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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: russwinter who wrote (1064)	9/26/2003 11:10:21 AM
From: mishedlo	Read Replies (2) of 110194

If this is going to happen, buy all the gold and silver you can stomach morganstanley.com But unrelenting layoffs, together with record and ever-widening US trade deficits, are a toxic combination in this highly charged political season. For Congress, the agenda is clear: It is now time for action against those deemed responsible for the distress of the American worker. China is the target. And so I was summoned as a so-called expert witness for a hearing on “China's Industrial, Investment and Exchange Rate Policies: Impact on the United States.” Little did I suspect the fireworks that awaited me. The degree of venom was extraordinary. It left little doubt in my mind as to where this debate is headed. In the eyes of these politicians, China should be held accountable for the virtual destruction of America's industrial base. Never mind the secular downtrend in US factory sector employment that has been evident for more than 45 years. It is China's emergence that is now billed as the coup de grâce. But this US Congress is not all bluster. America's legislators believe China must now be stopped at all costs. In keeping with this sentiment, protectionist legislation has recently been introduced in both chambers of the Congress that would slap huge tariffs on all Chinese imports into the US. The Senate version (S. 1586) sets that tariff at 27.5% -- midway between the 15% to 40% estimates the sponsors believe are reasonable approximations of the under-valuation of China's currency. The House version (H.R. 3058) also imposes across-the-board-tariffs on Chinese imports, with the tariff rate to be determined by a computation of the “rate of manipulation” of the RMB. At the hearing, one of the House sponsors implied that the calculated tariff under that formula could easily exceed the 27.5% rate of the Senate bill. If I'm reading the mood of Congress correctly, America's legislators are dead set on forcing China's hand -- one way or another. One of the most seasoned members of the commission -- a 30-year veteran of the Hill -- came up to me after my session ended and said, “Your arguments are solid, but the political train has left the station. I can smell it -- something big is coming.”

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