Greenspan on gold (not sure if was posted)
biz.yahoo.com
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Nov 13 (Reuters) - Following are excerpts from
the question-and-answer session after Federal Reserve Chairman
Alan Greenspan discussed the Asian currency markets in
testimony before Congress on Thursday.
Greenspan addressed the House Banking Committee at 1000
EST/1500 GMT along with Deputy Treasury Secretary Lawrence
Summers.
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REP. FRANK (D-Massachusetts): ''You and others have
historically said that the price of gold is an inflationary
indicator, and gold is at a very low rate. How do you reconcile
a consistent view over time to regard the gold price as an
indicator of inflation. Now gold is at a very, very low rate.
Does that mean that inflation is not much of a problem? Or has
the gold price somehow become an irrelevancy
when it comes to indicating inflation?''
GREENSPAN: ''It's a meaningful tool to evaluate the
expectations of inflation, which if you're talking about the
gold price denominated in dollars, it's one of the major
indicators we would employ to make judgments about the
expectation for inflation.
''At current prices, we're still more than nine times what
we were a generation ago ...
''That is an important question and I don't think we fully
know the answer to that, but there is no doubt that the decline
in the gold price in the recent past parallels the decline in
inflation expectations which we see elsewhere. I don't think
there's any question the Asian crisis has imparted a degree of
disinflation to the rest of the world. I think that's evident
and I don't think we see the full impact as of yet. You have to
remember that a goodly part of that has come in the form of
goods, tradeable goods. And tradeable goods, while important to
our economy, reflect a not very large part of the overall
business structure that we've got. If you take non-farm
business, goods production is a third of it. The big part is
services.''
REP. FRANK: ''Am I correct in saying that your view is that
one of the major constraints of our ability to grow at the
current rate without inflation is the size of the work force
and that you believe that we are in fact absorbing workers at a
rate that may in fact prove to be unsustainable?''
GREENSPAN: ''I merely pointed out the arithmetic of what the
data show, namely that the number of additions to the working
age population who wish a job -- remember that excludes
students -- are increasing quite significantly. That number,
which is, one must presume, the sustainable rate of employment
growth over the longer run, which is a number that is
signficantly below what the rate of growth of employment has
been, in recent years.
REPRESENTATIVE: ''Is it now possible for us to do something
concrete as a government with the help of other governments to
ensure that, in fact, by the Basle priciples being applied, by
using (Asia-Pacific Economic Cooperation) which can be enlarged
to the (World Trade Organization), that we began to see some
improvement in those domestic banking systems. Can we take
those steps as a government ... will it be a priority? Or
should we admit that our rhetoric was overblown and these are
not major contributing factors?
GREENSPAN: ''Well, I remember general discussion of the
Basle principles in Stockholm two, three years ago. I was
startled by how many countries were represented to try to
understand and find a means by which these individual countries
could apply those priciples to their domestic banking
institutions. I don't believe it's an issue of Basle, the Bank
for International Settlements, the IMF states, anybody trying
to impose principles on individual countries.
''I think they're seeking ways to ... solidify their
financial structures, which in very many instances are fragile,
because they increasingly recognize the importance of finance
in the developemnt of standards of living in their own
countries. A crucial question, however is that it's not a
simple issue, bringing a sophistocated banking system to a
developing nation. The development of experienced loan officers
who fully understand the nature of market risk and what
constitutes appropriate lending practices is a very difficult
issue to advance. So, I don't think that we need to press them
very hard; they want to, and I think we should very much try to
find means by which we can assist them, and to do that, we at
the Federal Reserve have been engaged for a number of years.
''We're extending a system to individual banking
organizations around the world, because we recognize that it's
to our interest that finance become far more sophisticated than
it is because it serves everybody's purpose, and it is an
essential component for the issues of trade across borders and
rising standards of living. To the extent that the IMF and the
World Bank, in its conditionality, can sharply focus these
questions, I think is very much to the individual interests of
the individual recipients of contingent aid and it is certainly
in the interest of the (Group of Seven industrialized nations)
and especially the United States.''<!--END--> |
