National Health Care in Brazil amputates Wrong Leg, turns to Cuba to relieve Doctor Shortage

Posted by PITHOCRATES - October 12th, 2013

Week in Review

The proponents of Obamacare say the United States is the only advanced economy in the world that doesn’t have national health care.  Which is probably why the American health care system is the best in the world.  And things like this happen where they do have national health care (see Brazilian doctors remove the wrong leg of patient before amputating other leg by The Associated Press posted 10/9/2013 on The Vancouver Sun).

A Brazilian hospital says a patient with diabetic kidney failure has been left legless after going into an operation to amputate his right leg and having doctors remove his left…

“When the patient’s daughter told doctors they had removed the wrong leg, they amputated the other leg as well.”

Is this an isolated incident?  Or is it an indictment of national health care itself?  Well, according to the Washington Post (see Brazil, facing health-care crisis, imports Cuban doctors by Paula Moura and Juan Forero posted 8/30/2013) it doesn’t look that much like an isolated incident.

Since the 1960s, Cuba has deployed an army of doctors by the tens of thousands to the world’s most inhospitable corners, from Haiti to Africa’s killing fields to the ultra-violent barrios of Venezuela.

Now, thousands of Cubans are heading to relatively affluent Brazil to shore up a decrepit health-care system that has become a national embarrassment.

Two months after mass protests against the substandard condition of public health and other services, President Dilma Rousseff’s government has signed a deal to bring 4,000 Cubans by the end of the year to serve for three years in forlorn outposts where health officials say Brazilian doctors will not work. Under the contract, Brazil will pay the island’s cash-starved government $4,200 a month per doctor, or $200 million annually.

But the government’s plan has its doubters. Among them is Aline Lais Ribeiro, 17, who on a recent day waited three hours to see the lone doctor working a 24-hour shift in a shabby clinic in this gritty Sao Paulo suburb, one of the 700 towns where Cuban doctors will be assigned. She asked why the government has not put resources into building a quality health-care system to match Brazil’s developed-world pretensions.

So national health care in Brazil is “decrepit.”  A “national embarrassment.”  And “substandard.”  It’s so bad they are getting doctors from Cuba to relive their chronic doctor shortage.  With Cubans becoming doctors no doubt so they can escape their godforsaken island.  As the Cuban communists prostitute these doctors to bring in some hard currency to their “cash-starved government.”

If these doctors work about a 60-hour week at $4,200 per month that comes to approximately $16.27 per hour.  Recently in America unskilled fast-food workers went on strike to raise their hourly wage to $15.  Imagine that.  Unskilled workers demanding nearly the same amount of money Cuban doctors will work for in Brazil.  Well, they won’t get all of that money.  Most of it will go to the “cash-starved government” back in Cuba.

As Obamacare rolls out Brazil may lose these Cuban doctors.  As Obamacare creates a doctor shortage in the United States the Americans may offer those Cubans as much as $20 an hour to come practice medicine in America.  As a bonus incentive they will be able to retain their native language.  For the illegal aliens flooding our country who will receive Obamacare speak Spanish.  Not Portuguese like they do in Brazil.  But Spanish.  Like they speak in Cuba.  A win-win for the Obama administration.  And Cuba.  Well, the Cuban government.  For if they are exporting 4,000 Cuban doctors that may make the average Cuban wait a lot longer to see a doctor in their national health care system.

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FT176: “The left instigates and exacerbates discrimination to increase their power.” —Old Pithy

Posted by PITHOCRATES - June 28th, 2013

Fundamental Truth

The Institution of Slavery was Dying Out in the U.S. before Eli Whitney and his Cotton Gin

Discrimination is wrong.  And it doesn’t belong in a meritocracy.  Which is what the United States is.  Here it doesn’t matter who your father is.  There is no nobility.  No aristocracy.  Here everyone is equal.  It’s why people came here with pennies in their pocket.  So they could work hard and live the American dream.  Having the liberty to do whatever they wanted to do.  Which many did.  Starting out sweeping floors for a boss.  And going on to be boss in their own business.

The Founding Fathers weren’t perfect.  But they were as close to perfect as you can get.  Selfless.  Disinterested.  Principled.  And, yes, some were slave owners.  But they didn’t invent slavery.  Or bring it to the New World.  It was part of the times they lived in.  And already well entrenched in the colonies before they entered into the history books.  The southern economy was already dependent on slave-labor during the writing of the Declaration of Independence.  And the U.S. Constitution.  Some of the Founding Fathers wanted to get rid of the institution.  But to form a new nation they needed the southern states.  And they wouldn’t join without their slaves.  So they tabled the subject for 20 years.  Trusting that it would resolve itself by then.  But then Eli Whitney gave us the cotton gin.  And, well, the rest is history.

The institution of slavery was slowly dying out before the cotton gin.  George Washington wanted to replace his slaves with paid-laborers.  For he wanted to change up his crops.  Grow many different crops instead of one large cash crop.  Something paid-labor was ideally suited for.  As he could hire people with a particular crops’ skill-set and they could hit the ground running.  But when you had slaves working the same large cash crop year after year such as tobacco change didn’t come easy.  For you had to retrain your slaves.  And with training there is a learning curve.  It was just so much easier to hire well-skilled paid-laborers.  And the fact that they wanted to work for you helped, too.  For when forcing people to work for you against their will all you’ll get from them is the bare minimum that lets them escape brutal punishment.  Which does not bring out a person’s latent talents.  It just prevents these talents from ever seeing the light of day.  No.  Slave-labor as an economic model was a horrible one.  As well as being immoral.

Abraham Lincoln and the new Republican Party ended Slavery in the United States

Slavery in the United States was concentrated in the South.  On the plantations.  Where they had a single, large cash crop.  And thanks to Eli Whitney that crop was cotton.  Because the cotton gin could so quickly comb the cotton fiber to remove the seeds and stems the sky was the limit.  The only thing holding back your profits was the amount of land you put in production.  And the only limit on that was the number of slaves you had to make land productive.  Which is why the institution of slavery didn’t die out in 20 years time.  Which really wasn’t overly optimistic.  Because in the grand scheme of things there weren’t that many slaves in the United States to begin with.

Of all the slaves brought to the New World only about 6.5% ended up in British North America (according to Wikipedia).  Another 18% went to other British colonies.  Another 18% went to Spanish colonies.  About 14% went to French colonies.  While the vast majority of those slaves went to Portuguese colonies in the Americas.  Approximately 39% of all African slaves.  Most landing in Brazil.  Which is why the Portuguese language is one of the top ten most spoken languages in the world today.  Because Brazil is a very large country.  Thanks to all of those slaves the Portuguese brought there.

Slavery was wrong.  And it is America’s original sin.  But it wasn’t what made America great.  Or rich.  Contrary to what our public schools are teaching our kids.  If it was the South would have won the American Civil War.  But they didn’t.  The industrial North did.  With her factories filled with paid-laborers.  This was the New World.  The South that lost the Civil War was the last remnants of the Old World in the New World.  Where it mattered who your father was.  Abraham Lincoln and the new Republican Party ended slavery in the United States.  And the Republican Party would eventually put an end to Jim Crowe laws in the south.  And passed the Civil Rights act (a larger percentage of Republicans voted for it than Democrats).

The Racial Divide has never been Greater despite electing a Black President Twice

So the Republicans have done more to end discrimination in the United States than the Democrats have.  Who have actually spent more time opposing civil rights.  But you wouldn’t know that.  Not with all the disinformation the left puts out.  Today the left claims they are the party that fights discrimination.  When in actuality they instigate and exacerbate discrimination.  Because it gives them power.  For trying to end discriminations is very lucrative.  Some have made careers and have grown quite wealthy trying to end discrimination.  You know who they are so there’s no point in naming them here.  But these people never end discrimination.  For while there’s money in fighting discrimination there’s no money in ending it.

If there are always examples of discrimination in our society then there is always a need for those who fight it.  There’s always a reason for new legislation.  To right past wrongs.  And make things fair.  So the Democrats increased the size of the welfare state.  To make the discriminated dependent on the state.  To keep them on the plantation.  Concentrating them in housing projects.  In the inner city.  Away from the Democrats’ nice neighborhoods.  They broke up their families with AFDC.  Replacing fathers with the state.  Who failed these kids miserably.  They implemented affirmative action.  Where some game the system and get a free pass.  Because of lower standards.  Getting entrance to a college or a job over someone more qualified.  Fomenting new racial unrest.  As some complain about being passed over despite being more qualified.  Which the left jumps on as proof of overt racism.  And the need for them to do something more to end it.

But they never end anything.  Because ending it would take away their power.  Which is why despite everything they’ve done since the Sixties things have never been worse.  And more policies and legislation to end discrimination have never been needed more.  Because the racial divide has never been greater.  Despite this country electing a black president.  Twice.

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Cane Sugar, Crystallized Sugar, Sugar Trade, West Indies, Wealth and War

Posted by PITHOCRATES - May 7th, 2013

History 101

As Muslim displaced Christians from the Lands of the Roman Empire Sugar moved West

There is a war on sugar.  It’s making us fat.  And it’s making us sick.  Because it tastes so damn good.  We crave it.  And always have.  Since the first days we chewed on sugarcane.  Sucking out the juice.  Which was where that sweet delight was.  It was so good that the people in New Guinea (just north of Australia) learned how to plant it and raise it themselves.  Instead of just looking for it in the wild.  Around the eighth millennium BC.  From there it spread.  North.  To Southeast Asia.  Southern China.  And into India.  Where they took sugar to the next level.  They didn’t just chew on sugarcane to suck out the juice in India.  They refined it into a crystallized substance.  Around 350 AD.  Concentrating that sweetness.  And making it portable.  Then the Arabs entered the picture.

The Arabs took the Indian sugar-making technique and made it into big business.  They established plantations to grow it in tropical climes.  Where the two things that made sugarcane grow best—heat and water—were plentiful.  They built the first sugar mills to refine the cane.  Basically presses to squeeze out the juice.  Which they then boiled the water out of.  Leaving behind sugar crystals.  And added it to their foods.  As Muslim Arabs displaced Christians from the lands of the Roman Empire sugar moved west.  The Arabs introduced sugarcane plantations as far west as southern Spain.  When Christian Crusaders returned from fighting Muslims in the Holy Land they brought back crystallized sugar to Europe.  And they quickly fell in love with those white crystals.  By the late 13th century even England had grown a sweet-tooth.  Who would go on to consume so much of the stuff that they would rot their teeth away.

Then the Europeans entered the sugar business in the 15th century.  At first it was just the wealthy that enjoyed sugar.  Then it spread to the common people.  As demand grew they established new plantations to meet that demand.  In southern Spain.  The Atlantic island of Madeira.  The Canary Islands.  The Cape Verde islands off the west coast of Africa.  All had good growing climates for sugarcane.  And each plantation had its own processing plant.  For a ship’s hold full of crystallized sugar was far more valuable than a ship’s hold full of harvested sugarcane.  Making these plantations labor intensive endeavors.  And working the fields was backbreaking work.  To step up production required a larger labor force than was available.  And to meet that demand they turned to using African slaves.

Sugar was a Turning Point from an Agrarian World of Slaves and Indentured Servants to the Modern Industrial World

By the 16th century the Europeans were taking sugarcane across the Atlantic.  And African slaves.  The Portuguese, Spanish, Dutch, French and British brought sugarcane and slaves to Brazil, Cuba, Jamaica, Barbados, the Virgin Islands, Guadaloupe, Saint-Domingue (present day Haiti) and elsewhere in the Americas.  With the Caribbean Islands becoming the sugar capital of the world.  France’s Saint-Domingue being the single largest producer in the world.  Until their slave uprising.  It was France’s wealthiest possession in the Western Hemisphere.  And its loss changed French ambition in the New World.  For Napoleon had his eyes on rebuilding the French Empire in North America that was so rudely interrupted by France’s loss in the Seven Years’ War.  But with the loss of Saint-Domingue and all that sugar wealth Napoleon lost all interest in the New World.  And sold the Louisiana Territory to the United States.  To prepare for war with Britain.  Again.

The British and the French both had lucrative sugar plantations in the West Indies.  When the American Revolutionary War turned into a world war the British and French squared off once again.  Especially in the West Indies.  Where they wanted to protect their possessions producing that valuable sugar.  And take the other’s possessions.  So they could expand their holdings.  And their wealth from the sugar trade.  As well as put down any slave uprisings.  Such as would later happen in Saint-Domingue.  Some say the reason the British lost the American Revolutionary War was because they diverted too much of their military resources to the Caribbean.  But the French were diverting a lot of their military resources to the Caribbean, too.  Which is one reason why the war lasted 8 years.  As the French were more interested in taking the British possessions in the West Indies than American independence.  Their first efforts fighting alongside the Americans (Rhode Island in 1778.  Savannah, Georgia, in 1779) did not help the cause.  It was only when the French fleet could be spared from the action in the West Indies that they joined General Washington in trapping General Cornwallis at Yorktown in 1781.  With Cornwallis’ surrender effectively ending the war.  Even though they wouldn’t sign the final peace treaty until 1783.

By the end of the international slave trade Europeans sent approximately 10 million Africans to the New World.  Mostly to Brazil and the Caribbean.  To work in the sugar plantations.  Where slave ships left Africa.  They unloaded slaves in the New World.  Loaded the sugar these slaves grew.  Shipped the sugar back to the Old World.  Unloaded the sugar and loaded on finished goods.  Then sailed back to the African slave stations.  Where they traded their finished goods for more slaves.  There was big money in The Trade Triangle (trade from Africa to the New World to the Old World and back to Africa).  But sugar also helped to kick off the Industrial Revolution.  For the iron industry grew to make the machinery of the sugar mills.  As each plantation processed their sugarcane into crystallized sugar that was a lot of cast iron gears, sprockets, levers, axles, boilers, etc.  Basically a turning point from an agrarian world of slaves and indentured servants.  To the modern industrial world and wage-earners.

There is a Correlation between America’s Obesity Problem and the Switch from Cane Sugar to Corn Sugar

By the 19th century technology was making better sugar at lower costs.  The British designed a low-pressure boiler.  As water boils at a lower temperature when at lower pressure they were able to refine sugar with less energy.  Cutting production costs.  And waste.  As higher temperatures caramelized some of the sugar.  Though caramelized sugar can be delicious on crème brûlée you don’t want it when you’re producing crystallized sugar to sell.  Then the Americans improved this process by creating the multiple-effect evaporator.  A multi-stage device where the pressure is lower in each successive stage.  They use steam to boil water in the first stage.  This vapor then provides the energy to boil water in the next stage.  Which is at a lower pressure.  And, therefore, has a lower boiling point.  That vapor then boils water in the next stage which is at a lower pressure.  And so on.  Where one energy input creates a lot of useful work cost-efficiently.

With the advance in refining equipment refinery plants grew more complex.  And expensive.  So instead of building one on every plantation they built fewer but larger ones.  And shipped raw product to them.  Modern ships and economies of scale made this the new business model.  Companies grew and opened other refineries.  And expanded vertically.  Growing sugarcane as well as refining it.  One of the best at this was the American Sugar Refining Company.  That at one point controlled 98% of the sugar processing capacity in the United States.  Which earned it a spot on the original Dow Dozen.  The first 12 industrial stocks the Dow used in calculating their Dow Jones Industrial Average in 1896.  And remained a component of the Dow Jones Industrial Average until 1930.

Eventually the Americans couldn’t compete with foreign sugar producers any more.  They enlisted the help of Congress to impose tariffs on cane sugar imports.  Forcing Americans to pay more for their sugar.  Then they started making sugar out of government subsidized corn.  High-fructose corn syrup.  Which pretty much sweetens anything manufactured in the United States today.  That some say causes more health problems than cane sugar.  Including obesity.  Those in the high-fructose corn syrup business vehemently deny this.  But there is a correlation between America’s obesity problem and the switch from cane sugar to corn sugar.  Because of the different way the body metabolized corn sugar it did not satiate our appetite.  Leading us to over consume.  Such as with sugary drinks.  Which have gotten so large in size that New York City Mayor Bloomberg tried to make these large sizes illegal.  Because America’s over consumption of sugar was making us obese.  While Britain’s over consumption of cane sugar only rotted their teeth away.  It didn’t make them obese.  Which makes the case that corn sugar is less healthy than cane sugar.  Despite what the corn sugar lobby says.

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As the Brazilian Economy cools Rousseff looks to Tax Cuts and Privatization to Restore Economic Momentum

Posted by PITHOCRATES - July 29th, 2012

Week in Review

The president of Brazil is Dilma Rousseff.  She belongs to the Workers’ Party.  A party that enjoys strong support from the labor unions.  Because it leans towards socialism.  At least in state-ownership of some state assets.  In particular those that employ a lot of people.  But the great Brazilian economic growth is sputtering.  Like an engine no longer firing on all cylinders.  Because of her party affiliation one would expect Rousseff to adopt Keynesian policies.  To stimulate their economy with some government spending.  But no.  She’s talking about doing something completely different (see UPDATE 1-Rousseff ‘very worried’ about Brazil economy by Alonso Soto and Brian Winter posted 7/23/2012 on Reuters).

President Dilma Rousseff is pessimistic about Brazil’s chances for a meaningful economic recovery this year and is pushing ahead with new measures aimed at lowering taxes and increasing investment, hoping they might give the economy a lift by 2013, government officials told Reuters.

The measures include a consolidation of some overlapping federal taxes; a new round of concessions that would allow the private sector to manage more of the country’s congested airports and seaports; and a more aggressive effort to reduce electricity costs for manufacturers and others, the officials said on condition of anonymity because they were discussing private policy discussions…

Rousseff, a trained economist, has reacted with several targeted tax cuts and more than half a dozen packages aimed at stimulating consumption and investment. However, many business leaders and foreign investors have complained that her policies have been too ad hoc and narrow in scope, citing forecasts that now see growth as low as 1.5 percent this year…

Some business leaders have called for Rousseff to take even more dramatic measures, such as an omnibus reform package that could substantially reduce or simplify Brazil’s tax load. Rousseff has opted instead to pursue more targeted reforms to help struggling sectors on a case-by-case basis, believing that Congress would block a more ambitious, organized effort.

So Rousseff would have been a more aggressive tax cutter if it weren’t for Congress.  So one can hardly blame her for her ad hoc ways.  You have to do the best you can with the cards you’re dealt.  Especially when your party tends to favor state ownership of industry and higher taxation to pay for the labor in those state-owned industries.

Lowering taxes and electricity costs?  Privatization?  Other than that part about consumption one would think that Rousseff’s economic training was of the Austrian school variety rather than the Keynesian brand.  Whatever her economic roots with policies like these Brazil should rebound well from this momentary interruption in their economic growth.

The move most likely to stir investors, for both practical and symbolic reasons, is the new round of port concessions. Airports and seaports are routinely cited as some of the country’s most crippling bottlenecks, slowing everything from commodities exports to business travel, as public investment failed to keep up with the boom in the economy over the past decade…

The officials declined to say which additional airports Rousseff was considering, but one of the targets could be Rio de Janeiro’s international airport, which needs renovations ahead of the 2014 World Cup and 2016 Olympics. Rio’s governor, Sergio Cabral, described the airport in an interview with Reuters last year as being like “a third-rate bus station…”

The Brazilian economy had been roaring thanks to the private sector.  What wasn’t keeping up with the private sector was the public sector.  While people were doing remarkable things in the private sector the best the government could do was make Rio de Janeiro’s international airport “a third-rate bus station.”  Which just goes to show you that for the best economic activity you have to release the human capital of the people.  When you let these people think.  When you let them create.  When you let them create the things they thought about you get the kind of explosive economic activity that put Brazil in the BRICS emerging economies.  While running ‘third-rate bus stations’ just doesn’t quite do it.

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Brazil is Rich in Resources but Beset with Poverty Despite its Social Spending

Posted by PITHOCRATES - December 18th, 2011

Week in Review

The Portuguese colonized Brazil.  Which is why Portuguese is one of the top ten most spoken languages in the world.  Because there are a great many Brazilians speaking Portuguese.  So there is a strong bond between Brazil and Europe.  Home of tiny little Portugal (and a wonderful dessert wine.  Port).  Perhaps a little too strong (see Brazil state struggles with poverty despite rich natural resources posted 12/12/2011 on the Los Angeles Times).

Brazil’s huge northern state of Pará is about three times the size of California, home to much of the Amazon rain forest and is the second-largest producer of the nation’s most important export, iron ore.

But poverty levels are well above the national average…

Even opponents of the bill, however, recognized the predicament, and it’s one that is repeated in parts of Peru, Colombia and elsewhere in South America: the lack of central government representation for states that are resource-rich (be it mining, gas or other commodities) but poverty-stricken.

“We can’t accept that in this country, natural resources benefit companies, but not its people,” said Simão Jatene, governor of Pará. “The Brazilian fiscal system is extremely perverse with respect to Pará…”

In Brazil, the last decade of economic growth has brought tens of millions of Brazilians out of poverty, powered by commodities exports, consumer credit growth and social spending. But the country still remains extremely unequal, across class and geographical lines. Some parts of the southeastern cities of São Paulo and Rio de Janeiro have a higher gross domestic product per capita than rich European countries, while in remote parts of Pará, residents who are struck ill must brave a five-day boat ride to the nearest hospital for treatment, O Globo reported.

The Amazon rain forest, eh?  Perhaps part of the problem is the environmentalists trying to save the rain forest.  Preventing any development there.  Condemning these people to a life of poverty.  Because it is usually a trade off.  Save the planet.  Or save man.  Rarely can you do both.  At least the way the environmentalists see it.  Who won’t be happy until they take civilization back to the days of Neanderthal.  And you know there are those out there who would bitch about Neanderthal’s use of tools changing his environment, too.  Which is the greatest crime man can make.  Changing his environment.

The lack of central government is the problem?  Funny.  The lack of central government didn’t stop the British and the Industrial Revolution they kicked off.  And the lack of central government didn’t appear to be a problem for Andrew Carnegie as he created a steel revolution in the United States.  Which is far bigger than California.  Yet the economy of the country grew so great it topped the mighty British Empire from the top spot.  One country with a limited central government.  Besting another country with a limited central government.

The problem the Brazilians have is spelled out in this article.  Their economy has been driven by the export of commodity materials.  Exporting raw materials?!?  This isn’t capitalism.  This is mercantilism.  And why only some Brazilians are living the good life.  They need to ignite an engine of economic exchange within Brazil.  Use those raw materials in domestic industries.  Build factories to transform them into consumer goods that Brazilians will buy with their factory wages.  Like the Americans did in the 19th century.  And we did that with less central government than we have today.  And I’m guessing that’s the only problem Brazil has.  Too much government.

Any country has the human capital to do what the Americans and the British did.  They just need the key to unlock that capital.  And the key to that lock is called free market capitalism.  Brazil is already far down this road.  They just need to let the rest of their country play catch-up.  And they’ve got to back off on the social spending.  Or else they’ll end up like Europe and their Eurozone.  Fighting for their life.  From excessive social spending.  If European capitalists had any advice for the Brazilians it would be this; don’t do it.  Don’t follow them down the Road to Serfdom.  Be free.  Stay free.  And let capitalism be free.

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Printing Money and Screwing Friends

Posted by PITHOCRATES - November 12th, 2010

My Coworker, the Cheap Canadian Bastard

I worked with a Canadian once.  A real cheap bastard.  Yeah, he had some financial issues.   But they weren’t my issues.  And I got tired of subsidizing his problems by driving him to lunch every day.  And I got tired of the conversations.  He brought up every negative story about America.  Belittled our president.  Chastised America for not signing on to the Kyoto Protocol.  And said that we did not honor our trade agreement concerning softwood lumber (that his government was subsidizing in order to undersell their American competitors).

What really bothered me was that he was a Canadian that lived near the border but worked in the U.S.  He criticized America but he chose to work in America instead of Canada.  Why?  Because he could get paid more in America.  And there were the perks of crossing the border every day.  He gassed his car up in the United States.  And his wife’s car.  Why?  Because our gas prices were cheaper.  Yeah, he would criticize America until he was blue in the face, but he took every opportunity to escape the taxes that paid for all those things that made his country superior to mine.

Now don’t get me wrong.  I like Canada.  I just don’t like hypocrisy.  He made good money over here.  And with a much more favorable exchange rate back then, that translated into big dollars on the other side of the border.  Back when the American dollar was strong and the Canadian dollar was weak, he did very well.  Those strong American dollars exchanged into a whole lot more Canadian dollars.  Which allowed him to buy a whole lot more stuff than his fellow Canadians.  In fact, a lot of Americans vacationed in Canada back then.  Because the American dollar bought more in Canada than it did in America.

Have Cheap Cash, Will Travel – In Canada

So what’s the point talking about this cheap bastard?  Exchange rates.  And whenever there’s a currency war on the horizon, I can’t help but think about this cheap bastard.  See how he, a Canadian working in America, lived very well with a cheap Canadian dollar.  We paid him in strong U.S. dollars.  He then could use those strong U.S. dollars to buy gas and other ‘less taxed’ items on the U.S. side of the border.  (If he brought in and exchanged weak Canadian dollars for strong U.S. dollars, that same amount of gas would cost him more.)  And when he took those strong U.S. dollars across the border back into Canada, he exchanged them and got so many weak Canadian dollars in return that he alone stimulated the local economy.

Of course, he wasn’t the only one bringing strong American dollars into Canada.  When those strong dollars were exchanged for weak ones, the Canadian tourism industry boomed.  People could vacation in Canada for a week for what a weekend in America would cost.  Canadians traveling into America, on the other hand, paid more for less.  A weekend in America would cost what a week in Canada would cost.

In the above example, you can see how the nation with the weaker currency has more economic activity than the nation with the stronger currency.  Now, to understand international trade and foreign exchange rates, make the following substitutions in the above example:

  • Canada -> America
  • America -> China/Germany/Brazil/other U.S. trading partner

Alone Against the World.  And Alan Greenspan

Well, America is devaluing their currency.  They’re printing money to buy back treasury debt.  Supposedly to stimulate the economy by injecting more liquidity. But our problem is not a liquidity problem.  It’s a lack of consumer spending because of high unemployment.  And a fear of being unemployed soon.  So this will do little to solve our problems.  But it will make our exports cheaper.  And our trading partners’ imports more expensive.  In other words, we’re trying to fix our broken economy by flooding our trading partners’ economies with cheap American goods.  Which is pissing them off big time (see Reuters’ Analysis: German tempers fray as U.S. policy gulf widens by Stephen Brown and Andreas Rinke posted 11/10/2010).

Finance Minister Wolfgang Schaeuble, 68, said last week that the U.S. Federal Reserve decision to buy $600 billion of government bonds undermined U.S. credibility and was “clueless.” There was no point, he said, in pumping money into the markets.

China and Brazil were among those echoing his comments but U.S. officials were particularly stung by Schaeuble and German Economy Minister Rainer Bruederle saying the Fed move amounted to “indirect manipulation” of the dollar to boost exports; this at a time when Washington is criticizing China for exactly the same kind of strategy.

“It’s not acceptable for the Americans to criticize China for currency manipulation then slyly help the dollar by printing at the Federal Reserve,” Schaeuble told Der Spiegel magazine.

And speaking of Brazil, President Luiz Inacio Lula da Silva said warned America not to rely on exports alone (see Brazil’s Lula Says World Headed For ‘Bankruptcy’ Unless Rich Nations Act posted 11/11/2010 on the Dow Jones Newswires).

“If they don’t consume, and they just bet on exports, the world will go into bankruptcy,” he told reporters as leaders at the Group of 20 industrial and developing nations headed into a two-day summit in the South Korean capital.

Even Alan Greenspan, former Federal Reserve Chairman, is expressing concern over the impact of American policy on foreign exchange rates (see Greenspan warns over weaker dollar by Alan Beattie in Seoul posted 11/10/2010 in the Financial Times).  In that same article, Mervyn King, governor of the Bank of England, warned that this currency manipulation could trigger a trade war that would make the next 12 months worse than the previous 12 months.

We’re All Cheap Bastards Now

When it comes down to it, I guess we’re all cheap bastards.  We all want some unfair advantage in life.  Like my one-time Canadian coworker.  And I can understand how our trading partners feel.  I’ve worked with and been lectured for years about how my country should change.  All the while he prospered quite handsomely from the way things were.  Of course, I can take some solace in the dollar’s slide.  It’s trading pretty much at parity with the Canadian dollar now.  It’s gotten so bad that I’ve heard my old friend has since found work on his side of the border.  Good for him.  Now he can truly embrace all those taxes that he spoke so highly about while he was avoiding them for all those years.

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