Geithner urges global effort to tamp crisis
Wed Apr 22, 2009 6:40pm EDT
6:40pm EDT
By Glenn Somerville and Corbett Daly
WASHINGTON (Reuters) - The United States bears "substantial" blame for the woes besetting the world economy but it will take a global effort to ease those strains, U.S. Treasury Secretary Timothy Geithner said on Wednesday.
Speaking to the Economic Club of Washington, Geithner said it was essential to find a better-balanced model for world growth that relies less on U.S. consumers as economies bid to climb out of the steepest downturn in decades.
"We must set ourselves on a path so that one country, or group of countries, does not consume in excess while another set of countries produces in excess," he said.
Geithner's remarks are part of a concerted campaign by the Obama administration to push developing countries to stimulate domestic demand and cut reliance on exports for growth.
U.S. President Barack Obama stressed the same theme at a meeting of the Group of 20 rich and emerging economies in London this month.
Geithner will repeat the message on Friday when he hosts a meeting of G20 officials after a regular gathering of finance ministers and central bankers from the Group of Seven major industrial powers.
SPENDING CONTROL COMING
Geithner stressed that the United States is prepared to incur budget deficits now to spur economic activity but said it would get spending under control once the crisis ends.
"That is very important to do, because the American people and investors (around the world) need to understand that we will have the will and the commitment as a country to go back to ... living within our means," Geithner said.
"To get to that point we have to get a recovery in place."
The International Monetary Fund, which with the World Bank holds semiannual meetings in Washington this weekend, said on Wednesday the global economy was likely to shrink 1.3 percent this year in its deepest swoon since the end of World War Two.
Geithner said that even when signs of stabilization appear, it was vital governments keep supporting their economies so a recovery can gain traction. The United States has been in the forefront in advocating fiscal stimulus, while some European countries say tougher financial regulation was more important.
Germany on Tuesday said it had no need for a third economic stimulus package, despite a deepening recession.
G7 sources in Europe said European finance ministers will point to tentative signs of economic stabilization at this weekend's meetings, even if none expects a real recovery before next year.
EXCESSES TO BLAME
In his remarks, Geithner cautioned that the current global downturn is far more severe than a typical recession:
"It is an abrupt correction of financial excesses that has overwhelmed economies' and markets' self-correcting mechanisms, and so can only be ended by extraordinary policy responses.
"We bear a substantial share of the responsibility for what has happened," he added.
The IMF, however, implied in a report on Tuesday that Europe lags in dealing with the crucial issue of cleaning up banks' balance sheets. It said the United States was about half-way through the process while Europe was far behind.
Political leaders at the London G20 on April 2 agreed to bolster the IMF's resources and to boost trade financing by a total of $1.1 trillion. They also agreed to try to tighten restrictions on tax-dodging.
Finance ministers from the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- will try to put more flesh on the bones of these proposals on Friday and set out their conclusions in a communique in late afternoon.
The G20 meeting to follow will be relatively brief but acknowledges the role that countries like China, India, Brazil, Russia and South Korea can play in becoming stronger consumers and in financing the IMF and other global institutions.
Geithner pointed out that U.S. recovery depends on reversing a decline in its exports. "We need the world to provide growing markets for our goods and services," he said.
In response to a question on whether China was manipulating its currency for unfair trade advantage, Geithner said he would go no farther than to repeat the conclusion of a Treasury report last week that once again gave Beijing a pass.
"China is playing a very important stabilizing role in the global economy today," he said, adding Beijing was committed to a "path of further evolution in their exchange rate regime, which is so important to China and to the rest of the world."
(Editing by James Dalgleish)
© Thomson Reuters 2009 All rights reserved
Pesonal Comment . : In the end it all boils down to fairness , equality ,and equity no man deserves to earn in a short while what another won't make in a lifetime here or elsewhere, and some of us hope this crisis will improve equal oppotunities across the world as time goes by . But the problem is there might not be a lot of time ahead of us to resolve something that lasted for thousands of years .
In my mind there is a movement that started a long time ago when Capital started flowing to poor countries creating jobs and opportunities for a larger part of those populations wich is at the root of the actual crisis , even though greed certainly accelerated and increased that movement.
Money did'nt move to poorer countries for the well being of those poor populations it moved there because labor was cheaper and out of greed taking advantage of slacker laws wether towards the environment or taxations or labors and also taking advantage of some corrupted leaders or just to launder money, but it does'nt matter what were the reasons the results are there .
Now labor across the world is competeting on pretty much the same basis, and while workers in rich countries see the value of their work being depreciated by the competition abroad, workers in poorer countries see their work being more valued, but that does'nt mean it's fair for everyone in the end it only means that labor overall has become cheaper . For those in rich countries who are suppose to support the world production by consuming products made in rich countries as well as in poor ones it now creates a big problem as there pay are decreasing . That's why Geitner and Obama are telling us the Us can't afford to support growth for the hole world but the thing is it's true for most if not all rich countries and soon the products will be increasing out of inflation .
Some countries Germany among them hope to come out of the crisis avoiding inflation , that's why they are reluctant to increase the stimulus package and increase their deficit and debts . But even if they do they won't avoid the pressure to lower labor costs even more as China and India will be producing more and more some of the same things produced or "serviced " in richer countries in the near future .
As for the problems with the banks , the whole financial system being so widely integrated some countries figure some of their own banks will need less help once the other countries have helped their own banks , saving their population from having to pay for those private institutions .
This crisis is underscoring that fact as well as accelerating the shift of jobs from rich countries to poor . All this talk about high tech jobs or value added jobs replacing old ones in richer countries is and has always been a lot of BS . Finaly whole enterprises are getting hit by that reality and a few years from now China and India will be competetive in high tech. jobs and value added ones as well ,and labors in so called rich countries will be out of work, or working for less then what is needed to survive in those rich countries considering the cost of living . When basic products and energy become out of reach for most workers then what ? It's all about fairness and sharing the wealth fairly .
But i suppose that won't happen easily man is too violent for that and some rich countries have too many weapons for that . It's a sad story coming our way , hopefuly i'll be an old men or dead by then and the people i love will have gone peacefuly but it seems to be closer then that.
Excess in earnings between people in rich countries remain a big challenge, access to resources between societies will soon become a big problem too as scarcity increases . Right now we are witnessing how dramaticaly the war for those resources is accelerating and is creating new political allignement along ideological lines .
Some countries are acting diligently to secure access to commodities for their population taking advantage of the sacrifices that were made in the past and a higher social and political purpose for the whole population . While in others bickering , greed and individuality leads to division while putting on the shoulders of the population the burden of supporting excess made by a few. Excessive accumulation of wealth by some individuals like those excess we witnessed on wall street or any any other rich street for that matter are creating rifts among the population and might lead to social disaster in the future .
There seems to be so many things converging to disaster in the next couple of decades or less ,wether it' s pollution of the air the seas or the earth or global warming threatening to flood some major areas of the planet ,or simply this financial disater coupled with the race for resources and commodities causing inevitable social unrest among OECD population .
Labor in those countries getting out of work or having to work for cheaper salaries while being confronted to higher prices and a scarcity of resources in the future is sure to promote the arrival of more radical political leaders and demagogues who in turn will point to far away countries as being responsable for their problems . Add to this the poorest populations of the world having to suffer even worse from hunger and thurst , it's bound to create more political feuds across the world while fueling more religion extremism and clashes .
I personaly believe we have a few years ahead of us to avoid the worst in terms of political social and economic unrest in the future if we make all the right decision at the right time... In other words tremandous odds are against us in terms of relations between societies . As for the part that belongs to the earth i believe it's inevitable , this train won't be stopped , the face of the earth as man has known for over ten thousand years is about to change dramaticaly, unavoidably , the only thing we don't know unless some of u are seers is the schedule , when will time starts running like rushing waters.
One thing we need to " unlearn " in our socities is what some describe as people of quality , it's a joke most people are not so much different from each others and no man deserves to earn hundreds or thousands of times what another one earns , nobody is that much more intelligent or knowledgeable or strong or beautifull or stupid from another, to deserve such a difference in treatment for what he does for a living . Any reasoning that lead people to support such inequalities is a lot of alienation going back to the times of slavery .
