Summers: U.S. economy recovering
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The U.S. economy has shown signs of recovery thanks to the fiscal and monetary stimulus measures taken by the Obama administration, but it's certainly not the time for celebration, White House economic adviser Larry Summers said on Friday.
Speaking at the World Economic Forum annual meeting in Davos, Summers said massive stimulus measures proposed or endorsed by the administration have "pulled the economy back from the brink of a depression, and created a basis for economic growth."
Citing the latest U.S. GDP report, he said the country's economy expanded at a 5.7-percent rate in the fourth quarter of 2009.
However, he also stressed that additional measures -- such as President Barack Obama's proposed payroll tax credit -- are needed to bring down the double-digit U.S. unemployment rate and boost middle-class incomes.
The GDP report "certainly doesn't suggest we are in any position to pop champagne corks ... It's going to take a lot more effort in the months, quarters and years ahead," he told government and business leaders at the meeting.
Summers conceded that much of the fourth quarter growth was due to inventory restocking rather than a substantial pickup in private demand, which remains weak.
He said President Obama will press the Congress to enact the job creation measures he outlined in his State of the Union address earlier this week.
The top economic adviser also defended the Obama administration 's proposed reforms in financial regulation, which he said would increase capital standards, create a new system for handling the failure of non-bank lenders, and limit the ability of commercial banks to own hedge funds and certain other alternative investment vehicles, or engage in purely speculative proprietary trading.
The latter proposal, commonly known as the "Volcker rule" after its chief advocate, former Fed Chairman Paul Volcker, was added only recently to the administration's legislative wish list.
Summers denied that this reflected any internal conflict within the administration over the proposal. "As any reform process moves along, details are always filled in, and that's what's happening here," he said.
Asked to comment on French President Nicolas Sarkozy's recent call for an alternative global reserve currency, Summers said any change in the U.S. dollar's role would be brought about by market forces -- including decisions made by foreign governments and Central Banks with sizable foreign exchange holdings.
"I believe the dollar is going to have a very central role in the international financial system for a very long time to come," he said.
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