The suffering from the emerging markets and commodities crash has gotten so bad that the Brazilians are even cancelling Carnival in some places. This is awful news. The FT reports that “Towns and cities across Brazil are being forced to scrap the annual carnival parade as the country is braced for what is expected to be the worst recession since at least the 1930s”.
Let’s hope this is a sign that things, though going from bad to worse, can’t get that much worse. The “momentum crash” is a crash in faith. Carnival is supposed to be a celebration of the coming of spring. A blow-out party you have before Lent, where you get more serious about giving up indulgences and sinful behaviour. A little pick-me up party is just what Brazil needs right now.
But then, this is how bad monetary policy, credit booms, and unsound money spread from the secular to the sacred, from the financial markets to the real economy. When you “bring forward” people’s economic behaviour with easy money, you distort values. The distortion of values causes people to inaccurately assess risk, or to cease planning for the future and “live for the now”. Brazil, like the rest of the world, has been doing that since about 2003.
Category: Economics