Studio Guest – Christian Dreger, German Institute for Economic Research
- 00:03:10
- DW-World
Studio Guest – Christian Dreger, German Institute for Economic Research
Our studio guest Christian Dreger, from the German Institute for Economic Research (DIW Berlin) talks about the price of gold and the effect of the financial crisis on the general economic situation. DW-TV: Mr Dreger, I've got to ask you, is the gold boom going bust now? Christian Dreger: The gold price is on the rise, in our view, because we have this economic slowdown, at least for the current year, and the year ahead. DW-TV: We have been seeing gold prices actually starting to slide. And that is tied with fears of a recession in the US, less demand for energy, which means oil prices are going down. Do you see us entering a cycle where gold prices are actually going to start sinking? Christian Dreger: This is of course a fundamental factor, gold prices will decline because of weaker demand. But we do not expect a large decrease in demand. For example, economic activity is quite strong in the emerging countries like China and India. Probably this slight downturn of the gold price has to do with the Fed decision to cut interest rates by 75 basis points. DW-TV: Yes, I want to ask you a little bit about the gold price. Is gold popular because equity markets right now are so volatile, or does it have more to do with the fact that the dollar is so weak? Christian Dreger: It's mainly a safe haven. We have an inflationary environment, so in the US, we have this conflict between growth and inflation. So the central bank tries to boost economic growth, but on the other hand of course, inflation is on the rise. DW-TV: Do you see a US recession coming to Europe? Christian Dreger: We see very slow economic evolution in the US for the coming two years or so, but the effects on Europe will be quite limited. Because the weight of the US has declined, the weight of the US in the world economy. DW-TV: So where is the weight now? Is it the emerging markets that are making the difference? Christian Dreger: Part of that story are the emerging markets, China and India for example, but also we have higher growth perspectives for the euro area. DW-TV: There are some people, particularly here in Germany, who say that the crisis we're seeing here now in equity markets, the finance crisis right now, is a result of too little cooperation between the state and between the banking sector. Do you think there needs to be more regulation, more cooperation? Christian Dreger: Oh, we do not agree on that, we have to keep flexibility just in order to react to a financial crisis.
DW-World | March 25, 2008
