Top economic adviser to Obama sees no quick fix
Chinese official repeats concern about Fed move
BEIJNG – Paul Volcker, a top economic adviser to President Barack Obama, said Tuesday he sees no short-term way to reduce high U.S. unemployment and expects slow growth for the next year or more.
Volcker’s comments come after the U.S. Federal Reserve said last week it would purchase $600 billion in Treasurys in an effort to boost growth and create jobs, cutting unemployment that stands at 9.6 percent.
“I have no answer to it at the moment, and I think that is the basic problem,” said Volcker when asked about unemployment at a financial forum.
“I suspect that it will gradually decline. But the basic fact of the matter is that the economic outlook is for continuing but limited increases in economic activity for the next year or more,” he said.
Volcker is chairman of Obama’s Economic Recovery Advisory Board and was Fed chief from 1979 until 1987 under presidents Jimmy Carter and Ronald Reagan. He was speaking at a meeting of the International Financial Forum, a group of bankers and finance officials from the United States, China and other countries.
Volcker said growing public frustration and political conflict in the United States has complicated efforts to craft an economic program. He expressed hope the Republicans’ gains in congressional elections this month would prompt the party to “share responsibility for government” and work with Obama.
“That’s a hope. I don’t think it’s an unrealistic hope,” he said.
“It is equally possible that we will continue to have divisiveness and, really, bitterness in the Congress, which would not help.”
Speaking last week in Seoul, Volcker said the Fed’s bond plan was unlikely to change the overall economic outlook or boost the recovery.
The Fed’s move has sparked complaints by China, Germany, Brazil and others that the Fed’s move might fuel inflation or hurt developing countries by triggering an influx of money as investors seek better returns. That would push up exchange rates and hurt exports by making their goods more expensive.
On Tuesday, a Chinese official speaking before Volcker at the financial forum repeated Beijing’s criticism of the move.
“If the United States can increase the volume of dollars and it can transmit inflation to other countries to lessen the pressure of debt, then it will bring about a catastrophic influence on the world,” said Cheng Siwei, a deputy chairman of China’s legislature.