Brazil’s Economic Policies Under President Rouseff

I would be the first to admit that I am not very good at reading the political tea leaves in Brazil.  I once anticipated that Jose Serra would win the presidency – in 2002!  I even thought this pragmatic centrist had a good chance to win in 2010.  Of course, I never envisioned the emergence of Dilma Rouseff.  Wrong again!   It now looks like Dilma in an absolute landslide and in the first round, no less.

Window on the World

A glimpse of the future is stretched along the eastern and western banks of the Huangpu River. Countries, companies, cities and international organizations showcased their best wares and services. Billions were spent on preparing the expositions and the infrastructure needed to support the hundreds of thousands of visitors that daily would march through the gates. Expos are typically venues where new ideas and technologies are presented. The Philadelphia Expo of 1876 heralded the telephone, the Paris Expo of 1889 introduced the building capabilities of the steel girder, and the New York World’s Fair of 1934 highlighted television for the first time. Of course, the Shanghai Expo was no different. There were presentations of new transportation systems, robotics and consumer products. However, the real intent of the Shanghai Expo was an opportunity for China’s vast population to catch a peek at the rest of the world, while appreciating the fruits of their own efforts. Without a doubt, the Shanghai Expo was geared towards the local population. Very little was done to make it accessible to foreigners. Of course, what was the point of catering to the foreign crowd? They comprised a tiny sliver of the attendees. Visitors from deep within the Chinese countryside choked the venues. Nevertheless, if the Shanghai Expo provided any insight into what lies ahead, then the future will be crowded, chaotic and Asian-centric. 

The Black Sea’s West Coast Weighs In on Caspian Sea Basin Pipelines

Bulgaria and Romania have over the course of the summer been setting down their markers as regards the Nabucco and South Stream pipeline projects in an on-again, off-again manner. What they finally decide may determine which pipelines from the South Caucasus and Turkey get built where in Southeast Europe. Major investment decisions are also on the line in coming months. It is consequently little exaggeration to say that the next year, if not the next half-year, will set the main lines of the blueprint for Caspian/Black Sea hydrocarbon development for the better part of the oncoming decade.

On the Shoulders of Giants – How Spain Is Destined to Follow in Germany’s Footsteps

The current generation of policymakers seem to be like Captains of large ocean liners, out there on the high seas, bereft of either compass or adequate charts, trying hard to calm there worried passengers by telling them nothing is amiss. But the charts are there, if only they would look at them, and in the present Spanish case, unlike the old refrain, the future is ours to see, and it has a name: Germany.

Why a Civil Society Extends Unemployment Benefits

I have the questionable distinction of appearing on Larry Kudlow’s CNBC program several times a week, arguing with people whose positions under normal circumstances would get no serious attention, and defending policies I would have thought so clearly and obviously defensible they should need no justification. But we are living through strange times. The economy is so bad that the social fabric is coming undone, and what used to be merely weird economic theories have become debatable public policies. 

Fiscal Policy in Brazil: Why “Primary Surpluses”?

A tragedy is happening in Brazil as far as fiscal policy is concerned and nobody is paying too much attention.

Although inflation and “monetary correction” have practically disappeared in Brazil since 1995, the country continues to use a strange concept to measure the behavior of fiscal policy: the “primary surplus”. This is the difference between government revenues and government expenses without including one major expense: nominal interest payments.

Are Wall Street Analysts Contrary Indicators?

‘Boy these companies look pretty good, earnings are OK, they have plenty of cash. What if there’s a double dip?’

‘I’m no macroeconomist, but . . .’

Here is an intriguing possibility, one that should make any investor holding 80% cash a tad nervous: The Buy/Sell/Hold crowd of analysts are excessively cautious:

“For the first time since at least 1997, fewer than 29 percent of ratings for stocks covered by brokerages worldwide are “buys,” according to 159,919 recommendations compiled by Bloomberg. Analysts are turning more pessimistic even as they push up estimates for profit growth among Standard & Poor’s 500 Index companies to 36 percent, the highest since 1988. . .

More than 54 percent of ratings for companies in the U.S., U.K., Japan and Brazil are “holds,” the highest level since Bloomberg began tracking the data in 1997. While the proportion of “sell” ratings in the U.S. has fallen to 5.1 percent, half the level of 2003, the total combined with “holds” reached a record 71 percent last month, the data show.”

Have We Underestimated Chinese Consumption?

On August 8 Credit Suisse published a study they had commissioned by Professor Wang Xiaolu of the China Reform Foundation.  A lot of readers have asked- on- and offline- me to discuss this study in light of the entry I posted two weeks ago about Chinese consumption – and especially to explain whether this study would cause me to retract any of the things I said.

The Baron Münchhausen Effect

Karl Friedrich Hieronymus, Freiherr von Münchhausen was a German baron born in Bodenwerder in the eighteenth century. Made famous by the Hollywood director Terrence Gilliam, the baron first came to public attention for his ability to recount outrageously tall tales about his adventures while fighting abroad in the Russian army. Among the astounding feats which legend attributes to him are riding cannonballs and travelling to the Moon. But perhaps his best known marvel is the story of how he managed to escape from a swamp by pulling himself out by his own hair (or by his bootstraps, depending on who tells the story). Which puts me directly in mind of the way some people are now expecting an export-dependent German economy to drag the rest of Europe – and with it the whole global train – up and out of the ditch in which it is currently sunk, simply by exporting to everbody else. Sounds just like one of those tall tales, doesn’t it. A very tall one.

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