Analysis: Finance Chiefs Have Full Plate

Treasury Secretary Henry Paulson, bottom row, second from left, gestures during a group photo of the G-7 Finance Ministers and Central Bank Governors meeting in Washington, Friday, Oct. 19, 2007. Central bank governors pictured top row, left to right: Christian Noyer of France; Axel A. Weber of Germany; Federal Reserve Board Chairman Ben Bernanke; Mario Draghi of Italy; Toshihiko Fukui of Japan. Finance ministers pictured bottom row, left to right: Peer Steinbruck of Germany; Paulson; Tommaso Padoa-Schioppa of Italy; Fukushiro Nukaga of Japan. (AP Photo/Charles Dharapak) (Charles Dharapak - AP)

WASHINGTON -- Faced with soaring oil prices, a falling dollar and the worst credit crisis in nearly a decade, the masters of global finance have a simple message for jittery markets: Be calm, we are keeping an eye on things.

It probably didn't help, however, that the new assurances came exactly 20 years from the date of the worst market meltdown in U.S. history.

The meeting of finance leaders from the Group of Seven industrial countries coincided with the anniversary of "Black Monday," Oct. 19, 1987, when the Dow Jones industrial average plunged by 22.6 percent, its biggest one-day percentage loss ever.

While Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke and their G-7 counterparts did not dwell on those long-ago eventsq during their discussions Friday, the anniversary served as an eerie reminder that the global economy does not always perform as its handlers wish that it would.

It didn't help that while the policymakers were holding their discussions in Treasury's ornate Cash Room, the Dow Jones industrial average was plunging by 366.94 points, or 2.64 percent. It was the third-biggest point drop this year and reflected in part oil prices that momentarily climbed to a new record, above $90 per barrel.

The problems this year came to a boil when credit markets essentially froze on Aug. 9 as fear overwhelmed many investors.

Troubles that began in the market for subprime mortgages have spread to many other kinds of debt. The credit crunch has been similar in intensity to the crisis that hit the global economy in August 1998 after Russia devalued the ruble.

Paulson, speaking to reporters after Friday's meeting, said the G-7 officials are watching market developments closely.

However, in their joint statement of goals, the officials essentially rehashed previous bland assurances about cooperation in such areas as limiting volatility in currency markets. Absent were any examples of where big differences in approach had been resolved.

European finance ministers had hoped the Bush administration would agree to more forceful actions to limit the sharp fall in the value of the dollar, which has hit record lows against the euro. That has helped American manufacturers by making their goods cheaper in European markets but is pinching European companies.

Paulson said he told the other G-7 officials that a strong dollar is in the best interests of the United States, an oft-repeated view that the Europeans complain is not being backed up with any action to halt the dollar's slide.

"I heard my colleague Hank Paulson say a strong dollar is good for the American economy. I hope the market will hear him. That's not the case today," complained French Finance Minister Christine Lagarde.