Risks of shocks in global economy rise: Fed´s Geithner
Thursday, January 13, 2005 3:51:22 PM
afxpress.com
Risks of shocks in global economy rise: Fed's Geithner WASHINGTON (AFX) - A set of pressing macroeconomic problems has increased the probability of shocks to global financial prices, said Timothy Geithner, the president of the Federal Reserve Bank of New York
"The probability of these shocks may be low, but it is higher than it has been, and higher than we should be comfortable with," Geithner said in a speech Thursday to a business group in New York
He said the threats of shocks is not reflected in prevailing financial market prices
Geithner said he was concerned about the weak fiscal policy outlook for the G7 nations. In addition, there has been a dramatic deterioration in the U.S. indebtedness, that cannot be sustained
"These two broad forces coincide with the increasingly rapid integration of China and India into the global economy and financial system," he said
A fourth challenge is the prospective changes in the global exchange rate regime. "The international monetary system now incorporates an uncomfortable disparity in the extent to which real effective exchange rates vary across regions," Geithner said
The U.S. and Europe allow their exchange rates to float freely, while Japan is less enthusiastic and China and other Asian economies actively seek to keep their exchange rate fixed
"The world has lived with this system for some time. But this is not an ideal mix...and it's probably not sustainable over time," he said
"Without policy action commensurate with the challenges, we face some risk, it may not be high, but it is material, of a world with somewhat lower growth performance and higher volatility," he said
The U.S. may be in better position to manage successfully through this period, Geithner added
"Our underlying fiscal position is stronger, our debt to GDP burden lower, our demographic cliff more moderate and our trend growth rate substantially higher than that of the other major economies," he said
[gag me with a spoon on this horsesh*t - mish]
The U.S. economy begins the new year with "pretty solid underlying pace of growth," Geithner said
"Core inflation is moderate and various measures of inflation expectations suggest confidence in the outlook for price stability," he added |
