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by Carlos Lessa
Tuesday, Sep. 30, 2008 at 11:44 AM
To Lessa, "dollar is over" and it’s necessary that a new "Bretton Woods" establishes new parameters to global economy.
Former president of BNDES (National Bank on Economic and Social Development), economist Carlos Lessa swims at counter-current of federal commissioners: identifies immediate risks to Brazilian economy, cause of crisis’ worsening in the United States.
Democrat and Republican Congressmen met yesterday the U.S. president, George W. Bush to discuss the package against the crisis. Attending the meeting candidates to the White House, Barack Obama and John McCain. The proposal provides $ 700 billion from the U.S. Treasure to purchase securities at risk. The final agreement has not yet been done.
To Lessa, "dollar is over" and it’s necessary that a new "Bretton Woods" establishes new parameters to global economy. In an interview to Terra Magazine, explains:
- - There is only one way. Russia has already proposed, and France did also: to combine the powers of the world and set a new Bretton Woods agreement. The dollar ended. But the problem is: the United States will not let the dollar end ... What the Americans are trying to do is to distribute this account all over the world.
The economist shows security to defend "the crisis is coming into Brazil," despite the calm shown by President Lula’s team. The model of national growth, in his opinion, is based on credit bubbles - and directs the attention to easy credit in the sale of cars. He makes another diagnosis:
- I’ll help you making an idea: companies in Brazil take 10% of their total business credit from abroad. But banks that borrow from outside stopped doing it. Why did Brazilian Central Bank reduce the deposits of banks? Do you know why? To try to generate an area of credit to those companies that have no more credit. Who could know that a “Tupinikim” country, ruled by all-powerful doctor (Henrique) Meirelles, paying the highest interest in the world, which has U.S. $ 207 billion in reserve, would have to do that?
Brazilian Central Bank’s President Henrique Meirelles, said that Brazilian banks had no liquidity problem. A little later, he made a retreat. The Central Bank announced the lifting of liquidity for smaller banks. An injection of $ 13.2 billion into the market. Critical of monetary policy, Lessa produces disturbing questions:
1. "I do not want to talk about it, but how much have Bradesco already lost? How much have Itau already lost? Nobody knows. They will not talk. But the banks are linked one with each other. "
2. "Hou did they drive the growth of Brazilian economy? On the indebtedness of households, not by business investment, not by government investment. "
Read the interview!
Terra Magazine – Bush administration’s package of $ 700 billion is a good way to combat the crisis? How do you examine this emergency plan?
Carlos Lessa - You must have two things in mind. First, the North American power. In the history of humankind, there has never been so powerful a society as United States’ one. It is a military power, it is an enormous cultural power, but the key of that power is dollar, for a simple reason: the reserves of all central banks in the world are integrated, mostly, in bonds of U.S. Treasure. The United States has a strategic advantage over any other country, what he delivers, is debt. But it is the wealth of others. So who delivers wealth, the United States, has more power than having the Armed Forces.
This U.S. crisis was actually the financial stake of U.S. banks that ultimately had deeply weakened the dollar. No one knows the size of the hole. The information that we have is that there are $ 14 trillion real estate transactions. But nobody knows how this was for the gymnastics of financial alchemy; derivatives on derivatives - the derivative gets a bad paper and converts it into a good paper -, leading in such a way that I shall give the following information: the more conservative country in the world is Switzerland.
From a financial point of view, is the most conservative country in the world. It is the country where banks are dominant. The biggest Swiss bank is UBS. The UBS has already lost $ 40 billion on first-class American titles. Forty billion. Well, what I'm trying to say is that to say all banks in the world are interdependent in that mess that the Americans did. The losses, nobody knows what they are. The hope of American government, of course, is that putting those $ 700 billion, it stops. At one hand, theoretically, that would be great. What the American government will do is to call to themselves all that is rotten. But the problem is that these crises, rots also what is good.
Economist Luiz Gonzaga Belluzo warned about the risk of contaminating the commercial banks.
Luiz Gonzaga knows that deeply. And they are already contaminated. I’ll help you making an idea: companies in Brazil take 10% of their total business credit from abroad. But banks that borrow from outside stopped doing it. Why did Brazilian Central Bank reduce the deposits of banks? Do you know why? To try to generate an area of credit to those companies that have no more credit. Who could know that a “Tupinikim” country, ruled by all-powerful doctor (Henrique) Meirelles, paying the highest interest in the world, which has U.S. $ 207 billion in reserve, would have to do that?
Combining it with the speech that the country is not being affected?
Only 10% of credit to companies in Brazil come from abroad. Now, UBS, the largest Swiss bank, has already lost $ 40 billion. I do not want to talk about it, but how much have Bradesco already lost? How much have Itau already lost? Nobody knows. They will not talk about it. But the banks are linked one with each other. Lehman Brothers was the third bank in size in the United States, the largest investment bank. Wonderful, strong and so on. To close the box, it drew $ 8 billion of deposits of Lehman in England. Then Lehman of England did not pay its employees. Four thousand employees going hungry because they did not receive the salary of the month. A bubble like this, when it explodes, distributes fragments to all sides. Nobody made an assessment like that.
So, how do you evaluate ...?
What I can say is this: the size of the hole is probably much bigger than it has been announced so far. American banks have already put $ 1 trillion.
IMF (International Monetary Fund) estimated losses at $ 1.3 trillion.
And now $ 700 billion more! Have you ever camped? Well, look! Everybody that camps knows that you have to smother the fire. How does it stifles? Do throw a blanket on it and it turns off. It takes oxygen away. But if you do put a blanket smaller than the fire, you do fuel it. They have already put $ 1.3 trillion over the past four months. And will put $ 700 billion more. I think it's a short blanket. How do the banks of the world consider this story? The desperation of them doing this is because the situation is very serious. If the situation is very serious, I will not lend to anybody.
In another interview, you had also alerted to the decoupling of consumption and real income of a person, for proliferation of easy credit. What is the risk to the country?
Sure. I’ve shown many times that Brazilian growth for the past two years, depended on a credit bubble. To sell cars without cash payment. However, the 90 month Tupinikim car buying is the equivalent to U.S. real estate bubble. If the crisis hits Brazil, debted people will do what? Stop paying. The banks will do what? Run and become the car owner? What will they do with the cars? American crisis is spreading all over the world. That’s what I’m saying. And no one knows the size of it. The only thing we know is that the more it progresses, the larger it becomes.
What should be proposed?
Só tem um jeito. A Rússia já propôs, e a França também: reunir as potências do mundo e definir um novo acordo de Bretton Woods (que estabeleceu, em 1944, as relações monetárias mundiais). O dólar acabou. Mas o problema é o seguinte: os Estados Unidos não vão deixar que o dólar acabe. Mas, objetivamente, o dólar acabou. O que os americanos vão tentar fazer é distribuir essa conta pelo mundo inteiro. Vai sobrar até para a Guatemala.
You only have one way. Russia has already proposed it, and France also: combine the powers of the world and set a new Bretton Woods Agreement (which established in 1944, the global monetary relations). The dollar ended. But the problem is: the United States will not let dollar end. But objectively, the dollar is over. What the Americans are trying to do is to distribute this account all over the world. Including Guatemala.
Entre as propostas do democrata Barack Obama para apoiar esse novo pacote de Bush, está a de ajudar também os proprietários de imóveis, não só os detentores de hipotecas. O que o senhor acha dessa proposta?
Among the proposals from Democrat Barack Obama to support this new Bush’s package, there is also one to help the owners of buildings, not only the holders of mortgages. What do you think of that proposal?
Isso é o jogo eleitoral que ele está fazendo. Porque os americanos nunca vão deixar, não vão estar preocupados com os proprietários de imóveis. Eles vão estar preocupados é com os bancos. O proprietário de imóvel, que se endividou, azar! Vai ter que pagar ou perde o imóvel. Agora, os bancos, não recebendo, vão ficando podres. O dólar não está nos proprietários de imóveis. O dólar está nos bancos e no Tesouro americano. Niguém está se perguntando o seguinte: se os americanos vão emitir mais US$ 700 bilhões, são mais US$ 700 bilhões de dívidas do tesouro americano. Quem é que vai comprar?
This game is the election that he is doing. Because Americans will never allow it, will never be concerned about the owners of buildings. They will always be concerned about the banks. The owner of property, which is debted, bad luck! He'll have to pay or forfeit the property. Now, the banks, not receiving, get rotten. Dollar is not the owner of buildings. Dollar is inside the banks and the U.S. Treasure. Anybody is wondering this: if Americans will issue additional $ 700 billion, these are U.S. $ 700 billion more of U.S. Treasure debt. Who will buy?
Quem o senhor sugere?
Who do you suggest?
Vão tentar forçar o mundo inteiro a comprar. Vão jogar pra fora, vão jogar a crise pra fora. E o que o nosso Lula está dizendo? Que tá tudo bem, né? O que o (Guido) Mantega está dizendo? Metade do povo brasileiro é de classe média. O que é que dr. Meirelles não diz, mas faz? Continua a fazer o que sempre fez. A minha preocupação é que se tenha uma crise muito grande avançando, enquanto o governo faz um discurso que não tem nada a ver com o real.
They will try to force all the world to buy it. They will put it out, the crisis will be exported. And what is our Lula saying? That's all right, hu? What is (Guido) Mantega saying? Half of Brazilian people are middle-class. What dr. Meirelles does not say, but does? Keep on doing what he always did. My concern is that there is a very big crisis advancing, while government makes a speech that has nothing to do with reality.
Não há uma dimensão humana por trás disso?
There is not a human dimension behind this?
As pessoas não estão… Há seis dias, estive em Juiz de Fora, pra fazer uma conferência. Lá tenho muitos amigos. Sabe qual foi a informação que eu recolhi? A cidade tem 520 mil habitantes. Sabe quantos veículos automotores estão licenciados na municipalidade de Juiz de Fora? 140 mil.
People are not ... Six days ago, I was at Juiz de Fora, to set a conference. I have many friends there. You know what was the information I collected? The city has 520 thousand inhabitants. You know how many motor vehicles are licensed in the municipality of Juiz de Fora? 140 thousand.
Uma proporção elevada.
A high proportion.
One at less into each four residents. If you get this information to Ribeirao Preto, Campinas, near Sao Paulo city, you'll find a higher proportion. Fewer people per car. How did they take the growth of Brazilian economy? On the indebtedness of households, not by business investment, not by government investment. The only thing that happened was the PAC (Growth Acceleration Program). When I was president of BNDES, Lula asked me to make a list of priority projects for the country. I made a very similar one to the current CAP. In fact, I think they’ve taken the list that we did. We worked three months with 50 people. Details: This year, brazilian governmente have only spent 40% of what was planned. Do you think they will continue the CAP? And then? Do you think interest rates are going up? I can say that they will and that’is the only thing dr. Meirelles knows how to do. As dollars are going out of Brazil, Meirelles will push interest rates up. Entrepreneurs will continue to invest? They have declared a paralyzing. The crisis is entering Brazil.
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