Stephen Roach writes about the "three senators in Beijing" (Schumer, Graham, and Coburn), co-sponsors of a bill which would impose 27.5% tariffs on all Chinese imports into the US unless there was an RMB currency revaluation of a like amount. When Schumer told Roach that the tariff bill would help boost US savings, Roach said he nearly choked on his watermelon. Before he could ask Schumer a follow-up however, the senior Senator from NY was off to the nearest set of microphones and cameras. (Someone once said the most dangerous place in Washington was between Schumer and a TV camera.) Roach wrote an opinion piece on the issue in China Daily titled Trade Frictions Result of US Savings Shortfall.
"...Thanks to China, America actually got a rather extraordinary deal for its trade deficit dollar in 2005 a net balance of some US$200 billion of low-cost, high-quality Chinese goods that expanded the purchasing power of US consumers. If, however, Washington politicians now choose to close down trade with China by imposing high tariffs or forcing a major Chinese currency revaluation - precisely the intent of legislation proposed by US Senators Schumer and Graham - those actions could easily backfire.
Remove the China supply line, and the trade deficit for a saving-short US economy won't shrink as populist politicians suggest. Instead, due to America's oversized external funding needs, the trade deficit would remain large and merely gravitate to another foreign producer - most likely, one with a higher cost structure. Such a shift in America's external sourcing would amount to the functional equivalent of a tax on the American consumer."
Global Liquidity BCA Research asserts that while global liquidity is falling, conditions are still favorable enough to support the more risky asset classes. There are various ways to measure global liquidity, however. A Reuters article from early March quoted Michael Buchanan of Goldman Sachs as saying that his favorite measure of global liquidity, "an excess of credit growth in the top six world economies over the nominal gross domestic product growth", was growing at over 3%, the highest since the middle of 2003.
