for any sake, even if it’s the sake of working people who want to make a livable wage. You prefer to profit off the $2 a day slave labor of the developing world.
You are the banksters best friend and you are, as Stiglitz put it so well, “Of the 1%, by the 1%, for the 1%” Please emigrate and enjoy your life in the BRICs. But when the BRICs come for your american made fortune, you’ll come crawling back for American protection.
You, sir, are the reason why America has a 20% real unemployment rate, why 1 in 5 children live in poverty, why 2/3 of american workers live paycheck to paycheck and why jails are filled with punks who smoke pot while the baksters that steal trillions from the taxpayer are rewarded with record compensation.
Take a look in the mirror and then try to realize the destruction your type causes worldwide. Enjoy your breakfast in Brazil, but please stay there and don’t take that return dinner trip to NY.
@Mitch: Oh please! Enough with the nonsense.
People like him have got nothing to do with Brazil/India/China rising in power. The blame lies in the way the U.S. government handled it’s own finances.
If you can’t accept that, then so be it. No matter how hard it is to swallow it, it is a fact that these emerging countries are rising super fast, and the U.S. is crumbling.
People like these (including myself) move onto the next money-making field instead of sticking with the losers when the signs are obvious.
It’s not people like these that have caused the U.S. economy to collapse, it’s the other way round. The emerging markets happened due to the nonsensical ways the U.S. finance was handled and now you have to face it.
Just because you are on the losing side doesn’t mean you have to sit on your PC and complain. Take a chill pill man and try to understand how the market works.
We have undergone 30 years of Reaganism now, long enough for us to have seen the effects: a wholesale shift of the tax burden to the middle class and poor, and the mass accumulation of wealth in the hands of the rich; the long, slow deterioration of the nation’s physical plant, with bridges and runways and highways crumbling; and now the concerted effort at both the state and national level to undo both Lyndon Johnson’s Great Society and Franklin Roosevelt’s New Deal.
“Take a chill pill man and try to understand how the market works.”
No no, Mitch is right. “Markets” exist within nations, and when things go down you are going to be the foreigner with all the money exploited from the local citizens (otherwise known as “money-making fields”). They’ll teach you how markets work.