Fending off world recession Clinton speech: Strong case for lower worldwide interest rates and global coordination.

September 17, 1998

THE MAIN DANGER to prosperity has shifted, President Clinton decreed, from inflation to -- though he avoided the word -- depression.

In his speech Monday, the president made as forceful a case as can be made that the Federal Reserve Board should lower interest rates in concert with rate reductions elsewhere to end the financial crisis that is making people suddenly poorer in Asia, Russia and Latin America. Whether Chairman Alan Greenspan agrees, however, won't be known until Sept. 29.

Mr. Greenspan hinted, in a Sept. 4 speech, that he does. "It's just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress," he said, raising deflation, not inflation, as the danger.

In their joint testimony on Capitol Hill yesterday, Mr. Greenspan and Treasury Secretary Robert Rubin supported Mr. Clinton's priorities and sense of urgency. Mr. Greenspan, however, gave no further hint about interest rates, other than to say that no coordinated international interest rate reduction is under way.

Mr. Clinton's call for a world meeting of finance ministers "to recommend ways to adapt the international financial architecture to the 21st century," suggests short-range and long-range solutions. The outlook is gloomy in some parts of the world. Japan's politicians probably cannot initiate the policies needed HTC to restart growth there within a year, though much of Asia desperately needs it. Russia is unlikely to make the reforms demanded by creditors.

But Washington must do its share to help. Replenishing the International Monetary Fund -- on which Congress has dragged its feet scandalously -- is an urgent need. As Mr. Clinton said, "Failure . . . to pay our dues to the IMF will put our own prosperity at risk."

He was vague about unilateral U.S. credits, successfully used to help Mexico. Support for the World Bank "to double its support for the social safety net in Asia, to help people who are innocent victims of financial turmoil," as the president put it, is essential.

The world is looking for U.S. leadership in the global economic crisis. Mr. Clinton understands it must be provided, or the world's recession could reach our shores.

Pub Date: 9/17/98

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