Volatility is a normal part of financial markets and the recent turmoil is not a symptom of major problems facing the economy, US Treasury Secretary Henry Paulson said on Friday.
Paulson said that while the US economy is experiencing weakness in housing and manufacturing, there were "some real bright spots" in terms of strong consumer spending and solid growth in exports.
"We are in the process of making what I believe is going to be a successful transition from the level of growth which was unsustainable to one that is quite sustainable," Paulson said in an interview on National Public Radio. "The economy is strong."
Asked about a week in which US stocks suffered a 416-point drop on Tuesday following big market declines in China and other countries, Paulson said that the volatility did not reflect any fundamental problems with the US or global economies.
"Markets at any one time don't necessarily reflect the economic fundamentals," he said. "As long as you have markets, you're going to have volatility."
Paulson, who served as the head of investment giant Goldman Sachs before taking the Treasury post last July, said the global economy was "as strong as I have seen it in any time during my business career."
Paulson said growth in the US was "slowing a bit," but the economy was still "adding a lot of new jobs."
Meanwhile, US Federal Reserve Chairman Ben Bernanke said on Friday that globalization has not hobbled the Fed's ability to influence economic activity at home by lowering or raising interest rates.
Yet, Bernanke said, increasingly connected financial markets have certainly complicated the Fed's ongoing job of analyzing financial conditions and weighing their implications for monetary policy.
Those thoughts were contained in a scholarly speech Bernanke delivered to an economic summit in California. Copies of his remarks were distributed in Washington.
"Globalization of financial markets has not materially reduced the ability of the Federal Reserve to influence financial conditions in the United States," as some have argued, Bernanke said.
However, "globalization has added a dimension of complexity to the analysis of financial conditions and their determinants which monetary policymakers must take into account," he told the summit held by the Stanford Institute for Economic Policy Research.
The Fed had steadily boosted rates for two years to fend off inflation. With economic growth slowing and some signs that inflation is improving, the Fed has left rates alone since August.
"There seems to be little basis for concluding that globalization overall has significantly reduced inflation in the United States in recent years," Bernanke said. "Indeed, the opposite may be true."
On the one hand, global competition and cheap imports flowing into the US can be forces helping to restrain price increases, and thus inflation, Bernanke said. But on the other hand, strong demand from rapidly growing China and India -- for instance -- has likely contributed to the recent big increases seen in the prices of energy and other commodities, he said.
"One direct effect of globalization on Federal Reserve operations has been to increase the time and attention that policymakers and staff must devote to following and understanding developments in other economies, in the world trading system and in world capital markets," Bernanke said.
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