would take part in the city and that effort but if we can do the job immediately and move forward. we need it. >> absolutely. : >> absent britain's involvement because it will be part of the european union. how do you see that progress developing? >> first of all following up on some of the comments, with such a large popular political

sensation on the banks, the banks have created a very strong cushion of capital. if strong liquidity. we also know that we are in and i'm with the demographic changes are leading to an aging population that needs the support of a pension system. if you look at those conditions it's time to just the sort of structure reforms in europe on the banking system. and addition the credit of our is quite benign right now. look at the global number of defaults during the year, it's up compared to prior years except not as high as 2009. it in the default if you take out oil and gas and oil exploration, the number of defaults is quite low. in europe in particular the defaults this year have been growing at a very low rate. so it's a lot of cash on balance sheets. there's a savings rate which is increased in the personal sector. there's a lot of focus on

banking so the structure reforms that come around this are quite important. capital markets union is one of those that could address the growing, the demographics, et cetera. what are a couple the conditions that would make that the most attractive? you hit on one which is insolvency rules. what are the advantages of the u.s. financial system, maybe not talked about a lot is a chapter seven, chapter 11 structure that allows companies that make you some type of a problem to immediately get a court order to go to restructuring, there's something called dip financing which stands for debtor-in-possession financing where a new money can come into a bankruptcy situation and provide liquidity to ensure that you can maintain the value of its assets as you go through a very fast restructuring. in europe each jurisdiction has their own bankruptcy laws, own insolvency laws. it's difficult to go across borders in multiple jurisdictions to come up with an insolvency regime.

this will be one of the most valuable parts of the capital markets in addressing this. it's a very critical aspect of continuing on with the banking union moving into the capital markets union. taxation and different types of excise taxes is not the one. we have different bond regimes and coupon regimes the end up with different types of taxation or holding arrangements in different markets and also inhibits the capital markets union. generally speaking the capital markets union will provide value because you get a better longer-term risk profile, you can do more infrastructure financing, a lighter more assets liability matching for different types of investors that will address the demographic shift that's going on. so i believe with the banking sector very strong it would be incredibly valuable to shift the focus of the structure and form an especially capital markets

union's. >> i fully agree but i think it falls short of what the real problem of europe is in terms of capital market. we have in mind view in europe to countries to countries that have somewhat of the capital markets what has never been in the european union. that's what children. and the other one is about to leave, which is not hungry, i mean the uk. now, if you take the risk of europe, we have no capital market. and i read the paper of commissioner hill who, by the way, is now leading. he wrote a paper about the european capital market union. it is a very nice paper that it falls completely short of what the real problem is. and that is not insolvency or other regulation. it's company legislation and tax

legislation in europe, is not built for a capital market your we do not entice companies to show profits. we entice our entrepreneurs to high profits, and that is -- hide offered send us up the basis for capital market. we have no capital market issuers in europe and we have no capital market instruments. i happen to sit on the supervisory board of a life insurance company where the committee just decided to increase pressure component because they can't achieve a return anymore from one-1.5%. that's capital market in europe. share ownership in most european countries is practically zero. in my region, people don't want to buy securities because they don't know anything about securities. we live in a cached society. that's why banks have become so incredibly big and important.

we run basically in the region, we run 90% of the business on both sides, on the lending side and on the deposit side. we have no capital market. what we would meet in europe before we could actually start about a capital market, which could probably take 50, 60 years to build, with the politicians who actually say we want capitalism because that's the basis for having a capital market. and we don't have it. do you see mrs. merkel walk up one day? dz president hollande -- i don't see it. it will not happen. it will not happen. not with conservatives. not with socialists. we have no capital market culture in europe. that's why i'm short europe and long u.s.

>> the two countries you just mentioned have been incredibly flirtatious, telling them they have never ever done anything other than love capital markets and banking and financial services, which is reassuring but a surprising statement. when i started in banking whatever it was, 21 years ago, we made most of our money, or we made the vast majority of our money on deposit margins and the maturity margins between borrowing at the short en end of the current lending at the long end of the curve. that's kind of what thanks did, and still do, but there's no money in it anymore, or very, very little. i'm going to ask this to all of my peers in the banking world. lower rates for longer some say kind of forever. how does the banking model work if we don't have deposit margins

and if there isn't a reward for maturity transformation? a double finish, what does that mean for long-term sustainability of financial markets? >> how do you do it? >> something that is a bit of a special -- >> always. [laughter] >> so what do we this morning we need -- it's true because we're 50% europeans, 50% americans, so 50% of our businesses brazil, a bit less mexico, argentina for sugar we still do maturity transformation. as i say sometimes you can invest in something they're, we are a group -- growth opportunity. europe is a big difference of course i think all of us are basically investing in digital trying to but in a more

efficient way our operations. it's going to be a very different model and the question is how do you balance what we need to deliver today with delivering five, six, 10 years now? that is a very hard thing for all of us because i think we know what we need to depict the question is what is the timing and how fast and how do we balance those two goals which is to deliver cash to a doctor our customers also because all want to be deal with us in different ways, anymore convenient way. we are offering mobile and other digital channels to our customers, and how fast we transform so we can be there. that is a big question. we always think about regulation in terms of the prudential site but i think as many aspects that should try to incentivize banks, and i think the point made in europe is it's especially important because banks make a huge difference to customers,

equity growth. so actually finding ways we can transform so they can service these customers and grow faster and create jobs and help create jobs is as important as being safe and sound for our depositors, and being strongly capitalized. those are the two things we need to find. investing, allowing banks to invest for the future more. we are investing. i think it's a crucial part of how we can transform business models. i begin support our customers and the economy. >> i think it's quite easy to kill yourself as a bank or indeed as a life insurance i sit on the board of a life insurance as well, that if interest rates are zero for ever, we might as well pack up. i don't think in a very long-term you can run that way. but in the meantime i think you've got to look at it this is by business.

she's right that in a pure we tell digitalization is going to go faster than we think. i think we are all going to have to find ways of cutting costs out faster than we think. i think the weight anything like maybe bank branches, all the things, they are straightforward but i think the clock is speeding up in that area and we're going to have to respond very rapidly indeed. you have a slightly different answer if you look at private banking. i think that we could add more value to our private banking customers. i think that their are more complex financial needs and i think -- i think banks left upgrade offering and every. in the small business market is a bit different. hear i think she was alluding to this briefly but i think it is will implant the banks with a good understanding of local markets and local businesses. there is i think still a very good sustainable business model there.

i think it's going to be different because it will be more responding to rapid growing companies creating environment of which entrepreneurs can flourish with the assistance of the bank, all those things a very crucial. i do believe in the small business market there is quite a defensible business model which doesn't go which is because of lower interest rates. in pure retail it's tough but there is a defensive mortgage market. i suspect the rest of it will have to be very digital and much, much cheaper. >> well, of course i agree. it's a key challenge for all of us. now, one of us, we don't have the same business model and i think it has a lot to do with the way we grow activities from a geographical point of view, from a business line point of view. the impacts of negative interest rate is not the same, business by business.

the way we try depends a lot on the business model. we try to grow what we call an integrated business model, providing various services, not depending only on the level of rate. of course, practice you another question which is the level of fees, and how to charge the surface, the cost of the service, which is a difficult question but there will be changes. and then to address the question you have to cost at some point, digital will move forward quickly. it's a difficult question. it is both costly, rather uncertain yet. we don't know where it goes do and it is very costly. the winners will be the ones who are able to mix the best of the two world, the best of the digital world but also the best

of the capacity of bankers to advise, to engage, to interact with client. this is a big challenge. we can do it. in your presentation yet given the view that 20 years ago bankers were lazy, getting cash and waiting for long-term lending and simply doing nothing. bankers are not lazy. we can adapt. >> i didn't say every banker was lazy. i obviously wasn't talking about branch bankers. [laughter] >> i admire you because you're so positive. >> i know you're going to be negative. >> i believe right may be in the

top segment, the top investment banks and top private banks we will have more time actually to offer advisory. so people will be more important for a longer time than for mass-market. that's correct. but i don't think it's going to last a lot longer. i am absolutely convinced that basically everything that we do in banking will be replaced by an algorithm up one point in time. so i think our ability to actually decide and actually assume risk will be taken away from us in the long run. and in that sense, my view is that regulation and digitization basically work hand in hand.

regulators want to put our lending business in an algorithm. i do not believe the ecb they tell us that credit is just to -- maybe they still believe it but once they have it come once they have all the information about any loan that has been handed out in europe that an amount of more than 25,000 euros, they will make use of it. and we have to beware the fact that regulators basically are convinced that bankers are not able to take risk, and that we just screw it up and that we should never be put into a situation that we will ever do it again. so we are giving out information to the regulators. they will put it in algorithm and then they will one point in time say yes, now, or you need more collateral, you need more security, or whatever. that makes it even easier for

digital providers to step in. i'm absolutely positive on banking. i believe there will be banks in the future. whether we call the banks for whatever i don't know. whether we will have branches, i don't know. whether we have people, i don't know. i believe we will have robots mostly. but our from what we see presently, they are cheaper. we are testing virtual bodies in the czech republic. the very last they don't drink beer and they work perfectly. they work perfectly well. i think it's just, we are not anticipating how fast that is going to happen. we are preparing ourselves. we have about 45,000 employees in our group. we are preparing ourselves for the time when we have 3000. it's not going to be in 50 years from now. it's going to be a lot sooner.

and i don't believe that regulators do it intentionally. it just so happens. and also agree that it's maybe better to be in private banking, but what really hurts us is inclusion. those people who do not have access to banking, those people who are too poor to be accepted by a bank, those people were have to go and say you don't have any collateral, even if in the capital, you have nothing but i want to help you. that is the only form of banking that cannot be replaced by an algorithm. and that is a huge problem that is going to come upon us. >> i have a great example for that. we have a great microcredit program in brazil where we held 250,000 people. 10 years ago we had a lady -- i

told this are at the dinner yesterday but i think it's worth repeating. exactly your point. she had been abandoned by her husband. she had 60,000 u.s. dollars in debt. this is in são paulo. every algorithm that apply to her would have said nothing. we had a relationship manager in são paulo decade or $250 in a loan. 10 years later, she has now three stores employing her daughter and two sisters, and the latest we did was $10,000 per this is the type of the problem with algorithms and robots. that's not going to maybe robots yes, but i do know. you need a personal relationship to action to foster financial cushion. i think it has to be combined with people and understanding specific situations which is very hard to understand through numbers. >> algorithms don't take you out to lunch. [laughter] selling point for clients.

>> one of the challenges we will all have is there are people out there who are better able to understand how these algorithms because that's their business. we are a large bank. we have something over 50 million customers, the largest bank in the world probably is 140 million customers, and financial part of ali baba has 400 million customers today, expected 500 on customers by the end of the with and i'm sure we'll be at a billion if w we know where they are because they're about to go from china to india. without the legacy of the structures and assets it's going to be an interesting place. so from a ratings perspective and analysis, your optimistic about our ability to cope with it? >> there's a couple of to look at this. one way to potentially look at not the long-term future for the next few years is to go to japan, which is that a banking system has been under stress for many years. they have large banks, not very

profitable. they are simple. they take deposits. but there's also fragmentation around them. this is the about fragmentation right now is one that not only talk about national borders from issues in the united states where the regulators are requiring capitalize subsidiaries, holding company structures. you have this balkanization around the globe of which goes against the full having global banks and information flow. we will have to watch that trend. is another trend which we haven't talked about and i haven't purchased from longtime which is shadow banking. let's talk about the disintermediation that's taking place in the financial services sector where the risk-taking might leave the banks to its in hedge funds, private i.t., private wealth funds, family offices and it's not be done on the bank balance sheets anymore. this is one of the consequences of what we talked a early which

is capital markets you need to do more liquid and transformative type instrument you get, the more you get a shadow banking market which i don't necessary think is bad. it provides the ability spread risk and the different types of players. so that's another element of the financial markets going forward. technology, algorithms, this will be another one that's going to transform banking. i think we are at a point where today when we rate financial institutions, we look at the national market, the regulatory front, capital liquidity, business models, et cetera and we're having to also adapt our own ratings models after own analysis on the banking sector as these models change. so might you would be consistent that the banking world is going to change dramatically no matter what we try to do with regulation government will try to do to hold on to old business model that is ugly enough. the changes coming. if you look at something like disrupted companies that don't really care about regulation, they've been disrupted all kinds

of industries and they go in first, they don't really worry about what the regulations are the they started the whole industry and to become so popular that you have this issue they are guitar environment. i would not be surprised if we start seeing that in payments, and consumer lending company equivalencies of credit cards and other types of businesses that are could be driven by algorithms. shape of the world of banking system is going to change. one aspect for the bankers in this room, which is probably using the japanese model, competition will probably come down. if you want to have the ability and is want of the ability to make some sort of a shareholder return and have a book value that's price-to-book not that is at least some were better than we are now coming out to have lower expense ratios, have to find ways to continue to return capital. i think the shape of the bank industry is going to change speed and let me come back to

one point because this is come up and up that come from the floor. i agree with you, uber is the best example of a company that is so in demand and supply to its customers so it's difficult to regulate it. but avoiding regulation or dismissing regulations has turned out for many of us to be an expensive. so how do you, from your perspective, whether it's the fact companies destined to be a very small amount of tax around the world our countries have you in a particular that attracts attention, how do you that in the way you look at risk when you do your ratings for these unpredictable and unquantifiable charges that appear that are surprising? >> so we would have models way we look at accommodation of contingencies that are either known or being discussed. so we have to look at a contingent liability as part of

the overall equation of the capitalization of the debt ratios of a bank of any type of corporation to register with what is the known and then have to estimate which at the time space of the bank's own model what are they using as their own operational risk calculations. as you know when you look at, i've been looking at some banks, capitalization as well as their book values and you try to forget what is there such a discount in a book value. i do sometimes it has to do with the profitability. sometimes perceptions that there is something wrong with the value of the loans or assets on the balance sheet. some sort of a market versus a bank difference in the valley and in a very third import what is operational risk which banks are accident prone. which once believed in which once of the market believe have

been issues or issues have not been resolved. the more that those issues are known for their not to mention, sometimes the greater the answer to becomes which is reflected in the discount to book for the market price. in the rating agency we will consider that factors but to a much deeper analysis on it. >> may i ask a question quite don't you think you will be replaced by an algorithm pretty soon? [laughter] >> we are doing it to ourselves. >> a superb question which is what why would anybody want to run a bank? let me try and end on a more positive note and going to go along the panel which is notwithstanding everything that we talked about, all of us are working on ways to find growth and improved profitability. going to go along the panelists

and say where to put in the incremental capital. what are we doing to provide business model? one of the questions, when you talk about europe are you just talking about the traditional european union plus the uk as it will become our what about eastern europe and russia and turkey and all these things? you are well qualified to talk about that. from her own perspective, we set up for a couple years, the estimates of gains in southern china, fast-growing technology hub of china is growing very fast. gdp per capita dramatically. i think it's going to be a region half the size of europe that will generate a huge amount of opportunity is in our heartland. so that's we see the growth. we look at the opportunities around the world in asia and particularly in southern china so don't get too pessimistic about the future.

it's because of the benefits of diversification and geography. >> you are similar but different places. >> we actually are confident we can grow and almost all our core country. latin america we are the number one bank in latin america and that is mexico, brazil, argentina, chile. that is 360 million people. we are going on lending and investing in mexico a double-digit. argentina seems like finally. i know this is always a question mark and i can take confidence by think it's going to do quite well. so loans to gdp in argentina is 13%. we do not lend money, going to your ratings. so when people look at us and say brazil, last at what was asking us about brazil. we made 1 billion net and 14% are obese in brazil this year because these are very transactional economies with

services other than that but at some point these countries are going to bore. opportunity to grow in latin america is huge and we are investing. we have grown our loans by double digits this year. but if you look at europe and begin i am quite confident europe is going to do better. that is political risk by me that is a time when we need to that encouraged its that when things are better at i think there is uncertainty but look at spain. spain is growing for two years in a row at 3%, creating jobs. people are doing better. there's a lot more we can do and we have a lot of people out of work or poland which is now the one of our countries. so i think europe has a bright spot and i think the nordic countries, germany, face of capacity to go in terms of consumption as we know. so there are things that can give growth in europe.

i believe the rate scenario might change sooner rather than later. but in our case clearly that american we are investing. north america we are investing also. our bank and east coast of the u.s., our commercial lending is run by 10% this year. so america's growing faster but also think europe can grow. low energy prices, low interest rates, this is good for many people. people are paying less than the mortgage. they can spend a bit more. you can look at the negatives but i think europe has positives. we have made a lot of reforms in certain countries and i hope we will see more in others so this can't continue to end a difference will be the high-growth country next year. >> based on one of the greatest talent pools in the world, scotland. >> incremental capital. you must explain to me over coffee.

we decided to be a larger domestic, british isles biggest bank, and i won't go through the strategic story that's let us do that but that's where we are. so within the ideas we would see two or three areas of particular growth. we think that the whole digital agenda, that requires further investment. it costs you money to get or improperly in that. our approach to nurturing entrepreneurs is something we think there's a lot -- with the largest business but in the uk. we think that it makes a lot of sense for us and, of course, in private banking. we've got to get going to do more and i didn't things with her money. >> jean? >> you understood, europe, we are investing in europe. eurozone is good.

big exporters. they need banking services. the french, the italians, the belgians, the germans understand this is a fantastic market where to be. it's a very unique market. and once more they need a lot of banking services, and cross-border. i do insist on this. traditional bank is not only lending, it's about transactions. this is a great, great business, and companies need them. so cas cash management, all of s will. you can't do it only if you have not only your been franchised by the global franchise. we do not see the future as we see a eurozone-based bank but with the global franchise. capacity to deliver and serve clients in the world. that's the reason why into two

regions which are extremely important for us, the united states, we work a lot in the united states. we are investing, creating a holding company, all of this, regulations of course rtm we are moving forward on the united states and asia. beige is important, i a great spent last word. >> i must answer with ana. i use it for europe. you said your great episode from in argentina and mexico but you never said your great in latin america. >> i did say where the number one bank in latin america spewing but you never that latin america is greater you say brazil is doing well, argentina simple and so on. europe is not doing well but we have double-digit growth in the czech republic are double-digit growth in slovakia. double-digit growth and many of our countries, long growth. is booming. so that a very good countries in europe, but as europe is not really working extremely well.

i believe in many european countries. i have my doubts about europe over all. >> i will end on a high note as well as reflecting on your rather interesting idea of political reform. can you join in thanking what's been an excellent panel? thank you. [applause] ♪ ♪ ♪

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♪ >> all right everyone. we will get ready to get started on our necks very exciting session so if you're talking in the aisles, if you could take seats ortega conversations to the foyer we would appreciate it. also if there are seats in the middle that people want to get to who are coming in we should have a full house for stanley fischer simply to make the seats available and make sure anybody who wants a seat can get one.

certainly appreciate that. we are delighted our next panel is could join us, stanley fischer of course is the vice chair of the federal reserve come as a greater conversation with tim adams people would bring them on stage we have another poll in question. this is sort of the critical question facing us other than the election. what's going to happen with the fed. where the employment report this morning that was golden locks not too hot, not too cool. grab your mobile devices and we have a simple question. do you think the fed will hike before the end of the year? which with in the december meeting presumably that could raise interest rates a few days before the presidential election though they will not tell us that. yes or no, that hike by the end of the year? we are at 62.5 -- 60 on yes, 40 on now. that sort of the wall street consensus that december is pretty likely given where wages are. you don't need it for me on that

the uk from stanley fischer and social let me please welcome to the stage again tim adams and stan fischer. [applause] >> great. thank you very much your it's a real pleasure to have with me today a dear friend, someone who i've admired and followed for me professional career who is do a little bit of everything, and who is probably trained more economists and industry leaders than just about anyone else. it's been a real pleasure to vice chairman of the federal reserve stan fischer with us here today. he is probably forgotten more about economics than i will ever know. thank you very much for coming here today. been described in numbers we saw, the jobs numbers, wages and such as goldilocks. isn't goldilocks?

>> it's pretty close. we think of the range in which the market is producing enough jobs to keep unemployment from rising at a fixed participation rate. what it did today the participation rate went up, the unemployment rate went up. those two things are fine, means employment was going at a rate that is fully consistent with keeping unemployment declining, somewhat further. >> and wages starting to pick up the? >> the wage changed 2.6% is closer to prevent it is to to. i have a friend who said when asked the old he is he says i am closer to 60 then to 50. [laughter] >> we will go with that.

how to see the economy generally? just generalized. >> the problem in the economy is the difference between the remarkable success of policy in reducing unemployment. this is almost global actually. and the very low rate of growth of gdp. unemployment is somewhere very close to the natural rate. i think we are close to full employment. and growth isn't. isn't close to what we used to think of as normal. and it's two things. it's the rate of growth of productivity post the very low rate of investment. there are obviously connected. that part of the story is less pleasing, and that's what is worrying people, and that is

what has consequences for the long run and for the short run. for the long run i think we should think that the standard of living of our children would be about double of that of hours. that's not the situation now. we are not growing that fast. with ichat negative productivity growth for the last three quarters which is possible. it's not that you forget how to produce things. it just means the move -- but the story is one which was very important to change. it will change at some point because we are not going to go with negative productivity growth forever, even for very long. but precisely what they will go back to is not clear. there are a lot of estimates of about 125% per annum -- 1.5% per

and. used to be over too. i learned many things we pursue many of you here have heard of, herbert stein county is to be richard nixon's chairman of the council of economic advisers always used to say the difference between a growth rate of 1% and 2% is 100%. that is absolutely true. if you look over 30 years, you double the 2%, and you don't double up 1%, you would be about half after about 35 years of where would you be if you were growing at 2%. so these have very important consequences for the long run, these low numbers, everybody is trying to find out what's going on. >> you gave a speech yesterday which i scored to read last night he goes at it now you're getting it but you talk about the long-term interest rate, cyclical versus structural. and get we've had this

discussion about productivity and the weakness of investment. investment just hasn't shown up in this recovery. u.s. corporation say unto trillion trillion dollars worth of cash, ordering truly are not arrested and capital expansion. why do you think investment has been so weak? why is it the missing ingredie ingredient? >> part of it come investment was hired before the oil price started falling. indeterminate the decline in the price of oil, which not coincidentally is essentially to a level below which investment in production of shale is marginal. and, therefore, the production of the capital goods needed to expand production, this appears. 's we lost a lot of investment through the decline in shale production in the price of oil. but over and above that you've got a lot sitting on a lot of

cash infusion from said uncashed in the united states. and as a sort of air of uncertainty about the situation that a thing is not encouraging of investment. if you were a teensy and you would say animal spirits on them. -- teen seek and. people are not excited about growth prospects. that is something do with productivity and with conventions. and you know when you're getting pessimistic about conventions, they do look what happened to the nobel prize today's in a row. one day people get the prize for learning how, the properties of matter very close to zero, absolute zero temperature. the next day they get a prize for being able to design machines that work at the molecular level. somewhere, 25 years from now, will be aware of these nobel prizes begin.

but what it will take to generate from than an actual production as still to be invented that we don't know at what rate that will happen. there's a very interesting result that has come out of the oecd, look at the diffusion of technology. it turns out that the rate, growth of productivity of the leading firms in an industry has not declined relative to the pre-recession levels. it's the same. the diffusion is way down. and so it's not spreading into the industry. what exactly is happening? you don't know what it is in spreading. it can't be that the cost of investing is expensive. it's close to zero, in terms of financial costs. so something has turned conference on come and

confidence has to be turned on to get people to want to invest. so we are waiting to see that happen. it will happen at some point, but precisely when matters. >> further digital tv in certain sectors. we've done our work that shows those sectors that are most i guess exposed to trade tend to be more productive as well. nontradable sector, housing, health care, education are those sectors which are huge part of the economy. we've seen very little or no productivity. i know trade is not invoked anymore and doublespeak to that in a moment but it really is about openness. the winds have changed that forces companies to innovate and invest. >> and that's also the difference between this service sector and manufacturing sector. productivity growth has been are in the manufacturing sector. that's what you're looking for it but it's a sector that is

declining in size. not in size of output but in size of employment. that's where the fortitude to growth has been very high. >> have there been policies or policy missteps are positive policies that have exacerbated the investment problem we have? >> well, certainly if you talk to businessmen that's what you hear. but the problem with it is there hasn't been a change in the level of complaints about excessive regulation since before the crisis, and what we have now. so i don't know to what extent that's true but i am impressed by how much you hear about it. its service something that at some point some serious, somebody was serious about growth is going to have to go through the regulatory framework and figure out how to change it. i'm attracted, i'm sure many of

you have read famous works now former, i mean late economist who try to find out why it is that after world war ii the countries that were defeated grew faster than the countries that won the war. and his conclusion was that every healthy country with a democracy gets a lot of cobwebs on it in the course of time, political compromises are made, and those compromises tend not to go away because you have to buy off these people in the political process. and what a good if he does is it wipes all that stuff away didn't you can start again. that may not be what we should be looking for. but it is certainly true that

there is something like that hanging around in the western economies, which have been here for a very long time, growing for a very long period without much civil strife. and there could be something to that. but what it takes is not a war but a political change. >> there are other forces at work in the. in nature, much more digital service oriented, demographics republicans going much older. one of the challenges among the emerging markets is there been socializing and growing older and for that the human capital that is about to compete with respect to service and the digitized economy. but some of the story, the absence of productivity come is because the structural change? are we still stuck any 20th century mindset of widgets and production when, in fact, he really is about platforms and turn 11 and other kinds of service providers?

>> -- uber. it may be but the point about all that is we should be, there's so much going on that relates to productivity in the service sector which comes out of the i.t. revolution. and there are some industries that simply couldn't operate. the airline industry couldn't

operate without the computer systems which enable them to run many more flights without many more people. and the same thing in the medical system, all over the place. it's there but it never shows up in the data. some of that has to do with the fact that some of the output isn't measured. i think marty has been heard to say that the output of google, the output of facebook doesn't show up in the gdp data. and there are a lot of people who argue that consumer surplus which is what is at the consumer gets out of the economy hasn't that continue to grow at roughly the rate it had before. it's just a non-measured parts of gdp have been growing. i don't think it's been established but it's a possibility that you could see. i think of something to do with the structure of the economy. particularly the growing role of services that could be responsible for this. .. problem and cannot account for

the decline that we see. >> robert gordon has written a tone, someone may describe it as the weight of a small dog. you said it was a miraculous century, 1870 to 1970 and 70 and all the great inventions have occurred. that we have our friend at mit that let us know we are on the cusp of something great. who has the story right? >> rob solow is at mit who said in the early 1990s the computer revolution is everywhere except in the gdp data. too dashed two years later showed up magnificently for about ten years. i go with mcafee because i'm also from mit we have to stick

together. what they really said is all the great employment creating technology improvements were invented. he is talking about simple things like flush toilets, electricity, transportation, cars, planes. >> i agree, some of those things are were late in life. >> i grew up with less of those things and you did and what was northern rhodesia. we didn't have that stuff either, but you can surmount it. >> these changes that have been profound, that robert gordon talked about and andy have had an impact on the labor force and certainly political discourse which are not going to get into. the hollowing out of certain jobs, certain sectors of the

economy, more exposed to being competed away because of technology, how do you think about the changes that are going on in the workforce as you make monetary policy? >> as we make monetary policy, the truth is we look mainly at the macro data. we go into the details of who's unemployed to see if there is something in monetary policy that is affecting the distribution on employment which usually we don't think we have a precise tool to get it to be this group or that group. i think about it as we have a workforce that comes equipped with a certain education. if you're 50 years old you have trouble operating your computer and it's kind of irritated when your grandchildren show up with no knowledge of computers and fix a problem that you have on your machine. they just have a different system and there had already we don't have that.

at least you may have it but i don't. we have a workforce which the people are very upset, older people and modern technology is different and they didn't learn it and we think it's affecting them more than it's affecting young people. is that something we can deal with? there are retraining programs. a colleague of mine went somewhere in philadelphia to a retraining program and was very impressed that a lot of these people came out with some other skills which enabled them to work. it can be done. how are going to get invested in that area other than true markets, how the government will

get into this is a matter that we hope happens and we will see if it does happen. >> there's a new book out called the 100 your life that based on their numbers, my children in their early teens will live to be 105. they will work until their mid-80s. if you think about the pace of technological change, the idea of having a single career is obsolete. you will probably have three or four distinct careers. the where we think about education, pension, savings has to change radically. >> it has to and sometimes politically difficult. just a little example. in israel they raised the retirement age. for men they raised it immediately and for women it would be implemented three years after. there was going to be a separate vote on it. between the time they passed the

law to have the vote, the women mobilized and this is a law which is important from the viewpoint of budget. i called the finance minister after the vote and i said how did it go. he said while there was one vote for raising the retirement age and it was mine. people don't like it very much but it's going to have to happen >> we have no choice. the current system doesn't work. >> right. >> i want to touch back on the part of the political discourse. the hope portion of the population that feels like this miraculous set, we've seen remarkable growth and we've seen a reduction in equality between countries even though we've seen some equality within countries. globally 1 billion people have been lifted out of poverty, we've had the ranks of the

middle class rise 100 million the last 20 years have been pretty were remarkable but there are people who feel like they haven't been a part of that. what we feel -- what do we do about that? >> it can be explained simply through a peculiar set of facts which is while in equality has typically increased in most countries, global inequality has declined. if you lined up all the people in the world, because you've moved 1 billion chinese in several million indians from the bottom to the middle, the distribution of income in the world is more equal than it used to be, but each country has a problem and the politics run in each country. people don't take great satisfaction.

that problem is out there and we have to deal with it at the national level and that deals with our educational system. it deals with education for those then those things had to be taken seriously and look at what the scandinavian do. they have to look at whether our society is willing to do that and we need to see if we can do that and then try to do it. >> i agree. >> to get back to regulation and loop in one of the questions if regulation is a potential inhibitor to growth, should we do a better job of measuring its impact and correlated to that is have we done enough.

seven years after the crisis, this morning, do we have enough regulation with respect to the financial structure and should we be thinking about measuring the impact across all structures? >> there's a lot of desire to have cost-benefit analysis of every regulatory measure. nothing can happen in court unless benefit analysis turns out to be positive. the trouble is the analyses are very imprecise and if you started on that, what you would end out and that's a way of getting growth but not productivity growth. you need to do it on big things and you need to make the argument, whether it has to be, you have to argue what it is you think you're doing by increasing

regulation. on the financial side, i'm pretty sure the big goals of the reform regulation that took place in dodd frank have been achieved in certain areas, the banking sector we do not have mechanisms for dealing with the banking system. that is something that has to be looked at again. >> are there particular aspects that you find more interesting? maybe your not worried. i want to focus on why and what about it makes you want to focus on. >> it simply that we don't have,

we don't have a whole lot of information about what's going on in various sectors which are very active in the shadow banking system. we also have, in the united states relatively few tools for dealing with this. you listen to people saying we've got bank regulation, that's okay, and if it isn't banking, we have interest rates to deal with banks and regulations and for the rest we will use credentials to deal with them. those measures are not interest measures to deal with problems of the financial sector. we have relatively few measures in the united states. the united states have a lot of them periods and aliens have even more. if you're a good regulator you can use those things. we can't. i can't say we can't, we do have some measures, is not hopeless,

but we have much less. i can't say that i am frightened about a particular thing. you can always point to things that happened in the past. we worried about leverage lending. it made a lot of noise about it, we spoke to the tanks involved in part the chain in those loans and the level went down and that doesn't sound very great at the moment. a regulator can do a lot. i'm very worried when people asked me, have we solved the too big to fail problem. my view on that is regulator or intelligence agency never knows whether assault a particular problem. if they tell you we have solved the too big to fail problem, you should dismiss them and get somebody else who actually understand that you are in the

battle to understand what's going on around you and that one of the things you have to keep asking yourself is what will i do if there is an accident and how do i build up defenses against getting into a problem of which we never thought and as a regulator, i used to spend most of my time wandering around, convinced that while i was looking here and there for a problem, there was one coming from over there somewhere that was about to hit us. it was like the great financial crisis of the united states. you've got to be watching on that. i don't know precisely what we can do to make this all better. i've think we've done a lot to

make it better. >> you mention too big to fail, i must say, i don't understand, it seems like breaking up the bank is everyone solution. i'm sure some congressmen will say we need a break for the hurricane. it seems to be the constant refrain. the first crisis i worked on was the s and l crisis but i was in the white house as a young staff 400 institutions one editor, we had the recession and they come from places we didn't think about, washington mutual is an s&l. then we spend a lot of time thinking about these large institutions, they have a $5 billion dollar worth of equity capital. do you worry about those kind of

metrics? >> you have to look at them, that's the first line of defense you have to make sure they have the ability to withstand adverse effects. the banks just like the large amount of work that is involved. you've got a system and you have to test it. those tests are pretty serious on the whole, a desirable development. >> we are now five straight years of sub 3% growth. trade has grown faster than

mobile gdp now growing at about half the rate. what is going on in global economy and how do you think about growth going forward? >> what i think is the nature of growth matters and i'll give you an example by what i mean by that. in the 1990s, during the asian crisis, if if you wandered around the countries bordering china, they all were concerned that they were going to be out produced, outcompeted by china. it was growing too fast. they said would you rather have a neighbor who is prosperous or a neighbor who is poor to trade with. that sort of shifted the debate a little bit. i thought what mattered was the size. i think what they're buying

matters a great deal well. they are still growing at a phenomenally fast rate by historical standards, whether at 6% or 7%, those are superb growth rates but their impact on trade has, on the economy's use of trade, has gone down. i reach a conclusion that actually, because a lot of the trade was in goods, including raw materials, it was a useful investment and it was the rate of trade that matter just as much of the growth weight of the economy as a whole. that's where you see the transmission of trade. it went from ten down to six.

you look at the west coast of africa and the east coast of latin america, they have all gone down phenomenally because of what happened in china. it's not the only thing that happened, but to go from a situation where, when i was in in the imf and you are in the administration, you had left already, we used to think that trade grew it twice the rate of the world economy. we now see that it is growing at the wrote rate of the world economy. that's a huge difference. it's related to the nature of chinese growth. it's also related to the nature production and their outsourcing list as we are outsourcing as well. level of trade has gone down. i don't think the importance of

trade as a growth machine has gone down and what worries me about the anti-globalization is the the view that globalization is useless, we ought to go back to worrying about ourselves. you worry about yourself and you start shutting yourself off from global growth and global markets there are very few countries which have succeeded in growing rapidly at a sustained period. without integrating into the global economy, that's the great fear that i have of what's going on politically all over the world at the moment. >> i completely agree and i will offer some thoughts on that in just a few minutes. i was in johannesburg last weekend. we had our summit and the number one question was about our outlook on china and if you were on the west coast for angola or nigeria, it was all about

commodity pricing. interestingly interestingly east africa seem to be doing a little bit better. >> i wasn't aware of that. >> i'm trying to bring some good news. >> thank you. >> the other issue, which we have been discussing and we touched on it this week, the level of indebtedness, if you look at the sector, the corporate sector, just about anywhere in the world, advanced economies, emerging economies, we have seen the economies leveraged out. our numbers are a lot higher because we've filled in the financial sector. and in inevitably we've seen the trend of indebtedness. how do you think about it, do you worry about the amount of debt that is growing and our capacity to service that debt? >> two parts to the answer, in terms of capacity, the debt service has not gone up anything like the amount that has gone up

because interest rates are very, very low. the interest which is a servicing burden has not risen anywhere like the numbers that have doubled and so forth. interest rates are very low and i don't think i'm revealing any secrets if i say that one member of the federal reserve board things that interest rates will be higher than they are today. that won't make it difference. these things are big. in that. you would expand your government finance or firms would expand their investment and then the economy would grow.

because growth is no longer the particularly story, it doesn't doesn't fill you with joy because parts the mechanism that was involved in it have broken down. >> as you say in your policymaking job, how important is the global environment, these international issues to you, obviously we live in an integrated global economy sector , how do you take into consideration the global environment. >> if you take a look at said statement of policy, you will realize that they entered those statements very rarely until recently. the external world was described in the most general terms. it didn't relate to china and

the european union, et cetera. it was externally, the economy, blah blah but it didn't go into details because they didn't matter very much. now we write about what's happening and chinese events have an impact on us. it's very interesting historical fact, the end end of world war ii, the united states economy accounted for half of world gdp. this is truly astounding numbers it now accounts for about 23% of world gdp. i don't think the importance of the united states economy and the world economy has declined as much as 50 - 23 and i think it's the role of the capital market. there were no market flows of capital at the end of world war ii. it is massive now. what we do affect the whole world.

if we didn't know that before, whatever we do and meet with foreigners, they tell me i've got a relative in south africa that says can you explain to me what you guys do sitting in an office in washington and why it has such a big influence on us. i tried, i'm not sure i succeeded. that influence is very big and it depends on what's happening on the other side of our monetary policy. we take it only think about it. in the end, we go back to the law and the law is that we take into account, our policies are aimed at the united states economy. sometimes that means we have to take account of what happens abroad as a result of our policies because what happens abroad affects the output and

the input of our policies. we do take those things into account. we don't systematically say it's good for the world if the world grows faster and it's your job and the fed to help the world grow faster. that is illegal in the united states terminology and we do not do it. we do take care of what happens in foreign economies. >> we have had a number of bankers on stage all morning long and one said global investment was way down by fear, collective confidence and political risk. the qualitative aspects of challenges in a global economy, how do you bring that in to the way in which you think about trajectory policy? >> you can say you've got a model which tells you what's happening abroad and how that affects the u.s. economy. if you think something, if you

think those have changed, there are crude ways of going into the equation for those countries and saying what their reaction for the united states is. they are called fudge factors and more eloquently they are called special conditions. you can do that. you get an idea. you get a precise idea, no. does anyone have a precise idea? no. you can take those things into account and you will know which way they will affect you and which way they will affect the decision you will make. >> this will be the last question. last night we had reception focused on artificial intelligence and augmented intelligence. we had eight or nine young smart computer scientist who basically set i'm going to be replaced by a computer and robot very soon.

i get that. i have john taylor on the stage and he says may be monetary policy should be rules base. he has a rule of nine. how do you think about going back to more rules base versus discretion. have we gone too far discretion and will we be at a time where computers are basically going to run monetary policy? >> you have no idea how much computer time we use for the average, we get a book full of computer simulations and so forth telling us what will happen if we do a or b or c or d. it is really there. as to rules, i believe the taylor rule is a useful description and other banks over lengthy periods. we do look at what the taylor

rule would say. we not only do that but we have a tailor, if you do this, you get that, and so forth. in forth. in the end, we preserve the freedom not to follow any of those rules exactly. they are describing average conditions. we are in very special conditions still and you make adjustments. it's not that you ignore them. discretion always sounds like it's ad hoc. it's anything but ad hoc. the reason is it right the statement "after words" and explain why you did what you did that's really important, that is part of her rule of writing. i don't think we are at a stage

where we could use it rule permanently. every rule that's ever used for monetary policy is broken down, the gold standard to fix exchange rate and money targets and so forth. there is a famous statement, we didn't give up on monetary targeting. money gave up on us. the world changes and there are laws that say otherwise. >> i sleep better knowing you are making decisions at the fed. ladies and gentlemen, stan fisher. [applause]

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♪ ♪ ♪ [inaudible conversation] ladies and gentlemen, please welcome tim adams, president and chief operating officer at the institute of finance.

>> thank you. i hope you enjoy the conversation with the vice chairman. he's an old friend of mine and it's good to take conversations bring them on the stage. the two previous panels we had this morning were quite good. it's a really exciting and interesting people that i get the deal with on a regular basis i'm going to bring douglas flynt out. i will bring him out in 15 minutes or so. i wanted to use the prerogative they have offered with some personal reflections in a time in which there is such great uncertainty and turmoil. first i want talk about the challenges on the financial landscape. much of this, was discussed

earlier today, but i will replicate what i said earlier. growth is a concern, central bank, bank, no matter where you go around the world, central banks are running pretty close to their limit as far as what they can do and there is diminishing concerns with policies in place. we talk a little bit about that according to a manpower survey. their increasing lead difficult to fill position. 34% of firms surveyed have a tough time bringing talented, qualified individuals to a job and that may be part of the politic story. let's talk about my edge of worry and that's where we see debt relative to gdp continue to rise at a 40-degree angle. it is an even rating and there is a downward trajectory in the opposite direction which is productivity, marginal official see and return on investment.

those trendlines are now substantial. it reminds me of 2004, 2005 where housing prices continue to go up. eventually you have to have a band or raise productivity. remember, bending the curve on liability is someone else's asset which means they have to be adjusted as well-paid the real issue we are confronting is populism. we have seen a surge of it. it's anti- trade, anti-immigration, anti- globalization, anti-, one thing since the 1950 or the 1980s the other party thinks it's the 1930s and 1960s but and the 1960s but there is the sense that there was this wonderful great time we lived in, this harmonic sense of abundance and we just have to go back to that. for those of us who are committed to free trade and open

markets, it's been an incredibly difficult year. i've been out trying to make the case and for all those forces that have had a profound impact on our life. i started with a young constituency because they are much more can -- i started with the three children my own own home. they said that we want to go to disneyland and i said that's great i'll take you to california. never mentioned disneyland in the offer. i want to do something about globalization. they said what's globalization. they say i said let's go and you'll know by the end of the trip are the first stop was the golden gate bridge. the story of the bridge itself is really remarkable. it is about globalization. those who worked on the bridge

were newly arrived immigrants of 1905, 1919, three of the top engineers were born in europe, ireland and switzerland and the chief engineer was the son of a german immigrant. there was a great book by author schwartz who looks at the world history and a large percentage were newly arrived immigrants. they tell great stories about getting off the vote and going to work as steelworkers on the bridge. the key financier was the son of italian immigrants who founded a small bank in san francisco, targeted at the areas immigrant working-class population and the bank was so successful that they actually purchased an even larger bank. that bank was the bank of america. that became one of the great banks and is still today.

when funding dried up for the bridge in the 1930s because of the depression, they wrote a check in support of the completion of the golden gate bridge. he single handedly financed it, the son of italian immigrants. also, the california industry of wine, the next time you're sipping, you should thank them and later made the first one at hewlett packard. he is one of the beginning geniuses behind running the tech sector. more important today, 35 years five years later after the bill, he still stands the bridge is a great icon of the 20th century of globalization. does anyone know what the color of the gold great bridge is?

international orange. we need more bridges not walls. my kids like the idea but they were still were asking about disneyland. i said will head south. we did. i took them to silicon valley. we started south of market street in san francisco. we made our way down to google and spent day walking around google campus. if you have not been there, it really does look like, it is a globalized workforce. looks like something from the un general assembly. there aren't enough women there, that's for sure in the tech sector knows they have a gender gap problem and they're working on it, but as we were sitting in the lunchroom, all the food you that he was free and all the ice when you consume, they looked around the room and said this is an interesting group of people

because they were from around the world. it truly is a global representation. the interesting thing about silicon valley is there is no real angle icon like the bridge of the 20th century, but it's because the 21st century is about knowledge and ecosystems and creativity in these inanimate things that really will dominate and determine the course of my children's lives. the profile of the google workforce, consider the following. 13% of the population is foreign-born, one fourth of tech engineering companies created in last four years was found by an immigrant. silicon valley, the number is 44%. 44% of silicon valley firms launched in the past ten years

was launched by an immigrant founder. more than 40% of fortune fortune 500 companies were founded by an immigrant or job of an immigrant. immigrants and founders of more than half the american startup companies now valued at a billion dollars or more. more generally they are twice as likely to start a business as our nativeborn americans. the companies founded by immigrants or cofounded include google, tesla, google, you who yahoo, instagram, those are brands in my house 247. it's not just in silicon valley. innovation is global, whether it's berlin or singapore, these same factors are at work. the discussion about brecht breck said in london as a truly global workforce is another example of what these ecosystems of creativity look like. they look like a global workforce. i have shared the stories about san francisco and silicon valley

because the current clinical climate i find is troubling. for those of us at operating in and around the financial industry, we need to do a better case and make a better case for an open economy. let me just start and give a little bit of a global backdrop. i mean a real global backdrop. starting with the neolithic era, 10000 bce, and until mid- 19th century, the human conditions did not change. in fact, weight, height, caloric intake intake and life expectancy was the same until about 7000 bc until the 19th century. think about that. when thomas hobbes wrote that life is nasty, brutish and short, he wrote about a time of known human existence.

the exception was that life would never change. it did change. starting in the mid-19th century, host of things came together. the enlightenment, the issue of property rights and human rights and political freedom and the great scottish philosopher sir adam smith who wrote the theory of oral sentiments where he talked about the importance of humility, benevolence and prudence. all of these things came together in the human condition began to change at a dizzying pace. living standards doubled starting in the 19th century and doubled again every 35 years. you went from a time period of flat life expectancy and human condition to 12000 years and then it simply took off. finance was a key part of that. the old professor was just written a great book entitled many changes everything notes the net effect of those forces

on economic growth was remarkable. the integration of the global economy, we are on the front page of the walls street journal talking about globalization. think about in my lifetime, how profoundly different the world has become. since 1950, the average life expectancy has increased from 48 - 71. my children have a 60% probability to live until 105. their children to 120. remarkable changes. global literacy rate has increased from 42 to 85% and girls education has changed remarkably. the share of the global population living in absolute poverty has fallen from 50% down to 11%. since 1990, more, more than a billion people have escaped extreme poverty in the ranks of the global middle class.

while inequality has increased within some countries, the gap between countries has narrowed precipitously. access to capital and financial services is served by 700,000,003,000,000,000 people people now have access to financial activities. there's a great professor at oxford university, if you're not on his twitter feed or where of his website, you should go to it. max is a great job of laying out some of these longer-term economic trends. in the words of former un secretary general who said it better than i could have, the poor poor are not poor because of too much globalization but because of too little. that said, there are tough times in many advanced countries and we see it every single evening play out with respect to the political discourse in this country and other countries. let me give you a little bit of

a personal insight into that. i grew up in a small town in western kentucky, a town of about 9000. my sister was a single parent with two young children and worked at a plant that produced washers and dryers and other goods and it shut down and moved out of country. she was unemployed. the fisher-price toy plant which was a great employer my hometown, if you graduated from high school and to go to college, that was the place to go work. great benefits, great pay, not the most interesting job but it was a great place to get a middle-class life. fisher-price shut down and moved to mexico and then to china. i saw firsthand men sitting in the front yards, in their lawn chairs essentially drink himself to death or use opioids or other substance abuse.

it is heart to see an economy, especially a small system, a small town go through rapid economic change. i've also seen the positive sides of globalization. when i was a graduate student at the university of kentucky i work for social anthropologists in our first job was to collect demographic data for georgetown kentucky. it would soon be the place of the newly announced toyota production facility. that facility today employs 6000 people with really great jobs. there are hundreds of vendors that feed into that plant that produce and support tens of thousands of other jobs not only in kentucky but in the neighboring states. on the one side, there's a human tragedy as we watched jobs lost but i saw overtime, wonderful jobs developing and other places because of foreign direct

investment. sometimes it's not just about globalization. it's not about trade in one place or the other. sometimes it's about technological change. how many people have ever worked in a factory on an assembly line. not many. i did. i worked at the general electric at the lighting plan. we produced headlamps and fluorescent bulbs. i worked there in college. fortunately i didn't spend much time on the assembly line and got a job in the accounting office where there was actually heat in the winter and air-conditioning in the summertime. it was a great place to work. in fact i became a ge stockholder starting in 1982 and ig stock will help put my children through college. just last month, it was an announcement that the plant would close down. 147 jobs would be lost. it had been in place since 1946. i enjoyed working there. i worked i worked there for two

years. the reason it shut down wasn't because it was moving to china, it was because of technological change. ge released a report that said in the last decade, the the lighting industry has seen major technological changes pivot away from traditional lighting options. the u.s. government has forced regulations that will phase out incandescent bulbs. we are moving to led and led is produced in other facilities around the country. technological change brought about the end of a wonderful factory that was in place for 70 years. sometimes, globalization is blamed for economic change in which it really wasn't. it was technological change and technological change is sometimes brutal but it's unstoppable. we must look for ways to help those people in kentucky who were laid off and lost her job at fisher-price and ge and find

ways to be reemployed back into the workforce. maybe it's not in the hometown. maybe it somewhere else. if we forget about them, we will end up with political actors and politicians and leaders who will lead us down some blind alleys. we also have to help the next generation, those people who are going to live to be 105 will have multiple careers over 60 years. to be able to be reeducated and be retrained and a culture of reeducation and training. we need to create an enabling environment for capital formation, job creation and entrepreneurship. we need more capitalism, not less. we need inclusive capitalism. as jesse jackson said, capitalism without capital is just another is him and that's true. we need to put capital in the hands of those who are at the bottom of the pyramid, those with great ideas, those with

great inspiration, those who are willing to employ that capital and as i noted earlier in my remarks, often times it's a different population. if we don't do that we will confront the rhetoric that the system is unfair and it's rigged mommy close, before invite up douglas on a musical note, which may seem odd. i was in south africa last week and our dinner event, we had a young poet and play writer. she is fabulous. she and i were in the green room getting miked up before she went on stage and i had to do my usual thank you for the evening and she said music is the language that offers insight into the soul. i thought that was pretty a personal but maybe you think it's not the way she said it, it really moved me.

i think through music we can to treat appreciate the emotions, the experience and attitude of those who feel disconnected from our political system and from our economy, why we need to find ways to include them in our system. it's true across all genres. i did take my kids to the steinbeck center in california to which they complained bitterly that it was not disneyland, but it's a wonderful place. go to the john steinbeck center if you are there. it's not just country and blues, i think the common man said something about today even

though as written many years ago there's so many songs about a group of people that felt they had been forgotten and abandoned i want to end on a blues note. i've been listening to a lot of blues lately and we will have the complete playlist tonight at our campaign cocktails where we will have a campaign update and i hope they will attend tonight. it's a song entitled ordinary man, smoking joe is no longer alive, he passed away last year, but i think they capture the moment for many americans. if you bear with me, i'm not going to sing it. politicians and their parties, playing games with my life, it's

causing trouble with my wife. i'm just an ordinary man trying to live a decent life. i've got to take care of my kids, staying married would be nice. tired of hearing about all the holes and statistics, those folks up on the hill, they seem a little statistic. i don't think it takes a genius to figure those people out. put on a suit, waive old glory, it seems like that's what it's all about. they say that's what people want but nobody's asking me a thing. it's just the right and the left and those are old polls games. i've done listening because i know nothing is going to change. it makes no difference who's in power, you know it's just going to stay the same. they say together we stand, divided we will fall but when the voting is over, they forget forget about us all.

i'm just an ordinary man trying to live a decent life, trying to take care of my kids and hold onto my wife. ladies and gentlemen, thank you very much [applause] if we can have douglas come out and join me now. ♪ ♪ >> thank you for taking the time. you've had a busy morning pretty rotten conversation with many of our board members. we had a meeting yesterday, interesting time for bankers to how much of your time do you spend focused on regulatory issues, compliance issues,

versus meeting with corporations and clients in thinking about putting capital to use? >> the chief executive of the organization, he does much of the client stuff so i spent probably half my time on public relation policies but that's kind of what my job is. i'm just lucky i really enjoy it >> in the interest of sweeping changes, each meeting we think this will be a last discussion about regulation. eighteen months ago, let's talk more about technology and innovation and let's move on, but it just doesn't go away. are we at the end of the regulatory process and can we refer back to something with regulatory changes? >> nothing will change because the world we live in and the

economies are changing all the time so it's understandable that regulation tries to keep up with the way the market is evolving. i think if one were reflective on the way the regulates its process work as opposed to what we try to do in our businesses, we try to think ten years forward and say what's the market going to look like and what do we need to repair for that in terms of technology, skills and people, but the regulatory bodies tend to look at what went wrong in the past and how do we prevent that happening again. it would be kind of, it would be lovely if they can start thinking about what we think the regulation challenges are going to be in ten years time because what we think the market is going to be and how do we start building regulations that shape the market that we want to see as opposed to catching up. on the panel that i spoke on or moderated earlier, i think the

example is a great one because a time mover was really examined and it was so popular that it was almost impossible for anyone to say were going to take this way. you look at what allie baba does in finance with 500 million customers at the end of the year and it's good to be quite difficult to say we want to treat you differently. it strikes me that if you had the luxury and the regulation you would say what is the world look like in ten years time, what will that do to the financial industry in whatever shape you think will be and how do we get ahead of that before we find what were up against. we are dealing with a huge tech platform that has a billion customers and we don't regulate it. >> you see any beginning of a movement about regulatory authorities to think more forward-looking?

>> i think the big is cyber where it's always been on the agenda but it's much more critical because of events that has happened, but i think that real forward-looking, what will the financial institution be a decade forward, what will the path forms of tech companies be contributing to that environment and we need to begin to think about where they are going to get to and put in place a regulatory, the big issues around data privacy. i love to say, the extraordinary thing about the internet and digital is that everybody on the internet lies every day they use it because we all take the box that says i have read the terms and conditions and none of us ever do. the terms and conditions, we wouldn't understand them if we did. we've given away our rights and i think people will find they've

given away all the bank secrecy kind of stuff that they expect from our industry because that's the way regulation works. we could end up in a world in the future where people have effectively picked the box to give away things they haven't really thought about. >> on the bigger issue, fragmentation, we've talked about it where it's the conflicts between a global system where you are managing across multiple jurisdictions, multiple time zones and they want you to follow them wherever they go versus authorities who want to control the information. how do you see the conflict between compromise and the need for solutions. >> i think there has to be an international agreement on what is important. what is the privacy aspect and what do they want to keep

locally and what does it want by way of access. if you think of the way transparency has gone over the past five years, many countries signed up for sharing data that in the past was unthinkable. there need to be protocols around two has access to it for what purpose but in a world where people click on an item on the internet without purchasing it without any knowledge of the supplying company, where it comes from, where was made, what the supply chain is and whether the company who's selling it is registered for tax and so on, it's difficult to say you can make something departmentalized within a physical location which is not relevant to consumers in the way that it was in the past. >> the consumer doesn't care. they want what they want regardless of where it comes from but you're responsible for keeping data and multiple jurisdictions.

>> were not as empowered as we need to be and were not as good as we should be at completing and detecting financial crime that has been given to her industry as accountability because we only see pockets of information and we don't see what happens in every countries were other institutions. in an ideal world, we are are to be able to talk to our peers about our concern and be able to gather information. you can see it enables us to do a much better drop which would

be good for society. >> you mentioned, you've been ahead of the curve on this issue, you been talking about it for as long as i've worked for you, do you think the public sector is finally, there's lots of high-class meetings going on, do you see real solutions? >> certainly it's been talked about in the right people are in the room, and now the race is on for the risking. there's two elements. one is the cost of doing what you have to do and you simply can't get the information or the customer segment doesn't generate the cost of finding out all the information that we need to do so there's an economic aspect to that and there's a

risk element. there's a question of people won't give it to you. if it's never been collected, it's very difficult to get it. : ..