(14 Oct 1997) English/Nat
U-S Federal Reserve Chairman, Alan Greenspan, said on Tuesday that it would be wrong to restrict the fast pace of global investments to prevent future currency crises.
Greenspan said that technological advances had dramatically speeded up financial dealing and that it was now impossible to "turn back the clock".
Greenspan's comments came in a Washington speech as he offered his thoughts on this year's currency crisis in Southeast Asia.
Much of the financial world on Tuesday was holding its breath.
U-S Federal Reserve Chairman Alan Greenspan was in Washington to speak on the global economy.
Only last week his negative comments on U-S economic growth had depressed markets.
But what he had to say on Tuesday was good news for investors.
He said that imposing controls on the billions of dollars of investments made daily would be a mistake.
But in the wake of the currency crisis in Southeast Asia, he warned that although developing nations were benefiting from the increased flow of investment they must pay attention to financial policy.
SOUNDBITE: (English)
"While there can be little doubt that the extraordinary changes in global finance on balance have been beneficial in facilitating significant improvements in economic structures and living standards throughout the world, they also have the potential for some negative consequences. In fact, while the speed of transmission of positive economic events has been an important plus of the world economy in recent years, it is becoming increasingly obvious, as evidenced by recent events in Thailand and its neighbours and several years ago in Mexico, that significant macro economic policy mistakes also reverberate around the world at a prodigious pace."
SUPERCAPTION: Alan Greenspan, Chairman, U-S Federal Reserve
Greenspan blamed Mexico and Southeast Asia for obscuring the true state of their economies and thus failing to head off a financial crisis.
SOUNDBITE: (English)
"The recent financial turmoil in some Asian financial markets and similar events elsewhere previously, confirm that in a world of increasing capital mobility, there is a premium on governments maintaining sound macro economic policies and allowing exchange rates to provide appropriate signals for the broader pricing structure of the economy. As a consequence these countries lost the confidence of both domestic and international investors with resulting disturbances in their financial markets."
SUPERCAPTION: Alan Greenspan, Chairman, U-S Federal Reserve
Greenspan disputed arguments by Malaysia's prime minister that international currency speculators are responsible for the currency crisis in Southeast Asia.
He said any attempt to impose restrictions or controls on financial flows would ultimately have adverse consequences.
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