Brazzil
US-Brazil Relations
December 2002
Today, we are living in a very strange world, and it is getting harder to make sense of events if you think in a rational way. It seems to me that, even though we have more communication channels than ever before, including the Internet, many people are not using their brains to think and assimilate information. They just accept anything which is broadcast to them, at face value. They are not skeptical, and don't ask the hard questions that show that they were giving at least a minimum amount of thought to the problems. Let me give you a current example of what I mean.
On September 11, 2001, there was a terrorist attack on the United States. Out of nineteen people involved in that attack, fifteen of the terrorists were from Saudi Arabia. If a rational person wants to identify a country behind that terrorist attack, there is no question about it—that country should have been Saudi Arabia. Besides that fact, the leader of the terrorist group, a Saudi Arabian named Osama bin Laden told his followers, "the call to wage war against America was a direct result of the US meddling in the affairs and politics of Saudi Arabia, and its support of the oppressive, corrupt and tyrannical regime that controls that country." He also found offensive to the Islamic religion that the US had tens of thousands of its troops in the land of their two most holy mosques.
It is crystal clear and there is no doubt that the country guilty of the terrorist attack on the US was Saudi Arabia. If the United States wanted to retaliate for the loss of life and property, the US should have gone after Saudi Arabia, instead of going against Afghanistan, a country which had no Afghan nationals involved in the attack on the US. Even though the US was attacked by Saudi Arabians, it was not convenient for the US to retaliate against them. The US had to find a scapegoat, a country that no one cares about, to give the impression that they were retaliating for the terrorist attack on the US.
If the US retaliated against Saudi Arabia, that action would have caused too much trouble to the US such as—1) the world economy could not afford a major disruption in the flow of oil from Saudi Arabia. 2) Saudi Arabia has too many investments in the US, and if they got rid of their investments, it would cause a negative impact on the equities and real estate markets in the US. 3) The other major problem for the US is that: if they attacked Saudi Arabia, the Arab world would see that attack as an attack on the two most holy mosques of the Islamic religion—in Mecca and Medina. Attacking Saudi Arabia could have the potential to become a holy war against the Islamic world.
Before September 11, 2001, I had never heard of Osama bin Laden and Al-Qaeda. The impression that I have is that since the US did not want to retaliate against Saudi Arabia, they had to come up with a very good story instead. Somebody must enjoy literature and the story of "Ali Baba and the 40 thieves." That story probably gave them the idea of creating: "Osama bin Laden and the 40 terrorists." (19 terrorists died in airplane crashes, one of them missed his plane and ended up in jail, and the other 20 terrorists are still around somewhere.)
Soon after the attack on the US, they started dropping bombs in Afghanistan. For all I know they could have used the same news footage shown on American television from the Iraq "Gulf war" in 1990. Most people would not know the difference even if they used images from the movie "Lawrence of Arabia" as being part of the current war.
In the age of immediate television news, the US had to show some results from this attack on Afghanistan. As The New York Times reported on October 29, 2002, on the front page, the US government decided to free some very dangerous Afghan men that they brought to Guantanamo Bay Naval Base in Cuba. "One of them, Faiz Muhammad, said he was 105 years old. Babbling at times like a child, the partially deaf, shriveled old man was unable to answer simple questions. He struggled to complete sentences and strained to hear words that were shouted at him. His faded mind kept failing him. He was asked if he was angry at the American soldiers who arrested him. "I don't mind," he said, his face brightening. "They took my old clothes and gave me new clothes." The second Afghan man released yesterday said he was 90 years old and gave his name as Muhammad Siddiq."
These are the only Al-Qaeda prisoners that the US government, has shown to the public up to this point. They turned out to be a very scary bunch.
Hail, Brave USA
The war on terrorism has been a great success according to the US government. The world is a safer place today. We should all enjoy this new sense of security despite the fact that Osama bin Laden and the other 20 terrorists are still on the loose after a year. It is interesting that the only people they managed to catch, turned out to be "the over the hill gang," including a 90-year-old man, and a very dangerous 105-year-old man, who on a good day was lucky to remember his name.
Four years ago, I wrote that the US would have "a hard time to justify their large defense budget, now that the Russians were not coming." It seemed to me at the time, that the US would not be able to justify such a large defense spending based only on the possibility of an attack in the US by Saddam Hussein, Omar Quadafi, or by Fidel Castro. It became harder and harder to find a foe around the world to justify such defense expenditures.
They finally found their bogeyman: "Osama bin Laden and the 40 terrorists." Now the US government can justify the current defense budget of US$ 393 billion dollars to fight against these terrorists armed with state of the art, low-tech box cutters.
Today the US is spending more in defense than the next 12 countries combined. On March 18, 2002, Fortune magazine had an interesting article: "What Do George Bush, Arthur Levitt, Jim Baker, Dick Darman, and John Major have in common? (They all work for the Carlyle Group.) The Carlyle Group, a Washington, D. C., buyout firm, is one of the nation's largest defense contractors. It has billions of dollars at its disposal and employs a few important people. Maybe you've heard of them: former Secretary of State Jim Baker, former Secretary of Defense Frank Carlucci, and former White House budget director Dick Darman. Wait, we're just getting warmed up. William Kennard, who recently headed the FCC, and Arthur Levitt, who just left the SEC, also work for Carlyle. As do former British Prime Minister John Major and former Philippines President Fidel Ramos. Let's see, are we forgetting anyone? Oh, right, former President George Herbert Walker Bush is on the payroll too."
In the next three years alone the US government will spend over 1.2 trillion dollars for defense. Even though the US economy is getting into a deflationary spiral, and it will be hard for most businesses to make ends meet, the Carlyle Group will have a bonanza in earnings, because of the government's defense spending spree. If George Bush Jr. can start a war against Iraq, or any war for that matter—dad Bush and his pals can make a ton of money with the Carlyle Group.
The UN and Iraq.
In a recent speech President Bush gave two options to the United Nations:
1) Become an obsolete institution such as the League of Nations or 2) Become a rubber stamp organization.
The members of the United Nations decided it was time for the UN to become just a rubber stamp organization. On November 8, 2002, the Security Council voted 15-0 for the American resolution against Iraq. This resolution boils down to stripping the country Iraq of its sovereignty.
If that UN resolution was against the US, I can't imagine the American people allowing such an inspection to take place in the US, with complete disregard for a country's basic sovereignty rights. Can you imagine the UN inspectors being allowed to go anywhere in the US, or Russia, or France, or England, or China, and take notes and pictures of anything that they desired? They used to have a word to describe that kind of activity, and there were people trained to do that kind of work—espionage.
Oil and war
If Iraq had no oil, would we be worried about anything related to Iraq? I don't think so. But because they have a lot of oil, in Wall Street jargon "Iraq is in play." Similar to a company in the stock market, when a company is in play, that means that the company will be taken over by another company. In this case the US wants Iraq's oil.
On November 10, 2002, The Record (a major newspaper in New Jersey) had an honest article titled: "U.S. vs. Iraq: Is It All About the Oil?" On October 2, 2002, I was stunned by Mr. James Woolsey, a former CIA director's honesty regarding his comments in the program Nightline with Ted Kopel. He said very clearly that the war with Iraq was about oil. He also said that the Russians and the French had been in Baghdad signing deals to develop Saddam's oil reserves.
Among them are Total Fina Elf, a French company developing the oil field near the Iranian border, and Lukoil, a Russian company developing another oil field in the Iraqi desert. Mr. Woolsey also said that the French and the Russians had better vote in the Security Council with the US, because after the US defeats Saddam's army, the US will be in complete control of Iraq's oil. All Iraq oil contracts in the future will be approved in Washington. Depending on how the French and Russians act in the Security Council today—Washington will answer their calls tomorrow, after the war, when they come calling for Washington to honor their old oil contracts.
We all know that George Bush will get his war with Iraq one way or another. It is a done deal. We all also know that it does not matter what Saddam Hussein does with the UN arms inspectors; he will not be able to meet the requirements of the UN resolution. I am sure that the decision to go to war has already been made, and the inspectors will just go through the motions until everything is ready to start the war.
Brazil and the War
The new administration in Brazil has so many problems as it is when they take office on January 1, 2003. But the war against Iraq will make things even worse for the new Brazilian president. The price of oil can go to $50 or $60 per barrel, and if things get out of hand with Saddam during the war, the price of oil can go as high as $100 per barrel. If the price of oil gets that high during any period of time, it will be a general catastrophe for most countries around the world.
I believe that we can expect the worse destruction possible from Saddam Hussein, because he knows that he can't win the war, but he can cause a major disruption in the world oil market if he destroys Saudi Arabian and Iraqi oil fields. The entire world would blame the US if that happens.
Saddam knows that the war is coming, and very soon. He also knows that if he surrenders, he will be put on trial with his generals on charges of genocide during the war against Iran in the 1980's. Saddam and his generals will spend the rest of their lives in prison. Thee reason I think that Saddam will try to do as much damage as he can, and as long as he can, is because I don't believe that Saddam and his generals will give up and give a chance for them to be caught alive and rot in prison the rest of their lives.
If Saddam somehow manages to destroy the Saudi Arabian and Iraqi oil fields, he might lose that battle with the US, but he might win the war—the economic war.
World Deflation
Maybe if I were in George Bush's position, I also would start a war against somebody. Just give me a war, any war because the US economy is tanking, and I don't know what to do about it, other than give tax cuts. (These tax cuts become more and more immaterial as the economy sinks to deeper levels, since there will not be profits to pay taxes in the first place.)
The world economy is in a mess. The second and third largest economies in the world (Japan and Germany) can't stop their downward deflationary spiral. Many countries around the world are already in a depression, including: Argentina, Paraguay, Uruguay, Brazil and Colombia just to mention a few. (The war on Iraq if anything, will make worse the already catastrophic economic environment.)
Eventually, deflation will hit the US economy as well. The Japanese and people from other countries will start cashing their investments in the US to bring their money home to pay the bills, or to invest in a safer place. When they start dumping their investments in the US, equities and real estate prices will be pushed down.
In the old days, things usually developed and happened slowly. Today, things happen much faster, at the speed of light. Look how fast the Soviet Union collapsed. Or how fast economic crisis spread in a large area or around the world. Keep in mind that today things happen much faster than before; just ask any Argentinean what happened to their economy.
If you want another indication that we are headed for a new economic depression in the US—I want to remind you that the Republican Party controlled the Senate, the US House of Representatives and the White House from 1921 to 1931, the result was the GREAT DEPRESSION of the 1930's. Have we learned anything from the past, or does history just repeat itself?
The Economist magazine dated November 9, 2002 had an article regarding deflation that confirmed what I wrote in my last article on November 2002 issue of Brazzil magazine. They also said that: "Deflation is particularly deadly when an economy has lots of debt, because falling prices swell the real debt burden. In America and Germany, firms and households have borrowed heavily in recent years, lifting total debts of the non-financial private sector to 150 percent and 160 percent of GDP respectively....
A cocktail of debt and deflation has left Japanese banks crippled by bad loans, forcing them to cut lending." Another major reason for money to leave the US for a safer heaven is the risk of doing business in the US because of the US Patriot Act and the Homeland Security Act. These acts give the US government the right to freeze and confiscate your assets. (A dangerous right to give to a government so deep in debt). Remember how they abused their power during the "Inquisition" in Europe, and how they targeted wealthy families with the only goal being to confiscate their assets. You can be assured that these new government powers will also be misused in the US as well.
Brazil and the Future
As long as I can remember, Brazil always was the land of the future. I believe that the future has finally arrived for Brazil. Brazil has everything to become the next world power. Brazil proved that it has a real democracy today, with many political parties giving voice for most groups of the population. Brazil has a free market and capitalist economy. The only ingredient that is still missing for the Brazilian economy to blossom in a spectacular fashion, is a strong and stable currency such as the Euro.
If Brazil adopts the Euro, Brazil will finally become a world economic power. Brazil should strengthen its laws regarding private property and ownership of assets including equities and bank accounts—no frozen accounts and absolutely no government asset confiscation. Brazil should strengthen its laws protecting the people's privacy not only against government intrusion, but also against business in general.
The Brazilian government should concentrate on building up a large middle class in Brazil to build a solid base for future prosperity. A large middle class is the secret to build a great country such as the US used to be—up to the 1970's. Let's not make the same mistake in Brazil as is happening in the US today.
Americans are surrendering all their civil liberties and rights under the US Constitution on a silver platter to the US government in exchange for the illusion of being protected against another attack by "Osama bin Laden and the 40 terrorists."
Billions of dollars will leave the US, because of the economically repressive environment created in the country with the passage of the US Patriot Act and the Homeland Security Act of 2002. These billions of dollars will find their way to a more friendly, and safer capitalist haven—Brazil.
The Economist dated November 9, 2002, also had an article about Latin America, which was not nice to Brazil, where they stated when referring to the relation between Brazil/USA: "...the far-right fringe of the Republicans in Congress. It sees Lula as part of a Latin American "axis of evil," with Cuba's Fidel Castro and Venezuela's Hugo Chavez. To that list, some would add Lucio Gutierrez, a nationalist colonel (and former coup-leader) who is likely to be elected as Ecuador's president this month."
Some bad international press will not stop Brazil. The future has arrived for Brazil; as soon as Brazil adopts the Euro as its new currency, all the other pieces will fall into place, and Brazil will become the greatest country of this new century.
Ricardo C. Amaral, author and economist, can be reached at amaral@alumni.fdu.edu