'Protectionism no solution to US deficit' « Thread Started on May 23, 2004, 12:43am »--------------------------------------------------------------------------------'Protectionism no solution to US deficit' -- syndication, 06:05:30 03/02/04 Tue'Protectionism no solution to US deficit'Protectionism is not a solution to the US huge current account deficit, US Federal Reserve chairman Alan Greenspan said in a letter made public today.'Creeping protectionism must be thwarted and reversed,' he said.'Probably the most serious long-term costs that could arise from the US current account deficit would come if we followed policies aimed at reducing this deficit that are inconsistent with our fundamental policy objectives, in particular protectionist trade polices that interfere with the degree of flexibility that has been so positive a force for US economic performance in recent years,' Greenspan said.The letter, reported on the Wall Street Journal web site, was published by US senate banking committee chairman Richard Shelby, who had asked Greenspan to expand on his views on the Chinese yuan and the current acount deficit.Greenspan also raised concerns that foreigners could lose confidence in US assets if the current account grew wider. Tax measures to improve savings could help reduce the budget deficit, underpinning foreigners' confidence in US assets, he said, although he did not give details of what measures he had in mind.He said that the dollar's fall against other major currencies had not had a bad impact on US financial markets.'Although the foreign exchange value of the dollar has fallen over the past year, the decline generally has been gradual, and no material adverse side effects have been visible in US capital markets,' Greenspan said. Foreign investors continued to have faith in US assets, he said.