Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21
CISCO 2020 Dot com Bubble Stock vs 2021 Bubble Tech Stocks Warning Analysis - 6th Oct 21
Precious Metals Complex Searching for a Bottom - 6th Oct 21
FB, AMZN, NFLX, GOOG, AAPL and FANG+ '5 Waves' Speaks Volumes - 6th Oct 21
Budgies Flying Ability 10 Weeks After wings Clipped, Flight Feathers Cut Grow Back - 6th Oct 21
Why Silver Price Could Crash by 20%! - 5th Oct 21
Will China's Crackdown Send Bitcoin's Price Tumbling? - 5th Oct 21
Natural Gas News: Europe Lacks Supply, So It Turns to Asia - 5th Oct 21
Stock Market Correction: One More Spark to Light the Fire? - 5th Oct 21
Fractal Design Meshify S2, Best PC Case Review, Build Quality, Airflow etc. - 5th Oct 21
Chasing Value with Five More Biotech Stocks for the Long-run - 4th Oct 21
Gold’s Century - While stocks dominated headlines, gold quietly performed - 4th Oct 21
NASDAQ Stock Market Head-n-Shoulders Warns Of Market Weakness – Critical Topping Pattern - 4th Oct 21
US Dollar on plan, attended by the Gold/Silver ratio - 4th Oct 21
Aptorum Group - APM - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 3rd Oct 21
US Close to Hitting the Debt Ceiling: Gold Doesn’t Care - 3rd Oct 21
Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
Original Oculus VR HeadSet Rift Dev Kit v1 Before Facebook Bought Oculus - 3rd Oct 21
Microsoft Stock Valuation 2021 vs 2000 Bubble - Buy Sell or Hold Invest Analysis - 1st Oct 21
How to profit off the Acquisition spree in Fintech Stocks - 1st Oct 21
�� Halloween 2021 TESCO Shopping Before the Next Big Panic Buying! �� - 1st Oct 2
The Guide to Building a Design Portfolio Online - 1st Oct 21
BioDelivery Sciences International - BDSI - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 30th Sep 21
America’s Revolving-Door Politics Behind the Fall of US-Sino Ties - 30th Sep 21
Dovish to Hawkish Fed: Sounds Bearish for Gold - 30th Sep 21
Stock Market Gauntlet to the Fed - 30th Sep 21
Should you include ESG investments in your portfolio? - 30th Sep 21
Takeda - TAK - High RIsk Biotech Stocks Buy, Sell, Hold Investing Analysis for the Long-run - 29th Sep 21
Stock Market Wishing Away Inflation - 29th Sep 21
Why Workers Are NOT Returning to Work as Lockdown's End - Wage Slaves Rebellion - 29th Sep 21
UK Fuel PANIC! Fighting at the Petrol Pumps! As Lemmings Create a New Crisis - 29th Sep 21
Gold Could See Tapering as Soon as November! - 29th Sep 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

China Economy Needs Serious Reform; Russia's Heading in a Bad Direction

Economics / Emerging Markets May 10, 2014 - 02:47 PM GMT

By: Bloomberg

Economics

On this week's "Political Capital with Al Hunt," airing tonight at 9:00PM/ET, Bloomberg Television anchor and Bloomberg View columnist Al Hunt, interviews United States Department of Treasury Secretary Jack Lew. Sec. Lew said to Hunt, China must avoid postponing long-term economic measures, "they obviously have to worry about their short-term economic situation. What they can't do is treat the long-term reforms as something they can just put off. They need to be serious about it."


Sec. Lew also said to Hunt:

- China must move toward market-determined prices.

- China needs to be serious about economic reform.

- Seen 'very negative movements' in Yuan recently.

- Russia risks more sanctions if behavior doesn't change.

- "Unacceptable for Russia to violate Ukraine's sovereignty."

- Steps U.S. has taken on Russia 'are being effective.'

- U.S. goal is to get Putin 'to change Russia's policy'

- Russia's economy is heading in a bad direction.

"Political Capital with Al Hunt" airs Friday evenings at 9pm/ET and midnight with repeats throughout the weekend, including 9:30am, 1:30pm and 9pm on Saturday and Sunday at 9:30am and 1:30pm/ET.

To find Bloomberg TV in your area, visit http://www.bloomberg.com/tv/channel-finder

Bloomberg TV live stream: http://www.bloomberg.com/tv/

Full transcript below.

AL HUNT, HOST: We begin the program with the United States Treasury secretary, Jack Lew.

Thank you for being with us, Mr. Secretary.

You're taking off for China on Sunday, an important trip. Chinese growth was 10 percent. It slowed to 7.4 and may slow more

How likely is it the Chinese will introduce new stimulus measures even at the expense of their economic reforms and what advice would you give them?

JACK LEW, TREASURY SECRETARY: Al, good to be with you today.

Um, I think, you know, China and China's economy is obviously of great into to the world, to us, to -- it's profoundly of interest to the Chinese.

Um, I think that they have a lot of tools that they have to -- to continue to -- to grow. But they have to make the right policy decisions.

Um, the challenge they have is the trade-offs between reform and -- and short-term growth. And I'm certainly going to encourage them to stay on a reform agenda. They need to open their markets. They need to have a level playing field so that their markets determine prices and the -- there can be competition between domestic and international goods and services.

Uh, and that...

HUNT: (INAUDIBLE) likely they'll stick with that reform...

LEW: Well...

HUNT: -- rather than a short-term stimulus?

LEW: You know, I -- I think -- I think that it's -- it -- they obviously have to worry about their short-term economic, uh, situation. We all have to balance short- and long-term decisions we make.

What they can't do is treat the long-term reforms as something that they can just put off.

HUNT: Right.

LEW: And they need to be serious about it. They know they need to be serious about it. They know that their economy, if it doesn't move more toward market-determined prices and -- and signals is not going to give them the medium- and long-term growth they need.

HUNT: Some worry...

LEW: So that they...

HUNT: -- that (INAUDIBLE) their property prices are falling. And I see some experts say that there's the prospect that China is in a bubble that's about to burst and that it will affect the global economy.

Is that a real danger now?

LEW: Look, I -- I think that, you know, there are a lot of challenges that China has to deal with. China has a lot of capacity to deal with its challenges internally. So I -- I think that the question is whether they manage some of the things going on in their -- in their economy, whether it's some price fluctuations in housing or whether it's shadow banking or state and local -- their local provincial finance.

They have the capacity to deal with it. They -- they need to -- to deal with it. (INAUDIBLE)...

HUNT: You don't see them in a bubble right now?

LEW: Look, I -- I think that they have challenges that they have to deal with to, you know, they focus on jobs.

They -- are they creating enough jobs?

And I think that if they're staying on a path where they're creating jobs, they have more license to do the reforms that they need to do, which is what is needed for China to grow and for it to be a level playing field so that U.S. companies can compete in China.

HUNT: Mr. Secretary...

LEW: Look, my -- my focus in China, from a U.S. perspective, is very clear. We want there to be a market that U.S. firms, financial firms and manufacturing firms, service firms, can compete in. And we bring that to the table every time we engage with China.

We also look at exchange rates. Exchange rates is an extremely important issue. You know, we have encouraged them (INAUDIBLE)...

HUNT: Are they living up to their currency commitment?

LEW: Well, you know, they have, uh, made some moves that are consistent with a -- with moving toward more market-determined rates. They widened their trading band. But we've seen some very negative movement in the exchange rate in recent months. One of the issues that I'm going to bring to them is if your policy says that the exchange rate can go up and down, you need to have market signals determining whether it's going up or down.

HUNT: That's also going to be a topic (INAUDIBLE)...

LEW: And that's going to -- that's a serious conversation, because it has to do with the competitiveness of U.S. good in China.

HUNT: Mr. Secretary, I suspect another topic, Russia plans to turn to China for money or ask China for money investments to compensate for what they're losing with the sanctions from the U.S. and the EU.

Are you going to pressure, urge your -- your Chinese counterparts not to go along?

LEW: You know, Al, we talk about a wide range of topics with them that -- when we meet. I'm going to bring the topics that are central to the U.S. agenda and they will raise topics of concern to them.

I think that, you know...

HUNT: This would certainly be...

LEW: Yes...

HUNT: -- be central to us, wouldn't it, if they're going to compensate for the loss of -- of -- of money in Russia because of the (INAUDIBLE)...

LEW: We...

HUNT: -- (INAUDIBLE).

LEW: -- we have -- we have been making the case consistently wherever we go that, um, that it is unacceptable for Russia to violate Ukraine's sovereignty and that when we take actions and other countries in the world take action, um, it is important for there not to be back fill.

HUNT: And we would not be happy, then, if the Chinese were to...

LEW: Well, it...

HUNT: -- (INAUDIBLE).

LEW: -- it is an argument I make wherever I go.

HUNT: And you'll make it in Beijing?

LEW: Well, it -- you know, we're -- we're going to talk about a whole range of topics.

HUNT: How about let's talk about Putin and Ukraine. Why not impose tougher sectorial sanctions now rather than wait?

And if so, would they apply to a wide swath of financial and energy initiatives or be more targeted specific to (INAUDIBLE)...

LEW: You know, Al, I think that the steps we've taken with regard to Russia have been very carefully determined and they've been quite effective. We have acted to target people in the Russian government, senior executives, CEOs who run some of the largest manufacturing firms in Russia, who are very close to the government.

And we have sanctioned a bank, making it clear that we are prepared to go farther down this path should we need to.

The president issued an executive order that gives me the authority to designate whole sectors. We have made very clear that our goal is not to go to the maximum degree that one can to hurt the Russian economy. It's to get President Putin to change Russia's policy.

There is a path here where they can avoid doing real damage to the Russian economy. But we've made clear that if they continue on the path they're on, we will take additional steps.

HUNT: If he doesn't...

LEW: We...

HUNT: -- if he continues on that path, one -- and looking at the sanctions on -- against Iran, one of the things that made them really bite was when we passed so-called secondary sanctions, which says, hey, you do business in the U.S. or Iran, but not both.

Now, if Putin continues, is that a weapon that we would consider using against him?

LEW: Al, I think that one of the things we learned in the Iran sanctions is we worked effectively around the world to have maximum pressure put on Iran. And I think that if you look at that effort, it's probably the most successful sanctions...

HUNT: It is.

LEW: -- regime ever designed.

We are working with our allies as we put measures into place against Russia to make sure that there are other countries that move along with us.

One of the things that we've been very clear...

HUNT: Could you see moving to secondary sanctions?

LEW: Well, no, I -- well, the point I was going to make, Al, is that we have been moving step by step and in a very surgical way. The goal here is not to hurt the European economy, the American economy. It's not to hurt the Russian people, it's to create pressure for President Putin to change his policies.

I think he understands that we are prepared to take steps even if there are second order consequences that we would rather avoid. That determination is very serious, but I -- there are -- are some who call for doing anything you can. I think what we're doing is the most effective way to proceed. And I think that the Russian leadership understands it. I think it's affecting their judgment and it's part of their calculus now.

HUNT: What...

LEW: They need to do change their policy.

HUNT: -- what advice would you give U.S. banks, hedge funds and insurers who haven't reduced their exposure and are still trading in rubles?

LEW: Well, look, I think if you look at the market indicators, since Russia moved into Crimea and since sanctions were threatened and then imposed, all of the major indicators show Russia's economy heading in a -- in a bad direction. Their exchange rate is down. The value of the ruble is down. The equity flight is real. The value of the stock exchange is down.

I think that anyone looking at Russia has to -- has to understand...

HUNT: So you wouldn't...

LEW: -- that...

HUNT: -- you would advise...

LEW: -- that...

HUNT: -- them to reduce their exposure?

LEW: No, I just think that it -- the pressure is on President Putin now to change his policy and that's -- we're going to keep that pressure on. And I don't give investment advice, but I can -- I can tell you that the -- the dynamic is what I'm describing.

HUNT: Your predecessor, Timothy Geithner, has a new book coming out. And he has said that -- and I'm quoting him -- "Of course we still have too big to fail. If one of the big banks went under, the taxpayers, in essence, would still have to pick it up, six years after the crisis."

Do you agree?

LEW: Well, I haven't had a chance to read Tim's book yet. It's not out...

HUNT: Yes, but do you agree with his comment that...

LEW: -- (INAUDIBLE)...

HUNT: -- of course we have too big to fail?

LEW: -- I haven't read the book, so I'm not going to comment on the book (INAUDIBLE)...

HUNT: This is what he said before the book.

LEW: (INAUDIBLE).

HUNT: He said be -- before. He said, "Of course too big to fail still exists."

Does it?

LEW: Well, I have spoken many times on the subject. You compare the U.S. financial system today to where it was before the financial crisis, we have done a huge amount to make it safer and sounder. We have capital where there wasn't sufficient capital before. We have resolution mechanisms where there weren't resolution mechanisms.

There are living wills for the largest (INAUDIBLE)...

HUNT: I don't think anyone would quarrel with that...

LEW: So we...

HUNT: -- Mr. Secretary.

LEW: -- we've done a -- a huge amount and we're doing more. And we have to keep asking is there more we need to do?

HUNT: But is -- is too big to fail still present?

LEW: You know, Al, I -- I think that the law very clearly said that too big to fail is over because it took away authorities that were used.

HUNT: And it is over?

LEW: And we are now implementing that law.

HUNT: One final question. Canada, a few weeks ago, sold 50 year bonds.

With rates low, demand high, why don't we do that?

LEW: You know, we -- we have the -- the deepest, most liquid bond market in the world. We try to develop innovative products. We have a floating rate note that just is being issued now.

I think our financial markets have proven to be the envy of the world and we continue to -- to innovate, but also to, you know, kind of make sure that we have products that the market wants and that...

HUNT: No interest in 50 year bonds?

LEW: Well, we -- we look at all kinds of things. But we're not, you know...

HUNT: It doesn't sound imminent.

LEW: I -- I think if you look at the yield curve, it's lengthened over...

HUNT: Yes.

LEW: -- over time. But we've kept all parts of the yield curve healthy and deep. And I don't think there is a bond market like the market for Treasuries anywhere else in the world.

HUNT: Secretary Lew, thank you very much.

And safe travels on your trip to China.

LEW: Thanks.

Good to be with you.

HUNT: And when we return, more on food and the Benghazi panel. The Bloomberg reporters are next.

Courtesy of Bloomberg Television

bloomberg.com

Copyright © 2014 Bloomberg - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Bloomberg Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in