Yesterday the economic news from Brazil was not good. The devaluation (i.e. debasement) of the Real (BRL) reached a historical maximum when the exchange ratio of BRL to USD reached 4:1. Of course, the "official" truth is that what is causing this "issue" are the "renewed worries of the market due to the political and economic crisis which is battering president Rousseff's government". Aha. Uhu.
The numbers are as follows:
Purchasing power loss over the last year: about 33%
Government budget deficit: about 8500 million USD (or 0.5% of the GDP)
GDP drop: 2.5%
Inflation: 9% and raising
Unemployment: 8% and growing
Allow us to ask you a question. Do you actually believe that because "the markets" are worried about the political and economic issues that Brazil has high inflation!!!??? Really!!!???
How stupid and naïve do you think Brazilian people are?
Oh…
That's right…
They voted communists to power…twice…
Well… if you put it that way… yeah… pretty stupid indeed!
Look, this is not a mystery to ponder. We explained in our article Brazil Yet Another Workers Paradise that the problem with Brazil (just like any other country ruled by socialists) is that they borrow. And they tax. And they print. That's pretty much it!
Inflation comes from more fiat money (i.e. worthless coloured paper or their equivalent, digital garbage) being created out of thin air.
Economic debacles come from interference with free markets. All this leads to unemployment and misery. This is not a mystery.
Again, for as long as a government has money to burn (typically from borrowing) things are pretty good. The reason for things being so is because they are living on credit well beyond their means. But eventually everything must come to an end.
But by then people have grown accustomed to the "fringe benefits" that governments dole out in search for votes. And so when the music stops people begin to show up on the streets demanding more. What more? More of the same.
But there is no more same. There is no more borrowing. Thus, governments do what governments do when they run out of money; they print. And spend. And print some more. And spend some more.
Of frigging-course! Inflation will skyrocket. It would be a gravity-defying feat if inflation would not skyrocket. Of frigging-course! Unemployment goes through the roof! Which entrepreneur in his/her right mind would hire people when costs are going up and up every day while people can afford less and less every day.
This is not rocket science.
This is plain socialist stupidity at work.
This is how it always ends. There is only one country in the world that has managed to get away with it for a very long time, and this country is the USA. This is so simply because they export inflation all the time. This is so because the USD is considered a "reserve" currency and thus foreign Central Banks accumulate it. This is so simply because US Banks have "excess reserves" stashed at the Federal Reserve. If we would to add those two numbers, the USA would be drowning in hyperinflation by now. Alas, it is not to be. The citizens of the USA are happy sinking the entire financial world at their expense… as if the politicians from all other countries would not be doing a bang-up job at that too!
But, this is not the end of history. Eventually, the USA will collapse just like everybody else. It is inevitable.
And after this short detour, we return to Brazil.
Yes, Brazil is screwed. The good old days of the workers' paradise are gone. Now, all that's left is the economic cycle of hell. Brazil is now yet another Argentina or perhaps Greece. And as we cautioned time and time again, this is the future that awaits all countries throughout the world.
But of course, you had no reason to believe us. But now you do. Countries are falling like dominoes in slow motion. And you know what is the true tragedy of all this? That it is all for nothing. All the future pain and suffering that billions of people will have to endure for decades to come is all for nothing. Nothing will change as politicians drive countries from one disastrous cycle to the next one in a downward spiral into economic oblivion.
And you know what is the true tragedy of all this? That it is all curable and fixable quite simply by releasing the forces of free markets. By getting the governments out of our economies altogether.
Please note the "our" in our sentence above. That's right. It is not theirs. It is not government's economy. It is not government's markets. They are ours. And as they are ours, we have the right to do as we see fit.
Unless you are a socialist. Unless you are a monetarist. Unless you believe that markets must be managed "for the greater good". Fair enough. Simple question. When exactly can we expect "the greater good" to reach us? Because, you know, history has been patiently waiting for 200+ years so far. When can we finally expect delivery?
Note: please see the Glossary if you are unfamiliar with certain words.
