For American readers this is hard to comprehend but other countries have to fight off the tsunami of little cute paper dollars surging into the global economic system; otherwise they will be facing rampant inflation themselves. To foreign readers... your welcome! With the Brazilian real up 35% year to date, the country has begun counter measures.
Via Bloomberg
- Brazil will impose taxes on purchases by foreign investors of real-denominated, fixed-income securities and on purchases of stocks, Finance Minister Guido Mantega said.
- Foreign investor will pay a 2 percent tax when they enter the country to buy stocks or fixed-income securities.
- The measures are being taken “to avoid an excess speculation in the stock market and in capital markets,” Mantega told reporters in Sao Paulo.
- The real has gained 35 percent since the beginning of the year, the best performer amid the 16 most traded currencies tracked by Bloomberg. The currency has gained 5.3 percent in the past month. The central bank started purchasing dollars on May 8 in a bid to temper the real gains.
- “Excess global liquidity could lead to an over-appreciation of the real,” Mantega said. That would threaten to hurt the country’s exporters and further fuel demand for imports.
- Mantega said the measures may not lead the real to weaken, but are designed to slow its appreciation and prevent the creation of bubbles in Brazilian markets. “These are to prevent excesses,” he said.
Meanwhile building bubbles is the top source of job formation outside of health care in the U.S. - funny that.
- Central banks need to “alert investors and markets of the risks of exaggeration in the formation of prices, which can lead to future corrections and create unnecessary volatility,” Meirelles said in the interview in New York.
- “We don’t want short-term speculation, we don’t want exaggerations,” Mantega said.
[Sep 18, 2009: US Dollar Replaces Japanese Yen as "Carry Trade" Currency]