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Sunday April 16 12:43 PM ET
Summers Urges Calm in Face of Market Plunge
By Knut Engelmann
WASHINGTON (Reuters) - U.S. Treasury Secretary Lawrence
Summers said on Sunday investors should remember the good
health of the American economy when they return to their
desks on Monday after a steep fall in stock prices last
week.
Exuding an air of confidence in the face of one of the worst
weeks in the history of Wall Street, Summers appeared on two
separate television programs in an attempt to limit the
fallout from the market's bloodbath.
While he insisted he could not ``make predictions'' about
what would happen when markets reopen on Monday, he told ABC
television, ``I think we'll all do best staying focused on
the long run and recognizing the real strength that this
economy has.''
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He said the Clinton administration was keeping a close eye
on developments in markets, but that it was focused on ``the
real economy, which continues to expand.''
In an earlier appearance on Fox News Sunday, Summers said
the economy was in no immediate danger of overheating,
despite a much-larger-than-expected uptick in U.S. consumer
prices that prompted Friday's sell-off
``The economy of the United States is in better shape than
it has been in a long time,'' he said. ``We always worry
about inflation because being vigilant about inflation is
how we kept inflation under control over all of these
years.''
Asked whether he saw a risk of a serious rise in inflation
in the months ahead, Summers replied, ``No, I don't.''
In its ninth year of an unbroken economic expansion, the
U.S. economy is growing at such blockbuster rates that the
Federal Reserve Board is increasingly worried about the risk
of overheating. Federal Reserve Chairman Alan Greenspan has
said higher stock prices could stoke inflation by driving up
consumer spending to unsustainable levels.
Other key industrial nations, too, are worried about the
effects that a sharp plunge in U.S. equity prices and
possible slowdown in the U.S. economy could have on their
own growth.
Sharing The Burden
Addressing the International Monetary and Financial
Committee of the protest-hit International Monetary Fund,
Summers said the United States had to ``ensure that
inflation remains in check'' and boost its low national
savings rate.
But reiterating earlier comments he placed the onus for
balancing lopsided world growth on Japan and Europe, whose
economies are still trying to catch up with the United
States.
``I continue to share the concerns of my Japanese colleagues
about the prospects for the Japanese economy. There have
been some positive signs and we can all hope that the worst
is past and look for growth to resume this year,'' he said.
Japan must continue to use ``all the tools of macroeconomic
and structural policy'' to cement its recovery, he said,
echoing a statement on Saturday by the Group of Seven major
nations after a meeting of finance ministers and central
bankers.
The weekend gatherings of the IMF and World Bank have been
overshadowed by mass protests against those institution's
policies, which critics have blamed for worsening the lot of
the world's poor. Both lenders have also been fought an
uphill battle on Capitol Hill, where U.S. lawmakers have
assailed their policies and complained about a lack of
transparency.
``Although global economic conditions are better than they
have been for some time, fundamental questions are being
posed about economic integration and the role of
international financial institutions in that process,''
Summers said.
``If there is one point on the debate on which everyone is
united, it is the desire to improve the situation of the
world's poor and a desire to ensure that a more global
economy advances this goal. The differences are about the
best means for achieving this.''
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