|
September 30, 1994
In a temporary stay of execution, not a pardon, the Fed did not tighten this week.
When the Fed raised rates in August, it said the move was "expected to be sufficient, at least for a time." "A time" was supposed to last until November. While it's nice that somebody in Washington keeps his word, mortgage and bond markets are just barely holding at the high yields of the year, and would clearly prefer fast, firm action from the Fed.
Strong reports are likely to force the Fed's hand. Durable Goods Orders surged six full percent in August alone, and were joined by a 9.7% leap in New Home Sales.
There is (maybe not) a trade war about to start (stop) with Japan. A threat by the U.S. to impose sanctions (more threats, no action) expires (extends) tonight at midnight.
Call Jimmy Carter.
The endless effort to persuade Japan to open its markets has reached a breaking point. The latest monthly U.S. trade deficit was $11 billion total with the world, and of that, $5.67 billion was with Japan alone. The yen has traded at or under 100/dollar for a year, now, and had no impact on increased American exports to Japan. The old excuses from Japan (price, quality, competitiveness) no longer cover the truth: Japan's markets are closed by a grotesque web of regulation and manipulation.
The generation-long "negotiating" pattern has been American threats, a deadline, a miniature concession from Japan, and a U.S. flinch away from sanctions.
Jimmy Clinton's negotiating team says this time, we really mean it.
If we slap on meaningful sanctions this weekend, there will be an immediate currency crisis -- but the first step toward healthy and fair trade. If we back away, there will be a gradual, long term dollar crisis, and organized theft by Japan will become more and more entrenched.
And elsewhere. The new round of the General Agreement on Tariffs and Trade (GATT) is going to pass, and remove many tariffs worldwide. Japan's contribution to world trade has been the invention of the bureaucratic hassle in place of tariffs, and other nations are watching to see if America is a permanent patsy for the hassle trick. Remember that $11 billion deficit? On top of the Japan portion was another $2.5 billion in negative trade with China.
The Clintonites will most likely flinch away from this latest effort to jimmy open Japan's markets. But someday, the trade pressure will be intolerable, and America will have to act. For an excellent description of how the first economic war between superpowers might take place, try the financial parts of Tom Clancy's new Code of Honor.
|
