Nathan Sheets Speaks at the Peterson Institute
Peterson Institute for International Economics
“Perspective on the Global Economy”
Thursday, February 19, 2015
Key Topics & Takeaways
- Shortcomings in Global Growth: Sheets said the G-20 agrees that the global economy is falling short of the goal for strong, sustainable growth in two ways: slowing trend growth on the supply-side and substantial cyclical slack on the demand-side.
- Structural Reform Agenda: Sheets said the Administration’s structural reform agenda includes reforming the business tax system, strengthening the framework for immigration, and pursing high-standard trade agreements such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.
- Financial Reform: Sheets said the G-20 program has a focus on building more resilient financial institutions and markets, and progress has been made by the FSB with its total loss-absorbing capacity (TLAC) proposal that will “go a long way” in addressing concerns and giving regulators tools they did not have in 2009.
Speakers
- Nathan Sheets, Under Secretary for International Affairs, Treasury Department
Nathan Sheets, Under Secretary for International Affairs, Treasury Department, said in his remarks that the focus of discussions at G-20 meetings is on the current and prospective performance of the global economy. While the U.S. economy “continues to gain steam” and add jobs, he said, this strong growth is not being seen across the rest of the world. He said the G-20 agrees that the global economy is falling short of its goal for strong, sustainable growth in two ways: slowing trend growth on the supply-side and substantial cyclical slack on the demand-side.
Sheets said trend growth has slowed in the years since the financial crisis and remains below “reasonable aspirations,” which raises concerns about the capacity of firms to innovatively combine labor and capital to produce output. He said structural reforms are needed to bolster productive capacity where needed, such as making labor markets more flexible, making product markets more competitive by removing barriers to entry, and taking steps to streamline regulation and increase openness to international trade and investment.
The U.S. has been a “pacesetter” in such reform efforts, Sheets said, and has historically been distinguished by structural flexibility, commitment to the rule of law, and openness to foreign trade and investment. He noted that the U.S. has moved aggressively to implement financial sector reforms since the crisis to make intermediation more reliable and efficient, and to ensure the integrity of financial markets. Looking forward, he said, the Administration’s structural reform agenda includes reforming the business tax system, strengthening the framework for immigration, and pursing high-standard trade agreements such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
Sheets then turned to the problem of cyclical slack, saying that while the supply-side has fallen short of expectations, the demand-side has been “weaker still.” He said the question of how macroeconomic policies should respond to shortfalls in demand often arises in G-20 circles, and that the U.S. has pushed for stimulative measures, including monetary policy. He explained that the U.S. position rests on five core observations: 1) demand-side policies have worked in the U.S.; 2) there are vital links between the demand-side and the supply-side; 3) the denominator of the debt-to-GDP ratio is just as important as the nominator, and prolonged periods of weakness limit the resources available to service debt; 4) the burdens of prolonged downturn fall disproportionately on the young; and 5) strong demand is the driver of confidence.
Sheets closed by saying sound economic policies must balance supply-side and demand-side considerations to ensure favorable growth today and to safeguard the capacity to produce tomorrow.
Question and Answer:
Asked about whether currency manipulation is being discussed by the G-20, Sheets noted a G-7 agreement that countries would not target monetary policies at influencing exports or foreign exchange. He also pointed out that China made commitments to refrain from currency controls and seems to be doing so. Overall, he said “there is momentum” in this space, and the U.S. consistently raises the issue of currency manipulation in both G-20 and bilateral engagements.
Sheets was asked about the inclusion of currency manipulation in either TPP or a Trade Promotion Authority (TPA) bill in Congress. He responded that TPP and TPA are absolutely essential and should not be put at risk. He again expressed that progress is being made on the issue and bilateral engagement appears to be the most effective strategy going forward to address currency manipulation.
An audience member asked about “too-big-to-fail” firms and Financial Stability Board (FSB) efforts to address systemic risk. Sheets said the G-20 program has a focus on building more resilient financial institutions and markets, and progress has been made by the FSB with its total loss-absorbing capacity (TLAC) proposal that will “go a long way” in addressing concerns and giving regulators tools they did not have in 2009.
For more information on this event and to view an archived webcast, please click here.
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Peterson Institute for International Economics
“Perspective on the Global Economy”
Thursday, February 19, 2015
Key Topics & Takeaways
- Shortcomings in Global Growth: Sheets said the G-20 agrees that the global economy is falling short of the goal for strong, sustainable growth in two ways: slowing trend growth on the supply-side and substantial cyclical slack on the demand-side.
- Structural Reform Agenda: Sheets said the Administration’s structural reform agenda includes reforming the business tax system, strengthening the framework for immigration, and pursing high-standard trade agreements such as the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.
- Financial Reform: Sheets said the G-20 program has a focus on building more resilient financial institutions and markets, and progress has been made by the FSB with its total loss-absorbing capacity (TLAC) proposal that will “go a long way” in addressing concerns and giving regulators tools they did not have in 2009.
Speakers
- Nathan Sheets, Under Secretary for International Affairs, Treasury Department
Nathan Sheets, Under Secretary for International Affairs, Treasury Department, said in his remarks that the focus of discussions at G-20 meetings is on the current and prospective performance of the global economy. While the U.S. economy “continues to gain steam” and add jobs, he said, this strong growth is not being seen across the rest of the world. He said the G-20 agrees that the global economy is falling short of its goal for strong, sustainable growth in two ways: slowing trend growth on the supply-side and substantial cyclical slack on the demand-side.
Sheets said trend growth has slowed in the years since the financial crisis and remains below “reasonable aspirations,” which raises concerns about the capacity of firms to innovatively combine labor and capital to produce output. He said structural reforms are needed to bolster productive capacity where needed, such as making labor markets more flexible, making product markets more competitive by removing barriers to entry, and taking steps to streamline regulation and increase openness to international trade and investment.
The U.S. has been a “pacesetter” in such reform efforts, Sheets said, and has historically been distinguished by structural flexibility, commitment to the rule of law, and openness to foreign trade and investment. He noted that the U.S. has moved aggressively to implement financial sector reforms since the crisis to make intermediation more reliable and efficient, and to ensure the integrity of financial markets. Looking forward, he said, the Administration’s structural reform agenda includes reforming the business tax system, strengthening the framework for immigration, and pursing high-standard trade agreements such as the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
Sheets then turned to the problem of cyclical slack, saying that while the supply-side has fallen short of expectations, the demand-side has been “weaker still.” He said the question of how macroeconomic policies should respond to shortfalls in demand often arises in G-20 circles, and that the U.S. has pushed for stimulative measures, including monetary policy. He explained that the U.S. position rests on five core observations: 1) demand-side policies have worked in the U.S.; 2) there are vital links between the demand-side and the supply-side; 3) the denominator of the debt-to-GDP ratio is just as important as the nominator, and prolonged periods of weakness limit the resources available to service debt; 4) the burdens of prolonged downturn fall disproportionately on the young; and 5) strong demand is the driver of confidence.
Sheets closed by saying sound economic policies must balance supply-side and demand-side considerations to ensure favorable growth today and to safeguard the capacity to produce tomorrow.
Question and Answer:
Asked about whether currency manipulation is being discussed by the G-20, Sheets noted a G-7 agreement that countries would not target monetary policies at influencing exports or foreign exchange. He also pointed out that China made commitments to refrain from currency controls and seems to be doing so. Overall, he said “there is momentum” in this space, and the U.S. consistently raises the issue of currency manipulation in both G-20 and bilateral engagements.
Sheets was asked about the inclusion of currency manipulation in either TPP or a Trade Promotion Authority (TPA) bill in Congress. He responded that TPP and TPA are absolutely essential and should not be put at risk. He again expressed that progress is being made on the issue and bilateral engagement appears to be the most effective strategy going forward to address currency manipulation.
An audience member asked about “too-big-to-fail” firms and Financial Stability Board (FSB) efforts to address systemic risk. Sheets said the G-20 program has a focus on building more resilient financial institutions and markets, and progress has been made by the FSB with its total loss-absorbing capacity (TLAC) proposal that will “go a long way” in addressing concerns and giving regulators tools they did not have in 2009.
For more information on this event and to view an archived webcast, please click here.