Treasury Secretary Robert Rubin On The Asia Crisis
JEFF YASTINE: Well, Treasury Secretary Robert Rubin today defended the Clinton Administration's Asia policy. In a speech at Georgetown University, Rubin said it's important to modernize the structure of international financial markets. He urged Europe and Japan to reform their economies to generate growth and reaffirm strong administration support for the International Monetary Fund. And addressing calls from some members of Congress to withhold IMF funding, the secretary was blunt.
ROBERT RUBIN, U.S. TREASURY SECRETARY: If the crisis were to spread more broadly in Asia, and more broadly to other emerging markets around the world, then the impact on American workers in businesses could be much greater. Simply put, we cannot afford to stand back and gamble that the crisis will resolve itself.
YASTINE: After the speech, Treasury Secretary Rubin sat down with NIGHTLY BUSINESS REPORT's Washington Bureau Chief Darren Gersh. Rubin said he was encouraged by some of the recent news from Asia.
DARREN GERSH, NIGHTLY BUSINESS REPORT, CORRESPONDENT: Mr. Secretary, the Japanese stock market has been up 10 percent this week. The South Koreans' stock market was up 25 percent year-to-date. So, are you satisfied with the progress that's been made so far in resolving the Asian crisis?
RUBIN: I don't think that markets are what we ought to be focusing on. I think the key is to focus on the programs; in terms of the countries involved in the crisis now, the programs that they have committed to, and the extreme importance of their continued adherence to these programs. In the case of Korea, the existing government and the president elect have both , I think , been extraordinarily faithful in their adherence to the program and their expressions of support for the program. And I think that's very encouraging.
GERSH: Are you encouraged by the market reaction so far?
RUBIN: I think the market reaction is I suppose, mildly encouraging. But as I said, I don't judge things by the market reactions. What I judge is what these countries are doing.
GERSH: Now, you've said even with what's going on in Asia, that you expect U.S. growth will be pretty good next year, inflation low. But you've said that the idea of importing deflation from Asia is a low probability event. Can you explain your thinking behind that, why you think that?
RUBIN: Well, what I said is that with the strength of our economy and the strength we've had over the past five years, I think as you look out over the coming year in 1998, it seems to me that far and away, the most likely scenario is the continuation of solid growth and low inflation. Having said that, I don't think there's any question that there'll be some negative impact from what has happened in Asia.
The concern is that the conditions in Asia deteriorate; either because more countries in Asia become involved, or because it spreads to countries elsewhere in the world--developing countries elsewhere in the world. The further it spreads, the more good markets for our exports deteriorate, and that it makes it more difficult for us to export. And the more emerging and developing countries have depreciated currencies which then adversely effects competitors of our goods around the world. The answer to all of that is to support these support programs and these reform programs so these countries can start growing again, which makes them good markets for our goods, and so their currencies can recover.
GERSH: Can you explain why you think deflation is unlikely though?
RUBIN: I think deflation is unlikely because, we really do have a robust economy-- the United States. And, while it is true, we have a very low rate of inflation which is very good, and which I think is in part actually a function of the way the international economy has worked, I think that for us to have deflation would take far greater effects than any that I can foresee under current circumstances.
GERSH: You know, the IMF has been the main focal point in terms of implementing reform programs in Asia. How good a job has it done? And what needs to be changed about the IMF going forward? What have we learned about it?
RUBIN: I think in the context of the existing institutions, and the existing state of knowledge with respect to dealing with these kinds of crisis, I think the IMF has done a very good job. They have constructed strong programs. Those programs are very carefully tailored to deal with the financial sector and other structural problems that have given rise to the financial instability. But these are very tough issues, and in many ways we really are at a new era. And in many ways, the global economy has never seen a situation like this before. So, this is going to take time, it's going to take patience. I think the IMF programs are the best and probably the only viable way to get through this, though there are certainly no guarantees. And I think we all, because of the enormous interest we have--the United States has in getting these issues resolved, we all must keep focused on moving this process along.
GERSH: Critics in Congress have said that when you come to them for more money for the IMF, they're going to want to put strings on it, especially your ability to use the Exchange Stabilization Fund which you used to help Asian countries. What impact would strings on that fund do to your ability to respond to crises?
RUBIN: I think that would be a very grave error. The Exchange Stabilization Fund has proven to be extremely important to help the United States promote and protect its economic and national security interests in a time of crisis. Because, it is a fund that could be used quickly. And you don't have time in these kinds of situations to go through very lengthy processes. You have to move quickly to try to put in place reform programs so it will be effective.
GERSH: Finally, IBM said today that the strong dollar hurt its profits. I think the dollar's strong in part because of what's going on in Asia. You've said a strong dollar is in the US's interest. Why is a strong dollar bad for companies like IBM, but it still could be good for the rest of the country?
RUBIN: Let's separate out two different situations. The crisis in Asia is not a crisis of a strong dollar. It's a crisis of vast depreciations in their currencies. And we believe that by supporting restoration of economic stability, financial stability in those countries; their currencies should also tend to recover which is good for the competitors of our goods. The question on the strength of our dollar is a different issue. I think without question that a strong dollar has contributed very substantially, to the economic well being this country's had over the past five years-- by reducing interest rates, and also by helping to keep inflation at much lower levels than anybody expected we could have with the high rates of growth and low levels of unemployment that we've had over the past five years.
GERSH: And it continues to do that in the current circumstances?
RUBIN: And I think that a strong dollar is very much in our interest in the current circumstances. But I distinguish between the question of the strength of the dollar which is one issue and the depreciations of the currencies of the countries that are in crisis, which is really a very separate issue.
GERSH: Mr. Secretary, thank you for being with us.
RUBIN: You're more than welcome. Good to be with you.
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