The thoughts on the high price of oil
>> finance ministers and central bankers from the group of seven industrialized nations gather in washington later this week. oil, interest rates and china likely to be among top issues discussed. michael mckee spoke with treasury secretary snow who, of course, will host the event beginning with his thoughts on the high price of oil.
>> these current price levels are most unwelcome. they’re too high. and it’s clear that if they persist, they will slow down the world economy. i think they’re out of line with underlying fundamentals and i trust that there will be a movement back towards lower price levels that reflect the fundamentals. i’m pleased by what opec and the saudis have indicated they will do. but certainly this is your -- you’re right, you’re absolutely right, this is a matter for intense discussion among the g-7 and the largeer i.m.f., world bank community that meets this weekend.
>> you have ministers from saudi arabia and middle eastern countries meeting with the g-7. any particular message to them, any particular request from them?
>> well, you’re right. we are meeting with the g-7. the g-7 has invited the ministers from the middle east to meet with us. and among other things, that will certainly be on the agenda. we’ll ask them to be as forthcoming as they can be to stretch and try to respond to this current situation by increasing output levels. they have been responsive in the past and i think they’ll continue to be responsive.
>> one of the concerns people have had that pea were talking―we were talking about earlier with prominent economists is the damage higher oil prices could do to the world. how do you see the global economy going into the g-7 meeting?
>> the global economy, mike, is about as strong as it’s been in 15 or 20 years. growth rates are the highest we’ve seen in many years. there are no crises, no financial crises anywhere. there are no recessions anywhere all the major economies are doing reasonably well and growth rates for the world economy as a whole are the highest in 15 or 20 years. so overall, i’d say things are very positive.
>> oil prices are not a crisis at this point?
>> no, but they clearly create headwinds for the world economy. they’re unwelcome. they’re not helpful. and they will not create, in my view, a recession but they certainly take something off the otherwise high g.d.p. growth rates.
>> along with the ministers from the middle east, you’ll meet with the chinese for the first time at the g-7 meeting. what’s the message there? are you going to tell them they’re not doing enough at this point to help ease global trade tension?
>> well, we’re going to urge them on with their w.t.o. com pliance requirements. we’ll talk to them about the need to deal with intellectual piracy, continue to open up markets and in particular we’ll talk to them about currency flexibility and the need for them to continue and accelerate the path to greater flexibility in their currencies.
>> they are doing well or not doing well enough in creating grart flexibility?
>> we’ve talked about this before, mike. they’re making some concrete progress.
>> where could i see that, sir? you have talked about that before but where does it show up? we see the trade deficit with china get larger.
>> in terms of the flexibility of the currency, mike? look at the fact that there have been a number of financial market openings. look at the fact that they’re taking action to clear up the problem of the non-performing loans. look at the fact, they’re allowing more non-chinese financial institutions into their markets . and look, finally, at the fact that they’ve entered into an agreement with the chicago mercantile exchange to put in place hedging forward market hedging on their currency. that’s not something you do if you intend to maintain a peg indefinitely.
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