Fiscal_policy
The Financial Times has published several columns over the last week written by their own staff and by big-name guests such as Mohamed El-Erian, Larry Summers and Nouriel Roubini. When we say “big names” there’s no endorsement involved – we’re merely acknowledging the fact that these writers have high profiles. The danger in “big names”, “experts” etc. is pre-judging their opinions, always a bad idea – especially so when the subjects involved are economics, fiscal policy, governance structures, financial crises and so on.
Abraham Lincoln supposedly said: “How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn’t make it a leg.” A recent report had us thinking about an issue that we’ve been discussing repeatedly in our reports: fiscal accounts in Brazil have been deteriorating. It’s unusual for this blog to mention sell-side research, but a piece by Santander’s Alexandre Schwartsman called “Brazil: The Naked Truth” is very well written and unfortunately recalls Mr. Lincoln’s quote. Mr. Schwartsman posted the main arguments (in portuguese) in his blog, which is a great source.
“You might argue that the government is mostly working, and the budget deficit is just one wrinkle that will get ironed out in time. But given that we’re in a budget death spiral that will eventually derail every other function of society, I would say that all we’re talking about is a timing issue. By analogy, maybe your brain can remain conscious for a second after your head gets chopped off, but as a practical matter, you’re not less dead.” — Scott Adams, creator of Dilbert, jokes seriously about the US budget deficit and the government’s apparent inability/ ineptitude to deal with it. Light reading about a very pressing topic.
Quick post: The proximity to the Elections these Sunday may be the factor behind the Financial Times publishing stories about Brazil almost every day. This one is a bit more “meaty” compared to the previous ones, but we’re starting to think that there’s some internal competition between the FT columnists… This one doesn’t stray very far from the norm: some recent history of accomplishments, a list of pros and cons going forward and (wise) words of warning regarding “complacency and hubris”. If you haven’t read the others, this isn’t a bad place to start.
The Financial Times had a piece about Greece’s woes on August 24th – and how Brazil’s fiscal policy presents an alternative. We feel it’s our duty as Brazilians to inform the FT that they’re basically right: Greece can borrow pages from the playbook of 2002 Brazil (or Lula, since the article mentions him). 2010 Brazil’s fiscal policies, however, should not be copied. What a difference a few years make.
