Quick recovery for US?

The Straits Times
Dec 3, 2008 | 6:00 AM
Quick recovery for US?
Not likely; much will depend on decisions of Obama's team, says MM
By Tracy Quek, China Correspondent

HONG KONG: Minister Mentor Lee Kuan Yew said yesterday US President-elect Barack Obama has in his new economic team some of the brightest and most experienced minds in America who are 'capable of thinking of all the sums and equations' in the current downturn.

The measures these top economic trouble-shooters adopt in the next three to six months will determine whether the US downturn will be 'long and deep' or 'medium and shallow', MM Lee said.

But it would not be possible for the United States to see a 'quick and short' recovery from its worst financial crisis in decades, he told a packed ballroom of participants attending the Clinton Global Initiative Asia meeting.

The conference is a project of former US President Bill Clinton's charitable Clinton Foundation which brings together leaders from government, business and non-governmental sectors.

The two-day meeting opened yesterday with a series of panel discussions which featured guests including Chinese Foreign Minister Yang Jiechi.

MM Lee, who arrived here just two days after minor surgery to implant a cardiac pacemaker, was speaking at a one-on-one dialogue with Mr Clinton.

In his introductory remarks, Mr Clinton described Mr Lee as 'one of the wisest, most knowledgeable, most effective leaders in any part of the world for the last 50 years'.

Turning to the downturn, he sought Mr Lee's view on how long it would last.

'The only people who can tell you that are those working on the current difficulties, some of the brightest and most experienced minds in America - Paul Volcker, Larry Summers, Tim Geithner and a panel behind them,' said Mr Lee.

Mr Obama, who has pledged to make fixing America's financial troubles and job creation his priority when he takes office on Jan 20, gave the trio key economic appointments recently.

Mr Volcker, a two-term Federal Reserve chairman, will head a new economic advisory panel. Mr Geithner, who will succeed Mr Henry Paulson as Treasury Secretary, had headed the Federal Reserve Bank of New York since 2003. Mr Summers, a former treasury secretary, will head the National Economic Council.

The three respected economists, said MM Lee, know the problem - 'falling asset prices, people feel poor, they can't pay their mortgages, home values are down, credit cards can't be paid up, instalments are due on cars, people are fearful of being retrenched, so there is a spiral downwards'.

The crisis, Mr Lee noted, started with the sub-prime mortgages and 'a floor must be put on that'. Otherwise, 'you run the risk of deflation, like in Japan'.

'Because people feel poor, they don't spend,' Mr Lee said.

'Some think the unorthodox must be considered and I am quite sure the team in charge are quite capable of thinking of all the sums, and all the equations.'

In their 40-minute dialogue, Mr Lee and Mr Clinton also spoke on combating climate change, sustainable growth and issues including education, which are the focus of the conference.

MM Lee took three questions from the audience, including one on why civil society in Asia has not quite taken off.

Throughout the session, MM Lee showed no outward sign of fatigue.

It was Mr Clinton who called time, saying: 'I promised Mr Lee that he would only have to speak for 30 minutes, but now we have gone over by 10.'

Yesterday morning, the Chinese Foreign Minister called on Mr Lee. During their 30-minute meeting, Mr Yang thanked Mr Lee for making the effort to visit Hong Kong after his minor surgery, and conveyed warm regards from President Hu Jintao and Premier Wen Jiabao. They discussed the impact of the financial crisis on Asia and global issues.