You are here

Robert Chapman essay on gold price manipulation

Section: Daily Dispatches

By Gerard Baker and Ed Crooks
The Financial Times
February 18, 2001

Palermo, Italy -- World currency markets are set to
test on Monday the most emphatic attempt yet by Paul
O'Neill, the new U.S. treasury secretary, to
demonstrate the Bush administration's commitment to a
strong dollar.

Mr. O'Neill used the opportunity of the weekend's
meeting of finance ministers and central bank governors
of the Group of Seven leading industrialised nations to
try to kill any remaining suspicion that he might not
be a wholehearted defender of the U.S. currency.

The dollar fell sharply against the euro on Friday
after an interview with the new treasury chief in
Frankfurter Allgemeine Zeitung, the German daily, was
interpreted by traders as indicating his lack of
enthusiasm for a strong commitment to the U.S.

But a clearly irritated Mr. O'Neill told reporters on
Saturday that he stood firmly in support of a strong

quot;If I decide to change, I will hire Yankee Stadium
together with marching bands and announce it,quot; he said.
quot;Until you hear the bands striking up, you should know
the policy has not changed.quot;

The Treasury secretary also told reporters that none of
the other G7 finance ministers and central bankers had
questioned him about the dollar policy during the
meetings on Saturday, where discussion ranged across
the outlook for global growth, reform of international
financial institutions, reducing global poverty, and
Russia's continuing financial difficulties.

Mr. O'Neill pronounced himself pleased with his first
G7 session, where he chose not to follow the lead of
his predecessor, Larry Summers, who often used the
meetings to push the Japanese and European governments
to do more to restructure their economies.

For the first time in at least five years, the U.S.
Treasury secretary had to reassure other officials that
America's economy would not drag the world into

The International Monetary Fund has significantly
downgraded its forecast for U.S. growth this year to
just 1.7 per cent from an estimate last autumn of 3.2
per cent. If the fund's forecast is correct, it would
make 2001 the worst performance by the U.S. economy
since the recession of 1990-91. The U.S. Federal
Reserve said last week its economists expect the
economy to expand by 2 to 2.6 percent this year.

In the European Union, prospects were seen as much
brighter. Wim Duisenberg, president of the European
Central Bank, said the IMF shared his prediction that
the euro-zone would grow by around 3 per cent this year
and in 2002.

In a signal that the ECB might be in no hurry to cut
interest rates, Mr. Duisenberg added: quot;This rate of
growth is still considerably in excess of the trend
rate of growth observed in Europe over the past 25

Didier Reynders, the Belgian finance minister, who was
for the first time present at the G7 as a
representative of all 12 euro-zone members, also spoke
up for his currency, saying he believed quot;a strong euro
is in the interest of Europequot;.