In finances, Brazil and the U.S. are ‘trading places’

Remember when an extra-scruffy supposedly untrustworthy Eddie Murphy took uppity Dan Akroyd’s place in 1983 movie trading places?

Something similar is happening in the world of government budgets and finances. Brazil might be described as the onetime beggar that has cleaned its act up and is now besting the Country Club set (Europe and the United States) at their own game. Meanwhile, European and U.S. account books look, well, like a lot of red scribbling.

Today at The Daily Reckoning, a gold investor newsletter, Eric Fry explains how the United States and Brazil have traded places:

… America’s national balance sheet has become so bad it looks downright Brazilian. But guess what? Brazil’s balance sheet has become so exemplary it looks like the American balance sheet of the Eisenhower era.

The economic axis of the globe seems to be shifting away from the US and Europe. This shift might occur slowly, but it’s not too early to notice the trend…and to prepare accordingly.

For the quantitatively minded, Fry includes a chart (below) that shows how the U.S. budget is projected to balloon with respect to its economic output since late last year, and how Brazil’s ratio is likely to remain steady:

Bye Bye Brazil we're going down

Incidentally, for those who want a detailed audio explanation of how the United States got this deep in the financial hole, you can listen to deficit hawk David M. Walker explaining it earlier this month on NPR’s “Fresh Air.” At one point, Walker, a budget official under Republican and Democratic administrations, has to answer this question from Terry Gross:  “Are we becoming a Third World country?”

The answer might not be “yes,” and Walker was nuanced in his response that the United States is still a great power but flirting with fiscal, educational and infrastructural mediocrity. However, if it wasn’t for the fact that the dollar still rules supreme and we can technically make as many of them as we want (though we shouldn’t) and settle our debts in our own currency, it might be very scary right now.

In Brazil, things are looking up in many respects. In a conference call with reporters last week, Guido Mantega, the country’s finance minister, said growth was nearly flat in 2009 at .2%, but that he expected Brazil to grow by 5 percent next year. Inflation did come up as a risk, but Mantega said it shouldn’t be a problem. More on that later …