 Welcome to Bloomberg's Davos Debate. I'm Francine Lacquano. Over the next hour we focus on cheap money and of course the tough questions that go with it. Can the Fed raise interest rates this year? Will quantitative easing work in Europe and how much weight do we need to give to the price of oil when we're actually setting a monetary policy? Does monetary policy and currency wars, are they the biggest risks to business? Now joining me to discuss all of this for the next hour, we have a cracking panel. Christine Lagarde, Managing Director of the IMF, Gary Cohn, COO and President Goldman Sachs, Ray Dalio, Founder and Chief Investment Officer of Bridgewater and Anna Boutin, Chairman, Banco Santander, Larry Summers, former US Treasury Secretary. Thank you so much for joining us in this great Bloomberg panel debate. Christine Lagarde, let me start off with you because actually the world needs more easing. How difficult is it going to be for the Fed to raise rates? The Fed is probably going to raise rates this year. Our expectations at the IMF is that it's more likely to happen in mid-year than at the end of 2015, contrary to what markets expect in a certain way. And the fact that the Fed is going to do that is good news in and of itself because it shows that two things are moving in the right direction. Employment is up and employment down and inflation is hopefully giving little signs of moving up in the right direction. So with these two indicators, which have been extremely well communicated and identified by Janet Yellen, who's done a terrific job in communicating and giving the right anticipations to market operators, I think that it is good news in and of itself. Now, the consequences of that are going to be a different story because clearly there will be side effects, there will be spillover effects, and there will be volatility as a result, unavoidably. But in terms of the sheer raising interest, it's clearly a good sign, and it's clearly an indication that the U.S. is growing, that the U.S. is reducing unemployment and that prices, expectations are on the upside. Gary, you disagree. So given what we just heard from Madame Lagarde, you think actually the Fed won't raise rates this year at all. Does that mean we should be worried? I don't think we should be worried. I think the U.S. is growing, and I think that's a non-debatable fact. What I am concerned about is the actual ability of the U.S. to raise rates with what's going on with the rest of the world. When you look at the policy measures going on in Europe and what's going to go on in Europe, and you look at what's going on in Japan and other parts of the world, and the interest rate differential that already exists, there's an enormous spread between U.S. positive rates and the negative rate environment that's in the rest of the world. You look at the strength of the dollar today, it will only get stronger if we raise rates in the United States. That will have a chilling effect on the U.S. economy. The good news is we're getting back some of that headwind in lower oil prices. Madam Lagarde talked about the unemployment picture. I think there's whatever news you want is in the unemployment picture in the United States. If you look at the headline unemployment rate, yes, we have very good news. If you start peeling back the unemployment rate, you can find some less good news. If you look at the wages, we're not getting wage inflation. In fact, last month's report we had negative wages. If you look at the participation rate, we're not pulling people into the U.S. job market. So yes, we can have headline unemployment rates go down, but no one's looking for jobs because they think the jobs that are out there are very, very low-paying jobs. And then on the inflation point, there's no inflation in the United States. We're not close to the Fed's 2% target. Now 2% target seems to be everyone's target in the world, and we're nowhere close to 2% target on wages and with commodity prices and oil prices going down more dramatically, I think we're a long way from 2%. Larry, what do you think the Fed should be looking at when setting interest rates this year, activity or inflation? Inflation. The Phillips curve is a constantly changing ephemeral relationship that does not provide a confident basis for a tightening. The risks are enormously asymmetric of setting off a spiral towards deflation. The Fed should not be fighting against inflation until it sees the whites of its eyes. That is a long way off. In the United States, Europe, and Japan, markets are saying not just that inflation is below target, not just that inflation is low right now, but that it will be low below the 2% target over the next 10 years. And there are further questions about in a slow growth, low real and interest rate environment, where that target should be, and what kind of prospect there should be for catch up. The Fed is right to be data dependent, but the data it needs to be looking at is inflation, and as long as the net pressure is towards deflation, they should not be looking to move. And I think they need to manage their communications quite carefully. There has not been a moment in my memory when the gap between market expectations of monetary policy as measured in the marketplace, and Fed's statements about future monetary policy as reflected in the dots has been greater. And that suggests that there needs to be careful attention to communication policy going forward. Ray, what's your take? You actually think there are more downwards risks to the US economy? I think we're in a new era in which central banks have largely lost their power to ease. They have a lot of power to tighten, but with a downturn, if you get a downturn in the economy, the effectiveness of monetary policy will be less. Originally, monetary policy worked by lowering interest rates, which would lower debt service payments, cause the present value of assets to go up, produces a wealth effect and stimulation. When interest rates reach zero, and there were large spreads in the market, large credit spreads, then the purchases of those financial assets narrow those spreads. The spreads are a transmission mechanism for monetary policy. So if you put liquidity in and there are spreads, people who want higher returns will go in and buy those assets. The buying of those assets cause those future returns to go down, the yields of bonds, the yields of future expected returns of equities and all to go down, producing those asset price appreciations which have the wealth effect that we have. We now have a situation in which we have largely no spreads, and so as a result, the transmission mechanism of monetary policy will be less affected. This is a big thing. Through all my life and through all history, monetary policy was the main tool. And so I do believe that we're entering an era. It's the end of, it's the end of the super cycle. It's the end of the great debt cycle in which the process of lowering interest rates, causing higher levels of debt and debt service and spending, I think it's coming to an end. Since 1980, every cyclical peak and every cyclical trough of interest rates was lower than the one before it. And we have, so we have a deflationary set of circumstances with zero interest rates or negative interest rates. How far will negative interest rates carry? It's going to begin to call into question what the value of holding money is. What is money? With the negative interest rates, literally the under the mattress looks good, right? So I worry on the downside, because the downside will come. Anna, why aren't banks functioning better as a transmission mechanism for monetary policy? Well, let me just start by saying that it's a very bad idea to have your money under the mattress. You should definitely have it in the banks, right? But having said this... What interest rate will you offer? How much do you want to pay? No, I think, you know, I think the issue about monetary policy is critical, but I think we should look at this as a full legged chair. So of course you have monetary policy. You know, I think of it as QE plus, right? Monetary policy, fiscal policies, I mean the demand side is incredibly important and I think it's encouraging that Europe is now doing some of this. I think we should do more. Structural reforms, of course. And the last one, which you pointed to, which is a transmission mechanism. IE, we need banks to be lending again. So everything has to work together. And I think as we think about growth and jobs, there's an aspect we need to think about which is what people and communities are asking of us as politicians, regulators, business leaders, education skills, you know, these kind of reforms are incredibly important. Micro policies, governments and companies and banks working together to foster employment. There's a huge disruption and we had a very interesting session yesterday on this because of technology. So there's a lot of, at the deflationary pressures that are upon us. So I think having these full legs of the chair work together is incredibly important. I can of course elaborate on the lending transmission of the role of banks as a transmission of monetary policy but the global financial stability report, which I'm sure Madame Lagarde knows much more than I do but about this report, which is, I encourage you to read. It shows that in a sample of 300 banks, a lot of these banks are ready to lend. So I wanna say that banks are ready to lend and support QE and growth and jobs. But the same report shows that certain banks in certain countries that are important are not in that situation. So I think it's very important that again, the full legs need to work together but the transmission role that banks have is critical and I'd say it's even more important in Europe than in any other place. So Gary, how concerned are you about that transmission mechanism because of course if that works then QE would work better. What needs to change? So I think you have to take Anna's comments and Ray's comments and put them together. Ray's talking about the new world or the new paradigm or the new normal and Anna's talking about the transmission mechanism. They go together. I don't know what came first. I would say the transmission mechanism being broken came first which created a new normal which is monetary policy and the effectiveness of monetary policy. And what I mean by that is historically, if you look back pre-2008, the way the system worked is central banks decided what monetary policy would be. They would interest rates money supply. They would lower interest rates, increase money supply. They would flow that through the banks the banks would then flow that through to customers or main streets all over the world. And that worked. The central banks were able to control growth and control the flow of currencies and sort of generate spending or withdraw spending. What happened after 2008 in a simplified way is with the regulation, the new regulation and I'm not complaining about regulation. A lot of the regulation that we have is actually very helpful. What they've done through regulation now is every time banks find new capital, they're told to hoard it. Like you should hold that capital. You should build a more bulletproof a more solid balance sheet than you've ever had before because we've got to make sure your bulletproof for the 10,000 year flood. And so I think that's what Anna's talking about. She's saying, look, whenever we get capital transmitted through our banking system, we used to turn around and give that out to our clients and help stimulate and grow the economy. And now she's in the position where she's not recirculating that capital. She's holding that capital on her balance sheet. And I think in many respects, in Europe, as we discussed at a meeting earlier this week in Zurich, it seems like that process is starting to get worse, not better in Europe. Anna? Well, I think, aside from the global financial stability report, we've done also some analysis on a smaller sample of European banks. And if you take the 40 biggest listed European banks and you look at where they were in 2007 versus today, risk-weighted assets at the same level and capital is more than double. So the returns on these banks' equity is actually around 6%. So that's why I said that I think banks are ready to lend again. And this is incredibly important. And I'm pleased to say, well, we just raised a big amount of capital, $9 billion. I think the two things are important about this capital raise. One, we said, and we mean it, we want to use it to grow our lending. We're not going to buy anything. This was discussed. We're growing our balance sheet. And over the last 12 months, we've actually now lending by 4% in nine out of 10 countries in Europe and the Americas. So I think we need more banks growing lending, not at huge rates, but at these kind of rates so we can actually help monetary policy work, which is what we're trying to do. Can I say to follow up on what Anna was saying, it's really a case in point. Because the reason you've been able to raise as much capital as you have is also caused by you chair with the four legs. It's also due to the fact that Spain has really managed to inspire confidence in the market because of various things. One is a fiscal discipline that was applied over time, maybe excessively to begin with, but more sensibly, and with determination. The second is, and I think it's the most important one, is the structural reforms that Spain, in terms of policy, decided to not only legislate but also implement. And third, which I think was also an important step at the time, the decision by the Spanish authorities, together with the banking system, to actually go through an inventory of all the Spanish banks to see what was under the skin of the balance sheets and to do some cleaning up. Now it's not to say that all the non-performing loans have evaporated. There are still quite a lot of those non-performing loans, but certainly in a much better identified way than in many other corners, particularly of the eurozone, which is why I'll look back to the structural reforms. If the right structural reforms are implemented, particularly at the level of bankruptcy, reorganization of corporates, then there is a positive feedback loop that helps from a bank balance sheet point of view, which will then help the transmission mechanism that we were talking about. So everything is linked together. But overall, does this central bank divergence actually make it much more difficult? Or does it reduce the effectiveness? I don't know. I think there are very divergent views on that. And one thing is for sure, we are in uncharted territories. You've got this potential exit at some place, at some time, earlier from my point of view than others. And then you have the entry route that is taken by the ECB, and then the continuation route by various others, including the Bank of Japan. Now, whether that is going to be absolutely counterproductive, whether this asynchronicity is going to produce only negative effects, I'm not sure. If there is enough coordination in this asynchronicity, it might actually prove helpful to have entry by the ECB when there is potential exit from the Fed. Final point, and then I'll be quiet. I'm just struck to hear that there are major downside risks and the US is in a bad place. Excuse me, but if the US is in a bad place, we are short of any engine at the moment. So I hope some of us, sorry, some of you, saying that the US is really under threat are wrong. I think they are. Just to be clear, no, I think the US is in good place. OK, good. I didn't mean that. I think there's the US and there's the world, and I think they're in different places, generally speaking. And it's just mechanistic. When there is no ability to change interest rates, particularly when there's no ability to lower interest rates and have a transmission mechanism, monetary policy to ease is in a bad place. We don't have an ability to ease if we need it to ease. The two reasons the United States is in a good place is partially because of the quantitative easing that it did. 25% of GDP was in quantitative easing, $3.8 trillion. 26% was in the UK. In Japan, it's been 36% of GDP. In Europe, it's been 3% of GDP. When you're in a situation in which credit is not going to work the same way as it did before, we cannot have debt growth the way that we had before. We can't look at debt growth the way we looked at it before. The interest rates to bring it down, debt service payments can't decline. So let's not look for debt growth as the solution. That means that you can spend with either debt or you can spend with money. That means money is more important. That's why when we see transactions, we'd see this ECB policy. It needs to have more money into the system. Money can produce more purchases. It also means that when the two levers are interest rates and currency, it means when interest rate lever doesn't work, currency lever becomes more effective. So we necessarily must see more volatility in currencies. We must see a depreciation further in the euro. We must see a depreciation further in the yet. The average cost of MMSD structural reforms. Structural reforms are important. The average cost of a Southern European after adjusting a person, worker, after adjusting for the amount of time that they work. Vacation time, the work week, the retirement age, is about twice what it is in an American worker. So it's expensive. Either that is going to have to lead to structural reforms in the form of changing to make that more efficient. There's a lot of potential in Europe to make things more efficient and more economic. But the currency depreciation is going to have to be a part of it. And it's the conversation that is not polite to have. In other words, we could talk about changing interest rates. But policymakers can talk about changing the exchange rate. And so the currency will be a bigger influence in the years ahead. This will produce a dynamic, because there's a lot of dollar-denominated debt. That means that because there's a lot of dollar-denominated debt, there's a lot of promises to deliver dollars that are becoming more expensive for various entities. So there's a short squeeze emerging in the dollar. Very similar to 1980 to 85. Of course, the period today, very similar to 85. In that there's falling commodity prices. There's falling oil prices. There's a relatively strong economy with falling inflation. Back then, we could lower interest rates. We cannot lower interest rates now. So it's a similar dynamic in terms of those deflationary pressures. I agree with Larry in that you have to wait to see the whites of the eyes of inflation. In 1980, if we didn't lower interest rates, even though growth was strong, we would have had a disastrous situation. It's somewhat analogous to that now, I think. Larry, given the QE experiment in the United States, is QE in Europe going to work? I am all for European QE. The risks of doing too little far exceed the risks of doing too much. Deflation and secular stagnation are the macroeconomic threat of our time. That said, I think it is a mistake to suppose that QE is a panacea in Europe or that it will be sufficient. There are several differences that are worth noting with the US experience. The US QE was most effective at the very beginning when markets were functioning less well than they're functioning in Europe today. QE functioned well in the US, starting with long-term interest rates in the 3% range, not with long-term interest rates starting in the 40 basis point range. QE worked best in the United States when it was unexpected, rather than when it had been widely predicted. QE worked best in the United States because it worked through a capital markets channel and a large part of lending in Europe takes place through a banking channel that, as Anna explained, is clogged by regulatory processes. So there is, I believe, every reason to expect that QE will be less impactful in a context like the present than it was in the context of the United States. And I think it is, I think the story in the United States is a more complex one than is sometimes told. Everyone at Davos a year ago was not in doubt that with the taper coming and the US expansion accelerating that the 10-year treasury was gonna endanger of rising sharply from its level of 3%. The small minority, which included Ray, that thought that the deeper issues went to the emergence of deflation have proved to be correct. And I would just remind everybody in the United States, and it's why I think policy has to keep a bias of expansion, that if you look at the post-war period, here's some facts. First of all, nobody ever has predicted, no institution, not the IMF, not the US government, nobody has predicted any of the recessions a year in advance, never. And yet recessions do sometimes come, fact one. Fact two, when it happens on average every seven years, the Fed has to cut interest rates by three to four percentage points or more to combat that recession. Are we anywhere near getting ourselves to a place where there's going to be three to four percentage points of running room to cut the next time the problem happens? I don't think so, and if you look at the forward curve, the market doesn't think so either. So we have to recognize that the era when central bank improvisation can be the world's growth strategy is coming to an end. And we have to move to a broader range of strategies. Some of it goes to banking policy, some of it goes to structural reform, although a lot of structural reform is on the supply side and much of the problem is on the demand side, so we have to be strategic about the structural reform. And there's also a crucial role for direct support for investment in both the public and private sectors. Anna? Yeah, I think the central point that we're all trying to address I think is growth, broad-based growth, and that comes, of course, creating jobs. And so, of course, macro policies are critical, those four legs of my chair that we were discussing. And one of those going to Larry's point on demand is we need to generate confidence. And if I think anybody is asked what are the biggest risks in the coming year, I think most people will say the more political uncertainties of different sorts, not just on the economic side, which of course, they're quite challenging, but more political. So I think how we achieve confidence is critical. A combination of all these macro reforms is very important, but I think one of the reasons we're in a secular lower growth time is because of disruptions in technology, less people are needed to do the same things. And so I think we need not just macro policies, but also micro policies with public sector and private sector working together to address this in different ways. And again, we were in a discussion yesterday when many of the leading companies and financial institutions were all doing huge amount of programs and education. Again, in our case, last year we spent, invested actually 180 million in education and skills, but I think this public-private partnership is something we need to do a lot more about because otherwise the macro policies on their own, which we need, and I think they're critically important, we need the QE, we need structural reforms, we need fiscal policies, we need banks to be able to lend again, but I think we need to get and to go a step further because otherwise we're not going to create the jobs that is what we're all looking for. And emerging markets did not like Fed QE. Will they like ECB QE? I think ECB QE is a good thing. So it's very welcome, we need it, and I think it will partly compensate what the Fed is not doing. Obviously it's another size, the balance sheet of the ECB is two trillion, and I don't know what the size is gonna be. In Latin America, which is the region I know better, I think certain countries are in a very different situation than they were in the 90s in previous crises, countries like Chile, Colombia, Peru, Mexico, even Brazil, I think would be less affected because they have better policies, they have very high level of reserves, so I think this time it will be different for certain countries. I think to move a little bit away from Latin America, which you're right to mention, there are emerging market economies in Europe, in the vicinity of the eurozone, and I think for these ones, it will have beneficial effects. If there is some re-anchoring of inflation in the euro area, those European markets, those emerging European markets, which are pegged to the euro, will have the benefit of that. Those that are at the moment importing the inflation, so to speak, from the euro area will also benefit from that. And if there is more growth, more jobs in the euro area, the emerging market in Europe will benefit from that because half of their trade actually goes to the euro area. So I think for emerging markets in the euro area, they should benefit from that. Additionally, you asked Larry if QE in Europe will work. To a point you can say that it has already worked. When you look at the currency variation and where the euro is at the moment, you can't deny that there is expectations there that QE is about to come and will be announced or is announced and will be significant. And Reyes Gondolski, who will come out okay of the central bank policies, be it communication or actual QE? I just want to first point out on the question of the United States doing well and the rest of the world not doing well as it ties into structural form issue. I think you can do an attribution of the two countries and you could say why is one doing better, one area doing better than the other. And I think that the vitality that is existing in the United States, entrepreneurship, big data, the flexibility that makes it, that goes to structural reforms. For example, entrepreneurship, there's twice the rate of entrepreneurship in the United States than it is elsewhere. If you go through the statistics of how long it takes to set up a business in Southern Europe or some, many of those issues that are structural reform, I won't go into all those. There are those impediments and that doesn't stand in the way of the vitality that is existing. United States and I think the world in many ways should be very optimistic about the incredible developments that are happening in technology, big data and so on. It's a force. So productivity in a sense is a terrific force that's going on when we are at the end of being able to use debt in the same way. So that means that if I think the two words that would characterize what would be good for Europe are structural reforms and money. If you have more of a money rather than debt-based economy, meaning monetary policy, quantitative easing, together with important structural reforms, and that means also currency changes, that that would be an effective force. I agree with Anna about the political issue. I think it's important. If the moderates of Europe do not get together and change things in a meaningful way, I believe that there is a risk that the political extremists will be the biggest threat to the euro. And so youth unemployment in Italy and Spain, youth unemployment is 50%. It will be a lost generation. And so there needs to be forceful action. Otherwise, there's going to be political extremism. And this year, there are a set of elections that, so I would say that forceful QE and forceful structural reforms would be what's required. How worried are you about the Greek elections as a kind of benchmark for the rest of Europe? Well, I think the Greek elections are a strong the wind. So there are multiple possibilities. One plays out all the different scenarios of what coalitions mean, and all of this gets very complicated. But in each of the major countries, in Spain, Fidemos is a politically extreme party. That would be when I say it would undermine productivity, it would undermine the effectiveness. And when we look at other countries, there are such issues. And so I think that the characterization of Europe over the next year will be one of what is the effectiveness of monetary policy and currency depreciations in producing stimulation, and how patients or the electorates regarding that matter or how much is their movement toward more political extremism, which would then threaten the economy. Gary, are we looking at currency wars, or have they actually never left? Yeah, I think we're in currency wars. And we've always been in it. I don't know if we've always been in. Lost five years? But yeah, five years. I don't know if it's five years, but look, recently, when Abe got involved in Japan and did a conscientious devaluation of the yen, it clearly put the Europeans in a position where Euro yen, the Europeans looking at their exportability versus the Japanese exportability, put enormous pressure on the Europe. And I think you look at those two pairs and the combination. And if you look at that pair, Euro had to devalue at some point. Now you're seeing Euro devalue and yen holding. Interesting how the Japanese is going to follow up at this point. And lo and behold, and I said this before, we've got the United States just sitting there watching. And being the one currency that's rallying because everyone else is trying to devalue, thank you for the Swiss. They decided to join the currencies that would rally. So we're happy to have them on that side of the ledger. But it does feel that we're in a global economy. And I don't disagree with this, that the prevailing view is one of the easier ways to stimulate economic growth is to have a low currency to export against and hopefully create tourism and imports with. And it makes sense. Well, currency wars, I mean, the Euro dollar, and I'm sure somebody on the panel can help me on this. But the PPP, the purchasing power parity for the Euro dollar is around 115, 116. So we're actually at the correct macroeconomic level. So the problem is not where we are today. The problem is where we've been over the last couple of years. Because of QE in the US and effectively tightening in Europe by the numbers I gave you before, because not just QE didn't happen, but because of the lending being constrained, and rightly so because we needed to deleverage. So I think we're now, and usually currencies don't stay at their sort of theoretical level. So it could go further, right? But right now, we're at probably the right place. So I think that is an important fact to bear in mind, as we said policy. I mean, as governments say policy. Would you agree that's the number? Well, I would agree that taking Japan aside, because there was a determined policy move on various fronts two years ago, which had a clear influence on currencies. And I'm not sure that the currency itself was the purpose of the other three arrows, abinomics determined policy. But taking Japan aside, yes, I would agree with Anna that there is an alignment with the key characteristics of some of those economies. And if you look at the growth current rate, the growth potential, it's not out of line. Larry warned about communication from the Fed. Who's worried about communication from central banks in general, given what we saw from the Swiss National Bank last week? Who wants to answer that? Gary. I think it's for Larry. Yeah, it's for Larry. I'm going to stay away from the Swiss and just beyond observing that it is a very useful reminder of how much deflationary risks are the main risks that we have to deal with. I think we need to emphasize what I think everyone in this panel is clear on, which is that a strategy of austerity and grudging acceptance of limited monetary accommodation in the hope that that will be a driver of structural reform has proven itself to be substantially counterproductive and is instead bringing radicals to the fore in most of the places where it is being applied. That the situation in Europe is not yet in hand. I agree completely with you that the movements that have taken place in the euro have been desirable. I don't think that any and I agree with Christine that Huey has already had a significant impact. But that's why I'm worried. We've already had a set of positive developments and the economic forecasts are pretty dismal from here. And the kinds of policies we're seeing are already built into those forecasts. So I don't think we should make the mistake of supposing that the situation in Europe is in hand. And I think we, I am for structural reform too, but I just want everybody to think about what I find to be one of the most surprising global economic facts when I look at it because it's quite different from the conventional wisdom. Take men between the ages of 25 and 54. And I choose that group because there's a pretty strong expectation in most societies that they'll all be working. And ask yourself about the non-employment rate of men 25 to 54. In the dynamic, flexible United States, it is several percentage points higher than it is non-employment rate than it is in France, with all of France's many, many rigidities. And that tells us something about the human magnitude of the human capital issues that the United States faces. And it tells me that we can't, and it tells us something about the consequences because the coming of technology is probably more advanced in the United States. And it tells me that we can't be completely serene that if we just have flexibleizing reform, all will be well, which is why I come back to the central importance of demand. And I would suggest that there's a very basic idea that Keynes had that has largely eluded Europe's largest economic power. And that is what Keynes called the fallacy of composition, which I would explain this way. If anybody in this audience stands up, they will see better. If everyone in this audience stands up, no one will see better, and everyone will be less comfortable. If any one country saves more, or any one bank hordes capital, it will strengthen its position. But if all countries save more, there will be less spending, which will mean less income, which will mean less spending, and the situation will not get better. If all banks simultaneously cut back on their lending, the result will be a across-the-board reduction in asset prices. And ironically, they will all end up with less capital, not with more capital, once that works through. And it is the failure to recognize that a one-off model that worked to produce export-led growth for Germany in the early part of the decade, when applied collectively, is like everybody stands up. That leads to an outcome that's worse for everyone. It is the failure of generalization and the error of assuming that a strategy that worked for one once, when applied universally will work, and that is the central error that is driving much of European economic thought. And as long as it continues to drive European economic thought, the prospects for economic success in Europe are going to be very limited. Yeah, and I'd like to get Christine's thought on that. But before, because Larry didn't answer my Swiss National Bank question, are there lessons to be learned from what we saw last week? If you're a central bank around the world and you look at what happened last week, what have you taught you? Well, given that I'm not a central bank, I can speak to that right now. I think it was very difficult for the Swiss Central Bank to actually do any advanced communication. It was actually impossible to do that. Equally, I'm assuming, and I certainly hope that there was at least a teeny tiny bit of communication amongst some central bankers. So that the surprise effect that was needed the day after was tampered by positive feedback from other authorities in the eurozone in particular. Can I come back to Larry? Great, because assuming everything Larry said about standing, sitting, and I was lost as to who was standing, who was sitting, I think there was some reference to Germany at some stage during the course of his conversation. But what I'd like to do is ask, actually, Larry, if what I'm assuming from his hint is correct. And given that we are in a low, low, high, high, what I mean is low inflation, low growth, high unemployment, high debt environment in the euro area. And given the fact that structural reforms are fine, but they take a long time and they deal with the supply side, whereas effectively what we need most is demand. And I would agree with that, although I would insist massively that structural demands are in order and must be conducted, because if they're not, we are going to leave with those issues with a long time. And the fact that you can stimulate demand by either monetary policy, which we just agreed was maybe at the end of its course, or by fiscal expansion. Not many have fiscal space to actually do that. There's one or two countries in the eurozone that can do it, a big one, a couple of very small ones. Do you believe that that will be enough to pull the eurozone out of its current low, low, high, high? I believe that Europe collectively has quite substantial fiscal space. And I believe that a decision to have a common currency taken without a decision to be prepared to use common fiscal space is an irresponsible decision. And I believe, therefore, that having taken a decision to have a common currency, if that currency is not to be a brittle failure, there is no alternative to finding mechanisms to support fiscal expansion on a common basis. I also think there is a failure to think in a fully realistic way about liabilities. You know, when you defer maintenance, when you underfund a pension, you are placing a liability on the future. When you sell a building and you sell a building that you own and you commit to rent it back or to rent a building for the next 30 years, you have not really changed your financial position. You may reduce your measured debt, but you then have an obligation to pay rent for 30 years. So a great deal of what is happening in Europe is what I would call repressed budget deficits in analogy to repressed inflation, where you are, by taking these steps to fetishize measured debt, in fact, placing large burdens on the future and, in fact, upsetting the long-run fiscal arithmetic. And I think there is a failure to appreciate that kinds of borrowing that are unaffordable at traditional interest rates become vastly more affordable at interest rates that are negative in real terms. So no, I do not accept the judgment that there is limited capacity for Europe to engage in enhanced borrowing. There is limited imagination at present about the possible mechanisms through which that could take place. But there is no limit. There is very substantial room. And I believe that without finding ways to mobilize lending and borrowing, and that means through the public sector, and that means through, as Anna emphasizes, finding ways to enable financial institutions to lend more, the money will pile up. But you will not see the desired results to the extent that is necessary. I mean, let me just ask the people on this panel. Is there anyone who believes that even if QE takes place today in a reasonably robust way, that the situation is satisfactorily in hand in Europe and that Europe will have a basis for growth if the growth strategy consists of QE and asking the South to do more structural reform? Is there anyone who believes that that is a sufficient growth strategy for Europe? Or is the question, can we afford not to have QE in Europe? Can I say, I mean, we're all for QE in Europe. We can't afford not to have it. It's necessary, but it's not sufficient. But on the panel, can I say something? So you're saying Europe is less imaginative than the US, that we are slow, and that no, no, no, I'm joking. So I take all the points. I think America is an emerging market in terms of growth and has strong institutions, and that is quite unbeatable. So I'm very positive on the US, but I'm a lot less negative on Europe than most Americans, I would say. And again, allow me to use this example. I know it's us, but we raised $9 billion, and a lot of that came from Americans. And may I say, very smart money. So we see a lot of investment in Europe, and I recognize the challenges. And I think the biggest of all is unemployment and getting the recovery to be broad-based. But I think when we do structural reforms, and I'm very happy that I wasn't the one to bring it up, Christine was the one saying Spain has made deep structural reforms. We're creating 300,000 jobs over the last, I think it's 12 months. Growth has been revised up, two and a half, I think it'd probably be closer to 3%. And I think your point, Larry, is actually very real that we need complementary economies. We do not all do the same. Again, at the micro level, talking to some of my customers, I make loans to companies that create jobs. Spain has a very robust automotive sector. It's actually about 11% of GDP. I'm talking to some of the CEOs of the car companies. They've told me the most productive factories in Europe, and I must say, ex Poland, are in Spain. We have more productive factories of the same company in Spain than in Germany. So, I don't think all is lost. I think we need to do more, but I am actually confident that Europe can make it. And if you allow me one last point is, let's look at the positives. Where were we in the last crisis? Where are we today? How long did it take the US to get the US dollar and the country working together as one? And how long is it taking Europe? It's only been 50 years. So, what I ask the US and everybody who's a skeptic, give us a chance, because we're making progress. We have the SSM, we have mechanisms in Europe we didn't have, we actually are gonna do QE, which a few years ago was quite difficult to see. So, I think we have a lot of work, but I think we're doing, hopefully we'll move a bit faster, but I think we're doing what it takes to get to a real currency union. Christine, do you agree? Is there a difference between actually the way that the Europeans see themselves and the Americans or is it groups of people, the bankers versus the regulators of central banks? I think there is a general expectations and we all make the same mistake to compare the United States economy and the Euro area economy at best and sometimes the European Union. And it's just not the reality except at currency level. So yes, there is a Euro, which is the common currency. There is a monetary policy. There is now much more Euro supervision of the institutions, but is it to say that there is a Euro fiscal policy? No. And I don't think it's that the Europeans are short of imagination. I think they have plenty of it, but they are not yet at the political stage where they can actually have a fiscal policy in place. And I understand Larry's argument. When you look at the Euro area balance sheet, it looks good, it looks a lot better than the US balance sheet for that matter. But it's not bankable, it's not tradable yet because there is no yet a fiscal policy that is common to all. And they are not yet determined to use that balance sheet to go into binge borrowing at low interest rates. So I think it's a question as Anna indicated of process. Massive progress has been made in the last five years thanks to the crisis. I hope personally that it's not going to take another crisis to make yet more progress, but more progress has to be made in terms of fiscal union pursuing to the end of banking union, and we'll see more as to how the QE is structured, whether that confirms that we are moving in that direction. But there is huge potential in this part of the world. But to think of it as one single economic unit, unfortunately it's not yet the case. Right? Just to Larry's point, while fiscal policy will certainly be much more important in the years to come, I think you can't look at fiscal policy in relation without thinking about what is the income that the debt, they have to borrow money in order to have more fiscal stimulus if they're going to have a deficit. They can't let the debt rise relative to the income levels. So that must produce productive income to service the debt. And there are limitations on that. So fiscal policy is not a panacea. It must be used with monetary policy. If monetary policy helps to fund those deficits, that can be allow progress. So monetary policy helping to fund the deficits and monetization in a sense is a path. It is a path to consider. I think in terms of the structural reforms, I'm more optimistic than Larry on structural reforms. I mean, I think Spain has done a wonderful job on structural reforms. I think it's almost a model. Other countries have done Ireland and so on at different places. And if you look at the countries that have grown the fastest in history, they're not the most efficient countries. They're the countries that had big barriers, structural reform barriers, that China's the best examples, a closed economy, where did its growth come from by eliminating barriers? There are plenty of barriers in Europe that stand in the way of efficiency. And I think if those barriers are removed, that there's a lot of potential. I think that European, Southern Europeans are now having to deal with cultural questions, quality of life as they define it, or a vitality. So I would say efficiency is a key element in Europe. I'm sorry, I have to cut you off. We only have literally four minutes. It flew by. I just have, I want 40 seconds from each on who needs to pull their weight more this year. Central Banks, Politicians, Regulators, or Business? Gary, I'll kick off with you. It's hard to separate. At the end of the day, I think business needs to pull their weight. If Europe's gonna grow, business has to grow. I'll make a very quick point. If you look back at the United States and what it got it going, is we had cheap energy, we had low interest rates, and we had a very competitive currency. We used that to create jobs. The question is, can Europe create jobs? And so I'll go to business. Business has to create jobs, but you need the structural reform to be able to create jobs. Look what we did in Silicon Valley and the technology world. How many hundreds of thousands, not millions of jobs we created in the United States over the last five to 10 years? Christine? All. Because I think that they all need to pull their weight. 2015 is a critical year for all the reasons we've discussed, but also because there are big trade deals on the table that need to be wrapped up. There is a big climate deal that is coming up that would certainly fuel anxiety, but also a lot of opportunities. There are development objectives. I mean, those are three key agenda items. And in the world of central bankers, regulators, policy makers, business, all of them have to really rally around those jobs and growth objectives in the context of those big deals. So all of them and hopefully cooperatively as well. I think it's absolutely necessary. We have not talked about geopolitical issues. They all need as well collective support to be eradicated. Larry, is it politicians? All of the above. Central bank is doing its part and is doing as much as the politics will allow. Business leaders like Anna are primed and ready to go. The question is whether there's gonna be the political leadership to put a dynamic framework that's got both demand and supply elements in place for adequate growth. If you only had to choose one, Ray, because then it's not all- I agree with what you said. Which one? All of them are all business. All of them, all of them. But you have to choose one because that makes it so much more exciting. I won't. Anna. So I'm gonna be brave. I'm gonna say that banks are prepared and ready to lend. We are an essential part of the equation. We are the transmitters of monetary policy to the real economy, to businesses and people that wanna buy a home and get a mortgage. I think we need a balanced approach to regulation that takes into account the broader public policy issues that we'll discuss here today. And this is, I guess, one of the things that will fuel much of the debate for this year, right? The role of regulators, certainly with the banks. Yes. All right, thank you so much for joining us. It was a great pleasure. Time really flew by. Thank you.