 Well, welcome everybody. Thank you for coming out this afternoon. This is a treat and an honor for me to be able to interview the American Treasury Secretary Jack Lew. Jack, thank you very much for coming and for being here. Anything going on in the world these days? Give us your sense of why we're seeing this roiling of global markets right now. What do you think is behind it? Let me start with the United States. I think the United States continues to grow and it's still a source of confidence in the world. You look at the statistics in the United States over the last several months. We've seen record auto sales. We've seen the housing market doing better, not withstanding pretty substantial international headwinds. We've seen continued growth. Now there are a lot of headwinds and there are factors out there in the world to be focusing on. But I think it's important to start with where are we because it's important to us in the United States, but it's important to the global economy. I look around the world and there are a lot of headwinds. We've seen for several years now very sluggish growth and demand that's led to a not strong enough global economy. Now that things are developing in parts of the global economy that are disruptive, people are reacting to it. I think it's important to look at some of these things and realize that with each downside there's sometimes an upside. So take lower oil prices. We've seen a lot of focus in the last couple of weeks on the disruption that lower oil prices are causing and some of the producing economies in parts of the United States where there's production. Most of the world consumes oil and for anyone consuming oil, lower oil prices are a tax cut. It puts more money in people's pockets. It actually has a positive effect. That doesn't mean that disruptions aren't real. It doesn't mean you don't have pockets that could be problematic. It doesn't mean you won't have some firms that have really bad times or even go bankrupt. But it doesn't mean that it has to be bad overall for the global economy. There's been a lot of attention on China. I have to tell you, following China very closely as I do, I don't see the situation today as being so dramatically different from what we were seeing at the end of last year. China is in the midst of a long and difficult transition. Their economy has historically been an industrial economy that focuses on export and they're in a transition to a more consumer driven economy. That's a tough and disruptive process. I think it shouldn't be a surprise that China's growth rate is slowing down. That's been something that's been underway and the question really is can they reach a sustainable, healthy, stable growth rate with a mix of consumer and industrial activities that is sustainable. That will depend on the policies they pursue. I think the question that should be asked right now is will China stick to the reform policies that open up its markets that will let some of the state-owned enterprises that are producing goods that have no market either reduce in size or in some cases close down? That's bumpy. That's hard. The real question is are they prepared to follow through on an agenda that they've charted out and they've said is in their own best interest? That's I think a very important question. That will have a lot to do with whether in the long term China has the kind of sustainable growth rate that's important for China and the global economy. I know it's been bumpy days in the markets. I try to look beyond the hour-to-hour day-to-day at what the big trends are. Obviously markets are significant and I'm not minimizing that it's been a very choppy in the markets. I think you do have to look at some of these underlying things in a longer-term way. Mr. Secretary, your point about China reminds me every time I'm in India people ask me about China and every time I'm in China people ask me about India and I finally developed an answer for both of them. So to me China and India are like two super highways. Chinese super highway, six lanes perfectly paved, all the stripes you know right down the middle, street lamps, sidewalks and everyone's going 80 miles an hour. There's just one problem. Off in the distance there's a speed bump called political reform and the big question for you about China is what happens when 1.3 billion people going 80 miles an hour hit a speed bump. The car jumps up, slams down and one or two things happen. One they say you okay, you okay, I'm okay, they drive on and the other is all the wheels fall off and India now a super highway none of the lanes are defined. Half the sidewalks aren't finished and half the street lights are out but off in the distance it looks like it smooths out into a perfect six lane super highway and I asked myself is that the mirage or is that the Oasis? So they each have a huge question mark but the common denominator and this is really implied by your answer is that it's really about politics that ultimately whether China can make this difficult transition and India really is going to be about politics. Well I would say it's about policy but policy doesn't get executed without politics. India has a much more robust rate of growth than it had in the past. It is one of the bright spots right now in terms of growth but they need to stick to their reform agenda to be where they need to be next year and the year after and look it's hard in any of our countries to stick to tough reforms. Anything that's disruptive is hard but the price of not doing those things is very significant. It will be very telling if a year from now China has stuck to its reform agenda. If it's managed to exchange rate in a way that the world understands and it's not seen as something that's trying to gain unfair advantage but to manage to have an orderly transition to a more market determined exchange rate. Whether they look at their industrial capacity and allow it to right size by letting market forces not top down decisions work. These are big ifs and I think that in any of our political systems the ifs depend on policy makers making the right decisions but I think it's important in a moment of an ease to remember that we have a lot of control each of us in our own systems and we should just throw up our hands and say there's bad things happening and and that's why I focus on what can we as policy makers do and what can our political systems do. Well back to your oil point because I am baffled by that every morning here I fire up my iPhone I go to you know CNBC.com and I see all red numbers and at the top it says it's because oil went down another dollar today. So I totally agree with what you're saying. This is the world has gotten a huge tax cut when you think of going from four dollars a gallon basically to something close not to a dollar and yet the multiplier doesn't seem to be working in that direction. All the multiplier seems to be working in the direction of oh my god this means drillers in North Dakota may go bankrupt and pull down the North Dakota National Bank of Fargo or whatever is out to go. What's going on there. First I don't think it's it's true that it's not working. Look at Europe. Europe is doing better this year than they did last year and part of the reason is the oil prices. The U. S. has continued to do well in the face of international headwinds in part because consumers have more money in their pocket. In the United States one of the things that we're we're still trying to understand the data comes in a little late so you don't get a crystal clear picture in real time but our consumers spending what they are saving at the pump and it certainly seems that they're doing two things. They are consuming maybe a different mix of goods than they used to consume but that is just a change of preference but they're also improving their household balance sheets. Now we don't think it's a bad thing if a household is less indebted more savings and can weather a bump in the road or have a larger amount of money to spend on a capital item and there is some evidence that that's what people are doing. I don't think we know with with absolute firmness what consumers are doing until all the data is in and we can look in the rear view mirror but I don't think we should assume that that money is just evaporating. It can only go one of two places. It either is spent or it's saved. Interesting. So here's a I'm working on a new book right now and it's been interesting you know with my first book which I wrote in 1988. I actually had a hydrogen assistant as a young man. He was a physical person living and breathing. He sat in the desk next to me and I would ask him questions and he would go over as at the Wilson Center in Washington DC and he would go to the library. Now I was amazing assistant. She answers every question. I don't pair anything and she's called Google and what's really amazing is before I came here I could put in Jack Lew on oil prices and she would just tell me everything you said on oil prices. That is so productive for me. I don't know how much time I saved. That took me less than a minute but I'm being told now by certain experts that none of this compares to a flush toilet or electrification. Are we measuring productivity properly? A lot of people are asking that question. Productivity is very hard to measure and it's always going to be in precise and at moments of change it has to catch up and I think we're at a moment of profound change. Two years ago I remember being here and talking about the rate of change in technology being faster than any change that had ever been experienced and that we were just at the tip of seeing what that benefit would be. I think there's probably a truth between the theory that it doesn't amount to much and it's the most important change ever but I find it, the experience you described, we all have. There's not one of us who when we're on the telephone with somebody and they mentioned something that we weren't expecting can't while we're talking on the phone get briefed up and have the first conversation be the last conversation and you don't have to then do it two or three times. That happens in every aspect of life. I don't know that that's measured perfectly. I think we also have a challenge that the structure of the economy is changing as we have technology doing more of the work and the amount of labor it takes to do the same thing. You don't have that assistant anymore. Now what does that mean as it flows through? Are there enough jobs for software designers to make up for all of those other jobs that are lost? I visit factories pretty regularly and you see different people in factories than you did 10 years ago. You see people with a higher set of skills, technical skills, doing more things with the support of technology and one has to believe that that will show up in productivity at some point if it's not already but you also have to ask how are we making sure we have enough people with those skills in the future and that comes back to what do we do as political and policy makers? Do we bring the next generation at a high school and college with the skills to take the next turn and to harness technology as opposed to feel like they're victims of technology. This is something we feel very strongly about. We need to do better in the United States because you end up with a very unfair distribution of opportunity if some people have the skills you need to succeed and others don't. But economists tell us there's no skills gap if there were wages would be going up for those skills that are not insufficient supply. But economists also tell us that we have millions of unfilled jobs in the United States and millions of people looking for work and they don't quite match up because they don't have the right skills. I guess there's only efficient markets you know when you're talking about Alan Greenspan and that but there's not a fit. I look at the jobs numbers each of the different aspects of them on a very regular basis. You know I look I think yesterday the president was in Detroit and he he observed that since the the great recession when we thought we were going to lose all of our auto companies we've added 600,000 jobs in auto manufacturing. So clearly there are manufacturing jobs of the future. The question is are we bringing the next generation up with the skills to make sure there always are more manufacturing jobs in the future. Can we harness technology? I think the United States has great advantages with technology because we have the most stable system and the best human and physical resources that you could ask for. If that's the challenge how do you look at a country like a Russia today or Venezuela or the Arab oil producing countries they're going to go from a hundred dollar barrel plus to you know something in the low 30s or high 20s now. What are those countries going to do at a time when manufacturing at scale in terms of employment at scale may not be available for emerging markets in the fourth industrial revolution. Look I think that if you look at an oil producer where oil has been the lion's share of the economy they are I think correctly looking at how can they diversify their economy and have more things that they do than just producing oil. I think there are opportunities for emerging economies. There's a lot of parts of the world that don't have the kind of technology hubs and financial hubs that they need to make the step forward that they need. You look at the annual report on the doing business report there's a lot of countries and regions of the world where there's a lot of services that don't exist that should exist. Those are opportunities. Now you need to have an honest transparent system of government and your financial system has to be so. You have to be open to technology and not close to it and fearful of it. You have to protect property rights. So all of the things that it takes to develop those kinds of economic engines are hard but there are also opportunities. It's not that they have to go back and be 19th century manufacturing economies to have more diversified economies. Is it easier to be the American Treasury Secretary here after we've you persuaded Congress to pay our IMF dues. It's easier to be anywhere. I think that the Congress's ratification of the IMF quota reforms was enormously important. You know the United States has been a leader the leader in the post world war two international financial system. For five years the world was waiting for the United States to approve reforms of the IMF that were profoundly in the U.S. interest but our political process couldn't quite do it. We managed to get that done and just this week we're finalizing at the IMF the details both in terms of policy changes at the IMF and the transactions of money. Now I think if you look at the series of things we've done this year it really makes a clear statement that the U.S. is committed to maintaining the economic leadership role in the next decades ahead. We have passed trade promotion authority which opens a door to trade for TPP the Pacific agreement to be approved. We've reauthorized the export import bank that was sitting there on the fence would it or wouldn't it be extended. And now we've done IMF quota reform. I think that's a profound statement that the U.S. is committed to playing an international leadership role in a changing world and what IMF quota reform does it's so important is it says that for us to continue to play a leadership role it doesn't mean we have to tell economies that have grown tremendously in the last 70 years that they don't get to step up and play a significant role as well. I think quota reform was more than about money. It was about a seat at the table. It was about having the conversation about international financial policy be a more inclusive one. And if you want to hold all the leading countries of the world to those standards they have to be have ownership of those decisions. And I think U.S. has to remain a leader. So IMF quota reform I think is something that is profoundly important. You know in your previous job the secretary you were the chief of staff of the White House you had to deal with politics. And we're at this really somewhat amazing political moment. We have a Marxist basically at the head of the British Labor Party. We have a socialist self-declared socialist competing head-to-head now with Hillary Clinton for the Democratic nomination. And we have in my words not yours a borderline fascist running for the head of the opposition party or let's say a deeply conservative man. Two of them actually. One is a bigger knucklehead than the other. But what do you think is going on? We're seeing strange stuff that we have not seen in our lifetime emerging on the political landscape. To what extent do you think is being driven by economics by the roiling of the economy? Stunnel, unlike my past position the position I have now is thankfully one where I don't do politics and I don't comment on politics. I do think that there are things in our economy that are leaving people uneasy. The fact that it does not necessarily appear to everyone that's an economy that they can get ahead in even if they do the right thing even if they play by the rules and work hard. I think we as policymakers not just as politicians have to be concerned that there's a sense and a reality that there's shared opportunity. That doesn't mean at equal outcomes but the door has to be open to everyone. And you know I think the way we conduct public debate has to be one that our publics look at and feel better about. Feel that it's got a pathway to producing that equal opportunity. What are the causes of that unequal opportunity? What do you think has been happening in the economy that has made it so many people feel that it's less inclusive that maybe even if I do all the right things as you said I'm actually not going to be able to pay the bill. So let me give you an example in the world that I'm in now. Financial inclusion. We have 30 million Americans working who are not saving for retirement. Most people who are saving aren't saving enough. You have an inordinate number of millions of people who can't get basic banking services. Now why does this matter? If you don't have banking in America billions of people around the world and it's a global as well as a U.S. problem and we're focusing on it both globally and domestically. If you don't have a credit history if you don't have a bank account if you don't exist as far as a financial system is concerned you can't get a mortgage and so you can't buy a house. You can't get a small business loan so you can't become a small and medium-sized enterprise. The door to opportunity just doesn't open for you. It's one of the reasons we're focusing so much at the Treasury Department on financial education, on helping to get people into the habit of saving by creating something called MyRA where you just go to myra.gov and open an account and you can put that five dollars a pay period away no minimum no charges a safe investment. We know that people are worried about losing their principal. This is a way you don't have to put your principal at risk. You don't have to have an employer who offers you the opportunity. I don't think there's any one easy solution and I don't want to suggest that financial inclusion alone is the answer but it's a part of it it's a big part of it because if you don't get people into our financial system they become part of that economy that we have trouble measuring and seeing and it's also a part of the economy around the world that breeds dangerous activities. The informal economy is another name for off-the-books and that's where money can go into the wrong hands all too easily. So if you accomplish financial inclusion you're also making both our country and the global the financial system and the world safer. So I think that this is something you know you can I could have given you other examples that's one that I think is very tangible. We're both baby boomers and are contemporaries and we will soon be retiring and I've seen really scary numbers in terms of how much savings people have as compared to how much they will need particularly in a zero interest rate environment or very low interest rate environment. How do you think about this to be our last question? How do you feel about that challenge? It's going to be for you and your successors obviously to manage but that feels like a really big train coming down the tracks. Look I think that it's a it is a huge challenge. We can't just look at our generation we have to look at kids who are in high school now and make sure that they start saving earlier. We have to make it easy for people in the middle of their careers to save more. Part of that is by having employers make it easier for people to save. If we had just a simple change that you opt in instead of opt out of saving for retirement we know from behavioral economics that most people don't opt out. So our system could improve that requires you know some change of law. I'm not as pessimistic about the overall picture facing retirees. I think Social Security is going to be there for people. I think people can save more but I think that for those who haven't saved more it's it's going to manifest itself as being tough choices. Do you retire later in order to take your savings and spread it over fewer years? Do you change your standard of living? And those are tough choices so I think a lot of people will be working longer. It can't be something we just ask what do we do for people who are 60 years old today. We have to ask what do we do to build a system that works for people who are 20 and 30 and 40 and also for people who are 60. Well you know I have to say Mr. Secretary I came in here feelings are dark and gloomy and worried and I greatly appreciate your equanimity and your your your your slight optimism. Clash is optimism. And if you don't mind I'm going to run out and buy some stocks. So thank you very much I don't give any stock. Thanks so much.