today we will spend the next few hours discussing the global and u.s. economy. first, a discussion on developing economies and long-term trends around the world followed by douglas elmendorf with a closer look at his role in the u.s. economy. janet yellen holter first news conference. >> shortly after world war ii, and a time of growing international tensions and increased xp notch activity, the department of state became convinced that a military force

was needed to guarantee the security of its foreign services establishments around the world. students are taught the fundamentals of security. they learn of the halls and problems which are hazards to security, particularly the adverse effect on security of incidents of misconduct. an adverse effect on your duties involving security. to know is speaking, these areas are the black market, illegal drivingchange, reckless and early marriage. film from training the state department security post. sunday at 4:00 p.m. eastern on c-span3. now a discussion on the state

of the global economy focusing on u.s. monetary policy, potential problems in developing countries and long-term trends in the years ahead. this is part of an all-day conference hosted by the atlantic and is 45 minutes. i think we are going to get started. good morning, steve clemons. i do think we are going to get started. welcome everyone here and on the lifevesstream. i would like to welcome you to her third annual economy summit. a daylong conversation on the u.s. and global economies with some of the leading thinkers and posse from sisters in the world. we have two dozen experts and moderators joining us throughout the day. we hope this will be constructed and timely conversation from a variety of this. among those joining us is

ranking budget committee member chris van hollen, michael froman, judd gregg, alice rivlin, and many more. we will be livestreaming throughout the day at atlantic.com/live. we encourage you to engage in the conversation on twitter @atlantic_live. hashtagalso use the #atlanticecon be sure to put your cell phones on vibrate or turn them off. forill have an opportunity q and day-to-day. the seven members will have microphones. at the end of most of the sessions -- the staff members allow microphones at the end of most of the sessions. we will have a cocktail party in the next ballroom. i am told that there will the

signature cocktails with names such as the deficit teeny and an drop. i do not write this stuff. i just read it. to ourecial thank you underwriter of the woods foundation and are supporting underwriters at the board of standards for making today's summit hospital. with that had a great day. enjoy the program. [applause] i and steve clemons. i'm the washington editor at large at the atlantic. everybody. i want to say a salute to scott haven. he is doubling his salary by leaving the atlantic. he's about to become head of digital for all of time magazine's publications. he is one of the great digital disruptors in modern polishers -- bushings. .- modern publishing

he comes he will be moderating or speaking, not presiding. thank you so much. these drinks are crafted and put together. easy people who are ushering you aggressively. that is what i told him to do. they are blocking queue from the greener. some like that. be sure to thank them. the one inc. that they really screwed up on today with our hastag. nticecontla n.would like it to be #atleco today, blamed them for the extra characters. my friend and colleague in journalism the chief u.s.

correspondent and columnist with the financial times. he is also author of "time to start thinking, avoiding the specter of american decline." do check out his book. i will give him the opportunity to introduce his panel. ed? [applause] thanks a lot. thank you. thanks for inviting us to do this very general subject outlook for the global economy. tranquil the most economic outlook relatively speaking since 2008, 2009.

i would like to focus a little bit of what the risks are to this relative tranquility of the outlook hear it and do not think the panelists need much introduction. of tb bank.ist a very balanced economist. peter morsi, very well-known commentator. simon johnson, former imf chief economist. we have this relatively tranquil outlook. we have janet yellen's first fomc meeting. tapering will continue. the fed is on a blind path.

itna seems to be managing rebalancing. outlook showonomic a relative of six from 2013. -- uptick from 2013. what could go wrong? >> you are right. the consensus is that they are going to experience a gradual celebration of growth. where you're going to see the rotation is you are to see more of the strength coming from the advanced economies. the emerging markets are where you see an environment fraught with risk. we started to see some of the risk from last year when the fed initially started talking about tapering. the minute they talked about tapering, it jumped about a percentage rate. cost of capital, suddenly

you solve that some of the emerging-market economies are some very bigg structural challenges. this was india. the second thing that happened was that we saw commodity prices come down. it revealed a number of emerging-market economies are dependent. the point is that for many years financial market were euphoric about the emergence of china and other emerging economies. excited, thatget is when you should take a step back and ask the question how sustainable is what is happening. we are seeing a lot of weakness in the emerging-market world. soo think the china story is much different than what is happening. in china you have a government trying to change the fundamental economic model under which they have been operating.

this creates enormous challenges for china. i do think they have a lot of lovers to maintain growth above seven percent which is what china needs. you have to be prepared from a global point of view that things may not go smoothly and china. bulk is on thehe geopolitical site. for example what is happening in the ukraine at the moment. this is someone supporting it earlier? simon.d adjust to i think you got strong views on ukraine potential impact on european growth. how they could that be? >> that is a good question. we do not know. it is a very unpredictable situation. severalians have one rounds. they can sit back and relax, and

a lot of other things will fall into their hands like eastern ukraine. the europeans don't want to react too much. i think this puts a lot of pressure on various parts of the european economy and disruption of gas supplies, all the large financial flows or concerns about what they would do to asset prices. it all become potential mechanisms. does the banking sector in europe have big exposure to russia? or soave targeted 11 individuals. if we get an expansion of the sanctions, where is most exposed. he might worry about hungrier or

austria. it is fairly contained. cap to be concerned about unpredictable jumps. hedge funds or other particular investors or a movement of closet russian capital to different parts of the system. there's a lot that we do not know behind closed doors in terms of the flows. your outlook for 2014? lot forrope, we take a granted in terms of the recovery of the southern european economies. the turn on devaluation that we lot moret requires a deflation than these economies have had. we think it deflation as a bad inc.. the cost structures going to get in is through processes of deflation that lowers the wages. and a lot of places where i see risks, will i also see

opportunities. the most rational response for the europeans would be not across the board sanctions because of all the interconnections and all of the web of connections that will come apart and all that business. it would be to finally start to develop their own shale gas and to reawaken their nuclear programs so that they gradually not only take away the threat of the russians turning off the gas but we fail to recognize that russia has no place else to sell that vast. they are flaring eight times as much as the next largest oil producer. they do not have markets. they get 75% of their export revenues from oil and gas. moscow gets 50% of the government revenues. gradually if the european search replace that gas, they do a lot to scale down the that that the

russians oppose. of themmatter recognizing and be willing to no longer outsource environmental them on russia, take themselves and manage them so that they relieve themselves. there is an opportunity there. in the united state it is almost become an annual rite of spring. there are a lot of things we have been doing to prop up 2.3% growth. like gettinggs young people to come to my university and study art history or museum studies. the economic report of the president optimistically states that all the people who up and preparing for more productive , ieers of the labor force see a much greater risk that

there are still is not in the demand for what they do. it'll keep them from getting into the housing market in a way we need to get into it. the way you described at breakfast. now they have been replaced. the household formation is going to generate a lot the demand for new housing. i just do the risk sunshine everyone else sees. they have a lot of debt. they can literally forgive it all in a way that no one else can. they are likely to do some of that simply to keep their economy growing. risks in thel places where we think we are going to get the strong growth.

>> the least outlook is the united states. it has been the weather in the last two or three months. does now start picking up growth again. we get 3%. shocks from the rest of the world whether it is china or ukraine that keeps you from becoming a bigger threat to growth, or a temper tantrum, t aper-tantrum, from markets. how well placed as the u.s. first of all to withstand these shocks? and to help counteract them? what kind of firepower are we looking at in the u.s. economy? worry for the u.s. is how to deal with china unwinding bubble with the

debt overhang. that will have ramifications throughout the world economy that will come back. the u.s. options. if you remember, china was one of the two engines of the the u.s.owth story, debt-financed overconsumption was part of the last decade. china's debt finance finance over investment. that was the second part of the leg. it affects a whole number of economies in terms of them tied to the u.s. in terms of capital good suppliers. hand, the commodity producers, etc. the u.s. is somewhat insulated and trade wise initially to that potential. the secondary consequences of

having to use the foreign exchange reserves, we do not know how that scenario will play out. the big issue for the u.s. i andk is that be energy manufacturing growth stories has been held back i the lack of demand locally and domestically. the fact that the eurozone essentially has chosen a german oft or dutch export way outs is more than two percent of gdp. it indicates that they are writing off of global demand into some degrees the u.s.. if you are looking on how the shockan cope with a big from a decline in china growth, that is demand for commodities

and caterpillars of the world. the question is whether the u.s. with its allies can construct a /american global infrastructure program to supply the demand that will be lost from a serious -- series of andines in china's road investment in infrastructure and real estate. obstacle is not financing money. it is likely to be a lot of global capital available. >> they are still unable to pass route this. i would imagine you are skeptical about this.

we have had growth in the last 5 -- five years. with zero interest at play. response of ahe turn in the interest rate cycle? when do you spent a turn in the interest rate cycle? tapering,he fed is actuallyd that is not tightening monetary policy. it is reducing the amount of stimulus. i do not think the fed was but.ng much bang for it ucks.r the b if it is running unknown risk, this down as shut soon as possible. at the end of the day, they will continue to need enormous

monetary stimulus. i think the fed will not be raising rates for quite some time. i am optimistic the u.s. economy is going to accelerate. one of the core dimensions here is the fact that laster the economy grew 1.9% with this culture from government spending from 1.3 points. without that fiscal tightening, the u.s. economy would have been growing over 3%. as you head into this year, the fiscal drag am assuming policy the fiscal rat -- drag those 2.5 this year and down 2.3 beer after. that reduction is terribly important in setting the stage for growth to actually pick up. we also have to keep your expectations realistic your it

is not that long ago we got 3% growth was moderate. it is not going to create an inflation problem. very depressed. the economy will can need to be heavily dependent on low interest rates for a long time. i do not think the fed will until least 2015. to change for guidance. the unemployment rate will drop under 6.5% over the next couple of months. the reality is the employment rate is like giving you a fair depiction of what is happening in the labor market because of the drop in participation. ultimately i think the fed will wind down tapering. rates are not going to move up for a very long time. >> i wanted to see what you have been writing. >> actually, i have been doodling. with the way i do nervous problem that professors have of listening. [laughter]

we are just not accustomed to doing a lot of that. these are dances to just a lot of self-control. ofexperiences to just a lots self-control. how do the young people to know people, these are worries. i do not see the fed tightening in the sense of the federal fund rates anytime soon. will be dueers poll for the next two weeks, what will be the gdp numbers, when do you see the fed tightening? mine is no time soon. the reality is that while higher prices are often associated with more money, more money does not always cause higher prices.

say that with great certitude have great principles of economics that have not taken any monetary theory. if you have less than full capacity in the economy, more money is a stimulus. i do not see as having a whole what of inflation. i do see growth taking a very long time to get to 3%. century across two administrations and two recoveries, both averaged a growth of 2.3%, both bush and obama. has been 1.9%.te reagan clinton years it was 3.4%.

have onlyntury we created an average of 30,000 jobs per month. we are now to the point where one out of every six adult males between the ages of 25 and 54 is without a job and has earned the prospect of ever finding a job. they do not even sign up to say they're looking for a job. time, i was out of carlsberg late last year giving a speech, that is a golf resort where rich people go outside of san diego. one of the things impressed me is that at the cocktail party in was the people that were waiting on the tables and semi behind the bars where women weren't very expensive jewelry, the kind of silver/gold set to

get at the designer from neiman marcus. they were certified years old. i am 65. for someone to me, we're talking at least 75. old folks did not have the income they expected. i do not see interest rates going up anytime soon. i do not think there is an expectation. it is reasonable to have an expectation that we will have a big rig down in growth. to what extent is the financial sector? in 1994.is there was a panic. is a very nerve-racking one.

safeguards that were not there before. how confident are you that this time will be different? this time is never different, think you know. there is more capital or equity financing on the balance sheets of many of our financial institutions. i am worried when i hear the consensus so strongly. this is exactly when change in moremstances may give you if of anger. we used to be good at generating a lot of jobs. i think there is some risk of the financials that are. of our cover only

about a few institutions to become very big. a few very large eggs in that basket. if one or two the mix a calculation it causes problems. bige is at least one of our for that is mentioned having a large exposure to russian risk. >> one of the great imponderables of the advanced world in general has been the profit-making of corporations have on the balance sheets. as is suddenly going to justify putting that money to work? will it be another year and share buyback?

the cash reserves are actually very evenly distributed to the folks and the different sectors of corporate world. it has been the corporate debt to buy out or print stock is off oh insurance of or print it to asia. not the banks or the money centered banks, etc. a whole new category at risk. the best thing about the recovery to date has and the sustained the slowness of the private capital expenditure.

we can pick up and drive the economy. investment has actually fallen during this time. are eroding the value of our capital stock. because of a very weak investment performance. enormous problem and post-financial crisis. saw it in east asia after the 97 financial crisis. is thatquestion i think you have to think of the certainty in regulation. after the financial crisis you may be in a time where you are going to have sustained low average private investment. that means public investment is going to have to be used to crowd him. not only are you going to have an extended time of low interest

rates but you are going to have to have it in an investment strategy that create demand and provides a sort of certainty environment. it also requires public investment. is going topects it happen. it makes perfect sense what you're recommending. is an enormous pent up, the look of growth. middle-classntial consultations. there is pent-up demand for possible capital demand. >> wiest dill -- we still may

need the crowding in an certain industries. >> we can think of sectors where we really need more investment. in the oil and gas are. we are producing oil but we do not have the pipelines and the rail system is terribly overburdened. in other areas of the economy we are operating on the assumption that the capital labor ratio is going to be the same in the next cycle as the same as it was two cycles ago. there have been things like facebook and twitter and so forth were you can create enormous amount of value with a stock full of servers that do not caution the greater money.

this gives me pause. nothing gives me pause except on mobile sales have grown genetically. now they are up close to 60 million units a year. i do not see them getting above 70. they have to keep going out for that to be growth. the administration assumes this and buy houses. you are a recent graduate of the law school or a phd program, and you have $100,000 debt and you landed $50,000 job, you're not in a position to do anything but rent. that we're always trying to cast this recovery in the image of past recoveries. that might not be appropriate. >> i take your point. rates rise?nd just

whatf the observations is if it is wrong in the u.s. is stronger? risks are on the emerging-market size. stronger u.s.much economy. if you have a much stronger u.s. economy and bond yields go up significantly, that is the catalyst that could actually create a lot of the financial challenges in the world. we have seen an enormous increase in the leverage. particularly in the private sector side. with the average age of the goals on u.s. highways running years old, if your cars more than a decade old, you have a conversation with a mechanic about whether to fix or replace. they're another building enough

housing. if you think about real estate, there are lots of things that drive it in the short run interest rates. what drives in the long term population growth and demographic. there's a lot of pent-up demand. there are risks on the global site. there are some positive upside risks as well. >> i hope there are pent-up sessions. we have people, if you could raise your hand. a gentleman in the back. please give your name and occupation or whatever. it will record -- dental records. >> in the panel comment on what is going on in japan and abenomics on all the good stuff? >> who would like to take japan? abenomics consists of three

pharaohs. to lower the yen and two have qualitative and quantitative easing by dramatically expanding the thatary basis during structural reform. it is going to be complicated. we're moving into these ring where they will be raising that. assumptions that japan is now moving to this very critical phase were the easy gains from abenomics are over. you have seen some improvement in the corporate weight set her. the whole broad sector has not increased.

the whole danger now is whether devalue therts to yen sets off a new round of competitive devaluations and a stagnant world demand world. gets stymiedpan because the yen becomes a safe haven again. therefore they do not get the boost from 80 here when. weakertis, -- from the yen. ken curtis did a round table. he likened it to trying to cross the niagara falls on a tightrope during a heavy storm. make thee slip can experiment go awry.

>> the lady in the back. rich miller live bloomberg or the submittal to early. i'm wondering if you can expand on the geopolitical risks facing the global economy. not only russia and ukraine but what we see in the middle east with the irani negotiations. nuclear programs plus the whole series of elections we have in emerging markets. thank you. >> would you like to take that? i agree. the big risk is that interest in the united states. that is why they are not ready. they have the kind of local .olitical changes it was a everyday volatility. there does seem to have been the

markets were convinced that they have become more stable. largerre able to sustain amount of debt that the government were capable of providing. i do not think that is the case. i am convinced that the federal reserve pays no heed whatsoever to circumstances and any other emerging-market. i think you should expect a fair amount of volatility but all coming from the economic society rather than from these civic geopolitical dimensions. >> the bottom is whatever the risk comes from. >> the government is running the countries or they do not have that hasof firepower been demonstrated by mario draghi or ben bernanke. >> it was more about japan.

boost fromne-time exchange-rate appreciation. that is what they got. it comes at the expense of someone else. i will give you an example. perta now has another $1500 car sold to spend on investment and r&d. a greatly narrows the margins at general motors and ford. that is one of the reasons that despite it is a booming car general motors is discounting again. the pricing is getting very thin. you get to growth there. you lose it here. what is really wrong with japan. to some extent the united states. are not forming households. more importantly, they are not having babies. nothing stimulates growth like babies. [laughter]

pingback into baby boom. you run out and buy us and you expand your houses. you expand your houses. they are not. they're buying purses and gucci shoes. it is very important, the optimism to have children is an enormous stimulus to demand. japan, theng in both , and in southern europe. people are gradually living longer and yet fully otherwise is population would be in track. a veryse that is significant problem. >> good morning. we focused on the adoption of behaviors that have long-term impact. a simple question with an obvious answer but no practical solution.

the u.s. is accumulating something like were trillion dollars in infrastructure that is obligations to repair roads. they might invest in housing stock. it is a natural role for governments to invest in infrastructure because they have long-term benefit and cost a lot. what would be the practical way of getting the u.s. to invest when we have low interest rates and the opportunity to employ repair thel to infrastructure that we will need over the next decade? there are in fact a number of bills in congress to create a national infrastructure bank of nature, to provide to use the

bond market in particular to leverage up private capital to be able to provide loan guarantees and other systems to state or local governments. investment and economic, the solution is fairly easy and clean. virtually everyone comes through. there is an enormous need for long-term debt instruments that atvide reasonable returns relatively low risk. there is a lot of money out there. there is this huge infrastructure investment deficit. to be finance. it requires some sort of national or state debt financing banks. about those that have

not been repatriated offshore? the bill allows for $15 orlion to be reincorporated repatriated. then they would leverage that up 15 times. they would take $15 billion of and create $750 billion of capital to provide loan guarantees and low interest loans. economists arel having an out of the despot experience without a lot interest rates. -- are having an outer body experience when they talk about interest rates. many knowledgeable observers would say stable local governments have too much debt. .hey have been borrowing money it is to do with tensions and to build goals and things like this. of the sudden and infrastructure bank by barring

more money is ok. it does not make sense to deal with the infrastructure problem by facilitating more are women. the real problem with infrastructure in the united states is that several sectors have taken up a very large share of the supply that goes to taxes. we are now pay more in taxes in the united states than we have in the last 30 years. they are sucking up too much of the money. secondary education is too expensive. he really want to find some money then you have to start places costs and other where this has spun out of control. if yourowing more money think the stage on the verge of bankruptcy.

>> i own a business. my question to the family is what can we do to improve this. we have taxes too high. there's very little investment. get ahave to cut taxes or chance to build the business? sure i fully understood the question. what can we do to stimulate the global economy? that is a discrete subject. i think the fundamental challenges that in the advanced

world, governments around the world have made commitments to people they simply cannot afford. they are seriously thinking about how they currently do their expenditures and rebalancing policies in a way that promote economic growth. of the challenges is ultimately you need to unlock stronger growth to provide the revenues that can then pay for the priorities the governments want to spend. and on the social priorities that people want to acquire. this is a very a task here it is is being done in the world of enormous fiscal challenges here nine if we2008 or have not had this we would have had depression. now we living with the legacies of that. we need broad-based fiscal rebalancing.

it is politically difficult to do. in the emerging-market world the big challenge is actually around the fact that they have overleveraged their economies. if you think about the court challenge, on the one hand we have problems of public-sector debt. on the emerging-market side we have excesses of private sector debt. what you need to do is figure out some way. the trillion dollar question we do not necessarily have the right answer to. how do you do leverage your economies and still create an environment that has strong economic road? that is the fundamental challenge that countries around the world are going to be struggling with for years to come. >> very brief. >> all of the things are important. there really are major structural problems in the major global economies that need addressing. japan, andficit in

the high cost of health care in the united states, the german has a system similar to obamacare. they spend 12% of gdp on health care. we spend 19%. things of that nature. it just about every major economy in the world has issues. in europe it is the labor market. here it is the health care. i encourage the audience to make babies. we can generate growth together. [laughter] thank you very much. big round of applause to aded luce and his great panel. [applause] thanks to the panel. just a terrific panel. it is always fun with crack when he ascends from canada to the lower quadrant. you have been doing the feisty thing of betting against the

canadian dollar. , he will show you how feisty and dangerous it is to be there. when we were in keynes college some years ago, dominique strauss-kahn was speaking at a conference. these protesters showed up with giant banners that they hung over. simon had a red bag. he was detained as a protester. mistakingly. >> yesterday want to correct the record. with that i want to thank the panel. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2014] we will return to the discussion on the economy in a moment. first here's a look at tonight i'm time programming here on c-span. at 8:00 p.m. eastern, elena abouttalks to students her life and career. follow a