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[Music]
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not at all optimistic I think it's a lot
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deeper than we fully realize you've got
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sovereign debt problems that are on top
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of uh traditional banking problems that
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are on top of serious growth problems
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and you're not going to solve the former
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two until you figure out how to grow and
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growth is not going to occur until such
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time as governments promulgate some
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progrowth policies which are a ways off
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so I would say this year probably is as
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Bleak as we've seen in a very long time
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but we're going to have to figure out
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how deep the crisis is and whether it's
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Greece or Greece and Spain Spain and
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Italy you know the third and fourth
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largest econ iies of the Euro Zone
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whether or not that impacts France for
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example what in other words the metastas
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is
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ultimately uh but I think we're a long
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ways off from being able to make any
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real sense of
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it well I think there has to be a sense
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of predictability going forward from a
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regulatory standpoint from a tax policy
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standpoint uh from an overall long-term
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austerity uh standpoint in other words
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it's one thing to have a certain at A-
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kilter debt to GDP ratio but beyond that
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what is your investment regime going to
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look like is it going to stay consistent
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uh and bankable investable for more than
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just a year I think all these things are
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going to be terribly important to the
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investor Community going forward and
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with uh the unpredictable nature of
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where some of the economies are in the
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Euro Zone getting any of those longer
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term policies in place that will really
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give the sense of confidence to the
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investor Community really is almost
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impossible how do you stimulate
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investment you stimulate investment by
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creating an economy that is conducive to
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investment and Capital's a coward let's
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face it and it's going to flee wherever
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it perceives you're to be risk in the
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marketplace and find a safe haven so how
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do you make your economy a safe haven
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it's generally done by uh tax policy uh
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by investment regimes that are uh
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improved either through transparency or
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trade and investment facilitation
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measures so all of those are things that
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can be looked at and implemented but
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again the marketplace is going to say
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that may be a quick fix and it may be
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something that I can't Bank on longer
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term and I think that really is the
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problem in the Euro zone right now is
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how do you promote enough in the way of
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confidence in your longer Term Policy
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policy making so that it isn't one
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regime overtaken by another a year or
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two from now who will come in with
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completely different policies that's
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that's the fix that they're
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in that's another side of the equation
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the whole demand side of of of the
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economy and the high levels of of
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unemployment and the missed
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opportunities on the human capital side
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so it's a it's a serious serious set of
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circumstances right now and I think
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we're years away from any kind of settle
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settling out or ultimately a calming
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effect that would provide enough in the
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way of confidence and longer term
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policymaking uh
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transparency where investment is going
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to be attracted in any serious
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way I'd have to say the high levels of
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unemployment and the displacement on the
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social side because that leads to what I
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would consider to be unpredictable
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outcomes in terms of social unrest it's
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one thing to deal with the economic side
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numbers that just aren't looking good
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it's another to look at the social
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implications of high unemployment like
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we're seeing in in Greece and Spain and
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the unrest the unrest that that could
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very well
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trigger boy farbe it for me to Advocate
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anything in in Europe Beyond which
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they're already uh looking at but
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clearly you've got to attack debt you've
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got to figure out how to get your debt
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to GDP into some sort of manageable
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number that speaks to longer term
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confidence then you've got to attract
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investment you've got to have Seed corn
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with which to build your economic base
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and change the fundamentals and put
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people back to work and investment isn't
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coming in until there's a clearer
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picture of where the economies are going
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longer term and again that gets right
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back to debt uh with a higher debt to
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GDP ratio the longer term Outlook is
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very very Bleak so I think I would
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attack the debt side first knowing full
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well that that could boost a little bit
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in the way of longer term confidence
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bringing an investment that could
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ultimately settle out the unemployment
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problem I think you've got a broader uh
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architectural overlay that is altogether
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problematic that we aren't even talking
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about and and that is what about the
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Euro Zone what about the fiscal and
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monetary Union what about the Euro these
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are all issues beyond the individual
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economies that have to do with the
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regional architecture uh that have got
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to be resolved and many say today well
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it was a failed start you know was okay
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to call it a failed start today but what
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do you do about it so before you really
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start drilling down on the individual
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member states and some of their problems
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you got to deal with the problem of
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Europe and what it means to be managed
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economically within a common market or a
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common framework that doesn't seem to be
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working out so well so who do you call
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do you call Brussels do you call the
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nation's capital that you have queries
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about uh you've got the overlay of 27
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countries in the EU to say nothing of
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the 17 member Euro Zone that each has
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you know bureaucrats in Brussels that
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handle the various aspects of economic
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trade and foreign policy and so they're
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it's a topheavy system and it's really
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difficult to talk about how you bring
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back to life an individual nation state
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when you've got this architectural
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overlay that really is failing the
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region in a very serious
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way well to have a successful fiscal
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Union like the United States has a
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fiscal Union for
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example you have to have Labor Mobility
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just to begin the conversation I don't
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think Europe has anywhere near the labor
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Mobility that you need to make it work
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you've got to have some recognition that
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the wealthier states are willing to
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somehow subsidize the weaker States we
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do in the United States without really
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calling at that but you know that's kind
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of how our system of subsidies out of
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Washington taxation to watch and then
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payments back to the States really
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really works in order for all of this to
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work you've got to have a stronger
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political union uh to back everything up
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so it's as if you had uh a couple going
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off to be married not yet uh finalized
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yet you take out a joint checking
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account and You Begin transacting
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business with all the uncertainty that
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that would then uh entail uh you can't
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you can only go so far with a fiscal and
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monetary Union without uh a strong
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political union to provide the
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cohesiveness and that's where the card
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has been put before the horse so to
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speak and I'm not sure longer term that
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a political union the kind that would be
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necessary in terms of the innate
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inherent cohesiveness is going to be
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there to support uh uh an economic or a
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fiscal Union longer term
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I think that that that's exactly right
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and I'm not sure that a 70-year
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experiment uh you know let's just take
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it from Post World War II from the
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Breton Woods period right through to the
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Accords of the early 1990s the master
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master treaty uh and then take that
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through to today I'm not sure that the
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leaders of Europe are going to easily
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dismiss what has been the most important
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experiment economically and politically
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uh uh uh in Europe since World War II
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and maybe in maybe in 100 to 200 years I
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think they will endeavor to make it work
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so that you don't end up with a
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two-tiered system I think that's
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terribly problematic from a currency
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standpoint from a trade and investment
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standpoint but then they're going to
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have to deal with Greece and in order to
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deal with Greece so that they don't fall
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out of the Euro Zone uh someone's going
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to have to back stop the the numbers and
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there's only one country that can do
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that and uh and that's Germany and then
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in Germany you have to conclude that
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what is an economic problem for most
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others becomes a political problem for
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Angela Merkel she can't very well make
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the sale on the streets of Berlin when
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they say well gee in 2000 we were the
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problem economy and we did what needed
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to be done in the interim in terms of
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austerity in terms of getting our
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balances back in working order and you
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want us to do what you want us to
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subsidize those who aren't willing to
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step up and and uh Embrace those
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difficult measures that are needed uh
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such as we did that becomes politically
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untenable and so that's kind of where we
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find ourselves today is an economic
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problem that fundamentally becomes a
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political problem for Germany uh and a
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relative stalemate and the European
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Central Bank trying to create a wall uh
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a back stop uh to the best of its
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ability with certain member states
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playing a supporting role to ensure that
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or to try to keep contagion from from
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breaking
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out maybe
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some the Asian Cris crisis was followed
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by some pretty serious
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austerity and uh getting their balances
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back in in working order very
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aggressively might add to the point
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where for example the South Koreans you
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know were very angry at the IMF and the
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United States for the tough medicine
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that they advocated but they got through
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it and I would say they probably got
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through it better because relatively
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speaking many affected were smaller
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economies they're also newer economies
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uh they didn't have much as much drag uh
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uh in their systems as you find over uh
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in Europe it's also a more buoyant
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region in terms of uh inner Asian trade
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and investment
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flows uh so to some extent I think you
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could
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say they had imbalances they addressed
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the
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imbalances uh they took some really
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tough steps that were advocated by the
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IMF the United States and others and
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they got back in the game uh but there
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were also some factors that would would
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have made them a different set of
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circumstances in Europe
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well you have to ask yourself the
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question where are the engines of growth
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the global economy has always had in
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recent years some reliable engines of
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growth to pull
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those economies who were performing at
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lesser levels
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along but you're hard pressed to see any
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entrance of growth today uh China will
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remain reasonably strong they may not
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put in an 8% number or % number but
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certainly probably a seven or a seven
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plus perc number which is way down
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historically from where they've been
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over the last 30 years uh India is down
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probably by a factor of 30 to 40% in
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terms of their own growth numbers so
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where where are the engines of growth
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and I think that's bad news for the
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global economy and so you
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may get by with you know one and a half
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maybe 2% if you're lucky uh waiting for
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the traditional engines of growth to
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refire themselves and uh and get moving
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again but I think the next year or two
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are going to be very tough for the
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global
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economy uh and uh I think the I think a
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lot of it will depend on how quickly the
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United States gets back in the
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game I I would say
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streamline uh investment
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regimes uh introduce greater
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transparency into the system open
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Financial Services markets Insurance
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markets do a better job protection
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protecting intellectual property rights
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I think these are all
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probably quit manipulating your currency
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to the extent that you do uh these are
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all probably steps that would uh enhance
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the prospects of both countries China
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and India longer term they're hard to do
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uh particularly during periods of
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uncertainty when your export markets are
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uh less Reliant today than they were
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just uh a few short months ago even uh
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you're going to think Inward and you're
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going to Resort more to uh protectionist
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measures and you're going to be more
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inclined to manipulate your currency and
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to keep closed some of those markets
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that even under uh WTO agreements you uh
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you agree to open it it uh at some point
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so this we're we're at an important uh
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time uh in terms of whether or not some
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of the newer emerging economies are
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really willing to step up and show their
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commitment to to growth and to reform
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and to economic
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openness well the evidence is there that
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they're in that transition to some
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degree um when they announced stimulus
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measures as they did about 3 weeks ago
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to uh incentivize consumers to buy more
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in the way of household appliances
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televisions big
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screens consumer goods you know they're
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taking this transition seriously and
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they have to because the math just
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doesn't work for them any other way you
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can't maintain their current trajectory
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as just an export power uh and expect to
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deal with the demographic changes that
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lie on the horizon when you've got
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more people leaving the workforce and
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you have entering the workforce uh your
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costs are going to increase and labor
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rates and indeed in the southern
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manufacturing zones around Guang Joo and
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Beyond we're seeing prices escalate and
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I think that's because of the upside
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down demographics that China is just on
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the front end of
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experiencing and so you've got longer
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term four
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grandparents two parents one wager
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you got an upside down pyramid
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essentially uh and so how do you make
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the numbers work longer term how do you
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deal with health care costs Social
00:16:08
Security costs and uh an affordable
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housing cost when you get real estate
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bubbles every now and again they want
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certainty and uh certainty is tough to
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achieve when once you've started that
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transition from an export Le economy to
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more of a consumption economy but they
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they've taken that risk flexibility is
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driven by
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necessity uh because they can't go back
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to their old form of managing the
00:16:38
economy and expect to survive longer
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term they're in unchartered territory
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right now and but it's all that's also
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by necessity
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[Music]
