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Rising exports are the reason America hasn't sunk into recession, despite the global economic slowdown following the meltdown of the U.S. housing market, says Jacob Frenkel.

Speaking at a panel on the global economic future at the Israeli Presidential Conference 2008, the vice-chairman of AIG and former governor of the Bank of Israel insisted that the most burning problem remains the financial crisis.

"The real issue that we face is the credit crisis," he told the audience. "The housing sector is in deep recession, but that isn't the reason that we're all grim," he said, referring to the U.S., noting that the residential sector is responsible for only 6% of America's gross domestic product.

The real problem, Frenkel explained, is that "toxic" assets have been spreading through the system and now it's hard to know where they've reached.

"If you don't know where the risk is, you have to sit back and wait for the clouds to clear. That's the situation today," Frenkel said.

Frenkel feels that the crisis had been inevitable. "Three years ago, we were told that American housing prices had risen too far," he said, and that analysts had highlighted how personal and government spending had risen too sharply, that the dollar was too strong, and that the U.S. would suffer from deflation.

But now housing prices are falling, the budget deficit and dollar are contracting, China's yuan is climbing, and the U.S. is more afraid of inflation than of deflation. It had to be expected, Frenkel insisted.

The emerging markets today, led by India and China, are driving 70% of global growth. It's a whole new paradigm, and requires fresh thinking, Frenkel urged.

Why is this crisis different from all other ones?

Panelist Dominique Strauss-Kahn, the managing director of the International Monetary Fund, said that it is because it originated in the U.S. The crisis has largely dissipated, but it can't be said to be over, Strauss-Kahn said.