10:00 p.m. eastern. both debates are live on c-span and the c-span radio app. on tuesday will have several debates on c-span, matchup c-span, matchup in north carolina between republican governor pat mccrory and democrat roy cooper area on c-span to west virginia governors race between bill : his democratic republican, jim justice. on c-span three, first-term congressman democrat rad faces donna bacon, and air force veteran and college professor in nebraska second district race. >> leaders in the banking industry discussed international trade in the global economy today. at the institute of instrument finances annual meeting. will

hear from stanley fisher and a panel of four banking chief executives to discuss the outlook on the global economy. this is this is about one hour and 45 minutes. >> we are going to get ready to get started. our next exciting session. if you are talking in the aisles please take seats or take your conversation to the foyer we would appreciate it. if there are seats in the middle that people want to get to who are coming in we should have a full house for stan fisher. please make the seats available to make sure anybody who wants a seat can get one. certainly we would appreciate that. we are delighted our next panelists could join us. stanley fisher is the vice chair of the federal reserve. his agreed to a conversation with tim adams. before we are on stage we have a polling question. this is the critical question facing us

other than the election, what is going to happen with the fed and the employment report this morning that was not too hot not too cold. grab your mobile devices now and we have a simple question. do you think the federal hike before the end of the year which would mean the december meeting presumably they're not going to raise interest rates before the presidential election, they won't tell us that but i can imagine that. so yes or no. a fed hike before the end of the year. >> 62.5 on -- 40 a no. i think that the wall street consensus that december is pretty likely given where wages are. you don't need to hear from you that, you can hear from stan fisher himself. let me welcome to the stage again tim adams and stan fisher the vice chair of the federal reserve. [applause] >> thank you very much. it is a pleasure to have with me today a dear friend, someone

someone i have admired and followed for my entire professional career who has done a little bit of everything and who has probably trade more economist and industry leaders than anybody else. it has been a real pleasure to have vice chairman of the federal reserve, stan fisher with us today. he probably has more about economics and i will ever know. thank you for coming today. we. we appreciate it. stan was a. describe the numbers we saw, the wages and such as goldilocks. was was a 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 rates. what it did today, the participation rate went up, the unemployment rate went up, those

two things are fine it means employment was going at a rate that is fully consistent with keeping unemployment declining somewhat further. >> and wages starting to pick up? >> while the wage changes 2.6% is closer to three then it is to two. i have a friend who is 70 and he says when he asked cold there i am i am to 60 than 50. >> county see the economy generally them? >> the problem in the economy is the difference between the remarkable success of policy in reducing unemployment and this is almost global actually in the very low rate of growth of gdp. unemployment is somewhere very close to the natural rate.

i think we're close to full employment. growth isn't close to what we used to think of as normal. it is two things, it is productivity, it is the rate of growth of productivity plus the low rate of investment. they're obviously connected. that part of the story is less pleasing and that is what is worrying people and that is what has consequences for the long run for the short run. for the long run i think we used to think that the standard of living of our children would be about double of that of ours. that is not the situation now. we are not growing that fast.

we have actually had negative productivity growth for the last three quarters. which is possible, it's not that you forget how to produce thing is just that the mix moves from high productivity to low productivity. but the story is that one which was very important to change, it will change at some point because we're not going to go with that negative productivity growth forever. even for very long. precisely what it will go back to is not clear. i think there a lot of estimates of about one and a half%. it used to be over to and i learned many things from a person who many of you here have heard of, herbert stein, it used to be richard nixon's chairman of the council of economic advisers. he used to say the difference between a growth rate of 1% 2% is 100%. and that is absolutely true. if you look over 30 years you double at 2% and you don't

double at one percent, you would be about half of the 35 years of where you would be if you are growing at two percent. these have very important consequences for the long run, these low numbers. and everybody's trying to find out what's going on. >> you gave a speech last night that i read last night and he talked about long-term interest rates, cyclical versus structural. we had we had discussion about productivity and the weakness of investment. investment has not showed up in this recovery, at the u.s. corporation sitting on 2,000,000,000,000 dollars worth of cash, board rooms are not interested in capital expansion, why do you think investment has been so weak? what must happen before we see an excel ration? >> investment was higher before the oil price started falling.

and to the decline of the price of oil which not coincidentally is essentially to a level below investment in production of sale is marginal and therefore the production of the capital goods needed to expand production disappears. so we lost a lot of investment through the decline in shale production in the price of oil. over and above that you have a lot of them sitting on the lot a cash, even even from sitting on cash in the united states. there is an air of uncertainty about the situation that is not encouraging of investment. if you are saying animal spirits are not there the people are not excited about growth prospects. that has something to do with productivity and inventions

answered when you get pessimistic about inventions than you look at what happened to the nobel prize two days in a row. one day people get the price for learning how the properties of matter are very close to zero in absolute zero temperature, the next day they get a price for being able to design machines that look at the molecular level. somewhere, 25 years from now we will be aware of these nobel prizes again. what prizes again. what it will take to generate from them industrial production has still to be invented and we don't know at what rate that will happen. there's an interesting result that is, out of the oecd looking at the diffusion of technology. it turns out the rate of growth of productivity of the leading firms and industry has not

declined relative to the pre-recession levels. it is the same. the diffusion is way down. so it is not spreading into the industry. what exactly is happening you don't know why it is not spreading. it can't be is the cost of investing is expensive. it is close to zero. in terms of financial cost, so something hasn't turned confidence on an 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. the precisely when. >> so deepening in certain sectors, we have also done our own work that shows those sectors that are most i guess

exposed to trade tend to be more productive as well. the nontradable sector, housing, healthcare, education are sectors which are huge part of the economy. we have seen very little or no productivity. i know trade is not in vogue anymore. but it really is about openness and these winds of change that forces companies to innovate and invest. >> yes and that is also the difference between this service circuit sector and manufacturing sector. in productivity growth that has been higher in the manufacturing sector. that's where you're looking for. it is in the sector that is declining in size, not in size of output but in size of employment. that's where the productivity growth is being very high. >> have there been policies are policy missteps are positive policies that have exacerbated the investment problem that we have? >> certainly if you talk to businessmen that is what you

hear, the problem with that is that there hasn't been a change in the level of complaints about excess regulation since before the crisis and what we have now. so i do not know to what extent that is true. i am impressed by how much you hear about it. and it is something that at some point some serious, someone who is serious about growth is going to have to go through the regulatory framework and figure out how to change it. i am to, i'm sure many of you have read the famous works by now, former i mean, late economists called olson. you tried to find out why it is that after world war ii the countries were defeated grew faster than the countries that won the war. 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 in those compromises tend not to go away because you have to buy off these people and that people in the political process and what a good defeat does is it wipes all of that stuff away a new can start again. will 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 has been here for a very long time, growing for a very. without much civil strieff. and there could be something to that. but what it takes is not a war but a political change. >> there other forces at work.

the nature and structure of the economy changing, digital services were demographics and population is growing older. one of the challenges among the emerging markets is their de-industrializing and growing older before they have a human capital that sets them up to compete with respect to services in a digitized economy. some of the story in the absence of productivity because of the structural change in economy? i was still stuck in a 20 century mindset of production when in fact it really is about platforms, uber, and other kind of service providers? >> well, it may be but the point about all of that is we should be, there's so much going on that relates to productivity in the service sector which comes out of the it revolution. there's so many industries that cannot operate, the airline industry couldn't operate without the computer systems which enable them to run many

more flights without many more people in the same thing in the medical system, all over the place it is 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 and 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 it is the consumer gets out of the economy has in fact continue to grow at roughly the rate it had before, it's just just that the non- measured parts of gdp have been growing, i don't think that is been established but it is a possibility that you could see. i think there there's something to do with the structure of the economy, particularly the

growing of services that could be responsible for this. as you know, there is miss measurement argument, a very nice article called does the united states have a productivity problem or a data problem? the data being that we may miss measure productivity. well, the answer of most economists have really looked at this is that it has a data problem but it cannot account for the the decline that we see in the measured data. >> robert you have there is a review of the new york times of the book you wrote, you said that there was this miraculous century, 1870 to 1970 know the great inventions out occur. then we have our friend andy,

and knows that we are really on the cusp of something great. who who has the story right? >> well -- was at mit who said in the early 1990s that computer revolution is everywhere except in the gdp data. two years later it showed up in the gdp data, magnificently for about ten years. so i go with mcafee because i'm also from mat. we have to stick together. but i mean where what bob gordon really said is all the great employment creating technology improvements were invented, he's he's talking about simple things like flush toilets, electricity, transportation, cars, planes.

>> some of those things were late in life. >> i grew up with even less of those things and you did. so in what was northern -- we didn't have that either but you can surmount it. >> these changes that have been profound that robert gordon has talked about and andy it has had an impact on the labor force. certainly clinical discourse which we will not get into. but the hollowing out of certain jobs, certain sectors in the economy more exposed to being competed away because of technology, how do you think about the changes in the workforce as you make monetary policy? >> as we make monetary policy the truth is we look mainly at the mantra data. we look at the details of who is unemployed to see if there's something we're doing a monetary monetary policy

that is affecting the distribution of unemployment which usually we don't think we have a precise tool to give this group or that group. i think about it as that we have a workforce that comes equipped with a certain education, if you're 50 years old you have a trouble operating your computer and it is kind of beer taking 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 in their heads are ready. we don't have that, at least at least you may have it, i don't. we have a workforce which the people are very upset are the older people in modern technology is different and they didn't learn and then we think it is affecting them more than it is affecting younger people.

is that something we can deal with? there are retraining programs, a colleague of mine went somewhere in philadelphia and went to see a retraining program and was very impressed. a lot of these people came out with some other skills which enabled them to work, more modern skills. so. so it can be done. that much is clear. how we are going to get investments in that area other than through markets whether the government will get into this is a matter that will see if it happens. >> there's a new book out called the 100 new life, based based on their numbers, my children, their early teens will live to be 105, there's a 60%, they will

work until their mid-eighties. if you think about the pace of technological change, the idea of having a single careers in obsolete. you'll probably three or four careers. the way we think about education, pension, savings, it has to change radically. >> savings, it has to change radically. >> well it has to. and sometimes politically difficult, just an example, in israel they raise the retirement age. for men they raised it immediately and for women it would be implemented started three years after. but there is going to be a separate vote on it. been that between between the time the past the lawn that had the vote the women mobilized and this is a law which is important from the viewpoint of budget, so i call the finance minister after the vote set how did it go? he said it was one vote for raising the retirement age of women and it was mine. and that was it. people don't like that very much. but it's going to happen. it's going to have to happen.

>> the current system does not work. i want to touch back on the part of the political discourse is there a portion of the population that feels that this miraculous set of, we've seen remarkable growth and we have seen a reduction in equality between countries even though we've seen some of the country globally since 1,991,000,000,000 people have been did out of poverty. the global middle class has risen. in some ways less 20 years have been remarkable. but there are people who file that have not been a part of that. what are your views? the trend that you are describing can be explained very simply through a set of facts which is that while inequality is typically increased in most

countries, global inequality has declined. if you if you lined up all of the people in the world, because you have moved 1,000,000,000 or something chinese and several hundred 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 in the politics runs in each country not so much as people don't take great satisfaction to some of the country people living better. so the problem is out there and we have to deal with it at the national level. that has to do with her educational system has to do with education for those people who have left school and those

things have to be taken seriously and you need to look at other countries and what the scandinavians do, they seem to do this pretty well. whether our society will be willing to do that is something we need to explore and not announce will that's the scandinavians, we can to that, we need to see if we can do that. and and then try to do it. >> you into scandinavia, or go back to regulation and loop in one of the questions about if regulation is a potential inhibitor to growth should we do a better job of measuring its impact. clearly that's respect to financial regulation have we done enough. seven years after, do we have enough regulation with respect to the financial sector, enough to avoid financial instability. should we think about measuring impact across all sectors. >> there is a desire to have cross benefit analysis on every regulatory measure and nothing could happen unless the analysis

turns out positive. the trouble is the analyses are imprecise. if you started on that what you would end up doing is make a living for lawyers and that's another way of getting growth. probably not getting productivity growth. so, you need to do it on big things, and you, and you need to make the arguments whether it has to be numerical is another issue. 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 their former regulation that took place in dodd frank have been achieved in certain areas, namely the banking sector. . .

>> in various sectors which are very active in the shadow banking system, and so, and we also have in the united states relatively few tools for dealing with this. you listen to people saying, well, yeah, we've got bank regulation. that's okay. and the if it isn't banking, we've got interest rates to deal with banks, we've got regulation, and for the rest we'll use macroprudential

measures to deal with them. >> right. >> well, those are not interest measures, read typically sort as regulatory, to deal with problems in the financial sector. we have relatively few macroprudential measures in the united states. the europeans have a lot of them. the scandinavians have even more. be you're a good regulator -- 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. it's not hopeless, but we have much less. and so i can't say that i am frightened about a particular thing. you can always point to things that happened in the past. in the united states a year and a half ago, we worried about leveraged lending. made a lot of noise about it, poke to a lot of -- spoke to a lot of the banks that were part of the chain in those loans, and the level went down. and that doesn't seem like a threat at the moment.

so a regulator can do a lot, but things will happen. i'm very worried when people ask me so far you haven't, have we solved the too big to fail problem? my view on that is that a regulator or an intelligence agency never knows whether it's sod a particular problem -- solved a particular are problem. and if they tell you we have solved the too big to fail problem, you should dismiss them and get somebody else who actually understands that you're in a 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's an accident, and how do i build up depences against one -- defenses against one of these agencies getting into a problem of which we never thought. and, you know, as a regulator, i

used to spend most of my time wandering around convinced that while i was looking here or there for a problem, there was one coming from over there somewhere that was about to hit us. like the great financial crisis. >> right, right. >> in the united states. so you've got to be watching the whole time on that. so i don't know precisely what we can do to make this all better. but i think we've done a lot to make it better. >> you mentioned too big to fail. i must say i don't understand the obsession about size, and it seems like breaking up the banks is the solution to every problem. you know, the hurricane's blowing up the west -- the east coast of florida. i'm sure some congressman tomorrow will say we need to break up the banks because of the hurricane. it seems to be the constant refrain. but the first crisis i ever worked on in washington was the s and l crisis. i was in the white house as a young staffer at the time, we put together the trust resolution corporation.

400 institutions went under. we had a recession, and it cost the president i was working for at the time his job. often times crises come from small places or interconnected places or places we didn't think about. washington mutual was an s&l, indy mac was an s&l. don't we spend an awful lot of time thinking about these really large institutions? we have jpmorgan coming up at lunch. they have $500 billion worth of equity capital. do you really worry so much about those kinds of metrics? >> well, you have to look at hem, that's the first line of -- look at them, that's the first line of defense or the last line of defense, i'm not sure which. >> right. >> and you have to make sure that they've got the ability to withstand adverse effects. that's why the stress tests are among the most important changes in supervision that have been introduced since the crisis. i mean, the banks dislike large amount of work that's involved.

you've got a system, you've got to test it. >> right. >> and those tests are pretty serious, and i think on the whole a desirable development. >> maybe we could talk a little bit about the global environment. we're now five straight years of sub-3% growth. the fund has come out with their new wheel forecasting growth about 3% next year globally. they marked down the u.s. trade has grown faster than global gdp prior to the crisis, it's now growing at about half the rate. what's going on in the global economy? how do you think about growth going forward? >> what i think is that the nature of growth matters, and i'll give you an example of what i mean by that. in the 1990s during the augusts -- asian crisis, if you walked around the countries

bordering china, they all were concerned that they were going to be outproduced, outcompeted by china. and it was growing too fast. and you say would you rather have a neighbor who's prosperous or a neighbor who's poor to the trade with? well, that sort of shifted the debate a little bit. but, and i thought what mattered was the size of the unit you're trading with. i think what they're buying matters a great deal as well. what happened in the -- what we learned in this crisis from the slowdown in chinese growth and its impact, they're still growing at a phenomenally fast rate by historical standards. whether it's 6% or 7%, those are superb growth rates. but their impact on trade is, has declined on the economies which they used to trade has gone down a lot, and i reached the conclusion that, actually,

because a lot of their trade was in goods -- including raw materials -- that were most useful in investment, that it was the rate of growth of china's trade that mattered possibly just as much as the growth rate of the economy as a whole. and that's where you see this transmission in trade. you know, chinese growth rate went from 10 to let's say 6. the you look at the west coast of africa, the west coast of latin america and the east coast of latin america, they've 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 the imf and you were in the administration -- or you'd left already -- we used to think that world trade grew at twice the rate of world economy.

we now see that it's i growing at the rate of the world economy. well, that's a huge, huge difference. it's related to the nature of chinese growth. it's also related to the nature of production. they're outsourcing less to their neighbors -- >> right. >> -- as we are outsourcing less, actually, as well at the moment. so level of trade has gone down. i don't think the importance of trade as an instrument, as a growth machine has gone down, and what worries me about the anti-globalization is the view that, well, globalization's useless. we ought to go back the worrying about ourselves. you worry about yourself, and you start shutting yourself off from global growth and global markets. and there are very few countries which have succeeded in growing rapidly over sustained periods -- >> right. >> -- without integrating into the global economy.

and 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'm going to offer some thoughts on that in just a few minutes. i was actually in johannesburg last week, we had our africa summit, and the number one question was about our outlook on china. and if you were on the west coast from angola, nigeria, it was all about commodity prices. interestingly, east africa seemed to be doing a little bit better. >> yeah. i didn't, i wasn't aware of that. yeah. >> trying to bring some good news. [laughter] >> thanks. >> the other issue which we've been discussing, and the fund touched on this week, is the level of indebtedness. if you look at the household sector, the sovereign sector, the corporate sector, just about anywhere in the world, advanced economies, emerging economies, we've seen the economies leveraged up. the funds numbers are 250% of

global gdp, our numbers are a lot higher than that. but inevitably, we've seen this long trend of ever more indebtedness. but we've seen productivity decline. how do you think about it? do you worry about the amount of debt that is growing and our capacity to to service that debt? >> well, there are two parts to the answer. the one is that in terms of the capacity to service the debt, debt service has not gone up anything like the amount the debt has gone up because interest rates are very, very low. and so the interest burden which is the servicing burden is not, has not, has not risen anywhere like the numbers which have doubled and so forth for debt. but interest rates are very low, and i don't think i'm revealing any secrets if i say that this this -- that at least one member of the federal reserve board thinks that interest rates will

be higher five years from now than they are today. and that will make a difference to the amount of debt servicing. so these things are big, and there's a bump in debt servicing that awaits countries. now, the theory was there'd be a temporary period, you'd expand your government finance or firms would expand their investment, and then the economy would grow, and you could pay it off because the ratio to gdp was less. well, because growth is less, that's become a problem. it's no longer that particular story. it doesn't fill you with joy because parts of the mechanism that was involved in it have broken down. >> and as you sit in your policy-making job at the fomc, how important is the global environment, these international issues to you? obviously, we live in an integrated, global economy, financial sector. confidence moves on a bloomberg

screen in a nanosecond. how do you take into consideration the global environment? >> well, i mean, again, if you take a look at fed statements of policy, you'll realize that the external world entered those statements very rarely until recently. and the external world was described in the most general of terms. you didn't relate to china and the european monetary union and etc. it was externally the economy, blah, blah, blah. the dollar strengthened, but you didn't go into details because they didn't matter very much for economy. now we really write about what's happening where, and chinese events have an impact on us. there's a very interesting historical fact. the end of world war ii the united states economy accounted for half of world gdp. >> right.

>> this is truly astounding number. it now accounts for about 23% of world gdp. i don't think the importance of united states economy in the world economy has declined as much as 50 to 23, and i think it's because of the role of the capital markets. there were no market flows of capital at the end of world war ii. it is massive now. what we do here affects the whole world. if we didn't know that before, wherever we go and meet with foreigners they tell me, and i've got a rellive in south africa -- relative in south africa who said can you please explain to me why you guys do sitting in an office in washington has such a big influence on us? well, i mean, i tried. i'm not sure i succeeded. it's -- that influence is very big now, but it depends on what's happening on the other side of our monetary policy.

and so we take it and we think about it. in the end, we go back to the law, and the law is that we take into account -- our policy toes are aimed at the united states economy. >> right. >> 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, impact of our policies. so we do take those things into account. but we don't systematically say, well, it's good for the world that the world grows faster, and it's your job in the fed to help the world grow faster. that is illegal in united states terminology, and we don't do it. but we do take care of -- we do take boo account what happens -- into account what happens in foreign economies. >> we've had a number of bankers on stage all morning long, and one of them said they thought global investment was way down

by fear, lack of confidence and political risk. it's tough to put that in your models, but how do you -- the call at thive aspects -- qualitative aspects of the challenges in the global economy, how do you bring that into the way many which you think about the trajectory of policy? >> well, you know, you can say you've got a model which tells you how what's happening abroad affects the united states economy. if you think something, that those have changed, there are very crude ways of going into the equations for those countries and saying what their reaction to the united states is. you can, they inelegantly are called fudge factors. >> right. >> more elegantly they're called special conditions. and you can do that. ask -- and you get an idea. do you get a precise idea? no.

can anyone get a precise idea? no. but you can take those things into account, and you'll know which way they'll affect you and which way they'll affect the decision you ought to make. >> this'll be last question. haas night we had a reception at the iif focused on artificial intelligence, augmented intelligence. we had, i don't know, eight or nine young, smart computer scientists who basically said i'm going to be replaced by a computer and a robot pretty soon. i get that. john taylor later on says monetary policy should be rules-based. he has a rule in mind. [laughter] how, how do you think about going back to more rules-based versus discretion? have we gone too far many discretion? and will we be at a time where computers are basically going to run monetary policy? >> well, you have no idea how much computer time we use for the average fomc meeting.

we get a book full of computer simulations and so forth telling us what'll happen the we do a or b or c or d. so it's already there. now, as to rules versus discretion, i believe that taylor rule is a useful description of the average behavior of central banks of the united -- of the fed or of other central banks over lengthy periods. and we do look at what the taylor rule would say. we not only do that, we have a variety of vintages of taylor rule. you know, if you do taylor 99, you get this. if you do something else, you get that. but in the end, we preserve the freedom not to follow any of those rules exactly because they're describing average conditions. we are in very special conditions still, so you make adjustments. you don't do precisely what

those rules say. but it's not that you ignore them. and the other thing i would say is discretion always sounds like it's sort of ad hoc is and so forth. the reason it isn't ad hoc is you've got to write a statement afterwards and explain why you did what you did. and that's really important. that's also part of rule. >> right. >> writing. so i don't think we're at a stage where we could use a rule permanently. every rule that's ever used, been used for monetary policy has broken down the gold standard, the fixed exchange rate system -- >> right. >> and money targets and so forth. they all, and there's the famous statement by a canadian governor, we didn't give up on monetary targeting; money gave up on us. [laughter] and the world changes. there are laws which say that.

>> right. well, i sleep better at night knowing you're making decisions at fed. i hope you stay there a long time. ladies and gentlemen, chairman stan phish err. [applause] stan fischer. [applause] >> thank you, tim, for that. i'm also very much looking forward to this panel. a lot of people i like a lot and are very smart as well as stan fischer and the rest. it's really a jam-packed day. first, we're going to look at the global outlook broadly, leading executives to provide their perspectives on what is holding economies back and prospects for improvement, what policy responses could be most productive. we'll be moderated by the venerable martin wolf from the ft, and please join me in welcoming to the stage a truly stellar cast. mary callahan, chief executive