Federal Reserve Bank of Dallas President Richard Fisher said that China’s rising economic power doesn’t necessarily come at the expense of the US.
“China’s emergence will trigger changes to our economy, but they will not come so fast or be so big as to overwhelm us,” Fisher said in comments prepared for delivery before the Council of Economic Advisors to Utah’s governor, in Salt Lake City. “We will have time to adjust” and “we have proven time and time again that we thrive when we face up to the challenge of vigorous competition.”
Fisher noted that while many measures of the Chinese economy point to a rapid expansion, that nation’s infrastructure and educational system remain well behind that of the US. China also remains well behind the US on issues of competitiveness and transparency, he said.
The bank president said history is important, noting that following World War II economic growth in Japan and Germany outpaced that in the US, as their economies converged with the US’s.
Much of Fisher’s speech dealt with the virtues of free and unfettered international trade, an area of key interest for the bank president since taking on control of the Dallas Fed last spring.
Fisher said that based on recent economic data, “it would not be immodest for Americans to say the US economy shines brightly.” Part of that strength comes from open global competition, and also from the independence of the Federal Reserve, he said.
The policy maker noted that there are concerns on some fronts. “Some are predominately domestic phenomena - such as fiscal deficits, the problems of financing our health care and social security systems, and the unsettling price increase we are seeing in certain housing markets.” On the international front, Fisher flagged the US current account deficit, a measure of the imbalance seen in capital flows with the rest of the world.
Fisher also said globalization complicates the world faced by monetary policy makers by shifting many of the economy’s key dynamics, thus rendering old rules less relevant. “More than ever, we must look beyond our borders to understand movements in inflation, interest rates and wages,” he said.
In comments after his formal speech, Fisher, a voting member of the interest rate setting Federal Open Market Committee, reminded participants that “the role of the Fed is to try to get monetary policy right so we continue to have a growing economy and don’t have the ugly virus of inflation,” and he reckoned the central bank has been effective at this task. (Oster Dow Jones. News Provided by COMTEX.)