This week I bring you two different articles as an offering for Outside the Box. As a way to introduce the first, let me give you the quote from Merrill Lynch economist David Rosenberg about the rising threat of global trade protectionism:
"The Financial Times weighs in on the rising threat of global trade protectionism in today's Lex Column on page 14 ("Economic Patriotism"). The FT points out that the stimulus packages of many countries include "buy local" provisions. At home, there is a proposed inclusion of a 'Buy American' provision in the economic recovery package and this could set off trade retaliation from importers of US goods. Here is what the FT had to say, 'It was trade protectionism that made the 1930s Depression "Great". Congress would do well to understand that it is in everyone's interest to keep trade open today.'"
I have long written that the one thing that could derail my Muddle Through (at least eventually) view point is a return to trade protectionism. Nothing could be more devastating to the hopes of a recovery. Nothing could more surely turn a recession into a depression, and a global one at that.
David Kotok of Cumberland Advisors notes the very real problem with Tim Geithner's written testimony, threatening China and calling the manipulators, clearly making the point that this is Obama's policy. I did not have time to touch last Friday on the dangerous policy if it is that and not just rhetoric, but David says everything I would want to say and does it shortly and eloquently.
Second, several people requested a chance to look at the actual paper I cited in last week's Thoughts from the Frontline by Nouriel Roubini and Elisa Parisi-Capone of RGE Monitor (www.rgemonitor.com) on how they come up with an estimated potential loss of $3.6 trillion dollars in the US financial system. It makes for rather grim reading, but they go sector by sector to show where the losses are coming from.
Tomorrow I will hold my first "conversation" with Ed Easterling and Dr. Lacy Hunt. To find out more about how to listen in and still get the half price discount for the rest of this week at http://www.johnmauldin.com/conversations. Just enter the code JM44 when asked. Have a great week.
John Mauldin, Editor
Outside the Box
Geithner, Obama and China
Following Treasury Secretary designee Tim Geithner's public confirmation hearing, an extensive Q & A occurred in writing. We have posted a copy of the US Senate Finance Committee's 100-page text on our website. See: http://www.cumber.com/special/geithnerquestions2009.pdf. This is must reading for any serious investor, economist, strategist, analyst, or observer. In this text you will find what is on the minds of the Senators, and you will gain…