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As Brazil Buys More Dollars, Country Demands IMF Create An FX-Manipulation Index
The chart below from Reuters shows the recent timeline in Brazil's escalating attempts to prevent the surging BRL, and its increasing militancy vis-a-vis Ben Bernanke's printer. What is not shown on the chart is the nearly daily dollar buying intervention by the Brazil CB, of which one was announced literally minutes ago. Brazil's Finance Minister was the first person to call the current FX regime for what it is: an international currency war. Brazil also defected, literally, from the useless G-20 meeting last weekend in another indication it has had enough with the Fed's manipulative ways. And today, Brazil, which is so far proving to be the most vocal opponent to the dollar debasement QE2 strategy by the Fed, has announed that it will propose at the Group of 20 nations meeting
next month that the International Monetary Fund create an index
measuring currency manipulation. The idea is to identify who is keeping their currency
artificially low to boost exports, Mantega said, lending
support to eventual actions against illegal subsidies at the
World Trade Organization. "The IMF would have to come up with a method to measure
which currencies reflect the structural situation of their
countries, which are floating currencies, and which ones are
forcing their hand," Mantega told O Globo newspaper in an
interview. Um, it is pretty simple who is (and will be) manipulating their currencies the most: exhibit A, Goldman's suggestion that the dollar is headed far lower.
More from Reuters:
The next step would be to make a deal to reduce such intervention, and if that didn't happen the manipulation could eventually be considered a commercial subsidy, Mantega said.
"In fact, the WTO considers currency manipulation to be a commercial subsidy that has to be avoided and could result in sanctions", he said.
Many countries are already taking measures to devalue their currencies, Mantega said, highlighting Japan and South Korea. An IMF index would bring greater transparency, he added.
Brazilian officials have been at the forefront of a global battle on currency intervention, criticizing the monetary policy of advanced countries while taking measures at home to halt the rise of the real BRBY.
Over the past month, Brazil tripled a tax on foreign investment in local bonds, closed a series of loopholes to make the tax more effective and raised a tax on the collateral investors must put down to trade in the futures market.
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All the world's exports should double in five years.
by then the dollar should be worth 25% of what it is worth today, so that makes sense.
Wait. They are printing real's so they can buy dollars to protest dollar manipulation?!?
This sounds like "We are not opposed to the principle of printing to debase to boost exports, we are just opposed when the US does it."
The Brazilian Central Bank must be run by morons! According to wikipedia Brazil only has 33.6 metric tonnes of gold reserves which equates to 0.5% of foreign exchange reserves. Invest in Brazil at your own peril! Big shame but they (Brazilian Elite) have been ripping of the the masses via inflation for a long time. That is why Brazil is a Banana Republic and a Third World country. One of their former Central Bank presidents, Arminio Fraga, went to Princeton which is where Helicopter Ben taught! What can we expect from these guys?
One day we will be at their doorstep begging for oil.
The US military complex wasn't created for begging operations.
You are 100% correct Wynn. U.S. will just find or make up a reason to take the oil from brazil by force or through other covert measures like paying off corrupt Brazilian politicians and Central Bankers.
...in M1 Abrams and having sent the stealth bombers in the night before.
There will soon come a day when the operation of those diesel hogs will sideline there effective range and the begging will begin.
...and water
I am sure the IMF will follow through on this suggestion, but of course exclude the dollar
Asking the IMF, which is part of the problem, to be part of the solution, is stupid. Brazil has their own economists, have one of them set up an index, and publicly publish it, inviting comment and corrections from others.
The military might of the British Empire wasnt created for begging either but thats what they eventually resorted too (think lend lease WW2)
What a joke. Lets see, Benwa Balls and Suck Nuts Timma will develop the new index. Of course it will be hedonically adjusted. No problemo
"The IMF would have to come up with a method to measure which currencies reflect the structural situation of their countries, which are floating currencies, and which ones are forcing their hand" - if you come up with this formula you honestly deserve a Nobel Prise (no joke) this would expose all the Fiat Ponzi Schemes and bring the whole system down fast
Here is one way to see the manipulation:
DABCHICK's GOLD INDEX
www.sharelynx.com/chartstemp/Dabchick.php
This index is intended to show how gold is valued throughout the world independently of the value of any country's individual currency. It is not really much use as a day-to-day indicator when currencies are stable relative to one another, and is best plotted as a monthly chart.
The 18-year decline seen in the index from its start in 1982 appears to have come to an end in 1999 with the sharp upward movement at the time of the Washington Agreement on Gold (WAG). Let us hope the WAG marked the beginning of a climb of similar duration.
The Dabchick Gold Index is calculated each day using this formula : A x B / 452 where :
Calculation of Rebasing Constant ( 452 )
{ ( $ Gold Price Jan 82 ) x ( $ ERI Jan 82 [basis 1973] ) }
divided by
Adjustment factor when BoE rebased the ERI to 1990 in 1995
January 1982 was chosen as the starting point because gold seemed to have settled down quite well by then after the excesses of 1979 - 1981.
+100
Also, The Economist publishes the "Big Mac" index which sheds some light on under/over valued currencies.
Holy shit the USD is falling back down to 77! Quick! Somebody start a rumor that QE2 will come in tiny little droplets!
Perhaps America can seek forgiveness by out sourcing more jobs.....?????
There is nothing left that can be out sourced. Why do you think one in six Americans is unemployed?
Ya, but remember you're loss helps a third worlder feed his family.... sick.
Can't wait until they throw in the towel on their Dollar investments.
Please someone tell me an accurate way to do this? Sounds like a bunch of political hot air in Brazil.
Its called the market, and if the central banks and governments allowed it to work this would be over in a minute.
Brazil, go Chinese and start pegging to the dollar, get everyone in the emerging markets to do the same. That ought to F up the works.
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To achieve its goals, the IMF focuses and advises on the macroeconomic policies of a country, which affect its exchange rate and its government’s budget, money and credit management.
http://www.financemetrics.com/international-monetary-fund-imf/