U.S. Treasury Secretary Jack Lew, spoke with Bloomberg Television’s Peter Cook about ahead of the spring meetings of the IMF and World Bank. Lew discussed his concerns about global growth, the strength of the dollar, and the risk posed by a possible Greek exit from the Eurozone.
On the impact of a Greek Exit, Lew said: “I think that there’s no doubt that if this leads to a crisis that — such as Greece leaving the Eurozone, it will cause an enormous amount of disruption and hardship in Greece. I have said consistently that no one should think that all of the risk of a change like that is predictable in advance and, you know, even if the contagion risk is much less now than it was, say, in 2012 and earlier, it would not be a good thing in a world economy just recovering from a deep recession to have that kind of uncertainty introduced.”
On the strength of the U.S. dollar, Lew said: “The relative strength of the U.S. economy compared to other economies around the world, it explains what the current currency valuations are…I’m focusing on the need for other economies to be stronger. I certainly don’t want the U.S. economy to get weaker; that — we have the good fortune of having the stronger economy. The other economies need to get stronger.”
Jack Lew: Policy Can Drive Demand in Europe
PETER COOK: Secretary Lew, welcome back to Bloomberg.
JACK LEW: Peter, good to be with you.
COOK: As these spring meetings of the IMF & World Bank get set to kick off, what’s your assessment of the global economic recovery? Doesn’t feel like people are popping champagne corks here.
JACK LEW: You know, Peter, I think as people look around the world, they look at the United States as a real engine of growth right now and I’m pleased that the United States is doing much better and there’s a lot of attention on how resilient and how much the U.S. economy has recovered.
I look around the world and there’s clearly a need for more attention to how to generate faster, more sustainable growth. I think that as you look around the world, there’s areas where there’s a need for more use of some of the policy levers that are available. You know, we took advantage of all the policy levers to get our economy back in gear. Monetary policy, fiscal policy, reforms, particularly in the financial area. There are a lot of economies that need to use all the levers that are only using some —
COOK: Mr. Secretary, let’s name some names. You’ve gone through this before. Who is it you’re talking about?
JACK LEW: Look, we go around the world and there’s clearly a shortage of demand in a number of places. Europe, demand has been soft. Policy could help drive demand. You know, the monetary policy tools are being used, the fiscal policy tools, and the reforms that are needed in many parts of the economy would be very well-timed if they were put in place along with the monetary tools.
You go to Asia, and in Japan and China, you know, Japan has a policy, three arrows, they use monetary policy out of the box, fiscal policy out of the box. A little bit of, you know, kind of question as to how to balance their long-term need to get their debt control with the need to have fiscal policy that keeps growth moving in the short-term. The reforms have been a little slower, they need to get those into place and they need to keep focused on the fiscal tools as well as the monetary tools.
And you get to China and China has enormous reforms on the agenda, in terms of what it’s set forth to move its economy toward the more market-oriented, market-driven approach. Moving those reforms forward, opening their economy, their markets, their financial system to market forces is critically important. The sooner they do that, the better.
COOK: Before we talk about some of those other places, let me ask you about the U.S. because the IMF did downgrade its assessment of growth for this year for the U.S. down half a percentage point. We saw pretty weak jobs number the other day. Are we hitting a weak patch right now?
JACK LEW: I think if you look at the trajectory of the last year, 18 months, it is showing consistent trend in the right directions, sustainable, strong growth. I think if you look at where the IMF is now, it’s pretty similar to out projection of where the U.S. economy is. You know, U.S. economy growing in the range of just under, just above three percent is something the world looks at as being a driver of global economic growth. I think it’s a great thing that the U.S. economy is doing better. I don’t think it’s sufficient to drive the entire global economy, for the U.S. economy to be the one area of real strength.
Now obviously there’s a been a pickup in economic activity in a bunch of places that’s welcome. How durable it is, how structural it is, is something that there has to be a focus on. And I think the opportunity to move economic growth in the right direction is very much related to policies that governments have control over, and that’s one the reasons it’s important to have these discussions at the IMF meeting about using all the levers that we policymakers have.
COOK: The one big topic here, Mr. Secretary, you know, is going to be the strength of the dollar. And the argument being made at the IMF and elsewhere is that the strength of the dollar is one of the things holding the U.S. economy back. Are you OK with that?
JACK LEW: Look, I think if you look at the U.S. economy, the relative strength of the U.S. economy compared to other economies around the world, it explains what the current currency valuations are. It’s inherently coming from our strength and, relatively speaking, less strong economies elsewhere. Which is why I’m focusing on the need for other economies to be stronger. I certainly don’t want the U.S. economy to get weaker; that — we have the good fortune of having the stronger economy. The other economies need to get stronger.
I think you do have to distinguish between currency valuations that are the result of differential economic performances from policies that are designed to gain unfair advantage. We have made very clear that if there’s kinds of policy intervention that are unfair, that are designed to gain an advantage in trade, it’s unacceptable. We’ve pushed back very hard on it, and I think we’ve done so with considerable success over the last couple of years.
What we’re seeing now is the fact that our economy is outperforming other economies, and the focus has to be on other economies and other policymakers using the tools to get their economies moving in a better direction, in a stronger direction.
COOK: Your predecessor, Larry Summers, has generated a lot of debate over his argument for the secular stagnation diagnosis, as to what’s happening around the world, the risk of that going forward. Where do you fall in this debate?
JACK LEW: Look, I think that we’ve shown in the United States that when you put policies in place, the economy responds to it. There is a need for policy. Look, we have a need for more policy here in the United States. There’s no doubt that our economy could do even better than it’s doing if we invested in infrastructure more, if we changed our immigration law. If we did the things that — if we reformed our tax code, to have a tax code that was more encouraging of investment, and more competitive worldwide and closing loopholes that make it inefficient and lead to less effective investment strategies.
So there are things that we can do. I think it’s incumbent on policymakers to move the dial in the direction of creating more economic growth. I think there’s many areas around the world right now where economies could be doing better if policy were doing better.
COOK: Let me ask you about a couple other issues likely to come up during the course of this week in the talks.
First of all, you’ve got a meeting with the Greek Finance Minister this week. The president’s going to be meeting with him as well. What’s the U.S. message to Greece right now?
JACK LEW: Well, it’ll be the first time I’ve actually met with him. We’ve spoken on the phone, but I haven’t had the opportunity to meet with him before. My message is going to be the same as the message I’ve delivered over the phone on quite a number of occasions. It’s that Greece needs to get down to the
