Governmentspending
The Financial Times’ Beyond Brics blog has posted an article by PUC-Rio professor Marcio Garcia, and it’s a very sober look at what this country has been through in the years since it was included in the “BRICs” by Jim O’Neill. Much more importantly, however, is the warning about what we must still do if we are to succeed in the future.
Amazing how governments, agencies and especially politicians in Brazil have still not realized that the cost of doing business in Brazil must go down. In fact, says the World Bank, Brazil is actually getting worse in this aspect. What kind of sustainable growth can we reasonably expect when only the private sector gets to worry about productivity, especially when the government is actually increasing in size? Governance systems… incentives… Almost one year ago to this date, we published “The amazing sausage factory”, going into these issues. Apparently this will become a (sad) annual feature here, but we won’t let go.
After depicting both sides of the Eurozone crisis – Greece on the one hand and Germany on the other – Michael Lewis now turns his attention to the USA and to where he might find trouble. That he does, and plenty of it, in California. Our usual cautionary notes – about great writers sometimes skimping over a bit too much evidence for the sake of an argument – apply.
As per our post on Monday, Buffett’s article on taxing the mega-rich caused a wave of reactions – favorable, negative and the personal-attack type. Since then he went to Charlie Rose and discussed the article – and the deficit debate – for +50 minutes. There were at least three new strong reactions against the article as well, highlighted here.
Buffett’s recent article on taxing the rich has many interesting ramifications. The obvious one is analyzing the merit of his ideas. Another is studying the media reaction. Surely Buffett is a wonderful investor and his writing style is so clear and down to earth that one can’t help but pay attention to it. That doesn’t mean that his arguments on tax have to be taken without criticism. And yet the political climate in the US is so stormy that we must highlight the articles blasting Buffett’s ideas (after our comments).
From the “better late than never series”, a July 2010 special series by the Washington Post is way too enlightening to ignore even now. It’s about the huge inefficiencies brought by uncontrolled – and unaccountable – spending in the Intelligence/Military complex after the 9/11 attacks. Some will point out that, since then, a certain high-profile terrorist has been found and dealt with, but it doesn’t change the main arguments of the articles. In fact, there’s still a world of lessons to be learned and mental models to be taken from these pieces.
Two notes: a strong-worded LEX column about the need for Brazil to “grow up” and face its longer-term, big-picture issues such as lax government spending and poor labor and tax regulations. The other is an Economist article about investors’ growing interest in hedging “tail risk” – Nassim Taleb must have cringed when he read some parts.
Semi-update on our post about the US budget crisis and David Brooks: Roger Lowenstein wrote about the crisis at the very local level (cities), and David Brooks has a new book out for which we present two reviews (one positive, one negative). Mr. Brooks also presented at TED 2011 and we link to it. Finally, the US states under financial stress are again trying their best to get Amazon.com to collect sales taxes…
David Brooks is writing a series on the need for budget cuts in the US, and some of it reminded us of things we’ve been writing in our reports both about the US and Brazil in terms of governance, the size of governments, runaway spending and so on. It’s also an interesting timing because of the recently-announced budget cuts in Brazil. Finally, the Economist also published good articles on the subject, available in this post.
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.
