William Quick of Daily Pundit links to an Economist article about a looming financial crisis in Brazil, on the heels of Argentina's financial meltdown. Richard Jahnke's excellent El Sur links to a Financial Times article covering similar material. The gist of both articles is that Brazil faces a collapse of investor confidence, after a large devaluation of the Real, and a rapidly sinking stock market. The country's credit outlook has been downgraded and foreign investors seem to be getting the hell out of dodge. Both articles voice the fear that Brazil will default on its debts, following Argentina into economic turmoil.

More troubling than these economic problems, however, is the political fallout that accompanies it. The left will probably gain control of the Brazilian government in upcoming elections. Anti-capitalists thrive in chaotic situations like this, and one thing that won't help Brazil is massive taxes and even greater deficit spending to support social spending. They won't be able to solve the problem.

So what do we get when we look at the situation though my much beloved Yeatsian circular history method? Well, if things in Brazil follow Argentina's example, we'll have nations facing stifling foreign debt, extreamly high unemployment, hyperinflation (Brazil doesn't have this problem yet) a center-left political class unable to effectively service increasing unredeemable debt. I can only foresee this ending with a violent reactionary right vs. radical left struggle as the current mainstream becomes more and more discredited. Either way, Gulags or Goosesteps, such a scenario can only end badly.

I hope I'm overreacting to the situation, as there are several differences between the Argentine and Brazilian crises, most notable Brazil's floating exchange rate compared with Argentina's disastrous dollar-pegged currency. But, the danger is real (and the danger from instability in Argentina and Hugo Chavez's Venezuela is bad enough without Brazil joining them), and, unfortunately, our attention is focused on the war against Al Qaeda style terrorists. My fear is that five years from now, after Al Qaeda has been defanged, and the newly democratic Iraq and Iran join the free world, we'll wake up to find nasty things brewing down south.