septiembre 8, 2015
Going after the BRICS
Just how exactly are emerging countries threatening to drag the world into a new recession, if they are the ones who sustained the growth of global economy?

 

It is not economics: it is geopolitical, stupid.

Do you remember my speech at the Stock Exchange in its 161 anniversary last August 26?

Do you remember when I argued that due to the geopolitical struggle some are trying to  transfer the crisis to BRICS (Brazil, Russia, India, China and South Africa)? …

¿Do you remember when I said that knowing what happens in the world is very important, but understanding it is even more important so that nobody can deceive us? Our vision, which is not capricious, is that the crisis is being transferred violently to BRICS. 

If you’re not convinced, I invite you to read this article from the Financial Times, dated August 31.

Needless to say, the Financial Times is one of the three most important economic newspapers in the world.

Title: «Emerging: It’s time to fix a broken model. As exports slow and foreign capital takes flight, developing nations must act to avert a crisis.»

The article is signed by James Kynge and Jonathan Wheatley. I recommed its full reading, it is really impressive. 

«The dynamic economic models that allowed developing nations to haul the world back to growth after the 2008-09 financial crisis are breaking down — and threatening to drag the world back towards recession Unreal.

Just exactly where did Lehman Brothers go bankrupt in 2008? Where was the crisis of subprime mortgages and? Where is located the Bears bank from which directors where arrested and handcuffed?

And how exactly are emerging countries threatening to drag the world into a new recession, if they are the ones who sustained the growth of the global economy long before the crisis of 2008?

A financial crisis that still persists and moves precisely to emerging countries. Saying that emerging economies are now threatening to drag the world into a new recession, is quite simply FALSE.

The world was dragged into the crisis of 2008 by financial speculation, and has not  recovered yet. What do the BRICS have to do with that? Other than victims, there is no other qualification for them.

Further on the article there are four paragraphs so downright shameless they belong in the Guinness Records.

1st paragraph:

The growth models are challenged overall and exhausted in some countries,” says Mohamed El-Erian, chief economic adviser to Allianz, and chair of US President Barack Obama’s Global Development Council. “It is not just that emerging market growth has slowed . . . the weakness in emerging markets disrupts the economies of the west and makes its challenges harder to face.”

In other words, the crisis that broke in 2008 with a financial bubble was suffered by emerging markets, but it is them who now disrupt western economies. Or should I say  developed countries economies, see, the West is also Greece.

Amazing. If the words of the chair of US President Barack Obama’s Global Development Council are not enough, there is also Neil Shearing.

2nd paragraph:

Neil Shearing, chief emerging market economist at Capital Economics, sees a similar problem. “The models of growth that served the largest emerging markets so well over the past decade have broken,” he says, naming the powerful Bric (Brazil, Russia, India and China) countries as examples.

Why not mention reason to South Africa? The 3rd paragraph may explain the omission:

China has become too reliant on investment and exports, he says, while failing to give sufficient support to consumer spending. Brazil has had almost the opposite experience, becoming too reliant on consumer spending at the expense of savings and investment. Russia is over-reliant on oil, while in India red tape and bureaucracy weigh heavily on investment and productivity. (sic)

To sum up, then, the problem is that China invested and exported without consuming much, while Brazil was consuming too much and that affected investments. Russia seems to be too oil-dependent. (Although the article does not elaborate on why are oil prices and commodities prices going down.) India is burocracy ridden, affecting productivity and investment, while South Africa, who knows, perhaps their problem is the color of the population (?).

The 4th and last paragraph should be read, better yet, understood, by some of our local  politicians:

“The emerging market model is predicated on capital inflows but the cycle is now turning because US dollar liquidity growth is slowing,” says Atul Lele, chief investment officer at Deltec International Group, an asset management company. “This is pretty close to a crisis and it is going to get worse.”

Basically, he is saying that there will not be productive investments in dollars for developing countries. This is why we insist on debt reduction, re-industrialization, internal market, investment in research and development, etc …

¿Do you see why it is imperative that we understand what is happening in the world while in our country hegemonic media and its economic spokespersons deliberately and neatly hide this international context every day, every week, every month, every year?

Hopefully a thorough reading of the article will help. There is a paragraph on commodities, export and currency devaluation that is simply priceless ….

Go ahead, here is the link. 

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