US economy will 'take time to repair'

The US economy faces a "considerably long slog" in returning to normal growth patterns, White House economic adviser Paul Volcker told an economic conference in Montreal on Wednesday.

He warned delegates at the International Economic Forum of the Americas to expect slower growth than in the past, and said a US recovery will not be fast enough for many job seekers.

"In the United States we have had now, or are approaching a year of recovery," Volcker lamented in a speech. "But by past standards, it hasn't been much of a recovery."

"This has not been a normal recession and it's not going to be a normal recovery," he said.

The recession is rooted in prolonged imbalances in some of the world's big economies, including the United States, Volcker explained, and it "will take time to repair."

Americans should brace for "slower growth and consumption" than in the past on the road to a "balanced economy," and eventually new business investment as well as a potentially positive trade balance.

"That kind of change does not come very quickly," he said. "It's going to be a considerably long slog."

"I'm afraid that the recovery will not be fast enough to reduce the unemployment rate as fast as anyone would like to see it, (and) it implies continuing high budgetary deficits."

Volcker also denounced what he described as "furious lobbying" by banks against proposed US financial reforms.

"If they didn't spend money (reportedly 150 million dollars over six months) on lobbyists, they could afford some of the losses in income from some of the restraints that are being made," he said.

Volcker said the measure facing a conference committee has "substance" but that he was concerned about "whether there will be some amendments made that will limit its effectiveness."

One version of the proposed bill includes a controversial "Volcker rule" that would prohibit banks from making speculative investments that are not on behalf of clients.

"If we can get the bill passed, and the prospects to me look pretty good, I think it will provide a basis for the other major countries to get together in a way that hasn't been possible so far," Volcker commented.

"I think with the United States showing some leadership, I hope that we will see progress among the other major financial markets in adopting legislation that fits in coherently with the American approach."

To prevent another economic and financial crisis, Volcker said the United States needs "more than improved regulations and supervision, and more sophisticated capital standards."

Courtesy AFP