about canadians, the way we handle our patriotism? >> i think one of the interesting things about canada right now is in spite of the challenges that we have all had, particularly economic, i think the country is feeling good about itself and feels proud. i think people are excited about hosting the olympic games. i think that canadians, there is a deep well of -- it is not patriotism in the sense that we see south of the border, the loud, flag-waving patriotism, but a real deep affection and attachment to the country. we have a great country. people around the world really admire our country. we are one of those countries that is big enough to have influence, but not big enough to threaten anyone. i think events like this bring that out and canadians are feeling good and are excited about the olympics. i'm confident when it is over

that they will have reason to look back with considerable pride. . rii hope that the hockey does nt breed of all the oxygen at the

olympics. >> we are looking forward to it. it will consume the country. thank you very much. we wish you and mrs. harper and your family all the best for the holidays. >> thank you very much. i want to wish both did you and all of your viewers a very merry christmas and a very happy new year. >> what do you think? >> a budget in march is important. we will find out whether the tax credit will be extended. he is optimistic about recovery in 2010. he talked about the environmental policy, saying that we have no choice but to harmonize the policy with the united states otherwise wholesale companies could move to the united states. >> it is striking that he is looking forward with optimism.

>> goodbye. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2009] >> c-span networks are brought to you as a public service. coming up next, and look at international leaders with an interview with president medvedev. later the economist magazine hosted a discussion of political cartooning and the effect of the environment on world affairs in 2010. >> saturday on "washington journal" a look at the rise of al qaeda. then dr. david shern, president of mental help america, and a new law that takes effect today. later, the fellow for center education reform talks about the state of education in the united

states. we are taking your calls and e- mails every morning at 7:00 a.m. eastern here on c-span. >> after a while it seems as though it is gone. you do not own it anymore. you trust that. that hurts. my positions are now in a storage center. i was able to get it out before the house was locked up. what's this week the american casino, the documentary on the impact of a subprime mortgages on minorities. >> american icons, three original documentaries from c- span now available on dvd. it is a unique journey through the iconic counts of the three branches of american government. cbs was the details of the supreme court. go beyond the bill with ropes of the white house, america's most famous home.

explore the history, art, and architecture of the capital. american icons, a 3 does the dvd said. it is $24.95 plus shipping and handling. it is available at c- span.org/store. >> on christmas eve >> on christmas eve, russian president dmitry medvedev sat down with russia's tv network. here is a portion of that event. he answered questions on the future of russia's armed forces, his relationship with relation -- prime minister vladimir putin. he also talked about the recent copenhagen conference -- climate change conference, saying he was not happy with the results of the conference.

>> good afternoon. over this year, you have repeatedly met up with our colleagues and tv networks and have discussed relevant issues of economic politics. we're grateful for you to discuss the of doing your live with these three networks. we do have something to talk about and something to remember and something to discuss 2009 has not been an easy year. to this country has come up against new challenges. how do see the outgoing year? what have with the able to do?

>> this year has been very complicated. it has brought a significant amount of drama. i believe that all of our citizens have had a difficult year. the most important outcome is that we have stood our ground, we have overcome, we have continued to develop and we have paid what is a relatively small price for the international financial economic crisis that has swept the planet. in terms of what we have been able to accomplish, i believe that these three things. we have maintained social stability. we have secured the set of social payments which were promised that we would do. not a single social obligation has been terminated. on the contrary, this year, we are moving over to a new system of paying pensions. we have started enhanced pensions. this increment is not in our terms. it is also increased payments in real terms. virtually by 30% and by 25% in real terms.

next year, this effort will carry on. this is the first and most important achievement. second, we have been able to ensure financial stability. the year started out in a very alarming way. the central bank had to take efforts to make sure that they set the house in order in the financial landing area to ensure stability, to prevent banks from -- to prevent a scenario from repeating itself as it did back in 1998. all of this was done. the financial system was stable. it is working. last year, we had a 13% inflation. the share, it will be in the 9% neighborhood. finally, we have been able to

launch mechanisms of support for the enterprises. those that are too big to fail. there is not a single large enterprise that is in the middle of bankruptcy. everyone of them has been given support. the labor force is employed. allowance have been paid and other financial support measures have been allocated and provided. these are three things that are key and i believe that we have been able to accomplish that. in terms of what we have not been able to accomplish. we still have the same economic system, one that is based on the raw materials market. primarily our fuels, our energy. this is not something that can be changed in the course of one year, but clearly this is an obstacle. it is handicapping our development. we understand that we cannot

develop our economy simply by selling raw materials. when prices of raw materials plummet, that hurts our economy very badly and very quickly. we have a lot of fun competitive enterprises that need to be modernized. it is extremely important for us that innovation based development become the dominant. finally, something that i do not think we have been able to fully take care of is to put unemployment under control. this is a complex problem. there was a program developed that did curtail the growth rate of unemployment, decrease the number of unemployed, but we have not been able to meet this challenge completely. this work will carry on. most global media have virtually in unison reported that the crisis is basically over, but it seems that a globally nothing has changed. the fundamental reasons have not -- it is more like a face lift

has taken place. >> i am afraid that this is correct. indeed, nothing has changed globally. we have several times this year met with my colleagues, the heads of state, certain mechanisms have been offered to deal with the problems that have amassed themselves in the global economy. we have started to build a financial architecture. it was completely incorrect to say that this crisis are ruled out and that the next year will be trouble free. that would be completely incorrect. all analysts agree that the recovery from this crisis will be fairly slow, unfortunately. we should hold our breath as far as the growth rate in the next

year. this year, and our economy has contracted by 8.7%. our gdp has decreased by this amount. next year, we hope, we will see an increase in the gdp. >> what kind of increase? >> it is hard to say. somewhere in the 2.5% range. best case scenario, as much as 5%. this indicates that the recovery from this crisis -- the burden of the problems that have amassed themselves in the global economy is too heavy. we also have russia's specific problems. >> going back to what you just said, why is it that modernization has been stated today as the key priority? >> that is why it has been

stated as the number one priority. our economy is indeed a most difficult period. the price of fuel is slowing and the decision to modernize our economy completely and to transition to innovation-based development. if we were still in that period of of beneficial development. however, we are absolutely confident that unless we modernize our economy, this economy has no future. even though it does rely on the vast natural resources of this country, the resources that have fed are in sisters -- and our ancestors and are feeding on us. first, we need to make better use of them. we sell a lot of gas and a lot of oil. it would be much better if we

would sell refined gas and refined oil. engage any petrochemistry and build a gas refineries next to our borders. unless we take measures to move toward a modern, high-tech economy, we will never, ever be able to overcome the technological backwardness. we will not be able to change our economy in a radical matter -- radical manner. we will be much more dependent on the cyclical nature to which the global economy is subject to every failure -- subject to. we will be reacting to them extremely quickly. the securities market terms that applies to our securities market, where the market is very dependent.

it jumps back and forth. in the grand scale of things, our economy will be well tile, if we keep basing it on selling our raw materials. -- our economy will be a molotov -- volatile. the presidential commission has been put in place to look after. this work will carry on across the entire nation. our energy efficiency, nuclear power energy -- creation, space technology, public health and development and pharmaceuticals as a priority. these sensitive areas, we must make a break. -- breakthrough. >> for russia to keep going ahead, we have to get rid of

certain russian traditions. modernization in russia has some very -- peter the great would cut heads. stalling has destroyed millions of people. when you talk about modernization, you are saying that we need to develop civil society, democratic institutions. do you indeed believe that in the country where people never expect anything good from changes, i do believe that in this country, these methods can be applied to effective modernization? >> yes.

our people are strong. they're trained, skilled, and smart. they're capable of change. they're capable of change not just under arrest. they're capable of change when they see change as an objective that is identified with their eternal goal. most of our neighbors have a virtually gone up the the same. every nation has its own history. some have had more dictatorial factors in their history than others. some less. certain countries histories has been more dramatic. other nations have been able to muster the strength and motivation to develop under the influence of goals that they set for themselves. they need to be strong, independent, powerful. so what? we can do that? -- we cannot do that?

i do not deny that some of them eventually did do some good, but the methods that were used to enforce modernization is completely unacceptable. therefore, we will beat our own path. modernization must be based on effectiveness. and on people's inner desire to change. this is the most important thing. the russian army is not what it was 10 years ago. it has given us reasons to be proud of it and yet, the russian army has its work cut out for themselves. there are many problems. >> i would like to know what your priorities are as far as the russian armed forces. >> the russian army has shown its mettle, no matter what they say.

it has protected our citizens. yet, there are still problems. the material is getting obsoletes trade the servicemen are not being adequately rewarded for their work and their service. the system of organization of the army should be different. all the necessary decisions have been made. some of them were pretty difficult to make. these decisions laid down the foundation for a new image of the armed forces of the russian federation. in line with these decisions, which i as the commander in chief have approved, all of the units -- what does this mean? units with three or four officers and a lot of material and two or three soldiers. you cannot use these in combat. these should be combat ready units based on the modern image of our armed forces.

reforms have already started in the practical sense. what does this transition mean? the minister of defence has been paying material incentives to officers who have shown themselves well. it this is a very significant increment. this is an increment that makes it possible to pay our high quality officers monetary alliance that is completely comparable with the payments that are affected in our western countries. i believe that this is something that has to be followed through in the very near future. one-third of our officers are in receipt of this increment next year, another percentage

will get it to. before 2012, all of the combat readiness units should be transitioned to the new terms of service. when they are paid appropriately, they will be asked to provide a different kind of service. technology, equipment, materials. there's a lot of construction that needs to be done. we did not invest in it. we all love our country. we love our army. there was no money left. some time ago, we have the money and started investing the money. it is an extremely difficult crisis here. we have not cut funding to the main types of weapons.

new material, new weaponry will be provided in patches. they will virtually refit completely our army materialize. it is a capital intensive gold. russia must have strong armed forces. i will do everything i can to make sure that this funding is maintained. >> we're worried about those on the other side. illegal migrants. i am in love with security bureaucrats. question, within the program you have outlined in terms of performing the ministry of interior, will there be proper attention given to financing this service? it is an open secret that the

salaries received by those who are daily giving their lives to risk our at times ridiculously low. >> of course, the system must be changed. we must look at all the components. this includes the head count. we must reduce the head count in certain areas. that could be used as a tool to ensure that formal modern effective people come to the ministry of the interior. so they will surge qualitatively and work honestly. i have a lot of friends who graduated from the university. instead of just branching out

and making money, they signed up with the police. i have the highest respect for them. with their shiny university diplomas, they found what is a very difficult cup of tea. they are doing something that is very important. they're doing something that is subject to harsh criticism. they're doing it in an honest and decent way. i believe that there is a great deal of people out there in the police that simply must be given support. >> with your permission, speaking of the tragedy that has shaken the country, the act of terror against the express train, please update us on the investigation. well the culprits be found? >> that the culprits and perpetrators will be found, i have no doubt. the investigation is going aunt

and it must be going on in a confidential -- is going on and it must be going on in a confidential manner. i am positive that the investigation, along with the operatives, is capable of finding, arresting, and bringing to court these monsters. our state is capable of doing that. in addition to the investigation proper, as far as the implications of this horrendous act of terror, we must think of the matters of

security, including technological security. we must think about health security is provided along the lines of technology -- about how security is provided. think about the security of their plans. -- think about the security of airplanes and railways. we have more real ways than any country in the world. they have to be safe. they have to be safe to the sufficient extent. instructions, in terms of analyzing what has happened, i have given it to the ministry of transport and the russian railways. proposals have been drafted and they will be funded completely. 100%. this is a mandatory requirement. what happened to in the nightclub, the fire, when we talk about the enablers, the people who made it possible, you said that these people had never brain and your conscience. it sounded very desperate. where does conscience come from?

>> conscience is a moral notions and we all have to take care of that. that is not something you are born. it is something that is in stilled in a person, from the school, a matter of religion. this is the result of the complete, unbelievable lack of discipline. beyond understanding. i just cannot comprehend how somebody can put on a pyrotechnic show in a closed environment. they invited a great number of people. what needs to be done, in addition to the fact that now everybody -- everywhere these

kinds of things have been banned, the house had to be set in order. this set of legal rules has to be adopted and issued. the fire safety regulations have to be streamlined because there is also the blame of fire safety officials. why did they not close down the club? was there a set of other problems? we have to look at it at all levels. we need to see who is responsible for this process at the regional level. we need to see how such promises are allocated for clubs. we have to start with ourselves. >> this is a very indicative example. speaking of the -- i think this is a negligent crime. it is a negligent crime and one that has resulted in the gravest of consequences. it has to be looked at extremely thoroughly so that things can never occur in the future. >> we have just talked about

the latest tragedy. i have a question about our nation in general. do you think our people have been undermined? do you think their back has been broken? do think our people have the strength and the resources for future development? if one looks at 150 years back at our history, few nations have gone through these trials and tribulations. the thought that the backbone has been broken, the will of the people is not what it used to be, do we have the strength and resources to keep moving on?

that is a question that process itself. what would be your response? >> life has never been easy in this country. that is exactly what has shaped our national character. i am absolutely confident of that. the fact that we live in a giant country in very harsh climate where to simply take care of your basic needs, one has to create feet. all of this has formed our national identity. therefore, to think that over the last 150 years, something has happened that has radically changed the etiquette of our people.

something that has destroyed their will to live, this in my view is absolutely incorrect. if this had been the case, we would have lost world war ii. we would not be able to run this new state of hours. what used to be part of this country became a territory of other countries, when families broken-down, when relationships between people and between nations broke down, when the economy deteriorated, it would seem that after that, something should have happened to drive us right under the ground. but it has not happened. we have overcome. we have stood our ground. we are now living better than we did 10 or 15 years ago. we are capable of rising to some very major challenges.

we have a great deal of problems, but we're capable of meeting our goals. i am confident that no change in our national character, and our willpower, in our energy, has taken place. nothing like that has happened. >> before you became president, you had your own special relationship with vladimir putin. has that relationship changed? the interact at work and how do you interact at work? >> we still have our special relationship. it is a relationship of friendship. i am confident it will not change. >> one of the events of this year was the change of guard in the u.s. white house. a new president, one that was very interesting in many respects, how has your relationship with this new president that evolving? do you have trust? are you capable of finding a

common language with him? >> yes, indeed. i spent a significant amount of time with the new president. he is an interesting person and a strong politician. he is easy to interact with. he's a good listener. he is capable of responding to your arguments. from the americans, we used to hear this, yes, this is your point of view, but we have made our decision. he does not say that. at the very least, that in itself is worth it very positive reaction. even though the u.s. remains the largest, most economically advanced state on this planet, although with its own gigantic difficulties, all together, we have trust. our relationship is fairly good and i hope that in the future, everything will be normal. >> why the delay with the new

treaty? is russia -- are americans bringing pressure on you? what is their response to that? >> that is because the issue is so complex. it is a such -- it is such a complex issue. it is not a contract between two small businesses, something that can be slapped together in a quarter of an hour. we have been moving very quickly and we have agreed upon just upon everything there. as far as how it happens, it happens the way you just put it. in some areas, we put some pressure on our partners. we say, this is not acceptable. this is normal. this is a negotiation process. we have to put together a quality document. i am confident that we will create one. this document will have to defy the basis of our coexistence as

the largest nuclear powers for a substantial period of time. 10 years or so. everything has to be thought so. -- thought through. even though we will prepare and sign this treaty, we will still be developing our strategic offensive weapons. without them, we cannot defend this country. it is as obvious to us as it is obvious to americans. it is the law of current life. it does not mean that we will not be able to talk about a nuclear-free world at all. this is inappropriate and youthful cool, but one that we have to keep moving towards na -- this is an appropriate and beautiful goal. >> reduction is a great thing, but yet our nuclear shield, one

that was designed and built during the soviet era, is it resting up? >> no. our nuclear shield enables us to solve all the tasks is used to solve. of course, we will be developing a new system. it is normal. the whole world is doing that. it needs to be done in the conventional framework, including taking into account our future accords and agreements with the americans. this is a process that will be continued. our nuclear shield will always be effective and adequate to protect our national interest. >> speaking of the most important and near the

international subject, we have to focus on the elections in the ukraine. we have gotten away from the start date. who is our preferred russian candidate? is there one? >> based on -- most of my remarks on the ukrainian subject haverford to the -- subject have referred to the incumbent candidate. ukraine is an independent state where the president will be determined by the nation. i'm confident that the nation is capable of making sense of the political declaration and the political struggle which is under way there. there are a couple of dozen candidates there. i would very much like to see happening for the future

president of the ukraine would be leaning toward developing a kind, cordial, fraternal relationship with our country. so that the russian language will not be abused. so that letter context be allowed to develop, so that our joint economic projects will be developed. so that there will not be this strange desire to become part of a foreign military bloc that will make large numbers of people anxious one way or another. but i would like to see is this kind of partnership. i would very much like to see the ukrainians make the correct choice.

>> last week, you're in copenhagen where the whole world gathered to discuss the prospect of the global climate. honestly speaking, do you think that the earth is cooling off or heating pop? >> to say whether it is cooling off or heating up, i would have to be an expert in the field. from my perspective, that is not even the most important thing. there are cyclical theories and there are different points of view. the most important thing is what our reaction to this is. we have to change the ecology of this planet. we have to engage in green technology, in energy-saving technology, and to develop grain

engineering, to create alternative fuels. that is obvious. your respective of -- i was not happy with the result of copenhagen. i think copenhagen came up with zilch. we were not able to agree. this was not the blame of -- this was not the fault of the russian federation. we hear will be dealing with energy efficiency and creating -- reducing the energy consumption. if all the core cast regarding climate change turned out to be irrelevant or not serious, at the very minimum, we will improve the atmosphere >> these decisions raise the question of how decisions are implemented. decisions that i made -- how they're implemented in the localities. casinos have been closed. what do we have now as a result? they're hoping that everything will go back to the way it was. there are reasons to believe

that this will be the case. now there are some clubs where sports poker is being played. there are some instant lotteries. it would take a prosecutor to disassociate between slot machines. do you play these lotteries? >> i plan other games. i do not play poker. >> this business has gone underground. it has deceived the authorities. what do you think the lessons from this that can be learned are? >> i think it is an exaggeration. we have closed the oxygen to this gambling business which used to exist on a different kind of platform.

these for gambling zones indeed have not yet become active. these are giant investments. we're not going to pump government's money into it. if and when private investors pulled those methods together, it will be very welcome. there will remain operational. as far as the large number of casinos, they're not in this country anymore. they're gone. some people are trying to mimic and are using loopholes in the legislation. they're gambling for money. all of these clubs should simply be shut down. now that you are mentioning it, i will be sure to send an instruction to once again to go very thoroughly for the legislation and the regulation with a view to close off even these loopholes. our people are very resourceful.

the gamble on the internet, which we do not control. gambling for money on the internet is a legal business. just like all kinds of instant lotteries and other forms of bypassing the lot. we will look at our regis -- legislation and we will need to amend it. will this be enough? we will look and see. >> this has been a year of big- time soccer and there has been a very controversial role played by the chief coach of our national squad. what is your opinion of the role played by the coach and our soccer history? are you a fan?

>> casual fan. i have watched all of the key games. sometimes on television, sometimes in a stadium. no matter what anybody says, after this frustrating loss that we suffered, as the coach took the helm of our national squad, it has become a different team. that is my private opinion as a casual fan. we have had some very pleasant events embraced our spirits. it was a shot in the arm, if you will. just remember how beautifully our team played in a moscow -- in moscow. there were some other games that were very interesting. fantastic games that we played

against the dutch. everybody watched and could not believe these were indeed our soccer players. this alone is something that we have to think -- thank our coach. as far as club soccer, things are pretty good. as far as the union, this is not something that the cut should be patted on the shoulder for. i think we should just draw the conclusions and continue to support our national sport and their clubs so that they will play even better. >> speaking of soccer, can i ask you some personal questions? what time you get up? what time do go to bed? >> i get up according to my

schedule. as far as when i go to bed, it is pretty lake. usually it is about 2:00 in the morning. there are a lot of things to be signed. sometimes i will be signing documents just before i go to bed. that is not a great thing, but what can you do? >> do you have time for reading? >> i do, as a matter of fact. i spent at least 15-20 minutes to look at a book, to kind of prepare myself for sleep. >> what is on your bedside reading table? >> like most book lovers, and i consider myself one, i have several books and i always tried to read several books. i find it more interesting. when i come across something

extraordinary, i can just read it in a gulp. but that is only when i'm on vacation. for now, i am reading historical portraits. i've not yet looked at his work and i like it a lot. i am reading it fairly slowly and i am putting a lot of thought into it. i am reading in it in the electronic version. is the first time i am reading a book electronically. there are some other books that i have on my bedside reading table. i have a new book and several novels by the german novelist. those that have been freshly translated over the last 10 years. i have loved him since i was a child.

he is very modern. sometimes it raises your spirits. >> what is it that you are missing in life more than anything else? >> that is a very simple question. freedom. as in free time. this is something that you start to feel from the very first minute when you are sworn in to that job. >> what about your family? how are they coping with the burden of being the first family? >> they are coping pretty well. they're behaving pretty well. they're not giving me a hard time. they're not bugging me. of course, this is making an impact on their lives. this is not the most

comfortable life because there are certain restrictions. they're not subject to these before. those lies comprise a number of restrictions. that is the saddest part. you cannot feel those restrictions until after you have been sworn in and started doing the job. in no other position can you find out or even guess what those restrictions are. you can guess what those restrictions are, but you cannot feel what they are. >> all of us here are television people. we have been watching a lot of television. the burden of a presidential responsibility over the last 18 months has dramatically changed to personally. can you feel that burden? how do you feel it?

>> i feel that i have changed. i will be honest with you. i have changed because as you correctly said, this is a special kind of responsibility. even before this position, i felt some -- i have held some very responsible positions. even those positions are held before, when you have the maximum responsibility, it changes your nature, your world view, and many other things. as a human being, i have not changed that much. >> you have repeatedly demonstrated your affection for british rock. you have even attended a concert by legendary band. do you like any music that your son likes? >> he will listen to classical rock as well. he is 14 now.

he is a fan of alternative rock. i understand very little about it. certain bands i do know. there is a band called linkin park. he also listens to a time machine. -- he also listens to a time machine. >> how are you going to spend the new year? >> airtime on the air is contracting vigorously. -- our time on the air is contracting vigorously. >> the time is running out. i would like to ask you who the person of 2009 in russia is.

>> is a great question. from my perspective, i just have one person. we have about 1.5 million persons. these are all the citizens of this country who were born in 2009. they are the people of 2009. well done to be born in this difficult year. >> thank you, mr. president. happy new year to you. >> thank you very much, dear colleagues. it is my hope that i will still be able to congratulate you and the citizens of their country and residents of our country with a happy new year one more time. thank you. c-span is brought to you as a

public service. coming up next, a russian program with a vladimir putin. after that, a series of discussions on political cartooning, and the effect of the environment, and the global economy on world affairs in 2010. >> saturday in the that the rise of al qaeda in the yemen with the carnegie endowment for international peace. then dr. david shern on a new law that takes effect today. later in the fellow for education reform talks but the state of education in the united states. "washington journal" is taking your calls live every morning at 7:00 a.m. eastern here on c- span. >> saturday on america and the

courts, an interview with william sutter. he talks but his job and how the court chooses the cases they deliberate. >> fox news contributor michelle malkin is our guest this weekend on of an " in-depth." she is the author of four different books. she takes your calls, e-mails, and tweets. it is sunday and 9:00 a.m. eastern. >> last month, vladimir putin hold his annual question and answers to this -- session with russian citizens. to the entire event lasted for hours. latimer prudent answered more than 80 question submitted by audience members and telephone calls. he answered several questions on russian economy and whether he will run for president again in 2012. here is the last hour of the event. it begins with a question on his

personal relationship with dmitry medvedev. >> there are several questions arriving at the website. one of the most frequently asked, what is the relationship between you and dmitry medvedev? >> we have known each other for many years and we have been working together for many years. we went to the same school together. we studied from the same teachers together. same professors taught us. not just knowledge, but even attitude to life in general. these principles, the shared common principles. he is truly the prime minister

of the russian federation. we cooperate a lot. we have a special kind of relationship. >> when will he be released? >> i just visited france and they asked me the same question there. the person you mentioned has been put in prison by a court ruling. the problem is not when he will be released. the problem is that such crimes should never happen again in russia. we're talking about economic crimes now. the bankruptcy procedure for

the company was initiated by western banks. this bankruptcy was carried out according to russian law. absolutely according to law. i have never said this publicly before, but i am going to say it now. the money from selling the assets went to the state budget, but not just to the state budget when it happened. this happened mainly in the 2006. i persuaded my colleagues at the time that we should not just spend this money to state coffers or to our reserves, even though this might have been good, i told them we should use this money in areas that are most problematic. this money was stolen from the people, we should give it back

to the people directly. the poor's people in the russian federation. this money that we got we established many high losing funds with this money. the result of this fund benefited 10 million people. we repair their houses. 150,000 people will move to new houses from barracks. they will continue to replenish

this fund in the future. we use the money to improve housing conditions in villages of the russian federation. as for the criminal elements, we will act according to russian law. unfortunately, nobody remembers the fact that we have one of the chiefs of the security services in prison. he has no personal interest. he was not a major shareholder. it is clear they he acted according to instructions. we have proved five murders committed by him. it is a key company.

this lady refuse to sell her shop. she was killed in front of her husband. he got killed. he was murdered. .

the most talked about political

figures in the world. >> please welcome cal calaher. [applause] >> this has been so much fun. i am really said to be here with you guys today. i want to talk to you about something that i find extraordinarily decelerating. that is faces. i have been watching you guys during the coffee breaks, during the drains, eyeballing you from distances. consistent throughout the whole crowd, everybody here has a face. [laughter] some of you might even be to face. i am not sure about that. but u.s. -- some of you might even be two-faced. i'm not sure about that.

if one can take that face apart and reassembled it under their control, that is a formidable character. that is what economists have been paying me to do for 33 years, if you can believe it. i want to look at a phase, in particular phase, and what may happen to it over the next year. but i think the best way for me to inform you about the faces to talk to you about some of the faces of the past and of the present. i am literally going to give you a picture, several pictures to that effect. first, i want to stir with a slide show of some prominent characters. but that was important to start back with some of myerlee work to inform you a little bit of the work that abraham lincoln -- my first character from for for trade. i did start out my life in

caricature, doing it in streets. this is in london. hundreds of faces overtime come and sit in front of you and you learn about the pattern of faces and shapes and what to look for that is distinct the u.s. and individual. when i started with "the economist," it was during the era of margaret thatcher. this is one of the early covers, one of over 100 covers, that i have done for "the economist" over my career. there were full of characters, all of them interesting in their own way. some characters supplied you with more material than others. then, of course, you had the opportunity to cover historic events. caricatures often helped define the way public people remember important events throughout history. that is why cartoons are seen in

history books. bush was a cartoon that just kept on giving and giving and giving. sometimes i get confused which one is bush and which one is the other. i am unsure. he was a character who, over time, his face got more and more exaggerated the more he was in office. he also had other characters around, like tony blair. of course, his time in office also got him [unintelligible] in addition to doing cartoons, " i told my caricatures, when people sit down in front of me, when i am thinking about them is in 3d. i made a life-size sculpture of george bush. i also turned him into an animated moving character.

these are characters from today that we know. you can see the characters to play big roles here in washington. lieberman has made a kind of resurrection of late. this looks like it is made of silly putty. he is kind of moving through all of those muscles there. and then there are some people who do not want to go away. thank goodness. cartoonists were cheering when mccain nominated her. then we come to president barack obama. when a politician first comes into the public limelight, the characters are very close to the photographs. over time, the fish gets more exaggerated. last year at this time, when we had the election and post-

election, this was barack obama. he looks like he is smiling all the time. in fact, during the campaign, i had made a three-d model of him. i was on a six-city tour with " second city," the improv group. it looked like to talk to the sky and he would talk back. it was very effective at the time. but when he got into office, things started to change. he became more sullen and serious. in dealing with iran, you can see the guy in the back. but here was, obama no longer the pearly whites showing. when it came time to deliver the stimulus, he had to take on a different position in the government. he did not look as exciting as he did during the campaign.

more recently, when it came time to putting in his new orders for afghanistan, again, there was a more serious character. i want to leave the slide it there. i want to show you a little bit of what goes into the drawing of these characters. when i set out to draw some of the first time, the first thing i am looking for is the shape of their head. it is so interesting that you can spot somebody it across a room or on the other side of a football field and you can recognize them without knowing their very subtleties of the face because the shape of their head is the distinguishing character. i want to start with a character whose face a really enjoyed drawing. hihis back in the news with copenhagen. that is al gore. he has the distinctive shape to his head that kind of goes one line like this and then the

other line like this. that is where you start with outboard. -- that is where you start with al gore. he has the years. he has the use of spock from of a " star trek -- from "star trek." he hasn't elvis-like smell of that goes like this. -- he has an elvis-like mouth that goes like this. he lost the 2000 election because of florida. i'm telling you that is not it. he lost the election because he has the eyes of death. that is al gore for you. what you think? am i right? [laughter]

am i right? [applause] right. so we will sign this one here. there you go for you. let's draw another character with a distinctive face. john kerry -- long faced by. his face starts to appear and it is a long face, long phase, long face. look at that, look at that. no. ok, this is better. it goes up like this and like this and his nose is like this and his hair is like this and there's hair and his use come here like this and we have a line here and in line here. ladies and gentlemen, what you think? john kerry? [applause]

not to. -- not bad. not bad for a few strokes. who wants this one? can you pass this to the gentleman back there? that is a good way to start a riot. let's go with another democrat war. bill clinton. ok. he has kind of a turned up nose like this. he has a little bit of it turned it up mouth. and then there are the bags under his eyes. poor guy. have you noticed that he has more and more bags under his eyes. that is really hard. he travels a lot and they charge for every extra bag. [laughter] and then he has the used car salesman hair cut. and then look at this.

here is the bid. that is the bet that distinguishes the man. what you think? [laughter] bill clinton [applause] . all right. let's go to h.w. bush. know. let's go to h.w. bush -- let's go to w. bush. the years can never be too big. but the interesting thing about his face is that, over time, i abbreviated him so fast that i can turn him out in six seconds. he has very strong flared nostrils, a set of parentheses, a civil like that, horizontal line, horizontal line, and a few lines like this. his chin as a w. then you have the strong growth like this. and you have tiny eyes, a tiny

eyes. then the years. let's abbreviate the years a little bit like this and like this. then you have another parentheses here. then you have lines like this, which i called the perplex lloyoid. then you have george w. bush. what do you think? [applause] not bad. not bad. let's get on to president barack obama. it is interesting watching him over the course of time. he had a very young taut face when he first ran for office. the the combination of gravity and gravitas have worked its toll on his face the way it does. you look on the picture of any present, over four years, their faces age at an exponential rate.

-- of any president, over four years, their faces age at an exponential rate. you have a nice round top of the head. the years are a big portion of the balance of the head right now. but here is the important bit. he casts a heavy shadow in his eyes and you don't often see his eyes at a distance. you can see somebody at a distance, but they tend to be small, like this. his nose is quite small. he has a strong upper lip like this. you can see his face start to appear in front of you like this. drawing him and seeing the style of his portrait from the site, i am beginning to think that, the more i looked at him, i do not

think he was born in hawaii. i think he was born on easter island. [laughter] do you not think? that is more of what looks like right now so we have obama. ok. but now i am going to draw him from the front. i want you to look at this frame in the back. once to draw attention to the lines in his face and around the mouth, they're going to gain attention, not just from the cartoonist, but from everyone. you begin to understand how he moves and the way he talks. .

>> he has this kind of long shake here and that roundhead as we talked about before. here is the bit that will be interesting. it is what i call the oval. this line here and this line here, and it is this muscle that is going to get more and more accentuated. plus he has this little thing, you will see this little muscle down here moving when he talks. this line is also going to get stronger. his upper lip is like this. ladies and gentlemen, that is barack obama.

that is what he looks like now. let's show you what he is going to look like in a little while. we will stick this one here and take this path of. what he will look like in a year or so from now. this part of his head will get a little rounder. the years will get better. -- the shares will get better -- of the yearthe ears will get bi. that will be enough to divindefe barack obama. that leads me to a couple of predictions. first we will see the president get older and older. i have this little cartoon i

want to show you. if he is looking like this now, this cartoon took place early in his time as president. in 100 days, he is beginning to get gray and look a little older. 200 days, a little more. 500 days, it is going pretty fast. 1000 days, watch out. he comes around for his election bid in 2012. this is what we might see. i think he had better fix social security fast, if that is the case. i will leave you with one final prediction. we just came out with a new wall calendar. when "the economist" approached me and said let's do a calendar, we would just put some cartoons

of on the top. i said today, anyone can do that on their laptop. the digital world is so amazing, you can do just about anything. if you want to do something special, it has to be completely hand drawn from top to bottom. this is true, in the world of cartoons and animation, you are finding that more and more digital work is finding its way in, replacing the conventional way of delivering art and information and publications and in animation. the new digital stuff is awesome, but i think you'll also find that as the digital stuff moves out some of the traditional handpainted work, that work will become more and more valuable and more and more appreciated over time. that is my prediction for 2010 and beyond. thank you very much.

when >> let me tell you what a pleasure it is to talk about the challenges that we have had. we will describe everything in need to know about the future, the world economy, climate change, urbanization, global

health threats. we will leave it to the next panel to deal with the solutions. and would argue that we are entering on a new age of unprecedented global threats. in this century, i would argue

that the threats we have been focused on. there is a financial crisis and a response in developing a new economic order are not to the ones that we will be principally judge john from the perspective of 2050 or 2100. -- we will be principally judged on thfrom the perspective of 50 years ago o from now. these are not different in nature. there might be new threats that need new kinds of responses.

we will find out what our panel thinks. there are also ecosystem's challenges. if we talk about global health in the age of increasing protectiveness. we are in the middle of a pandemic. there are also of threats that come more silently. the chronic diseases that arise silently from a sicker, fatter, and older world and that kind of challenges that this poses to our health systems. the third challenge i would say is an organization. we are a primarily urban species

primarily. many of the challenges might be more difficult. there will be many challenges that will be judged on. there is an age of prosperity upon us. something bigger than we have

seen in economic terms since the arrival of columbus and the european. that climate is an area of your expectation, in copenhagen, they were offering the best chance to deal with the climate and ecosystems. >> be we need to be able to

price carbon as well as understand what the risk of return is. business will be able to unleash this entire potential for a new low carbon economy. it is absolutely critical that we get this deal. whether we get in copenhagen, that is uncertain but we will have a path forward. i think this is the best way forward in order to solve this problem. >> president obama has announced when he is going. he went with all the other leaders. what does this mean for the meeting? >> what we have seen over the past couple of weeks is certainly an increased expectation that we will get out of copenhagen. i think what obama has done recently by setting up a provisional target, by changing the arrival date towards the end of the session which is more

important, also by offering some financial increased commitment to help developing countries. >> what do you think about the prospects for a global approach for dealing with this most global of problems. this is a very attractive points? >> and surely, we need to have. >> we are in an age where president obama will be in a

position of leadership. we will be thinking about what is necessary. there is the mentality of people who are predisposed in a thinkig about near-term threats. that is physical harm.

who is powerful in this equation? this is a really big factor. my concern is that a lot of the people with wealth, a lot of the people with resources are the ones who have inordinate control both domestically and global lead. >> it is always that way? there has never been a utopian system? >> i think the differences aren't that the u.s. is in a position to want to confront these challenges. we are in a different era of leadership or the u.s. wants to solve these problems. the things that are hampering things are the domestic policies.

we are looking at a $10 billion commitment for >> funding to help ordinations deal with adaptation and mitigation. this is a small amount of the cannot even get global powers to agree. >> anna g. is a huge industry. i would argue that we need to do is to change the fundamental incentives facing investors, facing individuals including the behavior of all of us in this room so that we make different choices. how does one shift the balance of incentives? >> let me turn toif climate scio

have a cloud on it, i am paraphrasing and little bit, are there no regrets policies that would make sense for us to do even if climate or not on board? >> how much steel rubberize should i plan for as i am building a coastal facility? 52% of u.s. gdp is in coastal zones that would be affected by a 1 meter rise in sea level. why do we tell them that good

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least progressive of groups when it comes to dealing with sustainability issues. in new york city, they have managed to beat back a proposal by mayor bloomberg to retrofit existing buildings to become more green. they are a very real lobby. we have a very powerful mayor pressing an agenda of sustainability who is losing to industry. >> people are losing out on business because the people are

not becoming green. there is a certain cachet to having a green building and it is more healthy for the people who work there. the customers are telling the developers it does not matter whether you think it is a good idea or not, we will not lease. we have also seen histories in europe and in the u.s., when you have a vacancy, buildings that are greener lease back up again much more rapidly than those that aren't. >> this is an interesting idea. some tend to use a pace that don't have volatile organic compounds. people with children seem to like buildings that don't have these nasty compounds and them.

you gespend a lot of time talkig about development issues. there is a link between climate and property. there are about 26 billion people on earth to have no access to modern energy. here it is mostly women and girls who walk miles a day to catch count down and burned 8 in these stoves that leads to horrible pollution. -- walk miles a day to deal to get a fuel to burn in stoves. . .

we do know that the orders of magnitude of change are very big. for example, agriculture productivity has a very drastic projections. if the weather's going to become a regular belittle, the people -- if the weather is going to become a regular or volatile, it is a risk for agriculture.

because the policy response to climate change is likely to create shifts in the revenue stream, poor people might actually benefit from the climate regime. that is where we have been trying to focus our energies. first, prevent the problem and get a good greenhouse gas regime in place. second, prepare for the change windowwe know will happen. >> one of the key themes of copenhagen is thinking how to adapt. you can look at siberia or north dakota and said that a bit of warming could be good. people in the north could be most at risk because they tend to live in areas that are more volatile. they also tend to have societies

that have the least capacity to adapt. if you switched were looking at this from the anti-view, what are the bottom-up solutions? i am sure there will be people running off with the money and lots of scandals and other mechanisms. is going to be an imperfect and messy process. how do we counterbalance that with a reality check from the bottom-up. i know you spent a lot of time thinking about the world of technology in governance and how it might empower? from that perspective, while the big poobahs are working on this, how did you change behavior, including in developing countries? >> one of my roles is to be the

editor in chief of our blog for progress. we have a staff of 15 people. you are changing the course of politics by altering the balance of power in politics with new information. those who are in positions of great wealth, and they are constantly demeaning and putting down statistics with which they disagree. when the congressional budget office comes up with a report they do not like, the trash that. whatever it might be, whoever the independent exports are, they are constantly being trashed. we need to put back on the table things we can agree on. in their current course of politics and into the future, we can come to an agreement on a basic set of facts. the political discourse is that you do not disagree with

approaches and solutions. you disagree with the fundamental facts. we cannot even agree if climate change is occurring. the speaker of the denmark's parliament says that climate change is not a real threat to and it is dangerous to talk about it. the president of south africa says that hiv does not cause aids. >> if democracy is so messy, are you suggesting an alternative? here is the microphone. here's your podium >> going forward, i think that is the role of people -- here's your podium. >> going for, i think that is the role. the balance of power is greater than it has ever been. you can take advantage of those pools to give poor nations a greater voice.

you can understand the effects of climate change next year. that is the role of these new forms of communication. we're not going to get it from the coal energy giants. we're not going to get it from the people of con . . . . it, individual responsibility, a change in behavior? there is a popular school of thought known as nudge. it is a big brother who encourages you to encourage you -- who encourages you to do the right thing. is there something from the bottom up that could lead people to put down the cheeseburger and switch out to their inefficient lives for efficient ones? is there something that could

change behavior that comes from this school of thought from innovation technology, rather than having a traditional big brother regulating or banning behavior? >> people think they're being misled or lied to. to get people's attention to this, the uncovering of the golden nugget, that people feel like it is being held from them, the potential of changing human behavior is so ordered because of powerful actors -- that is what we have been concerned about for the past eight years, domestically, and what is preventing released peace. those are the types of powerful forces covering up, lying, d.the

seatin, deceiving. >> collect your thoughts and, when i turn to questions, please make yourself known with an animated waiting of the arms or whistle or catcalls. whenever you like. >> i would like to pick up on that. i think all of us are doing that. given the time scale of climate change, it is the business and government that needs to leave here. business is doing that already. this is an economic opportunity. it is an economic problem, first and foremost. the longer we wait, theof the more this will cost. >> is that true?

assuming we make the investments so that we have scaled up renewable energy your carbon capture -- or carbon capture, is this the only way necessarily to think about it? >> it will be harder to bring them down. 70% of the emission reductions that are needed by 2020, we have the technology to do it. it is increasing energy efficiency. it is increasing our use of low- carb and energy -- low-carb and on energy. we could put building codes in place. we could put in a plant codes. -- we could put in appliance) china is doing it for -- we

could put in applianced code co. >> is this a great green business opportunity? is that your sense of this? >> there is a lot of money to be made. there was also a lot of money made at the last carbon trading. it was made by the financial houses, not by the parties making the exchange. big is an imperfect model. -- it is an imperfect model. i have had major professional disasters in my life. they were all rooted in the same problem. that was me trying to convince people that they ought to care about something other than they were caring about when they walk in the door.

i do not see yes making progress, making people care about climate change. what we do with our clients, both public and private, is ask them what keeps them awake at night and what is the most clement responsible way to address their problems? we make much more progress in doing that then hammering them over the head over mitigation and modification. >> those are in such from the school of hard knocks. we will turn to the audience. do we have any questions? we have some microphones. let me see. while you collect your thoughts -- there is a gentleman there. excellent. identify yourself and make events short and sweet question rather than a grab bag comment.

>> from north dakota -- i am from north dakota it is cold, but not too bad. you mentioned that the government will look to establish a change in @ @ @ @ @ @ @ @ @ @h population is moving into the cities, what we will see is that there will be a lot of i.t. and telecommunications along the value change for design and

infrastructure within the built environment. i think that is where there's going to be a lot of pickup coming in the future. if we just work on -- in new york city, we haven't believe the pilot program -- we have an lled pilot program just to show that it can work. it is there to help decrease traffic accidents. you can come up with the policies necessary to drive the investments and then we can scale that kind of technology and the pace of change that we need. >> the stimulus passed by president obama included $80 billion in new energy technology. it focuses on wheeatherization, building technology that emmy was talking about, and building

the smart grid. those are what we call green collar jobs. you get people other who were formally blue-collar workers. you can see employment over the next year building up dramatically in these new technologies. >> i was on a stage recently interviewing carol browner. one thing she did it knowledge is that the green stimulus will hopefully be green, hopefully will create these jobs, but it may be less stimulating than one might think thus far. the nature of some of these investments will take time to play out. thus far, this year, perhaps not. but perhaps next year or the next year-and-a-half. just to put it in perspective, is spreading in 10 times as much

in real terms -- china is putting in 10 times as much general terms. it could crowd out private investment or if there will be a cliff in a year and have, what comes next when the green stimulus runs out, do you still have a windmill that is still not quite economic? there are difficult challenges that the history of energy subsidies and energy investment says that you need to workout. but there's no question that this kind of investment is a huge part of infrastructure. according to the national energy agency, because of the collapse of the credit markets, investment in renewable energy dropped 20% this year. it would have been a 30% drop had governments not in stilled stimulus packages. >> those were counterproductive to the discussion of climate.

the plans had to be completed and in the drawer. you have a two-year window to roll them out. houston, one of the great examples in the world of failed urban policy, they used to their stimulus money to start construction of a third ring road around houston to open up more squall. there was a portion that tried to do good. because there have not been a policy in the u.s. saying that there had to be a relationship between infrastructure and agreed outcomes, we were not prepared. >> i know what you're talking about. when people say "shovel-ready," i always say, "what are your shoveling?

>> no matter what we do in terms of conservation and energy efficiency, all efforts eventually are overwhelmed by simple population growth forecasts. we can all and we should tried to do everything we can, but what do -- you have to say about the absence of population control -- but what do each of you have to say about the absence of population control? >> that is an excellent question. our people the problem? >> people are the problem and people are the solution. it is as simple as that. the problem as population is far too simple. people consume in various ways around the world. the energy and pollution produced by a single american is it [unintelligible] will to [unintelligible] i think we have to look

ourselves and see that we have a much larger impact on the environment than several billion people on this earth. it is true that we want to empower people to control their fertility, to make sure says about their families, and, when they have the access and ability, they do. but when we see people as a resourced, as people to empower and support, not as the problem. >> 1 counterintuitive thing i have learned from scientists is that smaller numbers of families correspond with higher life expectancy. therefore, you have lower birthrates. you're not expect if you were living longer you have smaller families. people make their decisions about how large their families will be based on how many they think will survive.

in afghanistan, 13% of women over the age of 15 are illiterate. giving them the power to be educated and to make decisions about family decisions is hopefully going to be a solution, but not the solution >> if we actually look at population forecasts over the last 30 years, back when you have the limits to growth thinkers arguing that there was a population bomb, fundamentally, they identified a serious problem. as often happens, when one looks at strickland projections and says that the line is good to keep going, -- when one looks at straight line projections and says that the line is going to keep going, it does not. price signals, a policy response, and positive solutions

-- apart from being a population embalm, every forecast -- population bomb, every forecast shows that we have modified the population growth. it because -- it happens because of the impairment of girls and a number of other things that we have done in response to those warnings that have helped to mitigate that. it helps to live in a world of globalization and googlization. before, it was more of an elite process in the past. the more people that can apply their energies to solve these problems, people can be the solution to the problem. >> i think the population problem is a taboo in public policy. i think back to when i was the co-author of president

clinton's council of sustainability report, the sustainable communities chapter, there was a section about a population that went to -- vice president gore was all for that conversation. it went right to the president's desk and got ripped out and sent back. it was politically impossible to talk about population. it is an issue that has positive and negative sides to it. we have -- we are more comfortable to talk about population when it is growth in the developing world. population growth in the developed world is not. we want to talk about. -- is not something we want to talk about. >> to recognize that some people are not consuming enough for now, even now, we have 1 billion people who do not get enough food to eat. we had to have a convergence of

consumption the people at the bottom need to increase consumption and the people at the top need to monitor consumption without affecting our standard of living. >> some would characterize the u.s. position on climate change as not as closely participatory as our partners in other countries might like. what is the value proposition for the american electorate to be a full participant in a global climate change solution going forward? >> speaking as an american voter, where it is in it for me? >> from a business point of view, you want the certainty. we are in the middle of the road.

you see it in a bid with health care, too. you do not see where it is going. they want to know direction. if you give them the cab emissions, then they know with certainty what they can do. they can invest their money without concern that they will be stranded assets. then they can start creating jobs. we have, as americans, we have a huge stake in this. it is absolutely critical for a spirit we have generational issues, whether it is kids or grandkids. it is important that we get it right in the most flexible mechanism as possible. >> you run a progress of blog. perhaps your audience is already starting to think positively about action. but the question remains that we are asking politicians to act on behalf of voters who, in some cases, have not been born yet or who may never vote in this country. how do surmount that problem? >> of the political process is

already moving. peoplwe could see a collapse or success in this next year. it depends on whether the senate will take action. we have some powerful actors who are trying to do this, both inside and outside, and -- people to get involved isn't that a rupture. -- and trying to get people involved is at that juncture. western states, some states that stand to benefit, are starting to change their minds. other places like the midwest and west virginia, they need a little more convincing. >> i working lot with the chinese academy of science.

they straight forward say that we're using your debt to invest and create a green technology and service marketplace that will run the world. the longer the u.s. fritters away at this question, is it or is it not, they are getting huge competitive advantage and we will never catch up. >> there's one more question i want to take. >> my question is about nuclear energy. it seems to me that you have a huge problem with ultimate disposal with radioactive waste, the potential for an accent, or a terrorist attack.

i wonder if anyone has a strong opinion over whether we are confident of this being a good choice or in necessary evil. >> no clear, clearly there are issues with it. it works very well in france. it is a% of their energy surprise. it is not a cent -- it is 80% of their energy supply. it is not a silver bullet. >> it also costs a lot and takes a long time. >> is to be a campaigner for friends of the earth. >> would you like to leave day response? >> no, i left them behind. >> ok. >> i would turn to the panel before my perspective on 2010. as an old engineer from mit,

about nuclear, what bothers me is not safety. and every scientist in the world has agreed that the geological disposal, digging a big hole in the ground and leaving something in the ground is safe and can be done so relatively safe with a cost relative analysis. even with a carbon price, that would benefit nuclear. the investments for nuclear is so big and lumpy, it is much more expensive than the combined gas plant or distributing energy. it is from live -- it is from loaded. -- is front -- it is front loaded.

i predicted that, except for some special cases of countries where the cost of capital does not matter, like china, or it eastern europe, where they have a bigger problem with russian gas and a brother trying to cut them off, you will not try to find unsubsidized plants being built. there it -- there are cheaper and safer ways to attack the problem. let me turn to the real experts. gary, what is your forecast for 2010? >>please make it clear and short and witty. [laughter] >> by the end of 2010, there will be a new set of urban indicators focused on health, health equity, a social equity, and stability that will allow more of the world's population to enter into the conversations of climate.

>> great. >> i will start with a facetious one that you will not have to write down. president obama will attend the world cup in south africa. the u.s. will lose and obama will be played. the realistic one is that 2010 will be the hottest year in history. >> as the economic recovery gathers strength around the world, especially in gathering countries, we will return to an economic scarcity with rapidly rising prices for resources, food, and energy. >> i predict that the u.s. population will rally around and we will get u.s. legislation around climate and energy and we will get a global deal by 2010. >> i think you'll agree with me that our panel has done their job in provoking and enlightening. please join me in thanking them. [applause]

gma#a5c2 >> today. anen core presentation with supreme court special. a interview with witness yam suter at company p.m. speen.

on c-span >> this week on "q&a." leslie and ann co-burn. the impact of subprime mortgages on minorities. >> a look at what could be the driving factors in the u.s. and global economies in 2010. we'll hear from a member of president obama's council and economic advisors. this is just under an hour. on economic adviser. this is just under one hour.

>> we will talk about the world economy in 2010 now that the world has emerged from what is clearly the deepest postwar recession, what will the economy look like and what are the risks. the economy has been propped up mike government and by huge stimulus. what happens when we try to exit that? to leave risks sovereign debt crisis?

what will asset markets to do? do we face the risk of an asset bubble? those of the kinds of questions that i want to talk about. we will have some predictions, some very concrete predictions. i have two terrific analysts. their biographies are in your packets. austin coolclear joined by the present'president's economic bod representative. on his left, but carmen reinhardt, the director of

economics at university of maryland. she has had a very our illustrious career and it is one -- she is one of the experts on crisis analysis. how workers have been at the cutting edge but for more than a decade. much of this work has been together in an absolutely spectacular new book which is one of the best performing the government books of all time called "this time is different, 8 decades of financial falling tholly." alston, let's start with you. you arenw&x#ñ always optimistic. -- austin, let's start with you.

you are always optimistic. optimists talk about a z-shaped recovery. pessimist talk about a w. what kind of letter would you assign to the shape of the recovery? >> i am back to ph.d. time and i have one of those letters in my mind the. it is a greek letter. we hadn't up, down, sideways, and different. -- we have been up, down, sideways. at the beginning of the year, they jumped all over the administration and the chair of the cea forcing she thought that

we would see positive growth by the end of 2009. she said that is a totally rosy scenario. we will have had positive growth for half of the year. i think the question that we are now asking and it is a better question then will the recession and is when will the traditional leg come to an end between when the gdp turns around and win job growth begins -- and when that job growth begins? how much of the recovery is going to be reined in by some of the credit crunch factors that carmen talks about in her book. we might grow but we might reach some peak that is far less than what we could be. i am fairly optimistic.

i think at the end of 2009, it is better at than what people predicted. i think that the beginning of 2010 will be better than what people are thinking about. >> the third quarter of 2009 was 8% growth, fourth quarter was something like that. will we be looking at reasonably robust growth? >> 3% will be robust growth and i think that we will be in the same range for all of 2010. >> what do you think, carmen? >> hopefully it is not an "l." i think all of the indications point that we have reached a bottom. the question is how strong the recovery will be.

i do not think that the v-shape, when it was going through the 1982 recession, i was at bear stearns, of all places. that was paying v-shaped recovery and we had a lot of reasons to expect that real interest rates were very high, the highest since the depression. we had a lot of room on monetary policy. we did not have the leverage situation in households or with banks. for those reasons, interest rates that are near zero, i'm expecting this recovery to be sub-par. not just in the u.s. but elsewhere. >> there are some very powerful

forces skull lying in this -- there are some very powerful forces at play in this recovery. you tend to have some weak and fragile recoveries after that. i think of this as a backwards square root. you go down fast, you come off quite fast and then you love all of the very quickly. how different are things this time, carmen? are there things in this crisis, in the u.s. situation that leads you to believe that we will have a different trajectory? >> well, i will do good news, bad news. the goodness is that the policy

stimulus is more aggressive than we have seen in any prior crisis. the past to be worth a bit. the bad news is that this is a global crisis. we have not seen anything this synchronous across the largest economies in the world. we've not seen something like this since the 30's. if you look at the postwar recovery from crises, from deep financial crisis, one of the factors that kicks in importantly is export growth. it kicks in because you had a currency crash usually in the year of the crisis. it also happens because you are in crisis and the rest of the world is not.

the average growth in a postwar crisis situation which is 10% export growth annually, we will not connect that to help us pull out. that is a downside to the recovery. >> will start with the observation that traditionally economies have helped their way out of post banking crisis situations with export growth how much it is or rosy projection to a point on rapid growth. >> we can have robust growth in trade in general just to get back to some normal level.

it will be up and then flat. the flat as at 3 and 1/2% growth, i have no problem with that. >> new york talking about a growth rate, not a level, so it goes down and up and then instead of continuing and going "@ @ @ @ @ @ @ @ @ @ @ , r@ @ @r

that environment. we have always had less dependence on international trade than virtually anyone else. the wesu.s. is the biggest markt for the man credited in this market. -- for demand created in this market. robust business investment, consumption growth that is proportional to the income growth. we can have sustainable growth without having to go back to household balance sheets where the savings rate is literally less than zero and several quarters of the 2000's.

the stage is set where you can easily see the road for the moderate growth rate scenario. it is hard to see what the road is to super growth. in some sense, that is ok. we were facing down a horrendous scenario. tical -- people talk about getting to the bottom of the recession because you will not turn around and gdp growth for at least a year. we are out of recovery. >> let's talk about the other aspect, there has been huge government stimulus. we are running a double-digit

deficit. and we see an average prediction at 9% gdp. the debt will be higher across the rich world than when the crisis started. carmen, one of the most stunning statistics in your book is that public debt tends to rise in 80% in real terms after this kind of crisis. how much do you worry about that being repeated? how much do you care about the rise in public indebtedness here. will this restraint the recovery that austin is talking about? how much should we worry about the scale of the budget deficit and that the buildup in debt? >> well, i have lewis thought

that we should worry about getting out of the whole we have been in before we worry about medium-term issues. we want to make sure that the recovery is solid, even if it is not robust, we want to make sure it does not to the same thing that happened in japan and the mid 1990's. the case for stimulus is there and that is something that i will come back to later. the consequences of height that concerns me. it concerns me about that overhangs which do bad things to

growth, for example. if you look at the 80% figure, that is over three years. we are on track to come very close to the experience. the u.k. as well. ireland is ahead of the curve. spain, all the countries that have had financial crises. we have seen a dramatic increase in indebtedness. >> one of the big debates will be when it should you start at the exit strategy from loose fiscal policy. ireland's budget deficit has already been cut. they are raising taxes and cutting spending. the logic in the u.k. is that in means to be done fast because

otherwise investors will freak out. do you think that it is right that policymakers should be thinking about tightening fiscal policy? >> thinking about it, yes, acting on it, no. that is in a nutshell. thinking about it is critical. it is important to have in place for having confidence and to avoid risk considerations getting out of habit. one of the lessons that we should be taking away from the 1930's is that declaring victory too early can be costly. that was also the japanese in 1997. >> thinkin

the president said there was a need to focus on the rising debt. >> i don't think that those are contradictory. i think that what carman has said is exactly right. there are people that are just getting confused. in the middltail end of the deet recession since 1929, you do not tighten the belt of that moment. that is incorrect. if you did that that is extremely dangerous. there is a zero connection to the current crisis. the downturn has affected the

deficit but that is not the long run fiscal problem facing the country. the long run problem is the same one that has been facing us for the past 25 years, the aging of the population. >> in the long run. the lesson of the book is that there is a fiscal consequence to financial crisis. >> we are running a deficit for two to three years. >> if we think about the balance sheet, that stuff is not affecting the budget. if you look in the 10th a year, the deficit is forecast to be substantially worse than it was two years ago. that is the case because of the way we to the forecast, the boom

times, the tenured deficit's coming better than expected . -- the 10-year deficits come in better than expected. the main point is not to pay for the stimulus. the stimulus is almost totally out of the deficit five years from now. you have additional interest, that is a small component of the deficit, 50 billion a year where the long run deficits are up $400-$500 billion worse than ever forecast to be. there is this criticism that

the obama socialist are spending this country into oblivion. i defy you to look into any program that is increasing the deficit. >> i have to object to that strongly. one of the points that we have been making consistently is that even if there is zero stimulus, the consequences of financial crisis are very difficult for the budget because revenues collapse. even if you have no stimulus, you have very serious budget consequences because revenues from property, income taxes, any sort, this weakened substantially. i think that the the the issues have brought forward the issues that you raised.

there are aging population, social security. that has been brought forward because of the financial crisis. not necessarily because of the stimulus. >> i will move on. i think that we can all agree that you both said that it would be wrong to tighten fiscal policy next year but we need to worry about the medium term. there are long-term problems from entitlements and that the recession has made that worse. i want to get a couple of more subjects in. one is asset bobbles. six months ago, the whole debate was about policy makers needed to steer between deflation on one hand. we have a lot of talk that even as we can't have very much

inflation, we have asset prices, i am looking quite frosty in the u.s. and in asia, particularly, how much is next year, will it be committed by worries about asset prices. what should it be? -- will it be made worse by asset prices? >> with uncertainty about the strength of the recovery and, monetary policy is going to be dominated by concerns of asset bubbles as the main driver of policy decisions. right now, more money has been

lost searching for high yields. we have a lot of search for higher yields in the emerging markets. many have acted to try to dampen that and i think there are concerns about asset price bubbles. i don't think that u.s. monetary policy, if that is the question, if that is primarily reacting to that. it will remain focused on asset conditions. >> this is a formula of what should the rule of thumb, the monetary policy should depend upon conditions. you plug in the formula. right now, says the interest rate should be - 6%.

this is not the time to be talking about an exit strategy. that is the time for the fed to be talking about raising rates or doing something to pop asset bobbles. -- obubbles. they might face a difficult issues like you are trying to figure out if you are in a bubble. >> do you think are any signs of a bubble here? >> it is hard to tell when you are in one. if you have this in addition to huge leverage, we have seen that go wrong time and time again. we are in a time of the

@@@ @ @ @ @ @ @ @ @ @ @ @ @ @ @ would not be.

if the dollar will be replaced by other currency, what currency is it. if you look at history, the writing was on the wall that if the pound was to be displaced, that was by the dollar. that natural succession has not been determined. >> will it be the euro? >> we don't have a unified treasury market for euro. people don't buy your wrote or dollars, they buy government securities. -- people the purchase euros or

dollars. you don't want to buy greek debt. i don't see the euro as having a unified market that is competing with the treasury market. >> the u.s. dollar policy is determined by the u.s. treasury and i have no comment. whenever you see any announcement that sparks fear in the marketplace, unheard people run to the u.s. dollar. the idea that people cannot see the u.s. government has a column in the middle of a star has been disproven. >> -- a calm in the middle

of a storm has been disapproving. >> last friday's jobs figures, the unemployment rate fell. i would submit that we are going to have an uncomfortably high unemployment next year. we have midterm elections coming up in november. it is not a particularly pleasant number for any administration. there are two things which one can worry about. to what extent does this put pressure on the administration to come up with policies to deal with this? there's also the risk of protectionism. something i have long worried about in this whole crisis and frankly i have been surprised how little there has to insofar. if you have an environment of relatively weak growth by

historic standards and unemployment, shouldn't we be worried about this being the clear ingredients for rising trade tensions? >> you are always trying to scare me i have not seen any of this massive rise in anti trade sentiment. unlike any previous recessions where there is a nasty rise in anti-immigrant sentiment, night to the issues of trade or immigration have become central in this economic debate. -- neither of those issues of trade or immigration have become central in this economic debate. the job market is basically correct, even in a normal recession. it takes a lag between when the gdp turns around.

this is usually before it affects unemployment. it goes in the order of gdp growth, then productivity growth, then hours of existing employees go up and then payroll employment. the good news is that the gdp growth appears to be around. this past jobs report you sought hours of the employed start to pick up and down maybe we will see payroll employment growth. this was much worse than a normal recession. the unemployment rate could be going up even when you're generating jobs. the unemployment rate may still go back up even as it improves.

how much do you think that the american people are just being driven by the current today or how much did they take a step back and have understanding that to this was a really tough spot. a lot of economists look at the last quarter and say that we've really were that close to the depression. the financial system goes down and we are not on a self correcting past. -- path. if the unemployment rate is not down, i would hope that people would understand that we took on what actions that many of which were not popular and they

continue to be popular now by saving the financial system. >> when you look at the political economy, does that give you any insights into thinking about what things would look like here over the next year or two. -- over the next year or two? >> no, unless -- the only patterns that emerge from the political side are very clear are those extreme cases where you have had a sovereign default in which any administration in place at the time of default will not survive. apart from that, there are very

high grade political systems and different stages of being in to a tactic of administration. seldom does growth pay you -- daily out in terms of the debt accumulation. >> [inaudible] >> it is not often that you can do that. whichever administration is in place post crisis .

>> what about the military costs? >> i have not seen the budget. i did not think it would have

impact on economic growth or the recovery . >> i think that the balance is off. i think that you are forgetting the most important thing is people. people go within themselves. i think that we should think about the money. >> can we restrict this

primarily to questions, please? >> one of the things that we are seeing, there are a lot of people suffering. what can we do in the country to get back in the long term? how can other sectors help you? >> the goal in the stimulus and

the coal and what the president and the administration are saying is that if you will do jobs programs, you want to do something where you can do this partly because the fiscal position, it might be more sustainable.

in recessions, the businesses come back because the credit conditions are what they are and banks are the disproportionate a source of funding. there is a risk that the engine is not functioning. all around, we had this jobs forum. the ceo of the biggest companies said that their biggest fear is that small companies cannot get credit. one answer to the question is direct job growth policies.

>> one area that we can do better is to explain the link between employment, small business, credit availability. one thing that could be done is to light in the toxic asset load. >> in the credit channel is functioning. >> don't forget