"Today's (problem) doesn't have to do with China," he said in a 30-minute interview on the eve of the summit in New Delhi. "It has to do with the dollar and the euro." Pimentel also gave details of a new initiative to reduce business costs for Brazilian exporters and importers, and explained how his country will seek to address alleged global economic imbalances before the World Trade Organization.
Brazil accuses rich countries of causing a "monetary tsunami" by engaging in expansionist policies such as low interest rates and bond-buying programs.
The policies are designed to stimulate the troubled U.S. and European economies, but have also unleashed a wave of global liquidity that has poured into emerging markets like Brazil, driving up their currencies and making their economies less competitive abroad.
"Currencies have an effect on foreign trade," Pimentel said. "When the (35 percent tariff) was thought up in the 1950s, it was an absurd (high) number. Today, it's nothing. Today, a poorly balanced exchange rate easily sterilizes that 35 percent."
A united front among the BRICS is unlikely to persuade rich nations to change their monetary policies. But it could give Brazil and other countries critical political cover to seek palliative action by raising their tariffs or pursuing change at global bodies like the WTO. Brazil is spearheading a discussion on currencies this week at the Geneva-based body.]
The monetary policies of the United States have for decades caused whip saw effects in foreign economies, but in the case of emerging economies that are hypersensitive to monetary currents these policies have been devastating. The emerging economies have stood by watching the wealthy nations of the west attempt to prop up their debt based economies with trillions in inflationary fiat paper money without any benefit since the housing crash began. These emerging economies have warned of the west of the consequences that come from this Keynesian nightmare to no avail and now they are joining forces to create a united front in order to protect themselves together.
Some would argue that these are merely emerging economies and pale in comparison to the scope and size of the western economies but they are forgetting one thing, the west has gutted it’s manufacturing base and exported it to these very nations. This is a game changer in that they now have a dog in the fight and are standing shoulder to shoulder in solidarity with our manufacturing base as their leverage. These are American goods that are now produced overseas and shipped back to the United States and are effected by at least two inflationary steps: 1. the retaliatory currency adjustments they must undertake to offset the western dollar devaluation 2. the ever increasing cost of fuel to ship these goods back to the US.
This all happens while concurrently watching the purchasing power of the our dollars at home shrink in purchasing power as these foreign nations reduce the role of the USD in their respective economies and more of those unwanted dollars come back home to roost. This is also at a point where the FED is backed into a corner as they are the lender of last resort and are running our of tricks to apply to the economy in hopes of creating demand. So we have a perfect nightmare scenario building around us and nobody seems to notice? The world is getting smaller as far as foreign central banks that are no longer willing to keep hundreds of billions, if not trillions, of USD reserves in their foreign currency holdings. If they are shifting towards the Chinese renminbi as a greater percentage holding of foreign reserves then they would have less need to stock pile dollars wouldn’t they? So these dollars will be set free into the global marketplace and if less foreign central banks are willing to grab a hold of them to add to their reserve holdings they will most certainly end up flooding the United States with excess dollars and this is at a time when the FED is waiting to announce QE3, which would only introduce even more dollars into the market.
Now is the time to reduce your willingness to blindly agree with the talking heads on the TV who constantly preach of a recovery and begin to consider the ‘what if’ questions and their consequences. Establish your ‘Plan B’ in physical silver & gold bullion today and begin to participate in the sound money debate with alternative currencies. The ‘recovery message’ is programmed for you own good in hopes of artificially creating a recovery we so desperately need, but what if it doesn’t materialize?
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