i worry about how well macro prudential can really work on, though it's an attempt worth making. and i think much greater emphasis needs to be placed on making a system that is safe for ignorance can and court reportereporter error. and that means emphasis on capital markets, emphasis on liquidity, emphasis on strengthening the robustness of the system. the last time we had a great emphasis on macro prudential, it was spain's countercyclical capital requirements that we were going to protect against the spanish real estate bubble. that didn't work so well. >> mr. tom bainny, briefly. >> yeah. i think one issue that hasn't been discussed so much lately is the fact that this exit is unsynchronized this time around. you see more advancement in the area. in the u.s. and in the uk. but then when you look at japan and europe, you don't see synchronicity from one perspective. we don't have a vacuum cleaner in terms of resources being attracted to the advanced world. i mean, you have areas still in the unconventional mode. but on the other hand, you might have more volatility in the exch

respond a little bit indirectly because of a point that o'neill raised which is the usefulness of macro prudentialquestions, even if you think you have got macro potential measures at work can you put them in place quickly enough, responsively enough, preemptively enough and i think that is one of the things -- the bank of england is working to try to find mechanisms for more rapid response so to speak and i think that is one of the real challenges. for example, before the crisis the fed put in new guidance on commercial real estate for banks which meant, which strengthened the criteria for risk management and said that you shouldn't have too much cre on your balance sheet, et cetera, et cetera. that process went through, took more than two years of negotiations and discussions and sending it out to banks and banks have time to implement. in order to make this work, the macro prudential things work we'll have to have a more nimble system. that is a big part of this. so the answer to the question bill raised is that, i'm sure there were some things that could have been done but unless everyone coll

be done more remains to to understand how to design and implement macro prudential tools and how they interact with monetary policy. while liquidity provision and other steps were critical to stemming the panic, a rapid shift in the stance of monetary policy was necessary to counteract the economic blow delivered by the crisis. the f-1 c reduce the federal funds rate from five went to five percent in the summer of 2007 to a range of 0-1.4% by the end of 2008, a very rapid easing. the rate has been at its lower bound ever since. to provide policy accommodation despite the constraint imposed on interest rates, the fed turned to to tools, enhanced guidance and large-scale purchases of longer-term securities for the fed's portfolio. other major banks have responded to the development since 2008 in roughly similar ways. the bank of england and the bank of japan have employed detailed guidance and conducted large- scale purchases. the european central bank has moved to reduce the perceived risk of sovereign debt, provide banks with liquidity and offer qualitative guidance regarding future p

we think the macro prudential tools will be the big story of 2014 and they will be used increasinglyggressively through the year. >> we have more with michael gallagher after the break and we will talk about europe and what's in store for the euro. ♪ >> we're back with michael gallagher, director of research at idea global. we are all moving on china. the consent of slowing growth once again. the concern of slowing growth. how much of a concern is this going forward? is this just noise? should notrm, you get too sensitive. you have to remember that 2014 will be a good year for the g 10 , the main export market for china. we should see a pick up the next board growth to the course of 2014. the big question for china is can they implement reform without derailing the economy? >> the market becomes sensitive on the china story when it sees interbank rates spiking because it's a fairer -- it's scared of an accident the likes of 2007 where you see a squeeze in the withm causing difficulty financial institutions. we have had money market spikes. they don't want to really grab the tail of t

it's -- in order to make this word the macro prudential things to work we have to have a more nimblef this. the answer to the question that bill raised is that i'm sure where there are some things that could have been done but unless everyone collectively knew what was going to happen and was willing to work together cooperatively to take those necessary steps, it's not obvious that you could have avoided it. >> give you one more question. >> larry sideman, unit of delaware. you rightly express concern about the premature phase out of fiscal stimulus at the end of 2010. do you think in a future recession it might be helpful if the federal reserve were able and willing to give the cash transfer to the treasury so congress could sustain fiscal stimulus further without additional borrowing? >> i don't think i'm going to go there, no. no. see, that -- first of all, that's not going to work because presumably the fed has an inflation target, right? so even if and let me emphasize to everybody, this is entirely hypothetical, even if that were to happen and i think it's no doubt illegal any

in order to make this work, the macro prudential things work we'll have to have a more nimble system. that is a big part of this. so the answer to the question bill raised is that, i'm sure there were some things that could have been done but unless everyone collectively knew what was going to happen and was willing to work together cooperatively to take the necessary steps it is not obvious that you could have avoided it. maybe one more question. >> larry sideman, university of delaware. you rightly expressed concern about the premature phaseout of fiscal stimulus at the end of 2010. do you think in future recession it might be helpful if the federal reserve were able and willing to give a cash transfer to the treasury so congress could sustain fiscal stimulus further without additional borrowing? >> i don't think i'm going to go there, no. [laughter] no. see, first of all that's not going to work because presumably the fed has an inflation target, right? so, even if, let me emphasize everybody, this is entirely hypothetical, okay. even if that were to happen, and i think it's no dou

boston red sox would be macro prudential. there's furnishes industry lobbying.the industry rose up and told the crew that we will not do this. if you really impose the capital rules that they proposed over the last couple of years, the europeans would never get there. >> the outcome would return to 2005. the shadow banking that was there in the last decade. >> we have had a huge reaction to the misbehavior before 2008. how do we fine-tune this regime so that we can see growth in the economy? if you do not have credit growth, which we do not, credit is shanking. the fed is trying to slow it down. we are restructuring. the leverage is very low. to make, those are the issues that i look at. that is the growth driver. >> why is it so hard to come up with a common definition for this? >> we do not have common accounting. you cannot have a common banking regulatory. the definition of a default, that is the foreign concept. >> we need jargon. what is basel besides a city in switzerland? >> it is an attempt to have common capital rules the goes back to the 1980's. >> ha

at johns he uses the word "macro prudential." that is not happening in basel, in banking.umpstart ordination? >> tom keene from davos. >> wish you were here. >> say hi to matt damon for me. we will be checking in throughout the week. act in new york, time to look at our agenda, the stories shaping the day. bm, and absolutely huge story. reporting earnings this afternoon, fourth-quarter report on news and novell is in discussions to acquire the low end server business. ibm shifting business from hardware into software. the notion of the cloud. consistenteen a threat to our discussions, you can go back to the beats story, that is a hardware-software story. what is consumer, one is enterprise. you can see the dynamics between hardware and software. >> the ability or inability or lack of awareness to get different entities talking to one another. that sounds like what you're focused on. >> and disease meeting devices. during one of the breaks, i told ru about wendy polar vortex -- when the polar vortex rolled a software update to the nest. >> a glitch. producinges are products

in order to make it work come up the macro prudential things to work, you'll have to have a more nimble that -- i am sure there are some things that could have been done, but unless everyone collectively knew what was going to happen and was willing to work together cooperatively to take those necessary steps, it is not obvious that you could have avoided it. lice one more question. -- >> one more question. >> you write about the premature phase out of the stimulus at the end of 2010. you think in a future session, it might be helpful if the federal reserve were able and willing to give a cash transfer to the treasury so congress could sustain fiscal stimulus further without additional borrowing? don't think i'm going to go there, no. [laughter] all, that- first of is not going to work because -- the fed has an inflation target. let me emphasize to everyone that this is entirely hypothetical -- [laughter] even if that were to happen, and i think it is no doubt illegal, but if there were to happen at some point in the future, the fed would have to undo that. actually would not affect the