Brazil ready to retaliate for US move in ‘currency war’

John Paul Rathbone & Jonathan Wheatley

Brazil, the country that fired the gun on the so-called “currency wars”, is girding itself for further battle.
Brazilian officials from the president down have slammed the Federal Reserve’s decision to depress US interest rates by buying billions of dollars of government bonds, warning that it could lead to retaliatory measures.
“It’s no use throwing dollars out of a helicopter,” Guido Mantega, the finance minister, said on Thursday. “The only result is to devalue the dollar to achieve greater competitiveness on international markets.”
At a joint press conference with president-elect Dilma Rousseff, outgoing president Luiz Inácio Lula da Silva said on Wednesday he would travel to the G20 summit in Seoul with Ms Rousseff, ready to take “all the necessary measures to not allow our currency to become overvalued” and to “fight for Brazil’s interests”. “They’ll have to face two of us this time!” he said.

Reality Check……

Eric Cantor:

I don’t think any of us ran for Congress with the idea that we could finally provide a subsidy to this industry or that, or to this community or that. Or that we would vote to continue the same federal programs and agencies that are failing our citizens and bankrupting our children and grandchildren. And I know none of us ran with the idea that we should go to Washington to congratulate a collegiate basketball team for having a good season – or feel obligated that we needed to do so – even if we happened to be a fan.
Yet that is what we have been doing under the recent Democrat majority and even all too often under the previous Republican majority. Our problems have grown too immense to waste any more time. America stands at a crossroads, and the decisions we make at this very moment will determine the type of country that our children will live in.
That is why we will drain the swamp rather than learning to swim with the alligators.
How?
We start by rethinking how time is spent and about the types of legislation that will be considered on the House floor. We start by identifying our top policy goals and committing to take concrete steps every single week to advance those goals. And we hold each other accountable with this simple question: are the actions of the House, our committees, and our Conference consistent with our principles and do they advance the nation’s priorities?

It will be fascinating to see how this actually plays out…. particularly with respect to earmarks. Retiring Wisconsin Congressman David Obey ranked 5th in 2010 earmarks at $55,435,000. Local Representative Tammy Baldwin garned $8,968,000 in solo (16) 2010 earmarks and $21,636,800 in earmarks with other members.

Scientists unveil moving 3D holograms

Clive Cookson

More than 30 years after the famous Star Wars movie scene in which a hologram of Princess Leia appealed for help from Obi-Wan Kenobi, US researchers have unveiled holographic technology to transmit and view moving three-dimensional images.
The scientists at the University of Arizona say their prototype “holographic three-dimensional telepresence” is the world’s first practical 3D transmission system that works without requiring viewers to wear special glasses or other devices. The research is published in the journal Nature.
Potential applications range from telemedicine and teleconferencing to mass entertainment.
“Holographic telepresence means we can record a three-dimensional image in one location and show it in another location, in real-time, anywhere in the world,” said Nasser Peyghambarian, project leader.
Existing 3D projection systems produce either static holograms with excellent depth and resolution but no movement – or stereoscopic films, such as Avatar, which give the perspective from one viewpoint only and do not allow the viewer to walk around the image. The new technology combines motion with an impression of genuine solidity.

Lands’ End President discusses going the extra mile for the customer

Kathy Mance

From its beginning as a sailboat equipment company to its success in capturing the admiration and loyalty of legions of landlubbers, Lands’ End has stayed true to its famous mantra, “Guaranteed.Period.®” In addition to the company’s focus on quality, they have kept their eyes on their customer. In 2008 they were named to the NRFF-AMEX Top Ten for consistent excellence in customer service and retained that standing in 2009. To find out how this predominately catalog and Internet retailer continues to win accolades from consumers the world over, we caught up with Nick Coe, President of Lands’ End. You’ll find “quality” resonates through the answers of this top exec, who fell in love with retailing when he was intrigued by quality in “great tailoring or a perfect pair of jeans” – products he couldn’t afford.
In the five years NRF Foundation and American Express have conducted the Customers’ Choice survey, Lands’ End has consistently been ranked in the top ten. How do you continue to delight your customers year after year?

Lightning in a Bottle: economic Development and Entrepreneurs

Steven Johnson:

The musician and artist Brian Eno coined the odd but apt word “scenius” to describe the unusual pockets of group creativity and invention that emerge in certain intellectual or artistic scenes: philosophers in 18th-century Scotland; Parisian artists and intellectuals in the 1920s. In Eno’s words, scenius is “the communal form of the concept of the genius.” New York hasn’t yet reached those heights in terms of internet innovation, but clearly something powerful has happened. There is genuine digital-age scenius on its streets. This is good news for my city, of course, but it’s also an important case study for any city that wishes to encourage innovative business. How did New York pull it off?

There are no easy answers. Kevin Kelly, co-founder of Wired magazine and author of What Technology Wants (2010), writes in the book: “The serendipitous ingredients for scenius are hard to control. They depend on the presence of the right early pioneers. A place that is open, but not too open. A buffer that is tolerant of outlaws. And some flash of excitement to kick off the virtuous circle. You just can’t order this.”

And yet, even if scenius is lightning in a bottle, there are surely some practices that make you more likely to capture the lightning when it does strike. In an age of public sector austerity on both sides of the Atlantic the good news is that most of them don’t involve massive top-down government spending. (Although, in New York’s case, it does help to have a tech-geek entrepreneur as mayor, in the form of billionaire Michael Bloomberg.)

A vibrant start-up culture requires a healthy community of venture capital firms willing to back risky ideas. New York has a number of gifted venture and angel investors, led by Fred Wilson and Brad Burnham at Union Square Ventures, which supports a number of the city’s web start-ups including outside.in. But investors need ideas perhaps more than ideas need investors, particularly in an age when starting a web business is amazingly cheap. So the real question is: how did New York find itself generating so many interesting ideas?

Should we be worried about a cyber war?

Seymour Hersh:

The plane carried twenty-four officers and enlisted men and women attached to the Naval Security Group Command, a field component of the National Security Agency. They were repatriated after eleven days; the plane stayed behind. The Pentagon told the press that the crew had followed its protocol, which called for the use of a fire axe, and even hot coffee, to disable the plane’s equipment and software. These included an operating system created and controlled by the N.S.A., and the drivers needed to monitor encrypted Chinese radar, voice, and electronic communications. It was more than two years before the Navy acknowledged that things had not gone so well. “Compromise by the People’s Republic of China of undestroyed classified material . . . is highly probable and cannot be ruled out,” a Navy report issued in September, 2003, said.
The loss was even more devastating than the 2003 report suggested, and its dimensions have still not been fully revealed. Retired Rear Admiral Eric McVadon, who flew patrols off the coast of Russia and served as a defense attaché in Beijing, told me that the radio reports from the aircraft indicated that essential electronic gear had been dealt with. He said that the crew of the EP-3E managed to erase the hard drive—“zeroed it out”—but did not destroy the hardware, which left data retrievable: “No one took a hammer.” Worse, the electronics had recently been upgraded. “Some might think it would not turn out as badly as it did, but I sat in some meetings about the intelligence cost,” McVadon said. “It was grim.”

The Subprime Debacle: Act 2, Part 2

John Mauldin

At the end of last week’s letter on the whole mortgage foreclosure mess, I wrote:


“All those subprime and Alt-A mortgages written in the middle of the last decade? They were packaged and sold in securities. They have had huge losses. But those securities had representations and warranties about what was in them. And guess what, the investment banks may have stretched credibility about those warranties. There is the real probability that the investment banks that sold them are going to have to buy them back. We are talking the potential for multiple hundreds of billions of dollars in losses that will have to be eaten by the large investment banks. We will get into details, but it could create the potential for some banks to have real problems.”



Real problems indeed. Seems the Fed, PIMCO, and others are suing Countrywide over this very topic. We will go into detail later in this week’s letter, covering the massive fraud involved in the sale of mortgage-backed securities. Frankly, this is scandalous. It is almost too much to contemplate, but I will make an effort.

On China’s Renminbi

Michael Pettis

As my reference to the Japanese yen might suggest, I am pretty skeptical about the likelihood of this happening, at least with some of the more excited predictions. So, by the way, is the ADB, whose recent report (“The Future Global Reserve System — An Asian Perspective”), suggests that by 2035, the RMB may comprise about 3 to 12 per cent of international reserves. This is a pretty reasonable prediction, in my opinion, and far from the more feverish claims we see reported almost daily.



If the renminbi ever becomes a major trading or reserve currency, it is going to take a long time for this to happen and will require a radical transformation of the Chinese economy and the role of the government. This may seem like a surprising statement. After all nearly every week we see reports about a new breakthrough for the renminbi, and almost every day someone important somewhere speculates publicly about what the world will be like when (never if) the renminbi displaces the dollar.



But away from all “qualitative” arguments about why this is unlikely, and there are many, I think there is a problem with the arithmetic of reserve currency accumulation. If the rest of the world is going to use the renminbi as a reserve or trading currency, clearly it needs a mechanism by which to accumulate renminbi. This is something on which a surprisingly large share of people who talk about the future of reserve currencies don’t seem to focus.