The beatings will continue until morale improves!

So to answer the question from the previous post: yes, the recession is on purpose. The US Fed just admitted it: they want to create unemployment to improve the job market. They also want to cool the housing market, but their indicators are backward looking, not forward looking.  The Brazilian government has been running a surplus all year, and thus removing money from the economy, to a total sum of R$ 150 billion until the end of July. This cannot end well. The US government has been running a deficit, although not a big enough one to counter the effects of the rapid rise of interest rates. Links: The Fed to reset the U.S. housing market through a ‘difficult correction’—5 things to know about the plan The Rate Hikes Will…

Continue ReadingThe beatings will continue until morale improves!

Is the recession on purpose?

 See Bill Mitchell's blog post below. He argues (and well argued in my opinion) that the elite wants to inflict pain on the economy, regardless of the current situation. Brazil's inverted interest rate curve clearly indicates that the financial markets expect recession to come, that inflationary pressures are transitory, yet the Brazilian Central Bank will have to keep interest rates high to counteract the Fed's hawkishness, or risk currency devaluations and higher inflation from that. Brace yourselves, recession is on purpose, and its meant to make you poorer. Bill's blog post: Elites using monetary policy to deal with paranoid fears that power might shift towards workers From Bloomberg: ‘Inflation Fever’ Is Finally Breaking — But Central Banks Won’t Stop Hiking Rates

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Recession may be coming

The world is feeling the inflation created by covid and warmongering. US and European countries are sanctioning themselves, increasing energy, grain and other commodity prices. Central banks are foolishly raising interest rates globally to try to contain it (raising interest rates leads to more inflation). The US government has been cutting the fiscal deficit. So far $1.5 trillion. And they are proud of it. Recession will surely follow. Brazil's only chance to survive through this is with Lula's win, followed by removal of the useless expense ceiling.   This year, we’re on track to cut the federal deficit by over $1.5 trillion – the biggest decline in a single year ever. — The White House (@WhiteHouse) May 6, 2022

Continue ReadingRecession may be coming

Inverted interest rate yield curve

The interest rate curve for Tesouro Direto below is inverted, meaning the future rates are lower than near term rates. This is not a good sign, it usually means we are undergoing an inflationary period but expect lower rates int he future due to a financial crisis of some sort, hence the lower future rates. This makes sense from the latest news of Brazil's past quarter showing a technical recession.

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When the Economy Minister and Central Bank Chief have offshore accounts…

Such sad news that the entire country is facing skyrocketing inflation due to these guys deciding to devalue the currency, while significantly enriching themselves due to their offshore accounts in a foreign currency... This is just criminal. Plain and simple. And then it gets worse, as we learn they were against taxing of offshores! https://www1.folha.uol.com.br/mercado/2021/10/dono-de-offshore-guedes-defendeu-excluir-taxacao-de-paraiso-fiscal-de-proposta-do-ir-veja-video.shtml https://www1.folha.uol.com.br/mercado/2021/10/guedes-disse-a-comissao-de-etica-que-adotaria-medidas-para-prevenir-conflito-de-interesse-sobre-offshores.shtml Corruption in the government is alive and well. The right is no fancier than any other party when it comes to benefitting themselves from power...

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Brazilian federal tax income sets a record in July 2021

So, good and bad news, let's look into it: Good news: an increase in tax income for the government usually signifies an increase in money circulation, which is probably good news for the GDP. It could be a one-off for a major government operation, which then would not mean its good news, it would be an outlier. Bad news: more money taxed away from the economy means the economy shrinks. If there is an increase in government spending above the amount taxed then we would see an increase. By itself its hard to understand the impact of higher tax income. It is also bad news if it is caused by inflation an no actual growth, which seems to be the case, at least partially. On a side note, if the…

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“Government debt hits x% of GDP…”. Ignore these “news” pieces, they mean nothing…

The government's debt as a % of GDP means absolutely nothing. There is no correlation between the two, no cap on government debt issued in its own currency. It does not create "debt for our children to pay". Ignore any news article or economist who says otherwise. Dívida pública brasileira sobe para 90% do PIB e bate novo recorde

Continue Reading“Government debt hits x% of GDP…”. Ignore these “news” pieces, they mean nothing…
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