Brazil Declares New Currency War on US and Europe

Mike Shedlock
Posted: Mar 04, 2012 12:01 AM

In hope-against-hope scenario, countries with balance-of-trade surpluses struggle to maintain it. Put Japan, Germany, Brazil, and China in that group.

In that group, Japan is losing the Balance of Trade Battle.

Japan’s trade deficit widened to a record level in January, as falling exports combined with surging imports of energy.

Imports rose 9.8 per cent from a year earlier, while exports were down 9.3 per cent, resulting in a record monthly deficit of Y1.48tn ($19bn).

Last year Japan’s trade balance fell into an annual deficit for the first time since 1980, driven by subdued global demand and soaring fossil fuel imports in the wake of the Fukushima nuclear power crisis.

Japan reported a trade deficit equivalent to 1475 Million JPY in January of 2012. Exports have been the main engine of Japan's economic growth in the past six years. Japan imports raw materials and processes them into high technology products. Japan’s major exports are: consumer electronics, automobiles, semiconductors, optical fibers, optoelectronics, optical media, facsimile and copy machines. Its main trading partners are The United States, China and European Union.

Brazil Declares New Currency War on US and Europe

The Financial Times reports Brazil declares new ‘currency war’

Brazil has declared a fresh “currency war” on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country’s struggling manufacturers.

Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not “sit by passively” as developed nations continue to pursue expansionary monetary policies at the expense of Brazil.

“When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil,” he said on Thursday after announcing changes to the so-called IOF tax.

In a presidential decree, the government extended the existing 6 per cent financial transactions tax on overseas loans maturing in up to three years. Previously, the levy was applied only to loans with maturities of under two years.

President Dilma Rousseff later weighed in on the debate, vowing to defend Brazilian industry and stop developed countries’ policies from causing the “cannibalisation” of emerging markets.

The move comes as Brazil’s central bank also steps up direct intervention in the market, selling dollars and offering derivatives called reverse currency swaps to curb the real’s near 9 per cent surge against the US dollar this year.

Brazilian Real vs. US Dollar

The chart shows the Brazilian Real has pretty much been on a tear vs. the US dollar since 2003. Now Brazil is concerned about loss of exports, just as Japan is concerned about loss of exports.

Mathematically speaking, the desire for every country to be net exporters is impossible. Massive trade wars are on the horizon  as a result.

Vancouver B.C. vs. Donegal Ireland Real Estate: What Will $890,000 Buy?

Inquiring minds seeing new data on Vancouver's massively overpriced real estate just might be seeking new comparisons to other places. First, Let's take a look at what $890,000+- will buy in Vancouver.

Vancouver Real Estate

2119 East 3rd Ave, Vancouver
MLS® Number V934050
Listing Price: $899,500
Description: "This 1 ? story home has been extensively renovated over the last few years. The spacious kitchen has birch cabinets and Soapstone counters and opens to a 20x12' deck. On this level are 2 B/Rs and a modern 4pce bath. Upstairs has an office/den area, a 4pce bath and a big master B/R with a W/I closet and 12x8 view deck. The bsmt has a 1 B/R suite rented at $960 P.M. and the attached garage has been converted to a workshop with French doors opening to the fenced garden, with B/I bench, a patio and a kid's sandbox. "

That creative listing puts a new meaning to the the word "upstairs". Is the number of stories listed at "1?" really in question?

2564 East Pender Street, Vancouver
MLS® Number V930595
Listing Price: $899,000
Description: "Complete Transformation! Brand New Envelope! Hardie plank & cedar shingles, new windows, new electrical panel, new HW tank, new plumbing. Spacious 3 level home on extra deep lot!"

I believe it's safe to say the above creative listing puts a new meaning to the phrase "extra deep lot!"

At least the above homes were arguably livable. Check out this next beauty, and guess the price without looking too far ahead.

1016 East 7th Ave, Vancouver
MLS® Number V930461
Listing Price: $899,000
Description: "Opportunity knocks! Builders and investors need look no further if they desire a view property with multi-family zoning (RM-4). This property overlooks China Creek Park, with amazing views of the North Shore mountains and close to Commercial Drive and two skytrain stations. Priced at lot value, the property is being sold 'As Is, Where Is.'"

Congratulations to those who guessed the "opportunity knocks" price of $899,000 for this "As Is, Where Is" bargain complete with "amazing views", presumably through the opening where one would normally expect to find a workable door as opposed to the windows that are all boarded up.

All of the above listings are from Vancouver East Homes From $850,000 to $900,000

Donegal, Ireland

With those bargain listings in hand, let's consider a single property sale that just took place in Ireland. The previous price for the Sandhouse Hotel located in Donegal, Ireland sold at auction was $6 million.

Please consider Spectacular Irish hotel, massive discount price

Paul Diver has purchased a spectacular 55 bedroom hotel overlooking the Donegal coastline for a mere $860,000, down from the $6 million price the original owners sought for the Sandhouse Hotel three years ago.

Diver, who managed the Sandhouse Hotel in Rosnowlagh for 20 years, was delighted to secure the 50 staff members their jobs. He told on Friday that he had been willing to go "a bit higher" when the hotel was auctioned this week in Dublin, but was delighted when his reserve-price bid was accepted by the auctioneers.

Overall, Irish real estate prices have crashed since 2007-08, when the so-called "Celtic Tiger" economy collapsed. Home values have fallen more than 60 percent below their peak five years ago, and commercial properties have suffered similar declines.

There you have it: "amazing views"  in Vancouver for $899,000 vs. "amazing views" in Donegal for $860,000.

It is indeed "different" in Canada.

Mike "Mish" Shedlock