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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum

GLD 368.29

+0.6%

Nov 7 4:00 PM EST

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To: Elroy Jetson who wrote (14305)	2/11/2007 4:54:14 AM
From: elmatador	Read Replies (1) of 217573

That's the past script with fixed pegging. Today the Real is free floating currency and Brazil will no defend it's currency. Brazil is forced to save (what it takes in taxes) to pay the interest on that borrowed money. The public sector (fedreal, state and muncipalities plus the state owned enterprises) are subject to what is called fiscal adjustment. They have a target called primary superavit (tax revenue-spending) which should be 4.25% of the GNP. That limits what the government can spend. As a result the goverment cannot cut taxes, unless it cuts spending. The result is bad for the country because the government taxes are mostly covering government spending rather than invest in infrastructure. The government cannot print money to spend since it needs to keep inflation in check. As a result the money that came in was used to pay the foreign debt, thus decreasing the cost Brazil incurs to borrow money, which has this effect of being less risky and attract more foreign currencies. The Central Bank goes to the market and buy cheap dollars to increase foreign reserves.

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