Hope Sprouts For Global Recovery
SCOTT SIMON, host:
Of course, much of the financial world went to tailspin just about a year ago. Happy anniversary.
We're joined now by Clive Crook, columnist for The Financial Times and a senior editor of the Atlantic Monthly. Clive, thanks so much for coming in.
Mr. CLIVE CROOK (Financial Times; Atlantic Monthly): It's a pleasure.
SIMON: What's the status of that tailspin?
Mr. CROOK: Well, things do seem finally to be picking up. You know, in the U.S. the recession may actually have ended by now in terms of the numbers for output. Unemployment's still high and it just went up - the latest figures showed it going up on Friday. But I think we're through the worst of it and, you know, in the rest of this year and into next year I think we can expect to see growth resume and the economy getting back on its feet.
SIMON: Are there some parts of the world doing even better than that?
Mr. CROOK: A little better. I mean surprisingly, parts of Europe seem to be recovering faster than the U.S. That's novel. But that is happening. France and Germany had growth in the second quarter, whereas in the U.S. it was just a smaller decline than people have been fearing. So we might be a quarter behind France and Germany, but other European countries are really struggling. I mean the European picture's actually very mixed. The British economy's in trouble. Some of the Eastern Europe economies are in deep, deep trouble. So, you know, they're not out of the woods either.
SIMON: And some of those countries have larger unemployment rates than even the U.S at this…
Mr. CROOK: Oh, very much so, yeah. I mean the Friday figures showed unemployment in the U.S. rising to 9.7 percent, which I think was the worse in more than 20 years. It's a bad number. But in a lot of European countries that would be business as usual.
SIMON: What are some of the implications of a high unemployment rate that elective democracies have to worry about?
Mr. CROOK: Well, there are so many. I mean probably politically the most important thing is that they put governments under pressure to do things. Because of course, you know, economic insecurity, economic anxiety is so tied to that number, in the sense, you know, that you might be next. So it has, I think it puts a cloud over politics. And then there are obviously direct financial implications as well, if you are paying unemployment benefits and so on. Your tax base is squeezed because fewer people are working. That makes the budget deficit look worse than it otherwise would. I mean, you know, it's key to many critical aspects of economic policy.
SIMON: G2, G20, forgive me, finance - it's been a long time since it's been G2, hasn't it? G20 finance ministers are in London this weekend. What do you expect to see out of that meeting?
Mr. CROOK: Well, this is really a meeting to prep for the big summit, the G20 summit in Pittsburg later in the month. The guys meeting in London are finance ministers and they are trying to come with an agreed scheme for tougher bank regulation. They've been talking about, you know, the various stimulus fiscal measures they've put in place - when it will be right to start easing back on those, when it will be safe to do that. Those, you know, somewhat technical economic issues.
I mean the real show is the summit, when the leaders gather. You know, Obama will be there and the prime ministers and presidents will there later this month.
SIMON: We've put the word out that you would be joining us as guest this morning. Let me run a question by you that I think might be central to talk of recovery.
How is the Fed going to support the dollar if China forces their hand and starts to sell off to cut losses?
Mr. CROOK: Well, it's a great question. And this one of the Fed's worst nightmares, is having - essentially all they can do is control interest rates. You know, it doesn't really have any other policy lever. If the Chinese start to flee from the dollar, that puts the dollar under pressure on foreign exchange markets. If the dollar falls, that creates a risk of inflation. Not right now, because the economy is so weak, but later.
So the Fed is going to be conflicted. It wants to keep interest rates low, you know, to stimulate the domestic economy. But if it sees the dollar tanking, it's going to be very worried about the implications of that further down the road. And that would argue for a rise in interest rates, you know, to support capital flowing into the U.S.
So the answer is that that scenario would have the Fed being pulled in two opposite directions. It's certainly not a situation that the fed wants to have to face. But it could well happen.
SIMON: We want to take advantage of your personal presence here this morning to a question that's somewhat off the mark of the economy.
Is Gordon Brown's government going to fall over the controversy that seems to be developing over the release, by Scottish justice officials, of Abdel Basset Ali al-Megrahi?
Mr. CROOK: Well, Gordon Brown's government is in all kinds of trouble anyway. I mean Gordon Brown is fantastically unpopular in Britain right now for a whole slew of reasons. And this - what can I say? This disgusting shambles over the release of al-Megrahi is just the latest in a long series of errors and extraordinary lapses of judgment, in my view.
So it may not be the specific thing that brings him down but it's beginning to look as if there's no way Labour can win the next general election in Britain. And the al-Megrahi thing isn't helping, because a lot of people in Britain feel as strongly about it as people in the U.S.
SIMON: Clive Crook, senior editor for the Atlantic Monthly and columnist for the Financial Times, thanks so much for being with us.
Mr. CROOK: You're welcome.
SIMON: And you're listening to NPR News.