The straight shooting, sound thinking, optimistic Treasury Secretary Henry Paulson offered his views on a variety of topics on Kudlow & Company last night. What a pleasure it was to interview a civilized man with a keen intellect who does his own thinking.
It’s a pity Mr. Paulson has been dealt such a difficult hand. He’s up against a highly partisan Democratic Congress attempting to block the Treasury man’s good ideas on broad based reform of taxes, trade and entitlements.
Incidentally, the former Goldman Sachs CEO would not have argued that the subprime mortgage problem is contained if he didn’t really believe it. And his comments about the greatest global economy in our lifetime echo my own thinking.
Here’s a look at Mr. Paulson’s thoughts on last night’s show…
On U.S. & global economic health:
I don’t think there’s much argument that we are in a very strong global economy. Japan is on a sustained growth course. In Europe, their growth rate has just about doubled’”unemployment is still high, but it’s at a 15-year low. The developing countries, you know, are growing twice the rate they grew in the ’90s, three times the level of the industrial companies.
So now let’s get to what’s going on in the US. I happen to believe that we are making a successful transition to an economy that was growing at a rate that wasn’t sustainable to one that is sustainable.
There has been a very significant housing correction. I think we’re at or near the bottom there. I don’t deny there’s a problem with subprime mortgages, but I really do believe that’s containable.
We have, Larry, a very, very healthy economy. We have very strong employment. We’re creating jobs here at very high levels. The consumer is strong.
When you look at what’s happened with the equity market and S&P going up about 24 percent over the last 12 months, there’s been about $3 1/2 trillion of wealth created in the marketplace. That doesn’t hurt the consumer in the US. And again, the strong growth outside of the US helps the US economy. The fact that our trading partners are strong is a positive. So I believe we have a very healthy US economy.
On whether credit markets are freezing up, subprime, and a possible credit crunch:
Well, I would just simply say this: We have had, now, benign positive markets for a while. And there’s always a temptation to give way to excesses, to have less discipline. And so I believe that some of the issues we’ve had recently are a wake-up call. And I do believe that borrowers need to be vigilant, lenders need to be vigilant. I’m not going to say it’s without risk, but I’m going say we have a healthy financial sector in this country, record earnings. You know, non-performing loans are at low levels. We need to be mindful. We need to always be vigilant.
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