Commodities Pose a Threat to G-8 Nations
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Finance ministers from the Group of Eight nations said surging food and fuel prices have replaced the credit squeeze as the biggest threat to the world economy.
Deputy German Finance Minister Thomas Mirow said oil’s rise to a record means “an enormous withdrawal of purchasing power.”
In a statement, the ministers said the global economy faces “headwinds” and that risks to growth persist, with higher commodity prices posing a “serious challenge.”
Japanese Finance Minister Fukushiro Nukaga said intervention in the currency market wasn’t discussed by the G-8 ministers.
Emerging economies were pushed to cease subsidizing food and fuel prices.
Rising prices threaten to damp growth further by sapping household budgets and boosting production costs. Prices have also sparked protests from Malaysia to Spain.
Disagreement on Oil
Lagarde and Russian Finance Minister Alexei Kudrin argued investors are buying oil and food as a hedge against the dollar’s drop. Paulson downplayed the link by noting oil’s gain outpaced the dollar’s decline since 2002.
Italian Finance Minister Giulio Tremonti disagreed by calling on governments to “fight speculation” and proposed limiting it by raising deposits for investors trading in futures markets, effectively making it more expensive to bet on oil prices.
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