Rubin warns of risks to new economic paradigmgreenspun.com : LUSENET : TimeBomb 2000 (Y2000) : One Thread
Please note: This item never got past the ABC News site's "Raw" stage. Too gloomy, I guess, and besides, what does Robert Rubin know, anyway? 8-}
WIRE:02/02/2000 12:31:00 ET Rubin warns of risks to new economic paradigm LONDON, Feb 2 (Reuters) - Former U.S. Treasury Secretary Robert Rubin said on Wednesday the belief the world had entered a new economic paradigm of uninterrupted prosperity risked unwarranted complacency among investors and policymakers.
Speaking hours before the U.S. Federal Reserve announced its latest decision on interest rates, Rubin questioned whether a move to the information-based economy had rendered traditional concerns about periodic economic downturns irrelevant. 'This view of the economy is contrary to all of human history with respect to markets and economies, and that should be a sobering caution,' he said in the text of a speech prepared for delivery at the London School of Economics.
Rubin was Treasury Secretary between 1995 and 1999. Last year he returned to his investment banking roots and joined Citigroup as chairman of the board's executive committee.
During his tenure at the U.S. Treasury, debate in policymaking circles heated up about whether a 'new economy' was emerging in the United States in which faster gowth with low inflation was possible because of higher productivity. The Federal Open Market Committee is on Wednesday expected to raise interest rates by a quarter percentage point to slow an economic expansion which has become the longest in U.S. history.
Rubin highlighted a record trade deficit, tight labour markets, a low personal savings rate and stock valuations which were high by conventional measures as factors being dismissed as minor caveats to the positive U.S. outlook. He added that complacency was now the greatest threat to the global economy and the world's financial markets. The speed with which economies and markets had rebounded after setbacks triggered by crises like the one which engulfed Asia in 1997 had increasingly seen countries and individuals drop their guard, he said.
'With each successfully averted crisis, with each near miss, the certainty that things will always work out seems to grow and with it the likelihood of unsound decisions in the public and private sector,' he said.
However, Rubin said the risk of further disruptions in the global financial markets remained, particularly given the amount of money flowing around the capital markets, the expansion of markets to more developing countries and the structural weaknesses in the financial systems of some of these countries. He said the expansion of trade faced hurdles in the United States and elsewhere in the world and added there was a possibility that progress which had already been made could be reversed. Against this backdrop he urged measures on education, training, and health coverage to be taken to allay anxieties caused by consequences of trade liberalisation and to bolster the consensus for freer trade in goods and services.
Turning to the benefits of trade, Rubin said imports had helped keep U.S. inflation in check. He noted that one Fed calculation suggested inflation could have been as much as one percentage point higher and interest rates more than two percentage points higher if imports had not risen over the past three years.
-- DeeEmBee (firstname.lastname@example.org), February 07, 2000
Sorry about the bolding. Now let's see, where'd I put that NCSA HTML primer...
-- DeeEmBee (email@example.com), February 07, 2000.
Aha...it's the same new paradigm that we had in about, was it 1929?
Some basics (like sound investments) should be followed...those who go by other paths will eventually fall. A classic case was that of junk bonds, which did fine, until the market collapsed!
-- Mad Monk (firstname.lastname@example.org), February 07, 2000.
He is former now. Therefore, he can now tell the truth. Why he is doing so I wouldn't hazard a guess.
-- Kyle (email@example.com), February 08, 2000.
new Paradigm my aspidistra!
Same old pair-o-dimes, just hyper-fueled by a FED that was afraid of Y2K liquidity crunch.
-- Chuck, a night driver (firstname.lastname@example.org), February 08, 2000.