A Nobel Prize Winning Economist, Joseph Stiglitz, Agrees with Our Views on Proposed Chinese Tariffs

May 23rd, 2007

May 22, 2007 – In continuation of my last blog, today it was reported that Stiglitz criticized Congress for its stance on China tariffs.

“We are in a mutual hostage situation, and China may hold the better cards,” Stiglitz said.

The story stated that

if Congress were to pass measures cutting off Chinese exports to the U.S., China could quickly reduce these purchases. China could keep a high growth rate, but the U.S. “would have a very much of a problem financing our deficit,” Stiglitz said.

On March 13th, right here on this blog, I stated

I would argue that in the long run, punitive tariffs imposed upon Chinese imports for the Chinese government’s failure to respond to the U.S. directive of strengthening the yuan would do much more harm than good…U.S. Congress has already alienated China once before by blocking Chinese state run oil giant CNNOOC’s bid to buy U.S. oil company Unocal by calling the purchase a threat to national security, even as U.S. companies clamor for a larger piece of the pie in China. However, a bigger threat to the national security of the U.S. would be a decision by China to dump a large portion of its estimated $1 trillion of U.S. dollar denominated reserves.

I would guess that if tariffs do pass through Congress, that in the future, if the Chinese can dump massive amounts of dollars without such actions seriously hurting their own economy, then they will do so without concern for its effect on the U.S. economy.

Two months ago, when I wrote this blog article, nobody but me commented about the Congressional stance towards China and its pure foolishness. However, I guess when a Nobel Prize winning economist makes the exact same statement, the world listens. The point here is this. It’s not so much that other known figures are now making similar public statements, but the fact that politics have always been and will always remain critical to investment decisions, like it or not. I’ve discussed tons of other countries’ actions right here on this blog including those of the United Arab Emirates, Russia, Iran, and Venezuela that should greatly impact your investment choices.

If I have time, I will discuss recent developments in Bolivia and Kuwait as well in the future. If you don’t understand politics, when all is said and down, investors will find themselves invested in all the wrong sectors when it will eventually matter very soon in the near future. Now, a rising tide is raising all ships, whether in Brazil, Germany, Singapore or the U.S. What makes you a good investor is not times like these as anyone can throw darts at a board and make money. What makes you a good investor is understanding how you must prepare your portfolio NOW for a future time when these soaring markets fade away.

Technorati Tags: China tariffs, Joseph Stiglitz, politics and stocks, dollar crisis

Entry Filed under: China Investments