 Hello and welcome to our hour long Bloomberg TV debate here at the World Economic Forum in Davos, Switzerland. Now as the floodwaters of the global financial crisis recede, we are left with a landscape very different from the world that prevailed in the previous two decades. Investment confidence has been battered, bond markets have fragmented and countries are still burdened with huge debt. Will we ever return to the normal free world? The aftermath of the financial crisis. Central banks around the world began printing money, lots of it. More than six trillion dollars has been pumped into the global economy since 2008. The principle that this cash would find its way into the real economy and kickstart growth. The world's economy probably grew 2.2 percent last year but that's well below the average of the previous decade before the crisis. The economic malaise remains, interest rates in near-record lows, quantitative easing has lost its shock effect. So is this the future? No growth, easy money. Is this the new norm? And are we in this for the longer term? What does it mean for investors? What does it mean for governments and policy makers? Well to help me answer these questions over the next hour, I'm very pleased to say hello to my panel. Ignacio Visco, the governor of the Bank of Italy. Anshu Jain, co-chief executive of Deutsche Bank. We have Pierre Moscovici, the minister of finance for France. Brian Monaghen, the chief executive of Bank of America. Jin Liqun, supervisory board chairman of the China Investment Corporation and of course very Dalio, founder and CIO of Bridgewater Associates. Thank you so much to all of you. Minister, I wanted to start off with you because you have to steer an economy on its path to growth. You have the support of the central bank but it's going to be very difficult to achieve growth. In this kind of new normal, how do you go forward and try and power ahead? First, there's not one single path for growth. There are pathways for each country due to its own performances or characteristics. But I will speak for a country, France, which is in the Eurozone and with the difficulties that it has to face. And our strategy relies on four pillars. The first pillar is about Europe, about the Eurozone. As Mario Draghi said this morning, 2012 was the year, the relaunch of the Eurozone. But what we need to do in 2013 is to move from stabilization, from the end of the existential doubt, to dynamization, to dynamism, and especially to growth. And this is the question which we will have to address together in the Eurogroup or in the Coffin. Plus, moving on on banking supervision and banking union and also addressing the different problems that some countries will face such as Cyprus. This is the first pillar. The second pillar is about reducing deficits. This is something we need to do. It's a question of credibility and it's also a question of a fighting endowment. I always thought that endowment is something which weakens a country, which weakens my country. And this is why we're doing so much, a structural effort of 30 billion euros for 2013 in order to get to the 3% target of deficits in 2013. The third pillar is about competitiveness. We established a huge pact of 35 measures on competitiveness. I will just quote one, which is to reduce the labor cost by 4% this year, 6% the year after, because we know that's where France has weakened during the last decade. We are the fifth economy in the world, but still our competitiveness is too weak. And then I don't want to be too long. The fourth pillar is about reforms, structural reforms, and especially the reform of the labor market. This is why there has been in my country a negotiation during last months, which now has ended with an agreement in order to get as well more security for employment and more flexibility when you move to some shocks for the firms. I think this is the way now we have taken. It's a long way. It's a difficult way, but I'm sure that's the good way. It's a long and difficult way. What does it mean for investors? This is a new reality. Are we at the danger of being too complacent and possibly not seeing a credit bubble? Good question, Francine. I think it's very important to bear in mind that the last six months have seen a dramatic change in the one thing which investors dread, which is tail events. Black swans, fat tails, we've all gotten very accustomed to these words. Let's not forget as recently as June last year, the implied probability of default of Italy was as high as 50%. Due to concerted, very brave and resolute action from central banks and regulators, the prospects of a double-dip recession in the U.S. or if a Eurozone fallout event had been reduced dramatically. So the tails have been truncated. What investors now I suspect want to see, in fact I know they want to see because that's what we've been hearing for the last two or three days, is certainty. I think it's time now that we get some policy certainty. It's time that a lot of the decisions that are made are not made predicated upon the events of the last five years. 2013 marks the fifth year since the financial crisis. And yet if you take a look at the amount of time the business leaders, policymakers, regulators are taking still looking backwards, which is understandable. Grievous mistakes were made. Systems need to be corrected. Stability needed to be ensured. Now that that's been done, I think it's crucial we start to look forward. And for investors particularly, I would say policy certainty, regulatory uncertainty, which allows business leaders to start making investments again. That's the climate we need. Jilin Kun, are you concerned that actually this policy and this cheap cash is something that is going to be very difficult to come out of it? Do we even know that now it does more good than it does bad? Probably we should look at China on the one hand and the rest of the world on the other. Yes, of course, there's lots of liquidity which has been injected into the global economy. But of course, people understand this is very much important to shore up the economy in Eurozone in the United States. And to be fair, I think at least this lose monetary policy has been doing something. In China, as you know, we try to shore up the Chinese economy in the wake of the outbreak of the financial crisis. So the stimulus package really worked. But starting from the second quarter of 2011, the tight monetary policy has been in place so that we wanted to achieve the objective of keeping the inflation under 4% which was a target, which has been worked. And then you will find starting from early next year, the government tried to bring down the growth rate to deal with overheating. So on the one hand, you will find all this money injecting the economy has been working. But people are very much worried now about the research of inflation. So I think it's very much important for the government of all countries to take care of this. But I have to say, probably not all this liquidity has been going to the real sector. On the one hand, the banks are very much careful. They are cherry on making loans to dubrious sectors. So in spite of the huge liquidity, you will find still it's very difficult for some of the real sector enterprises have access to the banking sector. So we have to differentiate. Redali, are you concerned about inflation? And you're one of the most well-known investors. China is very much careful about potential inflation. And there'll be some discussions about this. But I think the government will be very much careful about that. And are you concerned about inflation, Ray? If you look at the way that we have all this cheap liquidity out there, what does it mean for your investments? I think the economy works like a machine. And I think it's just important to understand how the machine works in order to answer that question. So there's a transaction, and you could pay with money or you can pay with credit. And if you have money that is making up for a contraction in credit, it's not inflationary. Because spending, total amount spent in comparison to the total number of goods sold will determine the price. So when we've added money, we've made up for credit and that's been fine. What's happened now is that because of all of the money that has been added to the system, there's a great deal of liquidity in the world. So money in corporations and households, liquidity is all over the place, a lot of it. And it's gone there because of monetary policy and it's also gone there because of seeking safety. We're changing that on the margin. The returns of cash are terrible. Negative 2% inflation rate. So as a result of that, what we have is a lot of money, a distorted a lot of money in a place needed to go there in order to make up for the contraction in credit, but a lot of money that's getting a very bad return that in this particular year is going to, in my opinion, shift. And the complexion of the world will change as that money goes from cash into other things. Now each region is very different, each set of circumstances, but the landscape will change, I think, particularly later in the year and beyond, as those people who put their money there are receiving this bad return and feel an environment of safety because largely the imbalances of Europe have largely been rectified. They've been rectified because debt has the amount of borrowing is now consistent with the ability to fund that. And so those risks, the tail risks, as was mentioned, were taken off the table. And that less risky environment is going to create that kind of a shift, I think. Do you think we're seeing credit bubble? Well, we definitely, well, when we say it, let me be clear what I mean by that. There's a lot of liquidity. But the most fundamental laws of economics is you can't have debt rise faster than income. You can't have income rise faster than productivity. And the long term growth will be dependent on productivity. And we have these cycles around productivity growth because of debt cycles. And so as we are now in this environment, we don't have a credit bubble because of now the production of too much credit. But we do have a bubble in liquidity. There's too much liquidity. And so bonds are a poor investment. They'll have a poor return. Cash will have an even worse return. That's assured. And that's a bubble, too much money in there. So the cash bubble exists. But we're reaching an equilibrium in terms of the debt growth. Brian? I'd say that distinction gets lost because the word credit bubble, this is really a return bubble. A lot of low return assets have been put on. And as rates adjust up, that will have an impact. But I think, and you saw that, you've seen what Ray talked about actually has happened so far this month. You've seen the stop of the weeks and weeks of unbroken flows into different kinds of fixed income funds really stopped and then the equity funds kicked in. Again, because the return, perceived return and perceived safety let people move it out. So I think that the impatience for growth really will take some patience because of the excess that we're built in through the various economies. But what we've been seeing is the underlying fundamentals keep going forward. Consumers keep spending in the US. The company's in great shape. And they were waiting for enough certainty going to Andrew's point where you could start to see the thing take off. And you're seeing a little bit of that now. I mean, literally in the last few weeks. Is this we talk about all of this liquidity? Is this something that as a central banker, you think about a lot that, you know, is there a concern that actually you get to a point where it's going to be damaging, because you can't get out of the extra liquidity that you're putting out or by getting out of it, it just becomes very dangerous. First of all, we have to understand why this liquidity was created. And it was not created to engineer a real economy improvement in productivity or in innovation, because this is not the job of monetary policy. Monetary policy is there to provide stability and certainly price stability. I would say also financial stability is something which is, which sees the central bank responsible for perhaps not the only central bank, but clearly very much important is job. On the other hand, this liquidity was needed also because there was a risk and the risk was still the legacy of the financial crisis, not having completed its effects and this lack of the economy that was somehow showing in certain quarters risks of deflation. This has been addressed with conventional unconventional monetary policy. The interest rates are extremely low. It's a very easy monetary environment. And clearly there are risks that are popping up. There are risks for the government to see very easy way to borrow at low rates, for firms to do the same, for banks not to adjust their balance sheets. And we have to be as Jean-Claude Trichet always used to say vigilant, but also we have to be ready to intervene. Do we have the means? Yes, we have. Let me ask you this, Governor, do you spend more time worrying about how you get out of this situation, or do you spend more time worrying that you have the tools to inject more if needs be? This is an interesting question. It depends, I suppose, from different areas of the world. In our case, the last year has been a year in which the risks, the tail risks that were mentioned were dominant. And I think we have done a good job with the Altairos, with the OMT, within say set of policies at domestic level and at the European level in the governance framework, which have been successful. Now I think it is also the time of looking with care at the exit strategy and how to, but we have to be sure that the tail risks are out and they are not totally out. We have to keep on our adjustment process. There are two risks. One risk is a risk of, as everybody says, complacency. We think that the adjustment is done. The other risk is a risk of fatigue. There is a feeling that perhaps all this adjustment, well, it is being very costly. It is costly. We have to recognize it, but we have to have a longer term perspective. We cannot be biopic, and this is the biggest risk. So Francine, I would just like to jump in there because I completely agree. I think the world has been over-reliant on central bankers. They are the new heroes. It's because of them that we are where we are. But that over-reliance to me, I think my answer to the question you have been posing to all of us, are these unnatural times? These are extremely unnatural times. Yes, we have avoided the tail risks, but the price we are paying is to create a very artificial interest rate environment, which has been very low. Curves have been very flat for very long. Volatility indices are making new lows. Credit spreads are incredibly tight. This is all quantitative easing. Recently, Japan has joined the party with the yen, now depreciating. At some point, we've got to take the burden off our central bankers' shoulders, and really governments and business leaders now need to pick up that slack so that Baton passes from this artificial glut of plenty to actual genuine growth, clear policies, and a forward-looking agenda that we all share. How many of you are actually concerned? I'll ask that in a question. I wanted to ask you how many of you were concerned that we lose this independence of central bankers? But Minister First, you want to say something? It's always difficult for a minister to talk about the central bankers because of their independence, so I won't. Just maybe a very general comment in order to say that my feeling is that the ECB and so the national central banks did their job, and that was really precious in that time. And it's not only the interest rates that are acceptable. It's a situation which is exceptional, which led to exceptional policies. But when you talk about the OMT or about the fact that Mario Dragli declared that the safe of euro was a part of the mandate, the even mandate of the ECB, it changed all the aspects of the euro construction, including the markets this summer. So, well, I want to salute the ECB. But of course, the ECB and national central bank can't do the whole job. We've got to do ours. And also I think that then the adjustment is not over. There is an adjustment fatigue in our public opinions. That's logic because it's a kind of effort. It's a lot of sacrifices. But we must go on with that. The question is for us is what Christine Lagarde said this morning. What is the correct balance to just equilibrium between what we must do in order to enhance fiscal consolidation on the midterm and what we need to do in order to support growth in the short term. And this is a question which is asked as well to a national finance minister or to the finance ministers of the eurozone in the euro group. And we are going to discuss that in the months to come, obviously. You know, central bankers, central bankers might protest if you tell them, if you accuse them of losing independence. Probably the best argument they can possibly offer is that we happen to share the same concern that that of the government. Now the question is, I think central banks should be more tolerant of the slow effect or effectiveness of the monetary policy. But if you do find that the money injected into the system does not seem to work that fast, you have to slow down a little bit instead of injecting capital into the market on a continuing basis. That's the problem. And secondly, I would say central bankers certainly need to help the world or their countries understand that we are here and the economy would have much liquidity. Don't worry about that. But also a very important signal they should give is that don't worry about excessive liquidity. We will mop them up when the economy recovers as soon as possible so that people would be, you know, feel more relaxed about a potential inflation rate. I think it's important to understand that the adjustment that is happening is not just that central banks fill. There was a funding gap, the amount of money that can be lent and the amount of money that needed to be borrowed, there was a gap. And the central banks needed to come in and help to fill that gap. What's happened in the adjustment is that the amount of money that is being lent and borrowed has fallen a lot. And with that, depressions essentially have occurred. In other words, depressed economic conditions. So it's important to realize that when we go back to normalcy, normalcy is not like the past. In other words, that you can, that those countries can spend the way that they have spent before. The past is going, equilibrium means a depressed economy. And when that means, what that means, in other words, the fundamental law is when we go, that we can't raise debt faster than income from now on. And if we can't raise debt faster than income, we have to have a low debt growth. And the issue will come to productivity. So the shift of the discussion is going to change. The shift of the discussion is now going to change in the economics of how do you become competitive? And so competition will be the discussion. And that's a whole, I won't go on there, but there are clear benchmarks for discussion about productivity. And product, you have an app. Ultimately, you can only spend what you produce. And so when we look at those countries, they're very expensive. If you use the measures, literally, what does it cost to have an educated person? What does it cost of an educated person in France, the United States and China and other? Look at those comparisons. And the cost of an educated person in these countries is, I'll go through the numbers, is multiples of the cost of an educated person in China. And so when it comes down to it, they're going to be very big social questions. It's going to be values of life. How long is vacation? How many, how much savings? How much, very much quality of life types of questions? How much will there be transfers of wealth? Or how much will there be self-sustaining? Productivity is going to be the question. There are clear benchmarks of productivity. I won't go on, but we have a list of those things that correlate with 90% correlation with the outcome of the growth rate the next 10 years. They're like a health index. If you look at that health index, you can go down that and compare it. And those are going to be the drivers. Productivity, because the debt cycle will no longer be the main driver. Brian? Just following that, the fourth pillar that the finance minister talked about, it becomes the important pillar because effectively the central banks have provided support to divert the tail risk crisis. And then the question is how long a bridge can they build for you to make the adjustments? And that's the dialogue. But if you really look at the question, that is it. What's gone on for 20 or 30 years has been a massive change of where work has done in our world. And then the second thing is the connectedness of an average business. So in the United States, a middle market company with $300 million in revenue is selling in the world economy, buying in the world economy. And so the labor force that employs in the United States is absolutely not related to its business prospects. And likewise, a French company, likewise. And so the connectivity of those companies around the world is they can actually access demand, fulfill their business plans, grow, employ everything outside the country so that I think the finance minister's job has become much more difficult because the extra territorial globalness of the economy. And so they're trying to build a bridge with low rates to let the economy kick in. And yet the competitiveness is going to be the ultimate issue. And that's a tougher question because it's a it's a much longer build to get back the competitiveness that a lot of us lost in those areas of pockets and things. But that is a much more fundamental question which got lost for the last four or five years because we're dealing with a crisis. You can you it's a tough job. I can't confirm much tougher than before. Much tougher than before. Probably I'm doing the job but obviously. Are you concerned? Are you uncomfortable? I want to get back to this idea of bubble. Are you concerned that actually of where this credit is headed? Now, of course, we do not know. We have to be modest. We cannot claim that we know the future. There are a number of areas we know that are the obvious candidates. Real estate has been won and there might be some particular nations bonds or other things. But the point is that we know now that we cannot rely on your monetary policy to fix these kind of problems. You need other instruments. We are discussing a lot about these other instruments. These other instruments are in the hands of the central banks, but not only they are in the hands of regulators. Regulation is there. Now, obviously we have a tougher regulation word ahead of us. This is the new normal. Does it imply that we are going to have a lower retro growth because of that? I don't think so. I think that we may have a more resilient system and in this more resilient system we may pay a little bit of insurance, but maintain a more stable growth environment. And this is the new normal. The new normal is not a low rate of growth. The new normal has to be a rate of growth consistent with an economy which is more open, more global, more inclusive, with innovation really in 20 years. The world has changed dramatically. The end of the Cold War have implied a substantial change in interconnections among countries, in the demographics, the movement of people, in the innovation, technological change is making use now of what has been produced for the military in favor now for the civil society. We have to adjust. The adjustment is towards a higher rate of growth. We cannot but be careful of areas in which there may be bubbles. We have the instruments, we have to work more. Independence of central banks. Well, the central bank independence has served us in order to give confidence and credibility in the stable environment. I think we cannot lose this stable environment. The major thing that central bank produces is not money, is trust. And this is what really has to be maintained. And I've heard a lot that 2013 is going to be the year where a lot of investors are going to pile in equities. They've had quite a nice rally already. Is this wrong? I don't know, wrong and right. That's a very loaded and a dangerous question, Transin, which is probably why you're asking it. I think the fundamental factors that have driven the rally over the last six months are there. So this rally is understandable and it goes back to the tremendous risk premium, which was inequity prices because of the tail event possibility. Central Bank stepped in, closed down the tail events. That premium was taken out. We've seen this rally. Now, of course, you've got some of the liquidity factors that we are talking about, the very low credit spreads, very low interest rates for long periods of time. And there's a technical role that they all play in creating a higher PV to known future earnings. We come back to this. At some point, earnings have to go up and stay up to justify higher future valuations. So yes, it all augurs well technically, but we need the fundamentals, which is in the end corporate earnings to keep up. Mr. Jean, are you confident about the dollar? No, no, I think what is very much important for the central bank governors and also the finance ministers is to see how much role a monetary policy can play. The reason why there's been so much liquidity into the economies of across the world is that people have excessively high confidence in the role to be played by the monetary policy. And such circumstances actually the monetary policy has a limited role to play. In China, we've been doing something different because we have ample fiscal space. That is why we have the fiscal policy to do much of the job. But unfortunately, this is not possible in some other countries. So looking back, I would say well, so much money's been already there. There's nothing you can do about it, but it's very important, as I said, central bankers must give a signal. We will mop up excess liquidity when the economy recovers. But also we should we should understand, in spite of such liquidity, there's still lots of real sector companies which have difficulties having access to to funding that this is reality. So I think there are lots of lessons for us to learn instead of talking about independence or otherwise, you know, we have to balance the fiscal policy and also improve the overall investment climate. Are you confident of the dollar? Dollar? Well. A little bit worried. I'm a little bit worried, but I have confidence in the resilience of US economy. I do believe US probably can achieve 2 percent growth rate if it can work out the fiscal cliff and debt ceiling. So I'm still very much confident, but of course, the printing machine would have to slow down considerably in order to have for people to have confidence in the dollar. Thank you. Brian. The question of access to credit, I mean, Andrew and I do this as a business, so that we have to probably rebut that a little bit in a sense that we got to sort out. Your credit was restricted for a while, but in things like the mortgage area in the United States, it had to be restricted because this is what helped open the problem up. So there's more conservative underwriting built in. But what we observe in our client basis is that for a credit, for a middle market company needs credit, there's never been more competition in that space than there is today. And then and then the market, people can go to market. There's never, as Andrew said, there's never been a better market. So, you know, we did 20 percent more small business loans from 10 to 11, 20 percent more from level 12 and we'll do it again this year. And and I'm not sure that's the issue. There's bad business plans that can't get funded. Commercial real estate development for small developers is hard to get funded in some places because, you know, look at the history, mortgage credit is tighter. Why shouldn't it be? And if you made it looser, it would not be a good idea. So I think there's there's more acts. This issue I think has more on a demand side is getting to be more on demand side. We're sitting on tremendous liquidity in our industry and top of having almost a trillion dollars of the Fed really doing nothing, also in a sense of getting a quarter for it. So the money's there. And I think it really is going to come down to sort of the fundamental economy putting more demand and then, you know, then that a simple statement of banks are making credibility. Ray, are you concerned about currency wars? As an investor, is it something that that really concerns you or actually is there a play in there? I'm not particularly concerned about currency wars. I also think that central banks will play a much lesser role going forward. I think the ECB's balance sheet will roughly gradually probably taper off, same with the U.S., and so I think they'll naturally recede. I think that they're the next move will be, as described, to move from liquidity to the purchases. And then we have a shift. So I don't think that's the issue. I think that the shift of that cash, that massive amount of cash, will be what will be a game changer. Into equities, mainly. Into stuff. Into everything. Into, it'll mean more purchases of goods and services and financial assets. It'll be into equities. It'll be into real estate. It'll be into gold. It'll be into a lot of, just basically everything. Because you've had, you've had, as a business manager for company, an owner for a company, think about, you've had about six, really six years where the next year's core assumptions were somewhat impossible to predict for a whole host of reasons. And it's a different set of reasons every, you know, almost every year from 07 to 08 to 09. And so, and I think that that's led people to be very conservative. So we talked to our middle market companies. They're sitting there saying, I don't know the tax rate. Didn't know the tax rate for my employees. I didn't know what the demand would be. I didn't know what the fiscal cliff or the all this could solve. And they just been holding back. And I think we will see part of that comes through the system as each uncertainty falls down. And so the European uncertainty tail risk, as the colleagues up here spoke about, that's one. But you, but it was amazing that you'd be in the middle of, you know, Illinois talking to client and they could articulate by country and Europe how elections were going. And you're sort of saying what's going on. And that's, and that's because they're worried and therefore they're trying to understand that has a natural holding back. And then they can articulate how the budget negotiation to go. And this is a company of three or four hundred million dollars. It should not be that concern, but it is because they're trying to find excuses or reasons to try to figure it out. And the problem is that you come back to say maybe doing little not being aggressive is the right reason that will come out of the system as certain stuff melts away. Minister, I want to ask you if you're concerned about currency wars and in if we are seeing a currency war, either developing or already starting to be in its prime, is the euro going to be the big loser? Either a high currency too high for its own good. It's another point which is difficult to talk about by a finance minister currencies because also of the role of central bankers. But, well, as for the euro, certainly the level of the euro today is high and it creates some problems. But we must see why it is so. It is so because the trust comes back to the eurozone. It is because we've made that tremendous job by the ECB. I think also a sorry job by the ministers in the euro group that people feel confident about the euro today that the level of the euro raised. It is also something which leads us to strong efforts in order to adjust and to reach productivity and competitiveness because I'm also certain that the future of economy doesn't rely on endowment on debt but on competitiveness and productivity. But still, well, this will have to be discussed. We also have multilateral institutions or forums such as the G8 or the G20. And we'll have to discuss that because there is another point, of course, which has not been discussed here because I'm the only politician and minister present. It's cooperation, cooperation within Europe but also cooperation between the various areas of the world. I still believe in the capacity to cooperate in multilateral areas and in order to define together, well, common policies in order to get to the real and good level of currencies in the world. Andrzej, can I just get a comment on the euro and then I'll get to the governor because we've seen, of course, a lot of currencies and I'm thinking actually of the yen, a currency which was high but not because of confidence in the economy. So specifically yen or dollar euro? No, about the euro. Well, euro is a product of two countries, dollar euro. And in my mind, the euro is appreciated partly, as the minister said, because again, the euro zone break up fear has receded. But recently it's more because someone talked about the printing press in the US. It largely has to do with the fact that quantitative easing in the US is creating a weakness for the dollar. Longer term, it'll come down to differential growth rates, as it always does. At Deutsche Bank, our forecast for the US is now getting pretty optimistic. We've seen growth anywhere between 1.8 to 2.5 percent over the next year, year and a half. And our core forecast for euro zone is for a modest contraction of maybe as much as half a percent, certainly one-third of one percent. So that differential will augur for a weaker euro, but not a dramatically weaker one till the US continues with its expansionary monetary policy. Since I was a kid, I was told not to talk about exchange rates. Let me ask you this. But, but, but I think... That was a grown-up. Yeah, now I'm a grown-up, I can say. No, but I think that the issue is, is not an issue of nominal exchange rates. And it is not an issue of the euro vis-à-vis the dollar or the yen vis-à-vis the euro and so on. It is a more complicated issue which has to do with competitiveness. I think competitiveness is read in exchange rates, in real exchange rates. I don't think that competitiveness is made out of nominal exchange rates. It is made out of productivity and productivity affects unit cost and unit cost goes on exchange rates. So I would be very worried that one somehow looks for a short-term, short cut to a long-term real problem. So I think we have to focus on real exchange rates, terms of trade, the well-being of nations not on short-term movements, perhaps even massive movements in nominal exchange rates. Mr. Gin, can I get a reaction from Mr. Gin and then Ray and then we'll get to questions on the floor. So if you just prepare your questions. There might be some, you know, disputes with regard to the exchange rate of some of the currencies. IRMB has been the poster child, you know, for exchange rate problems. But I think the so-called currency war, this kind of thing has been very much exaggerated, you know, fundamentally it's based on your the competitiveness of your real sector. There might be some, you know, ups and downs in the exchange rate. So if you look at the Chinese currency, you know, recently the United States seems to be a less, you know, aggressive with regard to this issue. And IMF has been more or less, you know, reasonably, you know, confident that the Chinese exchange rate RMB exchange rate is more or less, you know, on the right level. So don't believe this kind of, you know, myth about a currency war. And there will be no winners in currency war. And I think we need to address the trade issues, you know, amicably. But I do believe it's very much important for the central bankers to make sure that money goes to the right place. But I know it's very difficult and sometimes. Right. When we're talking about exchange rates, I think it's an anachronism that we think about that being the dollar, the yen, and the euro. And realistically, that's an ugly contest. You know, it's, those are, if you take debtor-developed countries, you can break the world into two big groups, debtor-developed countries and creditor-emerging countries. And if you were to say what's going to be the changes, creditor-emerging countries exchange rates are going to rise relative to debtor-developed countries' exchange rates. Can I have a question for the gentleman here at the front, and then we'll go on to the second floor. Yeah, my name is Ruben Vardanian. I'm from Russia, and I represent Bear Bank, because I'm a commercial bank in Russia. I was a little surprised when you were doing the last three days in Davos about predictability and uncertainty. I came from the country with the last 70 years, was very predictable, and I'm not sure it's the best, the predictable country. You know, I'm not sure we're speaking about uncertainty, it's a normal part of the capitalism. I think one of the prominent points that I want to discuss and ask you a question, is not a question about uncertainty, but a question not following the rules that you establish. And the crisis happened because the rules that was established by European Commission or by any financial regulators was not followed. Like, Greece was bankrupt eight times and was not allowed to become a member of you, but to become a member of you. France was deficit about 3%, not but penalized. What lessons will we learn from this crisis? Do we learn any lessons? And do we follow the rules which we establish ourselves and we are violating after we establish the rules or not? We'll continue to violate the rules which we establish ourselves. Thank you. Ashu? I'm not sure that violation of rules alone would be what I would single out. I think the events of 2007, 2008 and economic historians are still pouring through it. So the lessons learned piece will continue to be a raging debate. I think there's a confluence of various factors that's identified them. We had unprecedented liquidity for a long period of time. We had regulation which took a back seat, especially as far as the private sector is concerned. Certainly the banking sector built up leverage at an unprecedented rate. Borrowers to raise point were borrowing a lot, lenders were lending a lot and sovereigns stood back and let all of this happen. So yes, when it comes to the Eurozone and Greece in particular, it might be an issue of sovereign rules and so on. But really the financial crisis to me was really a product as all truly bad crises are of a variety of a lot of things coming together at the same time. And I really think we have to tease it all apart, parse it. I think there's lessons learned for regulation, much stricter now than they used to be, which makes sense. There's a lesson learned for governments to be much more vigilant when it comes to their own discipline. There's a massive lesson for banks, probably the greatest lesson of all. Our industry has been transformed, needed to be transformed. But really it will take all of us working very differently than we did for that crazy four years in order to make sure that those events don't come about again. So I'm not sure it's just adherence to rules, although that's a very important part of it, specifically when it comes to the Eurozone issues. I do agree with that because obviously there is one problem and maybe one or two others dedicated to violation rules, especially Greece. But this crisis obliged us to invent new ways of governing the Eurozone. First, we had to invent new tools. I would mention the programs defined as well by the IMF and by the EU together with the system of the MOU and so on and so forth. We are inventing new fields of intervention, such as the banking union, the banking supervision, but then tomorrow, guarantees of deposits and then resolution. We are also inventing a new governance. And I think that there we've got to build more on that. There is a beginning, the role played by the ECB, cooperation between ECB, Commission, Eurogroup, IMF. But tomorrow we will have to reinforce these governance, obviously, if we want to be on a very stable basis and also to decrease uncertainty in the political area of the Eurozone. Because what this crisis showed is that we didn't have the right governance in order to rule such an integrated area with a single currency. There's a question on the second row. Thank you very much. Daniel Arbes, Perla Weinberg, partner, Zurion Fund, like to ask about a topic that hasn't come up here today and we really haven't heard very much about in the last three days, which is policy normalization and inflation risks. A couple of years ago, people were very concerned about this and then the pendulum has swung back in the other direction where people are not really talking about policy normalization right now. The US Fed, for example, has laid out a roadmap. They've said unemployment comes down to six and a half percent. We're into a normalization environment. You could see, we think, three million jobs created between energy and housing in the next 18 to 24 months in the United States, which brings unemployment down to 6.2 percent. At that point, I wonder, where's the velocity of credit? Brian talked about the money that's been created being on deposit at the Fed today in the financial system, so there's no real inflation risk right now. Once unemployment comes down, where is credit in terms of this money seeping into the economy and what are your views, say, Brian and Ray, about the Fed's ability to shrink its balance to soak up this excess liquidity before it creates an inflation problem? First of all, I would say it's very hard to define normalcy. What do you mean by normalcy? I think it's very hard. So probably we should leave that behind, but I think probably it will take some time for the macro decision-makers to be convinced that we should avoid doing something extraordinary because the economic situation is more or less on the right track. But as I said, I think probably central bankers should have been more tolerant of the slower growth. Otherwise, we should not have seen so much liquidity but because of impatience, because they wanted to see that economy could be recovered as soon as possible. So they keep pumping liquidity into the economy. So I would say it's an illusion to believe that you can depend on one set of macro policies to sort out all of the problems. I think that's the problem. Now, this can go on for quite some time. With regard to unemployment rate in the United States, do you think this is simply because lack of liquidity? Absolutely not. That is why I'm very much worried this may go on and on for some time, for some years to come. So instead of talking about when we can have the policy return to normalcy, it's very important for the government or regulatory bodies or central bankers and minister of finance to think about the overall measures to deal with the problems. Again, I think it's important to look at the economy as operating like a machine and everything's a transaction. So the amount of spending is what matters. Now, spending can be in money or it can be in credit. If credit is picking up, then money can decrease. And so spending is the thing that matters. When it picks up, it will be incumbent on the central banks to reduce the amount of money so that the amount of spending is consistent with the productivity growth rate. And so I believe that that can be done. And that could be as long as there's balance, as long as debt doesn't rise faster than income, income doesn't rise faster than productivity. And productivity then grows at a decent pace. That's what everything matters. And that's it all. As we look in our consumer base, you've seen the spending really hold up among the consumers even in January 13 versus January 12. It's up 6 percent. And this is not a small number of 40 billion dollars of spending a month. So it's a significant amount. So the consumer continues to spend. And then the question is what could interrupt that or what could sustain it. And I think that will keep helping the economy move forward. I think that the risky point now is the risk that we all worry about, you know, the spike in rates risk and will the market reprice the assets much faster than the Fed movements and things like that. And that could all happen. But we're still in an extremely low interest rate environment. And Preston is ten year below two, which has been for quite a while now, is very unusual. I think there's been one other period in American history. So rates moving up a lot is not, it's a lot relatively to where they are now as a move. But in a grand scheme of things, it's overall rate structure is still very low. And I think this is a challenge. The Fed will have to manage this carefully. They've been absolutely transparent. They've given us the principles by which they'll do it. And they need to keep their balance sheet also in perspective relative to the size of the economy and size of what goes on. We have 250 billion dollars of mortgage-backed securities on our books roll and we invest 20 billion dollars a quarter because we have to because the roll offs and stuff like that. It's there's other parts of the economy can pick it up, go in the point that have the liquidity to do it. It's just it's going to be managed in the near term. The risk of the other side I think is in the judgment obviously of what the Fed has been clear about far outweighs the risk of inflation right now in our minds and our experts minds that they tell us and I think the Fed has been clear about that. So this is an issue which will become more prevalent. But your posture was there's three million jobs created in America, that is the question. If we that is a if we get those three million jobs created, we have a whole different economic circumstance we're talking about in the ifs, can we do that? And that is not clear, not the rate structure, but that is not clear and I think the Fed has been clear until they see that that's when they're got milestones or goalposts or whatever. I'm just going to ask the governor to react to that and then we have to start wrapping up. So I'll just ask each of you if how you sum up the move in Davos and if it's optimism, if you agree. Well, I just been stimulated by some observation. The major observation I think is that monetary policy is not there to take the place of other policies. It has been mentioned that monetary policy has been so easy because growth rates were so low. This is only part of the explanation. A good part is because there were substantial financial imbalances and there is a lot of liquidity there now standing which is not used. So the major issue here is to avoid that when the real economy is picking up, that goes in the wrong place as it has been said, very, very difficult. But this is the challenge for central banks to mop up at the right time. Then the obvious issue here is whether we are in a cyclical or in a trend adjustment. Very difficult for attempting the United States policy is predicated on a cyclical adjustment. Unemployment is high. A good part is because of the cycle. This is what you hear from the Fed. There is some issue of some cyclical unemployment becoming structural unemployment. How to deal with that? You need structural policies. So this is my what I take from this latest discussion. If you want me to start with summing up because you said you wanted to have one word. I'm happy for you to start. Absolutely. My main point here is really again on the risk of being complacent, saying that, well, we are out of the crisis and now we can really reduce the attention on the main points which have been coming up in the last years. I think we leverage is still an issue. And I think in private sector in that is an issue. The difficulty of the real economy to adjust to the major changes in technology, but not only in technology is an issue. So there is a lot of effort in front of us. And please let's not talk too much about austerity and the bad things of austerity. I mean, there might have been some problems that are very important sacrifices, but we have to give a longer view and not stop in the short review. We have to take care of the distributional impacts, of course, but we cannot really go back to a world in which everything goes does not, does not pay. And do you feel the mood has been quite optimistic? And if it has, is it a little bit complacent? Optimistic, but predicated on two hopes. One, that the priority for regulators is to finish what started five years ago and to provide us clarity and now stability in terms of further regulatory volatility and probably even more crucially for government policy to truly be motivated by long term GDP growth. For too long, that agenda has been confused in terms of finding stability, redistribution, social justice, all reasonable things, but for now with clarity for governments to act in concert and focus on the future and to take some of the burden off central banking heroes, which at this point, I think those shoulders are starting to get a little wary. I'm sure. Minister. Well, I was not here in 2012 because I was campaigning for the presidential election. I was not the candidate, but there was a campaign manager of the president. So obviously, I don't know exactly what was the climate one year ago, but I can feel that it is better now. And especially when you look at the Eurozone. And even since things smoke so go, I remember when I went in Los Cabos for the G20, people felt my pulse in order to know how my heart beat. It's better now. So I think that we are on the right issues and that we've got to do the job of adjustment of reinforcing competitive during this year, because when the growth will start getting better and it will probably by the end of the year, we must be ready to take profit out of that. And that's what we are doing now. We must keep on that way. And then Davos 2014 will be a great moment, maybe. Brian, will 2013 be a great moment? Comparing 13 to 12, I'd say optimism, but with a sober tone in a sense that I think if you remember last year, you know, Greece was going to leave. There was just there was a much more tail risk in Europe now people that the mechanisms are in place, they're used, they're utilized. So I think there's a lot more optimism that that doesn't become tail risk for 13. And then but it's sober because there's a lot of hard work. And I think the colleagues have already sort of run through that. So I think there's a more balance to that as opposed to be a crisis where people are running around saying, how do we patch this? It's more OK. That may be solved. We're still worried about it. But now it's the hard works got to really be going on underneath it. But I think overall, the mood has been more optimistic. I think by and large, I think there's less less view that the tail risks are huge and and probability is high. You were shaking your head. So I don't know whether to take it as you're not as optimistic. Sometimes my shaking hands means yes. You know, I don't think there's some complacency if you if you talk to the government and officials, talk to media, talk to general public. I don't think there's complacency. But there is a kind of optimism, which is helpful. We have to be optimistic about 2013, which should be better. What is most important? If there's anything positive comes out of the Davos meeting is to have the people understand there's better cooperation among the regulators, government of institutions, central bankers and minister of finance and also the corporate business people. So if there's some kind of cooperation, we would move on the right track. I would say 2013 would be would be a very good year when I shake my head, which means we have to be really careful about some of the negatives. And so what's your biggest negative? What is your biggest concern? Intolerance, impatience about results. Right. I think it's very difficult to talk about the world as a whole because the conditions are very different. So I think in the U.S. we're having that it's a transition year. It's one of those years that will go down in history that you won't even remember. It's a transition in between cycles as we move from one to the other. I think in Europe, what we have achieved is the debt creation has been brought down to a level that is funding. And that's a depression like condition. And that will now be an environment in which social pressures and and political pressures will be difficult. And the importance there is not to have a pick up in debt relative to income again and to deal with it through productivity. I think in China, they're on the other side of the cycle. The other side of the cycle is that debt is rising too fast relative to income. And there's and that's something that is the opposite side of the cycle. And now they will have to deal with it. So I think that those conditions are, you know, a landscape. They're transitions for all those countries. You've been called a hero. Do you feel a hero? No, no, I think Mario Drague, isn't it? Gentlemen, thank you so much for your time. I just want to remind that our panel was the governor of the Bank of Italy, Anshu Jiang, Co-Chief Executive of Deutsche Bank, Pierre Moscovici, the Minister of Finance for France, Brian Monaghan, the Chief Executive of Bank of America, Jinling Kun, Supervisory Board Chairman, China Investment Corporation and Ray Dalio, Founder and Chief Investment Officer of Bridgewater Associates. Thank you so much for your time. I really enjoyed the discussion.