Wednesday, November 10, 2010

Brazil: U.S. Opened an Exchange War With Disguised Protectionism; Printed Dollars Are Useless in The U.S.

Some more very harsh words coming from Brazil today. Guido Mantega, the Brazilian finane minister who first warned against currency wars. While in a stopover  in Frankfurt en route to the G-20 meeting  in Seoul, he said that the exchange rate war waged in the world today is in fact protectionism in disguise. He added that artificial devaluations can lead the world to a deep crisis.

He said that this G20 summit has gained much importance because all countries will have the chance to deal with "and condemn" something that so far only Brazil had been warning of: the danger of a crash in and trade on stock exchanges that operate on the basis of commodities, such as Brazil. "Because the trend is to have large applications in such investments, leading to speculative bubbles that can lead an economy into bankruptcy".

Mantega said that by throwing $ 600B worldwide, the United States started up an open exchange war. "For the first time all countries can talk about a subject that so far only Brazil spoke."

The minister said that Brazil condemns any form of protectionism, including the disguised versions, where countries force the devaluation of their currencies to benefit from trade with other nations.
He recalled that in the 1930s there was a similar problem and all countries were affected. Therefore, according to Mantega, Brazil will take appropriate actions to prevent the dollar from contaminating the economy.

According to him, besides the increase in the Tax on Financial Operations (IOF) already implemented, other measures may be taken, to curb speculation.
He said the dollar issued by the United States is useless in the U.S., because that country pays interest of 0.33% for two years terms. "Nobody will make investments there in this situation."
Thus, those printedUS dollars will flow elsewhere. And that is a problem. It won't do what the Fed claimed it wants, it will drop the US dollar, and it create chaos worldwide.

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