No double dip recession: US Treasury Secretary

WASHINGTON - US Treasury Secretary Timothy Geithner dismissed fears of a double dip recession in an interview aired Sunday, but warned of a slow US recovery with the economy only gradually gaining strength.

By (AFP)

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Published: Sun 25 Jul 2010, 9:01 PM

Last updated: Mon 6 Apr 2015, 10:38 AM

Geithner was asked on NBC’s “Meet the Press” whether he thought the economy would dip back into recession before things got better.

“No, I don’t,” he answered.

“I think the most likely thing is, you see an economy that gradually strengthens — over the next year or two. You see job growth start to come back again,” Geithner said.

“Again, investments expanding, manufacturing get a little stronger, exports better. Those are very encouraging signs.”

However, he said there was still a long way to go and Americans were understandably cautious about the future.

“We’re living still in a lot of challenge... ‘cause the scars of this crisis ran so deep,” he said. “And I think most Americans understand it’s going to take some time to heal this.”

Geithner was pressed on whether, in light of the poor prospects for growth and high unemployment, President Barack Obama’s 787 billion dollar Recovery Act had been sufficient to lift the economy.

“There is a lot of stimulus still in the pipeline,” he said.

“And we’ve got some long-term fiscal problems, they’re going to be a challenge for the rest of the country. And we’re going to work to fix those problems we inherited, but the best way to do that is to make sure we’re growing, private investment starts to come back, private firms start to hire again.

“The government can help, but we need to make this transition now to a recovery led by private investment,” he told NBC.

The White House has said the stimulus has created up to 3.6 million jobs, but the Federal Reserve has forecast worse-than-expected growth and unemployment, currently at 9.5 percent, for the rest of this crucial congressional election year.

The US government on Friday lowered its 2010 federal budget deficit estimate by 84 billion dollars to 1.471 trillion dollars on projected spending declines.

That would still be a record-high deficit amid massive government spending to pull the economy out of the worst recession in decades.

The new deficit estimate amounts to 10 percent of gross domestic product, down from 10.6 percent of GDP in previous estimates for fiscal 2010, which ends September 30.

In addition, Federal Reserve chairman Ben Bernanke warned US lawmakers on July 21 that the outlook for the US economy was “unusually uncertain,” saying the central bank could step in if the recovery fails.

Bernanke said the world’s largest economy would see “moderate growth, a gradual decline in the unemployment rate and subdued inflation over the next several years.”

Compounding fears of a painful exit from recession, he also warned that private sector hiring was growing at an “insufficient” pace.

Asked about the potential impact of the expiration of the tax cuts instituted under former president George W. Bush, Geithner said “the economy can withstand that, and I think it’s good policy.”

In a separate interview with ABC television, Geithner urged China to allow its currency, the yuan, to appreciate compared to the dollar, after Beijing announced on June 19 that it would make the yuan rate more flexible.

“That’s very good for China. That’s very good for the United States,” Geithner told ABC. “What matters to us is how fast and how far they let it go.”

For nearly two years, the yuan had been effectively pegged at about 6.8 to the dollar, which critics say undervalues the currency by as much as 40 percent and gives Chinese exporters an unfair trade advantage.

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