See, we worried about nothing as it is not even worth the time of the new aluminum Treasury Secretary ...
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O'Neill signals hands-off stance to world economy
By Gerard Baker and Stephen Fidler in Washington
Published: February 14 2001 21:32GMT | Last Updated: February 14 2001 23:22GMT
Paul O'Neill, the US Treasury secretary, on Wednesday indicated the Bush administration would take a strongly sceptical view of official intervention in global markets to help stabilise the world economy.
In an interview on the eve of his departure for his first meeting of finance ministers and central bank heads of the Group of Seven leading industrialised nations, Mr O'Neill rejected the notion that crises were an inevitable feature of capitalism requiring an official backstop to help resolve them.
He said the failure to stop crises from developing was a failure to let markets operate freely. "It doesn't have anything to with the failure of capitalism. It's to do with an absence of capitalism."
Though Mr O'Neill was careful not to rule out US involvement either in co-ordinated currency market intervention, or leadership in International Monetary Fund operations to help countries in financial difficulties, he suggested more attention should be given to using free markets to prevent crises from developing.
"Why do we have to intervene? Especially why do we have to intervene on a crisis basis? [Crises] are great media fodder but they're not real hot for anybody else."
He strongly indicated he shared concerns about what economists dub "moral hazard", the process by which the certainty of a bailout in the event of a crisis leads investors to behave recklessly. "When you don't have risk associated with investment you don't really have capitalism. You have a kind of socialised lottery system."
Expressing confidence that free markets should be able to forestall crises before they happened, Mr O'Neill likened the IMF and the World Bank to a fire company that should never have to respond to emergencies. "In an ideal world the fire company never leaves the firehouse...hopefully they learn how to play chess really well."
In what is clearly intended to be a theme-note of the new administration's approach to international economic discussions - and a contrast to the Clinton administration's often aggressively didactic approach - Mr O'Neill said he was mostly interested in listening to what other governments had to say at this weekend's meeting.
"I would not characterise what I want to do at this meeting as bringing a message," he said.
Though he praised the G7 process as a means by which the world's policymakers got to know each other, he sounded a note of scepticism about the value of the discussions. "I'm interested in watching the process and finding out what others think the value is that's created by this process."
Saturday's G7 meeting in Palermo, Sicily, will be the first since the Bush administration took office last month, and the first since US economic growth slowed at the end of last year.
For the first time in almost a decade, US growth is likely to slip behind that of Europe this year. The Federal Reserve, the central bank, has cut interest rates by 1 percentage point since the start of the year, and this week Alan Greenspan, the Fed chairman, expressed cautious optimism that the economy may have bottomed out.
Mr O'Neill expressed concern about immediate economic prospects but seemed optimistic that the US would recover quickly.
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