Brazil Bucking The Buck

Posted 18 May 2009


Brazil with 3,285,618 square miles (8,511,965 square kilometers) and around 200 million people is the fifth largest country in the world and about 11% larger than country-continent Australia. With 5 World Cup wins Brazil leads the board ahead of Italy with their four wins and a purported 2,451.8 tons of gold and Germany with their three wins and an overtime March bailout via the ECB of Deutsche Bank's naked short gold derivatives.


The festival of Carnival with its spectacular street parades, vibrant music and scantily clad beautiful women has become one of the most potent images of Brazil.  But the Real has lost its neurotic nature of decades ago with a rapid climb in value against the FRN$ over the past several years.

With a GDP of almost $2T Brazil's economy may be twice California's considering their Controller John Chiang recently reported, "Sales taxes were $452 million lower (-50.9%) than last April, and personal income taxes were down $5.7 billion (-43.6%). Corporate taxes were $142 million below (-8.6%) April of 2008."

Indeed, California leads the United States and California is completely out of fiscal control.  Meanwhile the party-hearty Brazilians are beginning to dream and have achieved tremendous self-sufficiency as typified with its ethanol fueled automobiles.  


This week Luiz Inacio Lula da Silva, Brazil's President, is visiting Turkey, China and Saudi Arabia.  As the first BRIC (RunToGold article series: Brazil, Russia, India and China) member this is an important development.  With its sensible financial sector, premier domestic energy super-major Petrobras, hardy industrial base and bountiful and beautiful Amazonian gardens Brazil is a force to be reckoned with.

On 23 February 2009 I wrote about China's Latest Hunting Trip where "Brazil accepted about $10B and in return guaranteed China up to 100,000-160,000 barrels per day at market prices.  The oil will flow from Petrobras (PBR) to China National Petroleum Corp and Sinopec."  It seems Mr. da Silva is strengthening that commitment.

Even Brazilian supermodel Gisele Bundchen 'wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.'


Ironically, the Industrial Age allowed for obfuscation of information and inefficiencies of epic proportions.  It will be during the Information Age that there is a return to all things real.  There is no concealing of a plane crash while its passengers are Twittering.

 The instantaneous transmission of information around the globe is putting tremendous strain on the inherently unsound, unstable and immoral financial and monetary system.

Indeed, the Internet pulls back the curtain and reveals the true state of things.  Because of the grotesque malinvestment and the painful nature of a credit contraction it is natural for The Onion to report that Americans just want to be lied to about the economy.  But it is the lies that are being dissipated.  Reality is barreling down the tracks whether you want it to or not.

But there is real wealth in America and lots of it.  But the costumed criminal clowns in Washington DC are intentionally exacerbating the greater depression and feverishly feeding any real wealth they can steal into the wealth destruction machine.

 Their reckless policies burden the FRN$ which continues evaporating the dreams of Americans which go up in flames like the dusty brown grasslands of Southern California.  This prairie fire started raging on the coasts but is racing to the heartland and revealing which wealth is real and which is illusory.

But Brazil has a real economy built by real labor that grows or builds real things and generates real wealth.  Consequently, Brazil can trade their real things to Italy for some of its real gold.  But even the Brazilian Real is facing gold's immutable justice.


Many Central and South Americans espouse the ideology of revolutionary Che Guevera who was executed over forty years ago but whose life and legacy still remain a contentious issue.  

Che concluded the region's ingrained economic inequalities resulted from monopoly capitalism, neocolonialism, and imperialism.  But it seems South America has found a new ally against the West.

On 9 May 2009 the Buenos Aires Herald reported, "Argentina and Brazil yesterday agreed to a 1.5 billion dollar-equivalent currency swap aimed to boost each other’s currency standing."  Meanwhile as Businessweek reports, "Argentina signed a $10.2 billion currency swap with China in April."

China is continuing its pursuit of natural resources.  Through competition the yuan will reduce the liquidity of the FRN$ by decreasing the area's use of and dependence on it.  This is another attack on FRN$ hegemony and bearish.


Brazil is a monstrous self-sufficient commodity powerhouse.  America has long been able to exploit the wealth of this fertile land to fuel its dreams.  

But California and by extension America are completely out of control.  Brazil is forming relationships with other wealth generators which is attacking the liquidity of the FRN$.  Gold and silver bullion are slowly beginning to circulate as currency in ordinary daily transactions and thus increasing in liquidity.

As The Great Credit Contraction intensifies capital will continuing moving into the safest and most liquid assets.  Consequently, North Americans will have to wake up and work in order to finance their dreams.  North Americans 'love the money fire' which underscores the reason it is called the American Dream.  Because you have to be asleep to believe it and gold is the shrieking fire alarm and insurance!

Disclosures:  Long physical gold and silver with no position in the Real, long-term US debt or Petrobras.