So you are saying that BRL/USD * USD/AUD is not equal to BRL/AUD ?

“Now Brazil have chosen to introduce a 2% distortion.”

A distortion to what? Being a sink to US dollars printed to plug the hole?

Most scholars do not consider Ralph Nader to be an authority on capitalism, much less economics. As someone with some experience teaching comparative economic systems to undergrads, I can assure you that your calling capitalism “one enormous system of state intervention” is rather novel. But I do believe we find much with which to agree in what caused the current economic crisis. It is something that developed, over a long period of time, as powerful corporate interests used the state to promote its interests. Wall Street created the Fed, and today it controls it and the Treasury, while military contractors exert just as much influence over the DoD and firms like ADM dictate the ag policies coming out of the USDA. What frustrates is that the state shields these entities from market correction–surely we’d be in a better place today if Citibank, Goldman, et al. were forced to internalize their losses, just as the economy would have been worse off if Enron was successful in getting the protection it sought back in 2001.

I assume we agree on this line of reasoning, but not on whether these activities are correctly called capitalism. They should be categorized as mercantilism (like you said), or corporatism, or state capitalism, or socialism. To repeat, terms matter, and to blame capitalism is to let the interventionists off the hook. And if that happens, well, they will be more likely to continue to do damage in the future.

Now Brazil have chosen to introduce a 2% distortion. Does the world really need little Smoot–Hawley’s popping up everywhere?

Why do you think that “letting the markets work” would help Brazil?

The Brazilians don’t care about the US. I don’t care about the US either – I have never lived there and have no family.

To me “letting the markets work” is just blind faith in discredited economic theories.

Brazil interest rate stands at 8.75%
http://www.tradingeconomics.com/Economics/Interest-Rate.aspx?symbol=BRL

I think that you are wrong regarding the carry trade potential. It has not been realised only because of the Brazilian government policy.

http://www.investorsinsight.com/blogs/dailypfennig/archive/2009/09/28/a-new-carry-trade-currency.aspx

“But, let’s talk about that for a minute… If the dollar begins to become the new funding currency of the Carry Trade, that means that people will be selling the dollar short, and using the proceeds to buy a higher yielding asset… Well, in today’s markets, there aren’t what we would traditionally consider to be “high yielding assets”… For the Carry Trade is quite risky, therefore you need to have some cushion from the “buy side” asset… The only “real interest differential” in the world resides with Brazil… But the real is traded on a non-deliverable forward, which means it’s just as liquid as say Aussie or kiwi, which were the main beneficiaries when the yen was the funding currency.

So… This new Carry Trade, might have to wait a bit before getting into 4th gear. When the Reserve Bank of Australia (RBA) begins their rate hike cycle, probably by year-end, then it might begin to make sense… Which is just another thing in the gauntlet the dollar has to run through every day! “

Brazil’s tax on capital inflow is simply to devalue their currency, nothing specific to the carry trade. It’s just another method of propping up the $US, and not letting the markets work.

Several other countries are trying to prop up the $US by various methods, eg. like the Asian central banks did earlier this month. The US needs a weak dollar to help it restart exports.

It was a good interview to put Chartalist’s theories where they belong – in fantasyland. It showed that Govt is anything but benign and benevolent.

I saw Alan Ramsey interview; puts into perspective the type of fools we have running the joint. Rudd, Howard almost all of them are from the same mould – slimy show ponies

” I feel sometimes as if these people should be thrown into the streets, shot and burned on the spot as vermin.”

And, not to put too fine a point on it, so should all those who enabled the Bankster parasites (around the world).

Let’s not forget- ever- that it was Govt’s, regulators and CB’s that fully supported and indeed enabled the parasite Banksters with provision of the legal and regulatory structures for this abomination in derivatives trade to thrive. The enablers revelled and preened in the glow of their mythical economic “growth”. What is so galling now is that nothing has changed , save taxpayers and future generations being dumped on to the tune of $Trillions in debt. We have the bill, but our future has been plundered to pay it. And as we can see, the party goes on as speculation off the back of taxpayer funded free money is still rife with Banksters worldwide celebrating their obscene bonuses and bogus profits (thanks to don’t ask,dont tell accounting rules).Eventually, these same political whores will come to us begging again for our vote so they can keep their snout at the trough. A fine foundation for economic recovery.If we think we can see improved Governance as a result of the GFC, think again. Here is a commentary from a 30 year veteran of Australian political reporting;

http://www.abc.net.au/7.30/content/2009/s2724788.htm

And most populations ,dumbed down by Govt propaganda and anaesthetised with Govt handouts, are happy and thankful just to live another day while the Big Game goes on behind the curtain. At our expense of course, as our future wealth is borrowed then spent in the here and now propping up dead horses. I read the newsfrom1930 every day. I am sometimes dumbstruck with the acute similarities of the times, comments and policies. Very foreboding reading.

Are we now seeing the beginning of the catastrophic “C” wave down in the markets?

http://2.bp.blogspot.com/_TwUS3GyHKsQ/SuYU7mFbvPI/AAAAAAAACUo/OdhKh-0w8N8/s1600-h/30spx.png

Courtesy of Daneric (who I know EW just admires SO much!)

http://danericselliottwaves.blogspot.com/

No, I am not conflating laissez-faire capitalism with mercantilism.

On the ideal of laissez-faire capitalism, it is unreachable in the presence of the state. No economy has every approached this ideal, for two primary reasons: the rich (owners of concentrated private property) have always required a powerful, interventionist and quite often violent state to protect and subsidize them.

The other problem is that in the real world, markets function very differently as to what is asserted in the economic literature. The pseudo-science that forms the basis of micro- and macro-economic theory that asserts that markets are actually efficient.

On the other hand, some constructive intervention is quite often needed to bail out capitalism of its inherent self-destructive tendencies. As Ralph Nader has remarked, the only reason why capitalism is still around is because the state is always there to bail it out.

Rather than the myth of laissez-faire, we have always been subjected to some form of mercantilism throughout history. Back in the time of Adam Smith, it was state mercantilism. These days, it is corporate mercantilism.

“Nonetheless, terms matter, and to blame capitalism lets the interventionists off the hook.”

Capitalism is one enormous system of state intervention. The two primary institutions of capitalism, namely private property and wage labor, required systematic state violence and coercion throughout the centuries to enlarge and sustain them.

Yes, terms do matter, and to pretend that what is occurring is the fault of interventionists as opposed to ‘good’ capitalists who accept market principles (who does this?) is disingenuous. Quite often, but not always, they are one and the same.

Is this idea (capital inflow tax) silly for the Americans (the Brazilians don’t care) or for them?

If the idea of throttling carry trade and speculation on domestic currency (real) is bad for the Brazilians – please explain what’s wrong with it.