Rice to address Davos meeting

Last Modified: 23 Jan 2008
Source: ITN

The annual World Economic Forum is due to be addressed by US Secretary of State Condoleezza Rice as the global financial crisis continues.

The annual gathering of around 2,500 business and political leaders in the Swiss town comes as world markets continue to rollercoaster over fears about the US economy.

Many believe the recent turbulence could be the biggest financial crisis since World War Two. It began in earnest last August after problems in the US sub-prime mortgage sector led to a seizure in interbank lending.

On Tuesday, the US Federal Reserve announced a shock 0.75 per cent interest rate cut after two days of plummeting stock prices.

The meeting heard from billionaire investor George Soros who said: "Central banks have lost control."

He added: "The present crisis is the end of an era based on the dollar as the international currency. We need a new sheriff, not Washington consensus."

And Stephen Roach, head of Asia for US investment bank Morgan Stanley: "We have a market-friendly Fed possibly injecting a lot of liquidity in the system which will set us up for another bubble economy.

"I'm sort of worried that all they did yesterday was to hit the snooze button. (This is) excessive monetary accommodation that just takes us from bubble to bubble to bubble."

The independent forum, founded in 1971, brings together financial, industrial and political figures with the aim of improving the state of the world's economies.

But several policymakers have dropped out in recent days due to intense domestic demands, including Chancellor of the Exchequer Alistair Darling and US Treasury Secretary Henry Paulson.

It is a contrast from last year's meeting when markets were enjoying steady economic expansion and a private equity and takeover boom fuelled by cheap credit.

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