“Emerging economies like China, Brazil and India are growing very rapidly. That growth is helping to support rapid growth in U.S. exports which in turn is raising income and employment across the United States in manufacturing and high tech and agriculture,” Mr. Geithner said in his testimony before the Senate Foreign Relations Committee.
The U.S., he said, is working in the G20 to help build consensus on long-term reforms that will provide the foundation for a more balanced, more stable global economy.
“We lay out a framework for cooperation that includes movement to more flexible exchange rates by emerging economies, a type of early warning mechanism to help reduce the risk that we see the re-emergence of large external trade imbalances, and help for emerging economies to manage the challenges to come with large flows of capital,” he said.
“A second priority — we’re working very hard to build a more stable international financial system with better oversight of the major global financial institutions — the major banks — and the global financial markets,” Mr. Geithner noted.
Mr. Geithner said the U.S. is trying to make sure that China and other countries understand that America is going to change how it grows as a country.
“We’re not going to base future growth in the United States on consumption fuelled by borrowing from other countries. Our growth in the United States is going to be come much more from investment and from exports, not from unsustainable financing of housing booms, excess consumption. And that changes the reality those countries face,” he stressed
The Treasury Secretary said the global economy is now expanding after the profound crisis of the last three years, but the recovery is advancing at different speeds.
The IMF forecasts that emerging markets will grow by 6.5 per cent this year, while it expects growth in Europe and Japan to be 1.5 per cent.
“The U.S. recovery stands in between, with growth gathering momentum and inflation risks modest, but with unemployment still unacceptably high,” Mr. Geithner noted.
Mr. Geithner underlined that inflation in goods and services in the United States is still low, and it’s very important to note that there are still considerable spare oil production capacity globally.
“The price of oil has risen, adding to the pressures faced by consumers here and around the world. At this point, however, the impact of higher present and predicted oil prices are offset by other positive developments reinforcing growth around the world.”
“The United States and the other major economic economies possess substantial strategic reserves of oil and those reserves could be mobilised to help mitigate the impact of a major supply disruption,” Treasury Secretary added.