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     Brazil has imposed what may be the first Tobin Tax on foreign portfolio investment inflows. When you buy on the local bolsa, your costs now include a 2% disuasive tax intended to nip foreign currency inflows into Brazil.

     The reason is that Brazil’s Real currency has risen 23% against the dollar this year. And the impact could be harmful to the export-oriented economy because it will make Brazilian products more expensive to buy. Moreover, Brazilian local products have to compete with imports made cheaper by a rising Real, which hurts the fledgling economy.

     But there is a winner and it is us. American Depositary Receipts traded in the US are not subject to the capital inflow tax. So if third country investors or funds want to own a Brazilian share, they can buy ADRs right here on Wall St.

     Brazil is not the only country which is suffering because its currency is so strong. The same paradox applies to others. For example, the Hong Kong dollar is at the top of its band against the greenback. The HK$ has a fixed exchange rate. But now the impact of $200 bn in inflows into the city state has resulted in the HK$ hitting high valuation (HK$7.75) per US dollar.

     James Tobin, who died 7 years ago, proposed that capital flows be moderated by imposing a tax on them. His idea periodically resurfaces when exchange rates produce paradoxical results, as in Brazil today. But these counter-currents mean that any attempt to reverse quantitative easing in the developed world will cause serious issues in the emerging market countries.

     More news for paid subscribers follows from me and Frida Ghitis.