 It's over. My dear colleagues, we said that we would give them five minutes more, but the five minutes are over. And so I suggest that we start. And we will be perhaps as expeditious in our messages and our exposition. But I count very much on the audience to be as vivid, alive, and aggressive, if I may, as possible in the question. Because, again, we have perhaps even more stuff to discuss than was the case before. And I don't want to take myself too much of the time. I will only say that we had a dramatic inflection point starting mid-last year, and with the inflation being back with a vengeance in the advanced economy and by way of consequence in the entire world. And that, of course, has progressively, with some lags, to be frank, changed the monetary policy of the central banks, of the advanced economy and by way of consequence of many others. And even if it was relatively recent, because, after all, the first interest rate increase in the US was, if I'm not misled, in March this year. But this was really marking the inflection point. So we are in a totally different universe if I compare that universe with what we had experienced during, say, around 10 years since Lehman Brothers and the post-Lieman Brothers start of the recovery. So we are in a different universe, and that has a number of consequences which are considerable for the financial world and all the issues that I suggest that we could discuss. As some of you have seen, I thought it was useful to send some kind of, I would say, wrap-up of what's going on at the global level in terms of non-bank finance. And the very active way, I have to say, the Financial Stability Board, the IMF, the international institutions have to and the government and the institutions concerned to have a very active way to try to regain control of this intermediation, taking into account that the commercial banks and investment bank intermediation has been considerably improved since Lehman Brothers over the last 12 years, say. But it's not the case at all for non-banks. And all that kind of intermediation which is coming from the non-banks is probably the place where we have the most dramatic, I would say, threats to financial stability in the world. To make a long story short, let me tell you that I consider that we are still in a world which is extraordinarily fragile on this front, the financial front, and that new, I would say, crisis, substantial crisis are not to be excluded at all. So only for me to list a number of questions, it's not exhaustive. There are many, many other questions, but only to be sure that I convey myself some of the questions which seems to me interesting and stimulating. But I count on all of us to be, as I would say, imaginative and creative in their own question. I would say first, what is the likelihood of central banks of the advanced economy succeeding in regaining control of inflation? They are committed to produce around 2% inflation on both sides of the Atlantic and in the other advanced economy and by way of consequence in many other economies. In the medium term, which I would interpret in saying in three years' time, normally, if the central banks are credible and if they are taking the right decisions, if there are not new dramatic events that could come, it seems to me reasonable to say that, after all, it's pretty possible that we would be in the US, in Europe as a whole, around 2% in three years' time. But nevertheless, there is a question mark and many of us might disagree, of course, with this, I would say, statement of the central bank, which has been done again very, very forcefully by Jay Powell, by Christine Lagarde and others. Second, as always, do we have any comment on the present projections of the global growth by the international institutions? Some of us have certainly comments that would be interesting. Third, are we correctly assessing the divergences between the advanced economies, the developing world, the emerging countries? What about the, I would say, fragility of the developing countries? What about the probability of having big, big issues there? What is the likelihood of a financial crisis triggered by genuine major market corrections? I already mentioned that. Sudden stops in major market functioning, sudden stop in some of the non-bank intermediation, public or private abrupt debt losses of credit worthiness, asset bubbles correction, and so forth. Another issue should be addressed, crypto assets. What are the, I would say, cause and consequences of what happened in the crypto world? Can we expect much more drama in this domain? And what is the judgment that we can make only to convey to you what I think I have to say that I don't understand with the benefit of hindsight how we could let such instruments, at least those instruments that are purely speculative, prosper as they have. Another issue linked to this one is cyber insecurity. Is it a major threat to financial stability? And which kind of correction can we imagine? And say that can we exclude a major financial disruption which would be caused by climate change? What consequence to be drawn from that? And associated with that, do you share or not, do we share or not the judgment that it is very likely that the green transition would trigger the real interest rates at a global level much higher than in the past, taking into account that it's very likely that the savings glut will progressively evaporate, taking into account the immense new amount of investment that is associated with the green transition and also the replacement of the stock of capital which is made obsolete because of the green transition. So these are issues that are important. And of course, I conclude by that because if on top of the change of the monetary policy of the major central banks, we also have real interest rates higher than it was the case in the last 10 or 12 years, it is aggravating probably seen from the financial stability standpoint the situation. So this is only to be sure that on my part, I have conveyed a number of questions which, of course, would be very interesting to have response to if it is possible. And I'm speaking, of course, of the speakers, but also of the audience because I know that a number of you in the audience have also remarks to be made that are important for all of us. So let me now introduce the speakers. No, I will not introduce all the speakers. I will introduce speakers one by one, if I may. So Serge Equay is the president of the West African Development Bank. He's been in the private sector also. And you have both, I would say, the vision of the private sector, the vision of the public sector, and, of course, the standpoint of a very important development bank. You have the floor. Thank you, Mr. President. Thank you for having me. I won't be too long. I would just like to highlight four major key policy objectives we face in Africa in general. I would say more specifically into our region, the sub-Saharan Africa. The first one, it's addressing the food insecurity. I think it's a major threat we have to deal with in a context where we are in a region where the median age of our population is 20 years. And we all know that our population doubles every 25 years. So that's a real threat in the context. You know you have previously described. The second key policy objective is related to the way we should manage the shift in monetary policy, the new area in which we are, and I have to say that when we last met last year, I was among those who was believing that the inflation would be temporary, a temporary stage. And I have to say that today, when we look at things in details, it appears that we are moving into a new area. I would even say back into the 70s, where I don't know if you really, I'm sure you do. I'm sure you do. Where you remember where Mexico was funding, was getting access to capital markets in the late 90s at 18%, 10 years maturity. And that was not coming to anyone as a surprise. But today, getting funding at 18% is a real, real, real challenge. So the shift into monetary policy with this idea and this reality of the majority, not to say the whole, our country's sovereign would no longer have access to capital markets, that's going to be a real threat. That's going to be a real issue. The third one is the way we would consolidate public finances and meet tighter financial conditions, definitely. And the last, surely not the least, is the way we would be setting up the stage of sustainable and greener growth. We have, last year, at Beowarde, launched sustainable bonds with 750 million euro, six times over-subscribed. And back then, my credo was cash being king. Cash being king, we would have to do whatever to get as much funding as we could. So my very last point is, I think to tackle these issues, we need to see how to strengthen the chair one capital of our institution. Answering to this very question, the one and only question that matters, that is, who bears with the first losses? Who bears with the first piece of losses? So, Mr. President, this is, in a nutshell, what I wanted to say, and I could elaborate down the road. Thank you very much. Thank you very, very much indeed, Serge. It is very clear, very concise, and of course we understand very dramatic. You mentioned 18%, I mean, of course, I have the memory of Paul Volcker regaining control of inflation, inflation in the US at 14% or something. And then, of course, a dramatic recession and a dramatic financial crisis in the emerging world, late in America first, and then, practically, all the emerging world. You're absolutely right. I take it that we are not in the same situation because the central banks are not nonchalant. If I may, they are not letting things go. They have decided with some lags, as I said, but to regain control of the situation. But thank you very much for this very, very impressive and quite dramatic picture. Now, I turn to Geoffrey Frieden. We know Geoff, even if he was not last year here, if I understand well. I was teaching. He was teaching. Sometimes we have to teach. He teaches very, very brilliantly at his professor of government and his chair, if I'm not misled, of the Harvard Department of Government. And he, of course, is one of the most important and well-known professor in our domain. So he has the floor. We will be very, very keen on having your own judgment. Well, thank you, John Claude. I mean, I take the opportunity to take into account your questions and the expectation that we could answer them all in five minutes. I'm going to avoid that by invoking my own comparative advantage, which is political economy that is the intersection of politics and economics. And I want to focus on a couple of issues that I think are central. They are, I absolutely agree with the previous speaker about the importance of what's happening in West Africa and developing a world more generally. But again, given my comparative advantage, I'm going to focus on some of the problems that face us in the developed countries in the OECD and especially the US. The end of cheap money has very, very broad and deep implications, as John Claude has indicated. And the most direct is that it creates a whole series of sources, new or, in most cases, renewed sources of financial instability as markets re-equilibrate. We saw bubbles in market after market over the course of the last 15 or 20 years, with very, very low or even negative real interest rates. That era is coming to an end that will lead to, I think, a whole series of possibilities of financial difficulties as re-balancing takes place. It's not surprising, as John Claude has indicated, I think, that many of these problems will surface in the non-bank sector, in the non-bank financial institutions. There is, in the regulatory literature, a concept of regulatory dialectic, which is that the markets innovate, regulators try to, running behind the markets, try to figure out how to strike a balance between innovative activity, on the one hand, and safety on the other. But of course, the regulators are usually running after the markets, rather than the other way around. The regulators catch up eventually, usually in times of crisis, when the riskier, the financial institutions have collapsed. They impose a whole series of new regulations, and then in the next round, the private sector tries to find their way around them. And that's what's happening in this instance as well. And so I think that we face the unfortunate prospect of a new round of zombie financial institutions and zombie firms that will exercise, or at least have the threat of exercising a serious drag on economic growth. So that's the first problem, I think. What are the, not just where is the financial instability gonna come from, but, and not just what will the policy response be, but because there are such powerful pressures, political pressures, to keep essentially insolvent financial institutions and non-financial institutions alive to try to avoid a further crisis. Will we have another, I would say, Japanese style or other styles, a series of zombie banks and institutions with the result and drag on economic growth? Second problem is more general, and that is the constraints on economic policy in the current period. Monetary policy has been practically, or was practically the sole tool of economic policy for much of the most recent period, especially after the great financial crisis. Then the pandemic hit, and virtually every developed country and many developing countries spent, I think, dramatic amounts of money, and I think justifiably so, to keep their economies going in the face of a global pandemic. What that means is that fiscal policy in most countries is now heavily constrained by a very large public debt burden coming out of the global financial crisis and the pandemic. In an ideal world, we would have a monetary policy that was accompanied by a fiscal policy to try to, in this case, because we understand that the monetary policy that's necessary in the current circumstances is going to be restrictive, we would have a fiscal policy that would try to cushion the blow for especially for some of the more vulnerable segments of the population. But as is in the first instance in the previous periods, monetary policy had carried too much of the burden. Now we would hope that there could be some sharing of the burden of economic policy shift with fiscal policy, but most countries find their fiscal policy opportunities or their fiscal policy possibilities tightly constrained by the existing burden of public debt. So I think we face a very difficult time in the making of economic policy where monetary policy has no choice, but I think seems to have no choice but to focus on fighting inflation and fiscal policy or the fiscal policy that could dampen or soften some of the blows of that restrictive monetary policy is tightly constrained. Final point, and this is a bit of, if you will, political speculation, is to think about some of the political implications about of what's going on. We are in only the very beginning of a period of restrictive monetary policy after three decades at least of the great moderation in which interest rates were extremely low and growth was reasonable. In that context, as restrictive monetary policies kick in, they will slow growth as they already have in some countries more than the US, but in other countries, eventually that will kick in that after all is the purpose of restrictive monetary policy. I think that from a political standpoint, we can anticipate substantial pressure arising to take the brakes off monetary policy. That is the, now we could argue about whether these, whether this is justified and there are current debates going on in the US as to whether it's worth the candle to raise interest rates at a time when, or what the appropriate balance is between concern over inflation and concern over employment, we find ourselves in a sort of a sweet spot now where employment is doing very, very well, but that won't continue forever. And when there is a clear trade-off between fighting inflation on the one hand and creating jobs or avoiding unemployment on the other, I think there will be political consequences. So to be very specific, I think that this will almost certainly in countries that face increasing recessions in the context of type monetary policy, that this will provoke a resurgence of populist pressure from segments of the population that believe that central banks and the bankers that they are in league with, at least in the view of some, are doing what they can to impoverish the working population and that they should be taken under control by the political system. So that I think that the prospects, the medium-term prospects, political prospects, also presage a great deal of controversy over the appropriate measures to be taken. So those are my thoughts about the intersection of the economic events that we're experiencing and some of the political and policy dilemmas that we'll face when we're moving forward. Thank you. Thank you very much, indeed, Jeff. I only note, en passant, that inflation is also triggering populist reaction that are very violent. And I interpret the dialogue between the president of the U.S. and the president, the chair of the central bank as the president of the U.S., telling more or less, you are responsible for inflation. I count on you to do the job. I see that you're nodding. We will discuss that, of course. So thank you so much. Akinari Ori, well-known by a lot of us, of course, has been vice governor of Bank of Japan and is now the special advisor and member of the board of directors of the Canon Institute for Global Studies. You have the floor, my dear friend. Thank you. Thank you, Mr. President. It was three years ago I spoke at World Policy Conference in Marrakech. So let me begin by reminding you of what I said three years ago. Number one, globalization of economy and finance was slowing down as wages were rapidly rising in China and U.S.-China tension being intensified. Number two, if the U.S. presidential election 2020 brought about a liberal president, actually it did, he would formulate socialistic policies, he did, which would make American psyche more inflation-prone. Number three, negative interest rates in longer-term bond markets were a bubble. And when it burst, it would entail financial disruptions. That's what I said three years ago. Now I hope I have reminded you of my prescience three years ago. Today I would like to make a few points to follow this up. First, globalization, which has slowed down but it has not reversed the course. China's exports to the U.S. stopped growing. That's true, but at the same time, exports of Korea, India, and ASEAN countries are increasing. In other words, globalization in the periphery of China appears to be expanding. At the same time, U.S. exports to China has continued to increase and so has U.S. direct investment in China. This is one point. And between 2020 and 2022, there were several sources of supply chain disruptions. You're familiar with pandemic-related lockdowns and Ukraine war-related energy and food crisis. These disruptions are still with us, of course, and far from behind us, but the degree of disruptions is easing, in my view. Unless globalization is reversed, inflation pressures from the supply side of the world economy will recede as supply chains are restored and alternative sources are developed. This is number one issue related to globalization and the supply side of the economy. Second, U.S. fiscal policy. Now that the U.S. has a split Congress, no big fiscal spending program or tax reform is likely to materialize within the next two years. So no big fiscal surprise is good news for monetary policy, which is now aimed at, you know, combating inflation. Monetary policy tightening has begun to have effects on U.S. housing investment, which will dampen rent and other shelter costs in a year. Personal consumption and business investment seem solid so far in the U.S., but they will slow down going forward. Whether all this ends with a soft landing or not, I am perhaps more optimistic than most of the people around the table. Why? Number one, large build-ups in savings in the U.S. Well, that's the case in Japan, too. Huge 10% of worth GDP savings accumulated in the housing sector so is in the U.S. Number two, Chinese economy will get out of lockdown mode sooner or later. You know, herd immunity will present itself once again sooner or later, even Spanish flu sort of thing. It took only three years until the world attained herd immunity. Why not China now? So China's economy would recover sooner or later. At the time, the U.S. economy would... Economic growth will slow down. Okay. Number three, I see no large build-up of financial dislocations in the U.S. like the one which led up to the global financial crisis. Of course, there are sources of problems, but those sources, let's see, are more manageable in my view. Three years ago, actually, I discussed a possible financial problem arising from the asset management industry. A near crisis actually happened in the U.K. when long-term interest rates shot up a few months ago. That's true. We may perhaps witness a similar episode if my optimistic scenario of U.S. economic soft landing fails to materialize. That's true. But otherwise, I hope the central banks and other regulatory and supervisory authorities will be able to manage the situation by addressing problem-causing institutions case by case. You know, it's a muddle-through approach. I'm familiar with this, Jean-Claude, for a long time at the time of your head of Paris crowd a long time ago, but about 20, 30 years ago, Alan Greenspan referred to it rather than muddle-through. He called it sophisticated, case-by-case approach. I remember very well. I think it will continue to be possible unless systemic disruption happens in the banking system of a major country, whether U.S. or Europe. It's comforting to know that the most of the banks in major countries are so well-capitalized that they are unlikely to feed into a systemic crisis of the financial system. Let me stop here. Thank you very much indeed. I understand you told us very lucidly three years ago what would happen, and you were quite pessimistic, obviously, and now you're reasonably optimistic and confident. So we take note of that. And we will say, of course, we will judge in three years' time whether you're right. Thank you very much indeed for this exposition. I turn to Kyung-Wook Wu, former ambassador at the OECD and presently president of the Korean Bretton Woods Club and chairman of the board of the Korea Center for International Finance. You have the floor. Thank you very much, Chairman. I would like to make two comments on the one about the general monetary policy of the advanced countries where they can achieve 2% inflation target, and second is more about the Korean experience of dealing with this crisis this time. The first one about the global monetary policy, I think there is a real danger that we'll end up with over-tightening rather than under-tightening. There are a couple of reasons for that. Number one is that it looks like that all the advanced country central bank is doing their own tightening, but there is no coordination among themselves so that each country, when they do the tightening, they will also kill the overseas demand of other countries. All together, putting all together, they might come up with over-tightening. The second point is a little bit related with Professor Feldman mentioned about this coordination between monetary and fiscal policy. Normally, it would be ideal to tame down the inflation, the monetary and fiscal policy should have tightened together, but in this time, because of the very rapid increase of the interest rate, there are vulnerable groups in the society that face the danger, and that probably requires more support from the fiscal side. Plus, we talk about this inflation reduction act of the USA, and the same is being mentioned in Europe, Japan, even in Korea, because all this chip industry or EV industry, that requires fiscal support. Another thing is this climate change adaptation cost. We all know that after COP 27, we are behind the curve to meet this target so there will be huge demand for the fiscal support. On one side, when the monetary is doing the tightening, the fiscal side, even at the best of the intentions of the government, there are many areas that still require fiscal spending. If the tightening should be done by monetary side alone, then you can end up with over-tightening on the tightening. The third point about the behavioural side, we all know that Fed is behind the curve. At the beginning, they would say, this is a transitory, so about six months behind the curve, and behaviourally, then you tend to overcompensate, and we have all this famous delay of the monetary policy that actually have an effect. And one final point that's related to the Korean side as well is through the 14 exchange channel that also requires over-tightening. So when you look at all the things concerned, we might be able to achieve the inflation target, but we most likely have a recession than originally planned by the most recent IMF estimation. About the Korean experience, the point I'm trying to make is that we have a roller coaster during this year about the foreign exchange market. From April to October, about six or seven months later, our foreign exchange, the Korean one, depreciated 18% against the dollar. And we have done almost everything recommended during the Asian financial crisis, during the global financial crisis. We have built up huge foreign exchange reserves over $430 billion. We have net foreign assets, also around $400 billion. And our short-term debt against our reserve is around 40%. We have some capital management, macro-prudential measures. So all those things are in place, but when you exchange rate depreciates 18% for just in short period like six or seven months is still. You cannot observe all those shocks and the market is very much worried. Suddenly, the business has to deal with huge uncertainty, high interest rate, high dollar, super dollar, and then high inflation. And there's no way to know where it's going to end. And finally, because of all this change and expectation in the market, in November, starting from November, the dollar actually depreciated. In other words, couldn't want to appreciate around 7% or 8%. That actually calmed down the market. But during the time until November, if you look at the figure and how much burden it placed on the monetary policy side, in the first half of this year, we have this energy price hike, food price hike, and then we have this depreciation. So that in our purchase price inflation, about 80% comes from overseas. And it's very much difficult for the monetary side to set up its policy based on its domestic situation. We have liquidity schemes coming in the market. We have many companies facing difficulties. But because of this inflation pressure coming from not only a commodity price increase, but also exaggerated by this exchange rate. On October monetary policy, we had the full guidance that we're going to perhaps come up with a small step like 25 base points, but we ended up with 50 base points. And that's exactly the point that through this free exchange channel, some of the monetary authorities will end up with more tightening than desired or warranted by its local situation. And another point in that regard is that our central bank government famously mentioned that our central bank is independent of the government, but not independent of the Federal Reserve. And no more times we can follow the Federal Reserve with all this capital flow. But as I said, for six months, 18%, nobody can handle it. And there is a big pressure from the business and the political side to come up with a sub-arrangement with the Fed. And it's true that we had a sub-arrangement during the Asian financial crisis. And no, during the global financial crisis, there were nine countries with a non-convertible currency that was given this lifeline to show up the confidence, not so much for the money, but it's more for the confidence. And also during the pandemic times from 2020 to 2021, unilaterally this was given by the Federal Reserve. But now probably it's not a good time even though we ask for the Fed swap. I don't think they're going to accept it, but when you have seen such a big rollercoaster movement on the foreign exchange market, I still think that there must be some more structured way for non-convertible currency countries to have readable expectations of having access to the Fed, which is still missing. The last one is given by unilaterally during the pandemic times. So that may be something that international financial architecture is missing after now. So that's my comment. Thank you. Thank you. Thank you very much indeed. Only to be sure that I understood fully that what you have said, there was a period of, if I understand well, depreciation of the US dollar by 18%. And appreciation of the US dollar? Okay. And then you said rollercoaster. So then at a certain moment you had the reverse. Over 8%. Just in one month at a time. Yeah. And so first depreciation, which we understand pretty well because you did not augment interest rates and the US Fed augmented massively interest rate. Exactly. With a lag. But, okay, so that's not terribly surprising, obviously. If I understand well, the constellation of interest rates between the US and Korea. And then in a recent period, there has been some kind of catching up. So you wanted the swap to correct the fact that there was an interest rate differential which was substantial. Is that the message? No, actually, in terms of the RER, as you just mentioned, when the Fed tightened very rapidly, and Korean interest rates also began to follow up. But despite that, because the tightening was so rapid, within just six months or seven months of time, Korean won't depreciate 18%. Even at the best of Korean authorities' persuasion to the market that fundamental is okay, ideal is okay. This is not a Korean won problem, but rather caused by the Fed's tightening speed. But that does not calm down the market because if you are in the business and then you suddenly see your interest rate is going up, inflation is going up, and then we are the country very much dependent on import of energy and import of the food. I got the point. Thank you so much. That's clear enough. Thank you very much indeed. I turn to Pierre Jaquet. Pierre Jaquet is president of the Global Development Network. Are you still in New Delhi, Pierre? No, I'm now working from Paris but still with GDN. But you're still in the Global Development Network and you are professor also at the position. You have the floor. Thank you very much. It's quite difficult now because I tend to agree with all the analysis of risks that have been made so far around the table. And if I want to be provocative, maybe the question to ask is whether we are focusing on the right risks. And before turning to that, let me start with inflation. And I'm not critical of what the central banks have been doing. I think they have acted quite wisely and they have shown a restraint that is quite actually loadable. The difficulty is that we have not really seen real inflation so far. We don't have any wage price spiral. At least in Europe, we have a very strong increase in the prices of food and energy. So there is a risk of inflationary spiral, but it's a risk. And given the action of central banks, I think we could be quite confident that the Monetary Policy Reduction will manage at risk. However, Monetary Policy is not the ideal instrument for that. Supply is shock, and we are reacting to the supply is shock by restricting demand, which can be quite costly for the economy. So we need to keep in mind the fact that we are in a bind there. If we want to avoid inflation, we are using an instrument that is not exactly the instrument that we should have in our toolbox to address the supply is shock issue. This is compounded by the fact that I've not heard any convincing argument about the cost of inflation. There are costs, we all know that, but it's hard to find a very convincing analysis of this cost of inflation. I would say that for me, the costs of inflation are actually focused on the poor segment of the population, which is certainly a big concern. But beyond that, are these costs high enough to forget about all other risks that are there? And the reason I mentioned that is that for me, the major risks today are not financial, they are political. They are in the fabric of society. They are in the demand from various groups of society, not only the populist, to understand what the economy is about. And an increasing number of people think that the economy is about enriching the rich. I put it bluntly just to be provocative. So, and for me, it has become quite urgent to address that concern. So again, I'm not at all trying to say we should accept inflation. No, I like very much what has been done. But I'm thinking that when we project to the future, when we share our concerns, for me the concern is not inflation, because it is under control right now. It may become a risk. Yes, so we can list that. But we talk too much about it. The main concern for me is not there. It is in the fabric of society. And I'd like to just put that on the table for discussion. And I'm probably more provocative than I really feel, but just for the debate. The second point and last point I want to make is about crisis. I would agree that we are facing a very extreme moment of convergence of several crises that are unique. But I'd like to point out that capitalism is about crisis. And they play, and there are two dimensions of crisis. One good, one bad. The good one is that they help us find the actual value of things over time. So you have crisis, you have bubbles in the stock market, and when the bubble explodes, it reveals the true value. So that's fine because there is no other way to reveal the value except that having over investment in a stock and then discovering that this will not be the activity of the future and therefore the price collapses. So these are the good crises. Of course, the speculative dimensions of the crisis is a bad side of it. And this is not new. So what is new is that each of the crises that we see have specific short-term causes that will differ from the previous crisis. But what strikes me is the continuity of the profound reasons of the crisis which are very simple. These are periods of over investment followed by periods of over disillusion. And it was written already more than a century ago and I remember several, of course we had Kindelberger Minsky, but even Clemence Juggler in the 19th century wrote extraordinary passages on this characteristic of human behavior. As long as we are not able to deal with that, we will have crisis. And I like very much what Jeff was saying earlier about regulation and this loop between regulation and innovation. We regulate that with an incentive to innovate to go around the regulation and then regulation becomes obsolete and we have a crisis, so we need to re-regulate and it goes on. So it means that maybe when we think about regulation we should try to think about a continuous attention to regulation, a sort of adaptive regulation that tries to analyze risk in an ongoing real-time basis. And we don't have that because each time we are successfully regulating we say, who are we regulated? And we forget the fact that this is a short-term response based on the last crisis and not going to be adapted to the coming constants. So it seems to me that what this situation is creating right now is restoring the issue, the debate between markets and governments. And as a believer in the markets, I strongly believe that we need governments to help the market work properly. And right now we have a problem of regulation and we have a problem of valuation. And part of the social risk I was mentioning is due to a poor valuation of labor. And I think that the crisis, the pandemic revealed that a number of low-paid jobs have a social value that is way above the wages. And that is something that starts being mentioned in the debate only by populists. And it's a source of concern that for me should rank higher than inflation because inflation, we have the instrument. And as you mentioned, Mr. Sherman, we have also the first financial stability board that is an excellent job. We have banks that are highly capitalized. So in a way, we have been able to manage not too badly that side of it. There may still be risks, but let's not forget the deeper risks that are there and they are in the social realm. Thank you. Thank you very much indeed. You were very provocative, I have to say, and that will trigger certainly a number of questions. I reserve the right to comment on what you have said, but not now. Thank you very much indeed, Pierre. André Lévi-Long, former president of the Paribas Bank and the legendary mathematician, founder and president of the Louis Bachelier Institute, not everybody knows that Louis Bachelier was a visionary French mathematician inventing 50 years before. In 1900, he was the grandfather of financial mathematics applied to the markets with his thesis in 1900. He was totally unknown until he was rediscovered by Black and Scholes and a few others discovering the formula. Well, Louis Bachelier Institute is a non-profit private research network which was founded 16 years ago by a group of French companies, mostly financial companies, academic institutions with the support of the French treasury, working basically initially in applied mathematics to finance and then we spread, we broaden our scope to cover other subjects including climate for the last few years. And my topic would like to be the interaction between finance and geopolitics, what I call the weaponizing of finance. It's not a new issue. Remember that sanctions and boycotts were used for political means against countries like Angola, Iran, Sudan, but what is new is that since last February it involves Russia, which is a significant economy and that is a major change. So if you look at finance as a weapon, the question is what is the impact of this situation on the huge amounts of investments which, as Jean-Claude mentioned, will be needed to manage to finance climate change because we're talking about very large numbers. So the fact that finance is used as a weapon has implications in terms of systemic risk, in terms of the behavior of financial institutions, in terms of the markets, and it is not clear to us, and we're working on that, how can finance in general support and make it feasible to accomplish these huge investments without creating systemic risk, without breaking the system, without creating major unmanageable situations. So that is a key issue on which we are trying to start a project today with the IFRI, by the way, on this specific subject, again, which is very easy to express, to formulate, not easy at all to develop and to make as a research project. I think I will... I am well under the five minutes you asked for, Jean-Claude. Thank you very much. Then we will go back to you to have your judgment on the risks and the materialization of all the risks that we have. Thank you very much, André. John, you have the floor. Everybody knows you, and we are suspended to your lips. Jean-Claude, you're too kind. Thank you very much. There are so many things that we could talk about. I'm going to try to limit myself to just two. One, my good friend, Akinari Horie, has described an outlook that I think is quite congenial and quite plausible. And what he has said is that there are reasons to think that the outlook may be somewhat more benign than the consensus. If I understood you correctly, it's not saying that worse outcomes are not impossible, they are possible, but that the consensus is a little bit too pessimistic for the reasons that you laid out. And I find myself in broad agreement, but I thought I would step back and remember there's been so much focus on monetary policy recently for good reason, but I think it's worth going back and noting that this comes after a long period in which monetary policy has demonstrated that it is less powerful in controlling the economy than had been thought, or to put it another way, that in the wake of the global financial crisis that we've had a series of unexpected developments especially in the advanced economies that were not anticipated, and we still don't understand completely, but has been much more powerful in shaping the financial and economic environment than policy has been. We've had a period of slow growth, of low investment, of a lower than anticipated labor force participation, and at the same time, unexpectedly strong corporate profits. A combination has been associated with sustained unexpectedly low real interest rates that has produced the unexpected result that despite the very rapid growth of public debt in the context of the global financial crisis that for advanced economies that debt service as a percentage of public sector revenues in advanced economies actually fell, did not rise. So a kind of amazingly benign period that also was associated because of this combination of lack of pressure on public finances despite the rapid rise in debt and the unexpectedly strong corporate profitability that has produced very strong performance of asset prices, especially equity prices. So to me, this lays out, and what we saw of course, that despite the generalized agreement on inflation targeting format for central banks and universal agreement essentially on 2% as a target, no central bank seemed to be capable of hitting that target and virtually all persistently had inflation below target. Then have come the shocks that were also unanticipated, the effect of COVID and the war that resulted in this rapid increase, this dramatic increase in inflation that caught central banks by surprise and demonstrated that since their models failed to anticipate that suggested underneath that as I said, these factors that appeared important in the wake of the global financial crisis have been incompletely understood and therefore their incorporation in the models produced models that didn't produce the accurate forecasts. So it leads us with some important questions. Clearly, what we saw in inflation was a combination of strong support for demand through fiscal means and otherwise in a context of constricted supply. What, and I think what Dr. Norrie Horry told us is what we're going to see now is recovery of supply and a waning of the effects of stimulus that is going to correct the imbalance that produced the inflation and what we don't know is how quickly it's going to come back, how quickly inflation will come back. What we have seen is that the run-up in long-term interest rates has been less than had been anticipated. Either this would be interpreted as that investors expecting recession is coming, they anticipate, and therefore that it's going to be an unhappy road to low inflation. And I would say this is still uncertain. And if we need to look at some aspects that will be critical in determining this outlook, one is, of course, the obvious performance of wages. So far, wages have lagged behind inflation. Either you can take that as an end. The consensus view tends to say this is going to, there's going to be catch-up and that wages are going to accelerate and that we are going to end up with a wage price spiral that will be truncated only by conventional means of monetary policy action that will produce a downturn. But that's just a surmise based on the notion that what happened before will happen again. What we don't know is what has happened to expectations after a decade of unexpectedly low inflation. But obviously the formation of inflation expectations, including the labor market, is going to be critical. It will be critical to see if corporate profits will prove to be resilient, which means that asset prices also should be more resilient than is anticipated. And the course of long-term interest rates, real long-term interest rates, is going to be very critical for the outlook for fiscal policy in the near term. Because if long-term rates stay high or go higher, there's going to be tremendous pressure on the fiscal accounts in the advanced economies because we're going to start to see a rise in debt service costs as a percentage of revenues. So, big unknowns. I end up also a little bit more optimistic than the consensus, but that may just reflect my own personality rather than analysis. But there are critical things to look at and it strikes me that what I think are most important seem not to be at the forefront of discussion. Let me just add two other remarks. And that is what we can see coming almost certainly, and this is something that is not a new insight, is that developing country debt is going to be a problem. We can see it coming. We know the outlines of the problem of the solution, which is that there's big change in the composition of the creditors of the developing economies that has rendered the Paris Club ineffective in dealing with the problem and requires new cooperation. Recognizing that the Paris Club was no longer the appropriate venue, the G20 created the common framework. I'm repeating what I said yesterday. The common framework so far has been notable by its sluggish progress not to be more critical than that. This is an issue that I posited yesterday is a litmus test for the outlook for cooperation at a global level and in essence to a certain degree the relevance of the G20. The framework, the G20's replacement of the Paris Club, the common framework for debt treatment must be made to work. There needs to be a compromise that makes it work. Otherwise it will be not the biggest issue for the global economy, but for those worried about global inequality, there needs to be a solution. Thanks, I've talked too long. Thank you very, very much indeed, John. You are confident, but with a lot of nuances, if I understood the way. I turn now to Jean-Claude Meier, Vice-German International of Rothschild, previous Géran de Lazare, very well known of course by all of us. Thank you very much. At the last WPC, my view on the financial markets was optimistic. My forecast was for a transitory inflation like Sergei Quey and like everybody, as a matter of fact, and for a plateau on the stock market. Of course I was completely wrong on the transitory inflation like everybody, like every central bankers by the way. Excuse me, sorry, Jean-Claude, for your colleagues, but I was right on the stock market because the Dow Jones last November was at 36,000 and last November it was at 34,000 so the things went relatively well in this forecast. Of course after COVID, nobody could anticipate a war in Ukraine leading to increased inflation and a stock inflation in which we are now embarked. Today we face a very dark situation which is tackled by central banks with great difficulty but leading hopefully to better days. Very dark situation, you all know everything about it. GDP increase is low. Next year will be 1% in the U.S. maybe 0.5% in the Eurozone. Inflation is very high, 8% in the U.S. due mainly to labor market and supply bottlenecks and with a co-inflation of 6.3%. In the Eurozone of 10.6% because of energy and food with a co-inflation only of 4.3% due to consumer demand, huge liquidities after COVID provided by central banks and supply bottlenecks. The war in Ukraine has accelerated further this inflation. China is a problem with a very low growth. It's amusing that China does create a problem to worldwide capitalism. As a matter of fact, it's very ironic for Mr Mao. The U.S. labor market is running very hot with 3.7%. Only interest rates will increase next year which will reduce growth and create relativity and this crisis is global. For certain banks, the fine-tuning is extremely difficult. As we know, stock markets depend on inflation, interest rates, economic growth, profits of companies and today inflation is high, recession fears are mounting and therefore financial markets are very volatile and central bankers live in a tragic dilemma because their measures have adverse collateral effects such as medicines for doctors and therefore fine-tuning is difficult for them. Their key question is how much can they increase interest rates to reduce inflation and at the same time avoid recession. They are faced with this tragic paradox. Every good news on growth and jobs are in fact bad news because they maintain inflation and on the contrary bad news on growth and unemployment are excellent because they anticipate reduction of inflation, lower interest rates and then possibly a market boom. Today central bankers seem to shift towards a slower tightening to avoid a recession especially as it takes a year to measure the results of the rise of interest rates. Stock markets are therefore a little better oriented since the month. Other central bankers believe that if there is a chance of tightening monetary policy too much, the risks of doing so are not as serious as letting inflation prosper. Okish central bankers would do whatever it takes to curb inflation against dovish bankers in favour of a pivot as we all know. This December 14th, Fed will increase once more its interest rates after 4 increases already with 0.75%. Will it be 0.75% increase or just 0.50% increase? Same question for ECB the day after. A 0.50% increase by Fed is not unlikely and it is my hope, my bet, especially because annual consumer price growth in the US has slowed a little bit lower than the 8% forecast down to 7.7%, which should ease pressure on the Fed. This moderate increase would give an optimistic signal to the markets. But because of the big inflation pressure in the eurozone and of the delay taken by ECB vis-à-vis the Fed, ECB the day after could raise its rates to 0.75%. In spite of the fact that in the eurozone inflation is mainly due to a short supply and that the rise of interest rate will not solve the situation. A 0.75% increase by the Fed or ECB will affect the economy growth and the stock markets. Next year will be volatile, difficult, unpleasant, a tough year to quote just the chairman of Mubadala a few minutes ago. Because growth will decline with a recession in some countries until the summer, stock markets will remain unstudied, bumpy, interest rates should increase at a slower pace in parallel with a lower but sticky inflation, going down and energy prices, shipping rates and raw materials falling thanks to a lower growth. This growth contraction should also raise the unemployment up to 5.5% in the US maybe which will have a positive effect against inflation. But we can have a more rosy scenario in 2024. Once the job is done to quote Jay Powell, anticipations for 2024 should improve with a certain growth including in China, lower inflation and lower interest rates. In brief, a soft landing which is a dream maybe. Provided there is no more COVID that the war in Ukraine does not deteriorate that there is no war in Taiwan of course. In this framework we can be a little more optimistic for the end of next year with a recovery in 2024. I will join Mr. Akinori Hori optimistic views now. Naturally the US stock markets will then behave better than the European stocks. Thanks to the strength of the dollar and the lack of problems which Europe has to face. The European zone being more fragile than the US and more affected by the Ukrainian war and by inflation due to the price of energy, of food and the high demand stimulated by European budgetary policies. To conclude, we feel badly in the short term better in the medium term and contrary to the projections of Keynes not dead in the long term maybe a dream. Thank you very very much indeed Jean Claude. I reserve the right to comment a little bit and then we engage in the fierce conversation. Jean Claude, my notes of the last year are of course dated the beginning of October. So beginning of October you were absolutely right. Jay Powell was saying inflation in the US is transitory and I have reasonable expectation that in the course of next year namely 2022 we will be around 2%. He said that in October and you were right when you said all central banks more or less were saying the same. By the way, I have to say the modelling and John was very clear on that the dynamic stochastic general equilibrium model are plain wrong when you are in a very rapid period of transition. We experience that with the real economy in after Lehman bankruptcy and we are experiencing that because Jay Powell could not say that without having some papers by the thousands of PhDs that are in the staff of the Federal Reserve. So there we have an immense problem which explains largely the lags. There are other technical reasons for the lag to have been considerable because in November he said it's not transitory and the first increase of rates is only in March. So a big delay between the recovered lucidity and what they did. In my opinion it's also due to the fact that they had, I would say some kind of link between the non-conventional quantitative part of monetary policy and the conventional interest rates. They said we will increase interest rates only after we have stopped the net purchases of tradable securities. It was said on both sides of the Atlantic and it was one of the reasons why there was an additional delay of five months, six months depending on the central bank. That was in my opinion in retrospect a big mistake to link the two. As far as I am concerned I was not preaching the fact that there was no problem. I wrote myself don't follow the prophets accusing you. The prophets quoting your colleagues. I have always been against the theory according to which interest rates were eternally very low and that you had to borrow massively in order to be in the best situation possible. A lot unfortunately. Closed to a conventional wisdom at a certain moment it was obviously wrong. Other remark I am not sure that we have the same figures as regards core inflation. I look only at core inflation and I look at core inflation as is published by Eurostat for Europe and by the statistical office in the US. We have the same level of core inflation which is around 6.3 6.5%. I have the figures for the Euro area 6.6% in November. 6.6 is not 4. 6.6 means that even if you put aside oil and gas and the agro products you still have a level of inflation which is impressive and the job of the central banks is to get down from 6.6 to 2% in three years time as I think they can. But the fact that we have the same level of underlying inflation on both sides of the Atlantic and not the same level of headline underlines what has been said in the US namely that there are differences between the US and Europe because in Europe it's very much more of a supply problem and in the US it's much more of a demand problem and I give you the headline headline 10% in Europe 7.7 last figures I have in mind for the US. So 2.3% full difference in the real economy in Europe is attacked by the situation by inflation and by the war in Ukraine much more of course than in the US so that explains why the monetary policy in Europe is much more benign than the monetary policy in the US but both seems to me exactly appropriate if we want inflation to get down because again even in Europe it is not only oil, gas and agro products they are and I'm not sure that I'm in full agreement with the idea that there is no spiraling of prices to get 6.6% you must have some spiraling of prices not massively yet wages and salaries you have 6% wages and salaries so practically the level of core inflation that I was mentioning so I think we have to be very careful including in Europe because we are more or less the same problem but I agree that it is good that there is a difference of interest rates which is very significant to be frank between the US and Europe and of course it has also the that was underlined by your Korean friend namely the euro is weak and we import inflation in Europe that's clear and that's a problem but I will not call for accelerating the increase of rates in Europe but I'm reasonably satisfied when the both with interest rates are going up calmly quietly but firmly because it's very important that we are all convinced all the economic agents are convinced that 2% is credible in the medium term which is not absolutely obvious today frankly speaking two other remarks one on the fact that we are likely to have inflationary pressures in the time to come it's probably of a secular nature and not of I would say cyclical nature we have the green transition it was mentioned I think it's very important we have de-globalization which has been mentioned with nuances but I think it's part of the fact that in comparison with the previous period we have to expect more pressures upward for the prices we have the blue color issue of the uneasiness of the middle class or the lower middle class and so forth it seems to me that it is already there and to the extent that in some respect the US is a little bit the leader I interpret the sequence Trump-Biden as I would say accompanying the emergence of the blue color I would say infuriation transmitted in the political arena because clearly to imagine that the Republican candidate for the presidential election could not be I would say the guy defending big business but the guy defending blue color is really something which is absolutely incredible and the Biden of course is on the same line for very good reasons of course so I mentioned that and I take it that in all European countries as you said clearly it is also it's also the case we have to expect but it will play the role of a pressure an inflationary pressure also because you need labor cost our inflation arithmetically so a last point I wanted to mention also we are in a situation where you mention Minsky animal spirits it's absolutely clear that we have we had abnormal situation that you consider part of capitalism and said that also eloquently Minsky very eloquently so I think it's undeniable but from time to time you have situation which looks a little bit out of historical record and we are very close to situation where accumulation of debt piling up of debt accumulation of incredibly accommodating policies over 10 years and this very rapid change of monetary policy for good reasons all that creates a universe which frankly speaking seems to me a little bit less rosy than was said by most of us frankly so I don't want to be loiseau de mauvais augur maybe we have serious problems ahead of us and it wants to take the floor so maybe we will turn around in that sense please thank you Mr Chairman they say a school of growing criticism of unconventional monetary policies and personally I'm agnostic because I feel like I lack all the tools to really make a determination for or against it but do you have a view on it and then are you concerned by the other part of the criticism which is that there's basically too much debt overall between government, sovereign states and private players we'll take a number of questions of course and then the speakers will respond thank you very much indeed thank you so I thought this conversation was quite interesting in what you did not say or what was hidden in the conversation I would not step in the inflation conversation I think it's an important one but I think there are even more important things behind inflation as has been said by many I think we are feeling the compounding impact or the compounding effects of traditional crises and we react with traditional tools and traditional reactions with on top of that is geopolitical shift that we are trying to make this a little bit more complex than 15 years ago when it was basically the Europe and the US discussing the future of finance now it's a little bit more complex plus a required transition with climate so that's a lot to swallow and I don't think we've agreed on what is a policy mix nationally and internationally to address these compounding effects and what is the social contract we want to discuss with people and these are very striking questions that we have ahead of us of their thinking and as part of this to echo what Jan just said I think we are moving also and has been said by several from a period where leverage was the name of the game and it was pretty easy I mean you could borrow at zero it was very easy to buy real estate it was very easy to do M&A it was very easy to value Tesla at whatever price and now we are moving to a balance sheet stress where there is nowhere to hide because it's very unlikely that the central banks would so this is a complete change of the game and I don't think we started to really think what it means going forward my third question is it's related to the real economy are we going to finally allocate capital properly meaning do we have the risk pricing and I'm turning to André do we have the risk pricing mechanism that will properly allocate capital and properly price the risk and stop wasting money where it's not needed coming back to my point on the transition etc I think at a moment where there are more investments needed than ever and when there is capital it's probably not scarce but it's risk adverse so people will rush to buy US Treasury instead of investing in things that are really necessary for the world and necessary to repair the social fabrics that Pierre mentioned some of the points that John made so I think this question is central to me are we heading in the right direction or is just a blip and we will face inflation and not address the issue which is are we allocating our scarce resources where they are needed for the next 20 or 30 years I don't have the answer and finally of course because it's me I'm a little nervous with all the discussions on ESG so the focus on environmental social and governance issue now that it's becoming really serious that we realize that it's not just a nice transition where you will allocate one or two percent of your savings but it's way deeper people are becoming nervous the economists made this cover pages summer ESG these three letters will not save the world Texas is giving green credit to BNP Paribas and BlackRock and say we don't want to work with you because you're too green and then California say we don't want to work with you because you are not green enough so is it serious or is it another joke another tool of the financial industry to fool the people I don't know but there is growing doubt so again not totally linked to share this for messages thank you very much indeed I'm not sure frankly speaking that we ever had a nice period where you were tranquil and everybody was tranquil and the central bank were tranquil I have known permanent crisis permanent period of crisis and the worst recent crisis was the so-called very calm and tranquil and great moderation world ended with the worst crisis ever since World War II which could have been the worst since World War I so we are permanently in a dangerous world I never say tranquil Jean-Claude I agree that I agree that the accumulation of threats are there and particularly demanding and on top of that with the geopolitical element that you mentioned and we did not mention too much because we all agree that it is a common factor I guess what you said on ESG is very important and I expect that we will all respond to that thank you very much Madame you have the floor Merci Monsieur Trichy I have a question about inflation emerging markets like Turkey and Egypt there is a trade-off I mean you don't need to be an economist that to curb inflation you need to raise interest rate poor people I mean interest rate low interest rate is basically a subsidy for everyone especially the poor because the poor live on credit so how can we for example in Turkey or Egypt how can we how can we fight inflation without really creating because if you want to raise interest rate that will mainly affect the poor who live on credit so how can you fight inflation without creating unrest in this country thank you good question for all of us thank you very much you have the floor Madame thank you Jean Claude I will echo my friend Jean Lipsky's remark about the common framework and importance of saving it for sovereign debt restructuring that are coming and they're looming by an estimate between 35 and 60 countries will be in the emerging markets middle income and low income countries will be in financial distress in the next two years so the common framework was introduced in 2020 in November only three countries have applied and it seems to be a log jam at the moment with some very very small steps progress and one could say the problem seems to be China but nobody knows the reasons you know possible explanations of course on the China side that Chinese lenders don't want to crystallize losses which is understandable their balance sheets are already under pressure from the real estate collapse and other difficulties there is a lack of coordination among the various institutions in China that have done the lending and they're simply inexperienced and sovereign debt workouts and they're afraid that the western lenders will take advantage of them and the fifth reason could be that that issues are part of a broader geopolitical situations you know China might see no reason to cooperate on that until there could be some concessions elsewhere but in truth nobody knows it's complicated as John mentioned China is rising well has reason as the third major lender group in sovereign debt workouts in addition to Paris club members and private creditors but common framework progress remains obstructed is it destined to fail? I think not an enormous amount of political capital has been invested by official creditors and now other stakeholders in the common framework they will not easily let it fail I hope not but how to break that logjam so what is needed I believe is a credible way of assuring each creditor group including non-Paris club bilateral creditors such as China India and other non-Paris club creditors that once a restructuring agreement is reached with them no other creditor group can later extract from the debtor country more favorable to the creditor treatment so the best idea so far that I've been reviewing is getting traction among participants in Washington is a proposal to use the most favored creditor clause to deflate any expectations China or others might have by holding out or holding hostage the process and that would be able to extract better deals better deal once deal with others as made so it will have to be a cross-creditor group most favored nation clause compared to comparability treatment as a Paris club principle which is a variation of most favored creditor clause and it will need to have some courage from debtor countries to propose it because that will be a unilateral proposal and others hopefully will join but it seems to be better than the current log jam and so I want to also think because I was sitting next to you three years ago in Marrakesh I'm sorry to interrupt you do you have precise questions of the speakers for John in particular perhaps exactly because no I'm actually continuing with John a question with John that whether it will the common framework will fail I think it shouldn't fail it won't be let fail but there has to be a solution saying that China I wonder whether John agrees whether China is the problem or it is the multilateral issue thank you thank you very much indeed very important point of course we have a real problem with China to my knowledge and mainly with China even if there are other creditors potential creditors that are at stake of course thank you very much for this important question thank you I have a quick question to the panel about the future of the dollar as a reserve currency I think last year we had quite a few discussions on the role of the dollar as a vehicle for the U.S. to enforce the extraterritoriality of their sanctions and what we've just read is that the recent trip of Xi Jinping to the Gulf ended in deals which are going to be labeled in U.S. or whatever you call it or Revenue Bees and so I'd like to know how the panel views the future of the dollar as a reserve currency a very important question of course thank you very much indeed who wants to take the floor please sir I just wanted to build on what you said Mr. Jacques on the question around a supply chain driven inflation I think when we look at inflation today it's driven by I think four major supply chains energy, agri-foods, metals and semiconductors and so the question is do central banks really have all the tools to tackle this supply chain disruption thank you very much please thank you Mr. Chairman I have one remark I'm an entrepreneur and I talk also with quite a few other entrepreneurs and I'm also on the board of some manufacturing companies middle-sized but quite sized manufacturing companies and I think we have another factor I wouldn't call it supply chain shock but it is the lack of skilled stuff and I think this is a major problem and this is exacerbated by the fact that we have to do a lot increasing work through a very high level of regulations and reporting on that and it has constantly things added for instance in Germany there are now two very heavy things added this is this control of the supply chains the ethical and control of the supply chains where there is a reporting and the sustainability reporting it doesn't mean that I think it should be misused but it is a lot of additional work coming in and I think that wage price spiral is already rolling I know in all the companies where I'm involved there will be considerable rises in payment 6-7% and this one in certain countries like for instance in Austria we give not necessarily that we say we have a less edge rise but they get a one time payment to balance out which comes to the same and in Germany there was recently I think last week there was a conclusion of the largest trade union the metal and electric union where they decided on a very high price increase wage increase thank you very much indeed I know that it is not exactly the same to augment the regular wages and salaries because it's recurrent and to give a premium which is not recurrent and of course would be a good way to avoid the wage price but thank you very very much indeed Bruno you have the floor thank you I would like to have your view on the future of the debt accumulated to face the COVID crisis I heard John mention the service of the debt is manageable but the ratio of debt to GDP is still very high and do you think we can look at that with benign neglect because it's on the balance sheet of the central banks and it's a sort of helicopter money or do you think it's a real issue for a financial risk and in that respect inflation the view is sometimes that inflation can be useful to reduce the debt how do you react to that thank you very much Bruno indeed I think that we can I pick up the last questions from the audience and then we turn to the speakers please thank you Mr President I would like to develop economies in a way I mean twin deficit crisis are looming large with very tight fiscal space especially given that expenditures will be needed for climate change adaptation and mitigations and at the same time my question mostly to Mr Aikui actually do you think that private banks and state owned banks in developing countries are capitalized enough to weather the shock I mean in the case of banks or mostly holders of public bond there is a high risk in a way in developing economies that some major systemic banks will fail as well speaking for countries like Morocco Tunisia that I know pretty well and that have very tight buffers and that haven't necessarily followed governance and capital regulations recommendations that have been done after the global financial crisis so do you think that the banks are capitalized and what can we do to avoid the further crisis on that thank you very much I have a last questions there thank you I actually more of a throwing into the discussion a little dimension that wasn't mentioned and you are in the Arab world so I would like to throw in the general Arab outlook on growth and inflation so I'll just be very brief the growth rate of the Arab economies is expected to rise in 2022 to record about 5.4% compared to 3.5% in 2021 driven by many factors most important of which are the relative improvement in global demand levels the high growth rates of the oil and gas sectors and the adoption of stimulus packages to support economic recovery by many Arab governments in line with global development the general level of prices in Arab countries is expected to rise during 2021 it is expected that during 2022 sorry the inflation rate in the Arab countries will reach about 7.6% and it's expected to reach about 7.1% in the year 2023 and I'll conclude with this although some Arab countries are directly affected by the current challenges as they are major importers of food commodities most Arab countries can play a major role in reducing the global and Arab food gap and achieve self efficiency in some commodities such as wheat and petroleum products my questions to the panel here or to the gentleman here what kind of structural reforms are needed actually to relieve supply constraints and boost productivity and economic capacity in order to alleviate the global food crisis what kind of policy action is required that can help out in that dimension thank you very much colleagues I have a tendency to consider that there has been so many questions I counted 11 and I'm sure that there were 12 so each of us can pick up what he would like to comment it seems to me as concisely as possible because then I think that the best to terminate our exchange of views is to make a new to the table and I would if you agree I would turn first to Serge and then to Jeff and then to Akinari and so forth and I ask you to be very very concise but to pick up really the questions that seems to be exactly in line with what you the message you want to give please Serge thank you Mr Chairman there's one question that I would like to answer too it's naturally related to the question of the capital if you remember 2008 the lesson learned back in the days were to my view we had two lesson learned the first one was the need of a tighter regulation the need of a capital increase to increase the buffer and you remember back in the days the crisis we were in and you were at the command was that the crisis was worldwide and global and it was kind of the end of the word you remember that right and I think the two lessons were one first question of the tighter regulation capital increase for the financial industry and more specifically for the banks and we've been through capital increasing all the different banks the second lesson learned was the question of the SDR remember it came back on the table so what I think is there's a kind of there's a kind of symmetry here where we have the same discussions where I think the western banks are well capitalized even though there's still the question of the capital increase on the table today as we speak and the second thing as you well aware the question of the SDR and the allocation of the SDR the current allocation that has been done that has been made has been of no use countries of no use at all and the debate today is how can we reallocate this to those who basically need fundamentally need this SDR so for me there's a symmetry here between the crisis we faced back in the days and the the crisis we're currently facing with the two with the two lesson learned of earlier mention thank you chairman thank you very very much indeed as regard the SDR when we learned that not a single SDR has been reallocated de facto it's absolutely terrible Jeff you have the floor I so many questions I will try to focus on well one short one and then another that I think gets to some of the questions that are raised by no means all first on the dollar reserve currency I think my view is or what I should say is the consensus of experts which is my view but in fact my view is that the the dollar is going to be the principal reserve currency for the foreseeable future for one obvious reason which is that there's no obvious there's no clear replacement the euro is widely used as a reserve currency but it's probably not going to increase much given its troubled path and the the renminbi really is not an international currency in any way shape or form and it's far from having the Chinese financial markets and Chinese monetary conditions are far from being appropriate for it being adopted by the private sector as reserve currencies at this point it's used primarily by central banks that have a connection one way or the other geopolitically or economically with China so I don't see you can't beat something with nothing as we sometimes say and I don't see an obvious alternative to the dollar out there dollars likely to remain the principal reserve currency for the foreseeable future foreseeable future means I don't know maybe the next 10-15 years I want but the main thing I was going to say is about the core issue that some have addressed and that I started with we could argue for the next many hours about the underlying causes of the current inflation and the appropriate response but the reality is the really existing economic policy trend is a strong anti-inflationary policy in the OECD and so we can debate whether that's the right policy the wrong policy that's the policy that's being adopted there's a very little question that's going to continue to be adopted and there's very little doubt about what its impact is going to be we're going to face a period of relatively high interest rates and quite a strong dollar there may be some fluctuations and I understand the importance of the volatility but I think what we should focus on is the impact of the truly existing anti-inflationary policy which is a high interest rate environment which will bust a lot of bubbles and a strong dollar that will lead to I think a series of crises in the emerging markets whose debts are denominated in dollars and even those that are not denominated in dollars because the local currency debt interest rates are going to be rising substantially that's going to create debt servicing problems despite what John says I think you know the debt service has been easy now in low interest environment the environment is changing dramatically and so I think the problems are going to surface they are not going to affect the US directly but the constraints on fiscal policy and you'll get you can jump in if you want but the constraints on fiscal policy are real and I think in an environment in which there are very substantial fiscal needs like for the energy transition like for softening the blow of some of these anti-inflation policies governments are going to find their hands tied on the fiscal front in a way that will be politically difficult and third there will be distributional effects of these anti-inflationary policies and these distributional effects we've seen them already inflation is not across the board otherwise we wouldn't worry about it inflation is about relative price changes and relative wage or income changes will affect very substantial groups of the population and there will be a political backlash what form it takes I don't know whether it will be left wing populism or right wing populism or non-populism but there will be a political backlash so I think to me there are lots of very important issues that people have raised but there are clear implications of the anti-inflationary policy that the major central banks are going to be pursuing they have to do imposing real pressure on the emerging markets on raising some real questions about the fiscal constraints on OECD governments and distributional factors that will lead to a political backlash and those I think are the issues that we will face over the coming years thank you very very much indeed Jeff thank you let me take up two issues the first one is dollar as reserve currency or the international vehicle currency 100% not 100% 90% agree with Jeff freedom because the remaining 10% he said foreseeable future he said 10, 20, 30 years maybe 50 years they say give him a date or give him a number but never both at the same time okay three years ago I spoke at a plenary session of the international monetary system because it was a time that the BRS published then latest statistics and three years past and the BRS published so-called tri-annual exchange market review the survey was conducted April this year the result was published rather recently and I have statistics here it's exchange market turnover and the currency composition total being 200 because it takes two to tangle US dollar continue to capture 88% out of 200 the same as 2019 Euro 31 from 32 the same 31, 32 yen 17, 17 sterling 13 and 13 so as far as major currencies are concerned I always say that you know there has been no big changes actually over many decades one notable development was Chinese Yuan you may call it was 4% 219 rose to 7% in April 2022 it was a big increase although from very low point but at the same time there was a decline one percentage point of the shares of Russian ruble and also one percentage point decline in Hong Kong dollars and a few other emerging market currencies Mexican pesos half percentage point decline in other words renminbi's rise might be accounted for substitution for ruble for obvious reasons and also Hong Kong dollar for another obvious reasons so this is one thing and this is one fact I wanted to say. Another point I wanted to make is about ESG you know from a pure economics theories point of view using financing for greening or whatever purposes will distort Pareto optimum it will be much better to use common tax and board adjustment to preserve efficient allocation of resources but it will be much more difficult particularly to employ common taxes across the board this is only one example when political decision or right political policies are difficult to employ politicians ask financing people to do something this is I'm afraid this would create another bubble or distortion so populism influences many aspects of financial world whether good or bad thank you thank you very much indeed the number three was the yen we had a reserve asset of 5% approximately for the yen then the dollar came down over 20 years from 70 to 60% the euro remain at 20 men at 20, and the yen was also unchanged. And the 10% that the dollar had lost were in the sterling, in the renminbi, in the Canadian dollar, in the Australian dollar. So there has been some kind of redistribution. But it's clear, I have to say that in Passant, if there was the political decision to create a European federation overnight, everything changes because the death and the liquidity of the treasury market of the euro would totally be equivalent to the US. So we are changing the universe. It's not very likely that we will have a political federation soon. So can you walk? Do you have the floor? I have two comments about the dollar. As a reserve currency, I agree with the both of the two previous speakers. But I just want to mention that the more we begin to see dollar as a used as a financial weapon through the swift, I think there will be more incentive to find a way to go around it. I don't know when all those incentives got to reach a significant threat in the foreseeable future, probably not. But I just want to point out there is just strong incentive. The more we use these weapons, there will be incentive to go around it. The second point, which is not so much an answer, but I just want to raise it is that because the dollar is so strong and reserve currency and most of the advanced countries have a standing sub-agreement, but whenever the market becomes very much turbulent for many countries without all this privilege of a convertible currency, it would be much better for the stability of the global financial market that there is a reasonable expectation that when this Fed will come with some selectively, of course, but sub-arrangement to support the system. We, as I said, we have two cases, but we still don't know when this will be mobilized. And that creates a more uncertainty for most of the non-convertible countries. So I just want to mention it. Thank you. Thank you very, very, very much. I hope one of us will respond to the question on ESG and the drama that is associated with this deviation, perhaps, that the finance, global finance is organizing to take advantage of fake ESG. But that's another story. I turn now to Pierre. Thank you. Let me go back to Bertrand's remark on the allocation of capital. And he said, when are we going to talk about the ways to allocate capital properly? I see three responses to that. One is taxes. And what I have in mind is a carbon tax, obviously. And I think that we need to restore the dynamics that would lead to the adoption of a significant carbon tax if we want to be consistent with the talk about transition, energy transition, climate transition. And by the way, we have been talking about the green transition around this table, but a little bit marginally, because at the same time we are talking about growth. And growth is growth of GDP. And GDP is not a very helpful indicator of green transition. So we do have a problem of metrics. And that would be my second approach to it. We urgently need a metrics to guide the transition, because we are in a bizarre world in which in one sentence we mentioned green transition, and the other sentence we call for faster GDP growth. And the two are right now a bit inconsistent. And the third, and that's where I'm still going to be a bit provocative with some qualification, is in fact budget deficits, because what has been done during the COVID period is to direct private savings, which would have been poorly used and allocated through the government who presumably did a better allocation job. That's debatable. But if the private capital is poorly allocated, then there may be governmental solutions. So that's a way to restore the meaning of public deficit. Now I would again mention what Jeff rightly said. We are in a situation in which we have overgrown budget deficits. So the margin of maneuver is very, very tight, whatever we think about budget deficit. But just to mention that we should see the allocation of savings with a global approach rather than always separating public and private, because in the end, this is a bit artificial. What counts is the allocation of capital in the economy. And we need, we know that the green transition requires a lot of investments. Let me start there. Thank you. Thank you very much indeed, Pierre. André, I guess that you might have some message to respond to some of the questions, no? On ESG. Yeah. On ESG. We have the work in progress in trying to measure, to quantify more scientifically, if you wish, some of the elements of ESG and to build a database of controlled numbers which would make it significant. But because of the time being, I fear a backlash on ESG. There's huge amounts of money which is invested on the basis of implied ESG or published ESG with usually very, very little substance. So the real point I wanted to make, which is the same question in a different way, the pricing of risk is extremely difficult when you talk about climate, because the externalities are huge, both positive and negative externalities. And we know very well that pricing externalities is not very easy. They require regulation, government information, and so on. When you talk about long-term investments, it's even worse. We heard this afternoon the time it takes to create new mines, to change processes in industry, huge amounts of money, long-time frame, and huge externalities. So plus the fact that banks have to pay a higher price for risk than non-banks. So there will be a shift also of the funding outside of the banks. So we are facing a very, very difficult situation in which I don't see how we can avoid government intervention. Carbontax is one way to simplify part of the problem. It's unlikely that it will happen on a global basis. But in other words, to go back to what Pierre said, externalities mean in some ways government intervention, which mean in some ways deficits. So we're not out of the woods. I would have suggested maybe rules, regulations, global rules, global recommendations. We have created a year ago a new board, which is the International Sustainable Standard Board, ISSB, which has very ambitious, has already hubs in Asia, Tokyo, and Beijing, hubs in Europe with headquarters in Frankfurt, a base also in London, a base in Montreal. They are very ambitious. Every country is on board. China is on board. I don't know whether the specialists are expecting something from this new board, but the international community is betting on this new board, and they have practically completed the members, the membership. So I don't want to elaborate too much on that. I was a little bit involved in the creation, the setting up of that new board. Anyway, more deficit seems to me absolutely aberrant. So everything has to be financed through savings, savings, savings. In a country which we know very well, André and I, who is spending around 10% more than equivalent countries in public spendings, they are certainly your savings to make, and we could perhaps reallocate massively, but that's another story. Now, John, a lot of questions for you. Okay. Just one comment on what you just said, and that strikes me. For a long time, I remember vividly at the April 2009 G20 summit at the ministerial meeting of the G20, the question was raised, should the finance ministers take up the issue of climate finance? And without naming names, there were some strong voices saying absolutely not. No expertise. This belongs in the UNCCC. This is not for us. So what you had for a period of time was the formulation of goals that with no consideration of the sources of financing. And it strikes me that what's happening now finally is these, we're starting to get this, push this together and get some realism about what can be done. Okay. The points that I wanted to make first, for sure, the outlook for inflation and how difficult it will be to restore low inflation is absolutely critical. And my point was, we went through a decade in which we had lower than expected inflation, and even today we don't really have an explanation of why that happened. So we can't be sure, because what we're doing now is saying if we look to the past, when we tried to get inflation down before it took this, this and this, and if that happened then, we just can't be sure. But for sure, if it is difficult to get inflation down, there will be some consequences. And one of the consequences is, as I started out, for the advanced economies, they have gotten away with this big increase in debt because interest rates and debt service have been so low. And if that, if they're unsuccessful, we're going to have a big problem. Now, I should have been, I should have been more clear. This has not been true for the developing economies or the emerging economies. And in fact, a decade ago at the end of the global financial crisis, debt service burdens or the percentage of public revenues that we required to cover public debt service in the developing economies was about the same as in the advanced economies. And today, it's multiples of the burden. This is why we know that debt problems are coming for the developing countries because if anything, it's going to get worse and their interest rates are going to go higher. And especially the non-resource rich developing economies, growth, their income is going to be lower. So something needs to be done. This one is foreseeable. What has to happen? One, we need better standards of debt transparency. And that's going to require cooperation by everybody to put the numbers on the table if we're going to come to some kind of an agreement on debt restructuring and debt relief for the developing economies. There has to be an understanding on all sides of where we start. Second problem is private sector engagement. Right now, the standard operating procedure is the public sector makes the decisions, turns around to the, even if we overcome this issue of debt transparency, how the, one of the problems of the common framework, which is a problem, the Paris Club is the public sector gets together and then dictates to the private sector as to what their role is and engage, that produces log jams. So that we need a better form of public, a private sector engagement and better clarity on how do you, what is fair burden sharing. Anyway, my point here is we know the problems coming. It's going to be broad and big and we need to do better. And finally, one slightly extraneous remark on the process of not debt, of not of crisis resolution, but crisis prevention. And that involved the Fed swaps to the large emerging economies that Professor Herb is just talking about. I always considered that the Fed's granting of swap lines to a small number of large emerging economies as systemically destructive, or at least systemically disruptive. Because the question is, right now the system, if there is a system, is in the wake of the global financial crisis, the major central banks created permanent unlimited swap lines among them. Let's call that those are the guys flying first class. Now the Fed created business class, the favored friends of the Fed, that under circumstances that are not specified in advance, the Fed is willing to supply swap lines to countries in amounts and durations that are not known in advance. Under criteria that are not known in advance, I couldn't see why that was systemically helpful. Because the implication is if you're worried about, for example, creating stigma about going to, e.g., the IMF for help, that's a way to make the stigma even worse. If there's going to be crisis prevention in a world of securitized finance, you need insurance-like, swap-like facilities. The IMF should be given swap-like facilities that they could offer to all its members. And I think that would be helpful. Sorry. Thanks. Thank you very much. Jean-Claude? Yes. I would just comment that the emerging countries which we help to finance from time to time in certain countries are facing today indeed huge difficulties. They cannot even finance their budget deficit right now. Not only that, but they have problems of defense vis-à-vis the Islamist world. And they cannot pay their armies, which is extremely detrimental today. When they have, for instance, Ivory Coast for 10 years would pay between 8% and 9% interest rates. They cannot afford it, which is a problem. Now, I'm sorry, Jean-Claude, but Christine Lagarde confirms my hardcore figure, which is not 4.3%, but 4.8% for the Eurozone, which is in her speech in Tallinn in November 2nd or 3rd, 4.8%. Co-operation with the excuse... I've risen 4.8%. As I said, I don't take the ECB figure. I take the statistics figures of the Euro area. You're right. No, I'm sorry, because I do the same for the US. And they are always a way of introducing alcohol and tobacco. And I don't know why. I mean, you have this idea that... And I understand why they do that. Same in the US, because they try to avoid the spiraling, the wages and prices spiraling. And so the lowest possible, I would say, co-inflation is better from their standpoint, which I fully agree from their standpoint. But I think that what counts is what are the real figures, which are, by the way, very different from country to country also, to complicate the European reading of the situation. As you know, national inflation in France is much lower than in many other countries because of the cost which is paid by the fiscal interaction. The French are spending a lot of money to alleviate the price of oil and gas and so forth. But thank you very much Jean-Claude. We will check bilaterally and with Christine, exactly where we stand. Thank you very much indeed. I think that we came through many problems. I note, en passant, that this issue of whether for the dollar or for the euro, it is wise to have sanctions that are freezing the reserve assets is a real, real issue. And I was public to be against those sanctions against the Central Bank of Russia. And I still consider it's absurd. We have given the rest of the world the signal that to have dollar or euro as reserve assets is a bad idea. And we called for many countries that are in the rest of the world are not specially sure that at any time they won't have a problem with the U.S. or with the West or whatever. And we told them, look, be careful, you should put your money in other instruments. That was a big, big, big mistake and a very bad move. My sentiment. My sentiment. A second point, which I wanted to make clear. And again, it's not the dollar, it's the euro also. And the Europeans know how the U.S. can be inward looking when we were applying by the rule and by the treaty, the accord that we had with Iran. And the U.S. Congress decided to punish us because we were implementing what had been decided and signed. That was absolutely infuriating all the Europeans. I mean, there is something there. The dollar in a way is public good at the global level. And the New York market is also a public good. So to decide that it is the private property of one particular country is really self-destroying. I mentioned that. Even the Europeans were really infuriated. The Commission was trying to invent a bypass of the thing. And it didn't work, by the way. And my last point would be, of course, it is... Can I remind you that 50 years ago, an American Treasury Secretary said, it's our currency, but it's your problem. Connolly. Connolly. It's our currency, it's your problem. That's true. That's still true. Last point, we had a very good discussion on the balance for the central banks between considering that the price of some commodities and the inflation burst is both depressive or recessive and inflationary. And so you have to balance the fact that you have to fight against the inflationary aspect, but be very careful that it is also recessive. And there are differences between the US and Europe. It's more recessive in Europe. So that justifies monetary policy significantly different, obviously, and will continue to be significantly different. But in any case, there is a point fixed, an archimedean point, if I may, which is that you must go down in a reasonable time to price stability. Otherwise, you are in a situation of the Fed in the 70s and beginning of the 80s. Then Paul Volcker comes. Inflation is at 14 percent and sustainable in the long run, if I may. He has to do what is necessary. And what is necessary is much more dramatic than being a little bit ahead of the curve and try to regain control in time. Because when you have an inflation at 14 percent, your short-term interest rates are at 19 and 20 at certain moment to regain control. And you trigger a dramatic recession and a dramatic financial crisis. Nothing to be compared to what we expect will happen taking into account that the central bank are not nonchalant. And they are not saying, OK, no problem. We don't we don't move because the recessionary impact of what's happening is sufficient to correct the trajectory. But if when they do that, when they do nothing, all these second round effects are materializing and the situation becomes really very dramatic. So I understand that there is a balance to be found and it's normal that academia is reflecting permanently and on the impact, of course, on the social fabric and the political social fabric of what is being done. But it's very serious stuff. And I am reassured that both central banks and all central banks, to be frank of the advanced economy, had said we are trying to incur expectations. 2 percent in three years time is something which is reasonable and it is what we will try to deliver. This is reassuring because and also because it's the same goal, not the same monetary policy, not the same situation, but the same goal. I think that the audience could applaud perhaps the speakers. Thank you, indeed.