Currency War Rattles Brazil, Wakes Up the People

Fed Chairman Ben Bernanke and his ilk refuse to see the connection. They’re too busy ogling inflation in the US that is suspiciously low. But China has its eyes riveted on the revolt in Brazil. Like all revolts, it’s about deep-seated issues and inequalities, but the spark that lit it – after price and asset inflation had made life too expensive for the middle class – was an increase in bus fares.

The warning shot came in September 2010. From Brazilian Finance Minister Guido Mantega. In a speech, he denounced the “international currency war” that the money-printers in Washington and elsewhere were waging against his and other countries, and the hot money that they sent sloshing around the world, particularly the developing world. “This threatens us because it takes away our competitiveness,” he warned.

He’d taken aim at the Fed’s “bold” efforts to hand trillions to the big players – the hot money – who didn’t invest it in production and jobs in the US but plowed it into every conceivable “asset class,” such as commodity and currency speculation and similar productive uses. It hit prices in Brazil and drove up the Real.

Brazil counterattacked last year. The Real plunged 24% against the buck. Prices of imported goods soared – adding to the inflation that had already been zigzagging up from 3.7% in 2007. In May, it hit a red-hot 6.45%.