by Jim Rickards, Daily Reckoning:
As my readers know, I don’t like to get into politics in my analyses; I cover economics and capital markets. That said, there are times when politics are so focused and powerful that we have to pay attention because the impact on markets will be enormous.
This could be one of those times. House Minority Leader Kevin McCarthy, a Republican, has written an open letter calling on Congress to investigate the origins of the COVID pandemic and to hold China responsible if the evidence points in the direction of intentional or reckless conduct on the part of the Chinese.
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That much is part of the normal political give and take. Republicans want to focus on Chinese wrongdoing and evidence that Dr. Anthony Fauci facilitated such wrongdoing with U.S. taxpayer dollars funneled from the National Institutes of Health through third parties.
The investigation would look at so-called “gain-of-function” research in which virus genomes are intentionally manipulated to make them more dangerous. There’s even good evidence that the Wuhan Institute of Virology, where the virus likely escaped, is run by the Communist Chinese military.
The possibility is open that the virus that caused the pandemic was a bioengineered weapon designed to kill as many people as possible.
Whether it was released on purpose or, more likely, escaped through negligence does not alter the fact that the Chinese created a killer virus and covered up the initial release.
Of course, any talk that the virus came from a Wuhan lab was dismissed as a crazy conspiracy theory peddled by Trump. To acknowledge that possibility was seen as an endorsement of Trump, so the mainstream media reflexively dismissed any such claims. Social media banned any post alleging that the virus originated in a lab.
I argued that the virus likely came from a lab in my book, The New Great Depression. I came to that conclusion a year ago. Only now is the mainstream media and their social media bedfellows acknowledging that the lab theory is plausible (see below for one possible explanation for the media’s about-face).
Regardless, the result is almost 4 million dead worldwide, including more than 600,000 dead in the U.S. alone.
In contrast to the Republican position, Democrats led by Biden are trying to downplay any investigation into China’s role by fobbing it off on the intelligence community, which will result in inaction.
Well, here’s the market angle: the McCarthy letter includes the following in his demands:
“The families of those who have died from COVID-19 should be given the option to file suit against the Chinese government for damages incurred as a result…”
How to Make China Pay
If Chinese sovereign immunity was removed from lawsuits, individual suits would quickly become a class action. Total damages could easily top $2 trillion.
Skeptics then say that even if a judgment were obtained, it would be impossible to enforce the judgment against China.
Actually, that’s the easy part. A U.S. federal judge could order the transfer of China’s $1.4 trillion in U.S. government securities to a custodian to be administered for the benefit of COVID victims.
China could not stop this because Treasury securities are held in digital form on a ledger controlled by the Treasury and the Federal Reserve. A few keystrokes could deplete China’s liquid reserve position by more than half. I wrote about this possibility last year in The New Great Depression.