a special session on Haiti was shoe horned into the programme this morning. the panel consisted of
Klaus Schwab - WEF
Bill Clinton - Clinton Global Initiative
Robert Greenhill - COO WEF
Dennis O'Brien - Digisoft
Amorim - Foreign Minister from Brazil
Helen Clark -

Klaus Schwab
it is not about short term disaster relief and recovery. there are many who are already engaged in this. this is about the long term reconstruction.

Bill Clinton
this will be a collaboration between private sector and CGI/WEF. there is a call for those present to consider how to contribute as the companies wish. he described the situation on the ground. need:
1. safe sanitary shelter
2. more food
3. more water
4. better system of healthcare organization
5. reestablish schools
6. reestablish govt
7. reestablish functional infrastructure services
8. distribution network [100 trucks]

UN is setting up work for cash programs in order to get things back to normal.
10,000 NGOs operating in Haiti. Haiti lost 15% of its GDP in 2008 due to four hurricanes. This is horrible for the people of Haiti not just for the tragedy which occurred, but for the fact that they were on the way to rebuild their county and this has been a huge slap back.

the others then spoke passionately about the opportunity that Haiti presents.

sarkissian -
sharma -
jim leape - WWF
lars josefsson - vattenfall
robert hormats - US Dept of Economic, Energy and Agricultural Affairs
fatih birol - Chief Economist IEA

energy security depends upon diversification. natural gas should not be overlooked. HORMATS talked about the key role that shale and gasification will play. he calls this a natural gas bridge to supply a bridge. energy governance is also an issue that needs to be encouraged globally as 'new reserves' in 'new countries' [ie Papua New Guinea, Ghana] come on-line. this will help them get it right so that. the link between energy and water as well as energy, water and food is critical to understand. water security issues will soon be recognized as important as energy security. they need to be considered together.

SHARMA. we cannot neglect to recognize that there is avast difference between the current and near term needs of developed and developing countries. the responses, thus must be differentiated to the national differences. energy security cannot be spoken about without including food security. universal access to energy, so that every citizen has access to a minimum must be guaranteed. so for him, energy security is really about getting energy to the millions of poor citizens who are desperate for it.

LEAPE - we have to be careful to ensure that we are not forgetting that the climate is struggling. we need to ensure that renewables are at the heart of the transition. most important on policy front; we need to stop subsidizing oil and coal production and finding a way to put a price on carbon, transportation needs to go electric as soon as possible. many of these things can happen at a national level. developing nations need to get on a low carbon development path.

do we need an E20? the energy twenty?

we will see a gas glut within the next year.

only 30 countries have petrochemical reserves. 170 have to import it.

Barney Frank - US Congressman; Chair Financial Services Committee
Jacob Frenkel - Chairman, JPMorgan Chase
Lord Levine - Chairman, Lloyd's
Anand Mahindra - MD, Mahindra & Mahindra
Kenneth Rogoff - Professor, Harvard University
Zhu Min - Deputy Governor, The People's Bank of Chaina
Maria Bartiromo - CNBC Anchor

Back to the Future: the next global crisis
this had a really slow start and was a very weak session. moderator was a poor facilitator and the sound was challenging...ie feedback and too soft..

Barney Frank opened with the need for a military reduction and no concern for US debt. He is a one liner. and wants to downsize the military and downsize the expectations. he also plans to cancel the manned spaceship to mars and the agricultural subsidies.

we need to focus on the next war. we have to focus on security. especially the relationship between China and the US. this will become more significant and will create a problem for hard and soft power.

the idea that we can grow our way out of this situation is simply Vodoo economics. the public is not ready for the reality of the economics.

really interesting session to start off the week. Below are notes taken during the session.....

panel:
Dennis Naly
Arif Naqvi
Raghuram Rajan
Nouriel Roubini - very interesting and intelligent. look up his writing.
David Rubenstein - very pragmatic and intelligent. look up his writing.
Heizo Takenaka

employment issue remains a global problem, not enough jobs were created. issue of near term inflation is very real. also a problem with fiscal responsibility of sovereign funds of all nations. there will be a risk of withdrawing funds, but they must.
:
belief that the professional investors have survived a 'heart attack'. lots of bargain hunting. lots of opportunities in the US. emerging markets will remain robust; far more robust than the developed nations who will have a continued slow growth rate. energy, both green and black, will remain robust. healthcare will also be a great place to invest based on the boomer investment. financial services were most likely also be attractive. the US government will not shrink its size and is investing in certain areas. the current congress has not figured out if it is going to work to beat up bug business or to go more centrist. in summary, a good time to invest and the risk of systemic failure is now gone.

one has to differentiate between optimism and realism. we shall see a few more shocks to the global financial system and we will see more bankruptcies in this year....big ones. emerging markets are a great place to be right now. this is because there is so much to do there. the past perception of risk there has been rally internal. in MENASA half the population is under the age of 25. this is huge. the world cannot do without oil. 60% of the reserves sit in the GCC. 30% of annual production comes from the GCC. the GCC share will continue to rise. there is a new feeling of attention to

this year Shanghi production will surpass HK for first time. there will be a robust recovery in the entire region of Asia. most will have 10% growth recovery. the Chinese GDP is really pushing much of this. there is also a large-scale fiscal expansion. four groups in the region. the emerging markets. the second group are those who can leverage the first. ie Korea. the third is country like Australia who have growth targets thru population growth. the fourth category......[not sure what he was on about]. he then went onto deflation. Japan has been suffering from deflation for the past 15 years.

move from a time of great fiscal uncertainty to one of political uncertainty. we could see an increased move to poplularism and protectionism. there will be a huge growth in India. it is a young population with a huge need for improvement across the board. that said, the jobs needs to be created thru better infrastructure. India need to convert the large number of rural jobs to other kinds of jobs.

The BRIC nations are an interesting case. Brazil still needs structural reform even though the country is doing quite well. Russia has big problems due to is single sided economy and the health issues as well as falling birth rates. India is doing well as is China.

There is an issue of overreaction that cannot be understated. We need to remember that economists cannot really predict anything beyond a few months.

How has the intellectual climate changed over the past year?
There seems to allot of fear for market forces. In the UK, the case of Iceland is a good case. There is a feeling that there is a 'monster' that needs to be moderated. In the US it is more about outrage at the excess of the financial sector. There is also an increasing feeling of the irrelevance of the financial sector....they are not lending or helping out, so curb or eliminate it. One big problem is that the emerging markets will take a lead from the developed markets and this could curb their growth.

So, fear is driving policy in the US, outrage in the US. Populist headline making seems to be the driver for fiscal policy in most of the rest. The concern is that these actions will not really deal with the fundamental problems. It is far more complicated than just compensation....it is really about transparency.

The US has a huge problem. the 3Ds: Debt, Deficit, Dollar. 230,000 deficit per person. The Dollar will sink unless there are actions. This is an even larger problem then the other things that the US Congress is concerned with.

Populism is being addressed, not sentiment. For example in the US the companies are doing well, but people are not. The bid question is who is THE consumer that is of the most important.

Tough years change behavior. No economist model can account for sentiment or emotion. And we have seen a few tough years.

Politicians do not understand finance.

asset bubbles are not dealt with by governments and regulation.

in all of this talk, one forgets the shareholders. many bankers are now saying that 'we did not feel enough pain' because the shareholders are not holding the leaders accountable. there is a need for regaining this accountability.

the US will certainly inflate the currency so that the debt can be dealt with. [this is an important issue...we can anticipate that this will begin this year].

the digital and tech economy is doing really really well. there is a dearth of high tech employees. jobs are being designed out of this economy. there is a HUGE difference between innovation and employment. there is a fundamental imbalance between the new economy, the green economy, and the challenge of employment. [[[[I wonder if this is not just another way of saying that the REAL problem is overpopulation]]]]

big crisis tend to be around time so big technology change. there is always a period of turmoil until the technology integrates into the society.

this is all fine, but we cannot forget, nor ignore, the emotive part of this. there is a fear to invest, but a need to invest.

the last three bubbles have been from real estate. not technology.

i REALLY love this. it exemplifies the cooperation between a city and its citizens in order to make the urban environment more livable and safer for all.

http://www.fastcompany.com/blog/william-bostwick/architecture-design/safer-bike-lanes-come-down-earth

every city has its own special personality. i love to wake up with a place. it is fascinating to observe the patterns of movement, the sounds and the behaviors that make each place unique. i walk to the bus stop most days when i am in California. the twenty minutes bring me from a dense group of single family dwellings nestled at the foot of a hill thru a grove of majestic redwoods. this morning crows were having a very loud argument as they hopped from treetop to treetop. the air is fresh and clean. i rarely meet another person until i get to the corner where the bus turns down the street to small shelter which is the 'depot' stop. the local greasy spoon opens at 0730. the vegetable delivery truck for the restaurant at the corner is periodically present. It is a far cry from baguettes and gutters running with water in Paris, or the old men holding their La Repubblica and espresso in the middle of the piazza with the schools kids streaming around them. Mill Valley may not be a world city, but from 0710-0730 it's mine, and I'm pleased to discover just like baguettes in paris and esspresso in venice it makes my heart delight and leaves me realising that while the scenery may be different, the storyline is exactly the same the world over...every place is unique. they each have their own pace and it's a special treat to participate in the rituals of their daily emergence.

the following is copied from a note that Stephen sent out this morning. It is intriguing.

Every now and then, a novel idea enters the public domain. At first, that idea sounds a bit off-beat - almost revolutionary. Eventually the idea is taken up by more and more people so that it manages to reach the mainstream. Beyond that, if the idea gains traction, it becomes part of a new conventional wisdom. Once there, anyone who questions the idea is seen as something of a crank. The ideas behind the rise of China fall into this path. Originally, at the turn of the century, the notion that China would be a rising super-power was seen as fanciful. The then conventional wisdom of the Washington Consensus had no place for China.

Goldman Sachs questioned that conventional wisdom when they developed the notion of the BRIC economies. Over the course of the decade, as the BRIC economies grew relative to the OECD economies, so the notion took hold. It has now reached the point where it has become the conventional wisdom. I attend a number of futurist meetings each year and at each one I am greeted by the mantra that China will have the largest economy in the world by the 2020s. Personally, I very much doubt this.

My cause for scepticism is threefold. First, there is the question of demographics. The 'One Child Policy' has served China well to date but, at some point in the coming decade, it will go into reverse, giving rise to a sharply growing dependency ratio (the ratio of working population to non-working population). Unless China experiences a very high level of labour productivity growth to compensate, as the size of the working population falls, so GDP growth will come off the boil. The decade may witness the reduction of GDP growth in China to the 5% to 8% band.

At this point the second cause for scepticism assumes importance. As time goes on, the law of large numbers will start to act as a constraining factor to the Chinese economy. High growth rates are easier to achieve when the economy is relatively small, but much harder for a large economy to maintain. This is why the growth rates of the BRIC economies are much higher than those of the OECD economies. For example, the raw materials that are needed to run the Chinese economy at it's present levels have caused most markets for raw materials to tighten. At some point during the next decade or two the demand for those raw materials is likely to exceed the capacity to supply them, acting as a limiting factor to further growth.

Third, to close the feedback loop, China has a very high savings ratio - mainly in response to the absence of a welfare safety net, as most Europeans would understand it. The private sector is saving through bank deposits, which are, in turn, being lent to fuel property and stock market bubbles. Usually, the creation of such bubbles suggests a lack of productive investment opportunities and foreshadows a financial crisis as and when those bubbles burst. Any slight disruption to the Chinese economy could lead savers to ask for their money back, precipitating something of a financial crisis. Given that the Government of China has deposited its surplus funds in US Treasury Bills, there are grounds to suspect that financial contagion could spread quite quickly. If that were to happen, then the overtly nationalistic policy of the Chinese Government could well hamper a co-ordinated global monetary response to contain the contagion.

This is not to say that we are predicting the financial collapse of China. What we are saying is that the development of the Chinese economy is a lot more fragile than it appears, and that an uncritical view of the conventional wisdom does not encourage a balanced review of future prospects. It is correct for futurists to point to a trend of China becoming a greater economic force in the world. However, good futurists would also point out that for every trend, there is also a an important counter-trend that could well turn into a new conventional wisdom. Over the past few months, I have noticed the growth in the China-sceptics. More and more articles that question the conventional wisdom are being published (I have included the links to a couple below), which suggests that we might be seeing the start of a turning point.

Only time will tell if the case for China has been over-made. However, given its importance, I think that it is an issue to which we will return from time to time.

Contrarian Investor Sees Economic Crash in China (New York Times 07/01/2010)

Think Again: Asia's Rise (Foreign Policy, July 2009)

Stephen Aguilar-Millan
Director of Research
European Futures Observatory
6 Greenways Close
Ipswich, Suffolk IP1 3RB
United Kingdom

Work: 44 (0) 1473 402302
Email: stephena@eufo.org

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