Bloomberg on Market Crisis: Look Outward

By BENJAMIN SARLIN, Special to the Sun
January 23, 2008

As Washington haggles about the details of a stimulus package and the Federal Reserve tinkers with interest rates, Mayor Bloomberg is saying that welcoming more immigration is the key to solving America's economic woes.

"All these economies are linked together and our country has tried to look inward at the very time when we should be looking outward," the billionaire mayor said yesterday at a press conference in Queens. "We should be trying to encourage the best and the brightest from around the world to move here and bring their knowledge, bring their capital, bring their spirit to expand our economy, and, sadly, I think we are going in the other direction."

Mr. Bloomberg will discuss his views on economic policy again today in Washington, where he is addressing the annual meeting of the U.S. Conference of Mayors.

Although stocks stabilized or rebounded somewhat yesterday in some European countries, global markets suffered some of their worst losses in decades on Monday, confirming fears that America's recent difficulties brought on by the subprime mortgage crisis were damaging stock indexes in some of the world's largest economies. American markets avoided the Monday drops, as they were closed for Martin Luther King Jr. Day, but there were serious concerns that they would suffer upon reopening yesterday. These fears prompted the Federal Reserve to cut its benchmark interest rate 0.75% in an attempt to inject life into the market. While the Fed's move may have prevented a cataclysmic market collapse temporarily, Mr. Bloomberg said it would likely have little impact on the ailing economy.

"The problem with the interest rates at current levels is that they are reasonably low from a historical point of view, and so when businesses are not expanding in this day and age, I think its probably other factors rather than the cost of capital," he said. "When people are or are not buying houses, it's probably to some extent a view that they have of their employment prospects in the future and the economy in general.

"Clearly, lower interest rates do stimulate businesses to some extent and more for homeowners who have mortgages that are rolling over. That's good news for them, but I don't think it's the determining factor. What you see going on in the world is a general fear that the world economy has expanded to a level that can't be sustained, and that there are unknowns built into the banking system and into lots of parts of our economy. And since it's all connected, you see these effects around the world," he said.

The mayor's comments echoed themes he touched on in last week's State of the City address, in which he praised immigrants' role in the American economy and criticized "those politicians who, all of a sudden, have embraced xenophobia," an apparent dig at the Republican presidential field.

Yesterday, Mr. Bloomberg emphasized the issue in the context of the global economy, whose interdependence, he argues, makes isolationist policies counterproductive for America. "I think people in this country don't understand that a lot of the jobs in this country are dependent on our ability to export to countries around the world," Mr. Bloomberg said. "And all of our markets, whether they're financial markets or commodities or markets in finished goods and services, they're all interconnected. You see one part of the world get a hiccup and the damage done is quite extensive."

The mayor said Americans should not fear other countries' success, as strong foreign markets will help drive domestic ones as well.

"We, for example, need an economy in China that is flourishing," Mr. Bloomberg said. "We export a lot to China as well as import from China. We need to have a Europe that is growing — that's where we send a lot of our exports. We need to have people from around the world come here."

The frequent national scale of the mayor's comments regarding immigration, gun control, the environmental, and other issues has prompted speculation of a possible presidential run. In a move that sparked further chatter among political observers, Mr. Bloomberg met Friday in Texas with Clay Mulford, who helped mastermind billionaire Ross Perot's 1992 third-party run.

"We talked about the political scene in the country," Mr. Bloomberg said of his meeting with Mr. Mulford. "He has the view of a Texas resident and somebody who's active and involved in politics and it was actually fascinating to listen to his views of the world."