it? how does he maintain it and how does he get away with if? trumpocracy is the system of enabling, it's system in the white house, the system between trump and congress, the system between trump and the media that enable him and create an audience. it's the system that involves his -- the republican donor elite, the traditional elements of the republican bheert have succumbed to him and above all the core group of the voters within the republican party who enabled him to win the republican nomination and then go on to the presidency. >> watch "after words" sunday at 9:00 p.m. eastern. next, international monetary fund director christ ianella guard joins a conversation on the global economic outlook as part of the world economic forum in davos, switzerland. >> and so delighted again to be

moderating the global economic outlook after what one has to agree was a rather unusual warmup act. i am very disappointed, however, that for some reason they forgot to provide the band. [ laughter ] which i think we would have enjoyed very much. the previous speaker said three things with which i think we can all agree, that growth is very important, that jobs are very important and trade needs to be free and perceived, and i agree with this, to be fair, and i think those three points, growth, jocks and the nature of the trading system are pretty important for our discussions now. we are meeting at a point in

which i think for pretty well the first time since january 2008, the web has a tendency to be a bit behind the times so it didn't realize at that time just how bad it was going to be but since ten years of extraordinary global economic optimism and about a widely shared and synchronized recovery, so we will discuss the nature of that recovery, the risks in both directions to it and some of the longer term opportunities and challenges it creates, and to do so, if i may introduce to the panel very, very quickly, because you know i think everybody here. i have christ ianella guard to my level. i think she's been a member of this panel for a very long time,

and to her left, she's obviously the managing director of the international monetary fund and to her left is governor carney, governor of the bank of england and the central banks have so many governors after all. to his left is carry lamb, is chief executive of hong kong. and to her left is hiriko kuroda, the governor of the bank of japan who has actually been a friend of mine for 40 years. we met at oxford, and to his left is mary callahan edoes who is chief financial officer of jpmorgan's asset and wealth management who i've met and shared panels with now on quite a few occasions, and i'm looking forward very much to this one. so let's start with the short-term economic outlook, and

you've just recently at the imf produced your update which is wonderfullly cheerful and forecasting 3.9% growth in the world this year and next, so what could go wrong? >> well, let's celebrate what could go right for the moment because we are in a sweet spot, as i've said. 3.9%, 3.9 in 2018 and 201 is not bad and what's interesting is about 120 countries have actually seen the growth increase last year and we only have one-fifth of the emerging and developing countries that are seeing the gdp on a per capita basis decline so it's well spread out, and it's shared between advanced economies, emerging market economies and the part of the world that i would certainly worry most about is subsaharan africa where there's a combination of factors that lead to that lower income

per capita. i think we should celebrate that we don't do that too often and at the imf we're defining negative risk and we should celebrate. i think one of the reasons we are in that sweet spot at the moment, it's a cyclical upswing and it's largely attributable to policies that have been implemented, monetary economic policies that we had no idea about ten years ago. fiscal policies in many corners as well which have been reasonably good. it's debatable what was on exactly eight years ago but in the main it's the result of good policies. what the could go wrong, i'll mention three vulnerabilities as i see them. first of all, financialble vulnerabilities, and while the u.s. tax reform will certainly have positive effects in the short term for the u.s. and for

other countries around, it might also lead to serious risk and we can discuss that later, if you want, and that has an impact on the financial vulnerabilities, particularly given the high asset prices around the world and the easy financing that is still available. i would say that the second risk which is short and medium term and needs to be addressed in the short term is the excessive inequalities that in many places are growing and creating those fractures that klaus has identified as one of the themes of the world economic forum this year, and i would say that the third downside or risks that i see is the lack of international cooperation and the geopolitical risks that could be created as a result. i'll stop here, but happy to comment on any of those three. >> well, these are huge points, and we'll certainly come back to them. let's turn to one of the central bankers who has produced these

outcomes. central bankers have certainly become controversial. they have been described by a well-known authority as only game in town, and i think many of us think that's probably truer of japan than anywhere else so there were three arrows and yours is certainly the arrow that's gone further, mr. kuroda so tell us about your remarkable monetary policy, its success and how you're going to get out of it. >> thank you, martin. let me first explain the current status of the japanese economy. the economy is expanding moderately, supported by both domestic and external demand in a well balanced manner. real gdp has continued to grow for seven consecutive quarters,

and the average growth rate during that period is close to 2%. since japan's potential growth rate at this time moment is slightly less than 1%, 2% growth in the last seven quarters is really substantial improvement, and the unemployment rate has declined to less than 3%, actually 2.7% which is each in the japanese context is really full employment, and the current economic recovery has lasted for over 60 months and this is the second longest boom in the post-war era. going forward japan's economy is likely to continue its moderate

expansion so the cycle is expected to be maintained in both the corporate world as well as household sector on the back of highly accommodative conditions. on the price front, annual consumer price inflation excluding fresh food has been approaching 1%, but it has remained slightly positive, excluding the effect of energy prices. in japan a cop draft between strong economic recovery and relatively weak prices stand out as much at or even more than in the u.s. and europe. >> we're part improving in labor market conditions steadily tightening from its price

setting is expected to become gradually bullish and medium and long-term fluctuations are projected to rise. so while consumer price inflation is likely to increase while the price activity target of 2%, the deflationary mindset entrenched among people under prolonged differentiation has been more tenacious than expected. therefore, the bank of japan will continue to support japan's economy and prices by pursuing powerful monetary easing with persistence under the so-called quantitative and qualitative easing with various controls. there are various exists in the short to medium term but from my perspective they are mostly external including some

geopolitical risks. >> can i follow up. other you have an economy growing significantly above trend for a length of quite an extended period. you have unemployment at 2.7%, which is clearly very low and falling, and you announced when you became governor, not you, the government and the bank of japan together, that you would hit an inflation target of 2% which didn't seem -- most poem would say if the economy is like this you would have got there, so why is there no inflation? what down think is going on and how does that fit with what you're seeing in many other areas like eurozone and the united states as well? >> i think there are two factors

behind rather slow response of prices and in relation to strong economic growth. one is sort of universal common factor like globalization, new technologies, even effects so on and so forth, and all of them may make inflation rather subdued. this is universal factor, but second, japan's specific factor as i just said in my initial remark, that is to say after is a-year long deflation from 1998 through 2013 the deflation and mindset people expect prices and

wages to not rise, and this kind of mindset is not as strong and it's not so easy to eradicate this kind of mindset from japanese household as well as companies, but there are some indication that wages are actually rising and some prices have already started to rise and even medium to long term inflation expectations which have been so weak in the last couple of years and are now trying to pick up and there are many factors which made achieving 2% inflation target or price target so difficult and

time-consuming, but i think we are finally close to the target. >> okay. >> which hope so since you promised to the government you would deliver t.mark carney, you don't have the problem of low inflation at the moment. you do have the problem of managing monetary policy in the face of some strange decision that the british people, got bless them took in june 2016, one which those who ever read me will realize i wasn't wildly enthusiastic about. you have started a tiny increase in interest rates so a step towards normalization. how do you perceive the monetary policy challenges for you and other central banks in similar situations ahead in this strange environment of strong growth but still generally contained

inflation and where among other things people are concerned about is that the -- this normalization process might reveal more financial fragility than is now evident. what is the path forward? >> in the next what 15 minutes should i answer that. >> you can do it in two minutes. >> to do it in two minutes let me talk about the normalization challenge, if i could, and if i could pick on what we just heard. the nature of the expansion, the recovery as the imf has just indicated, it's stronger. it's getting up to around 4%. it's broader. it's 90% of economies growing faster than potential so slack is being used up, and it's also healthier. i'll give you one example. in terms of the acceleration of g7 growth in the last year, 80%, 80% plus of that has been investment picking up and net trade pick up, so this is not a consumer boom-led poll recovery

or acceleration and all of those have consequences for normalization as you can anticipate. the first slack being used up is the phillips curve coming back. that's the question in the face of bigger secular pressures, globalization technology as just mentioned and all of us have been discussion over the course of this -- of this woke and at other times. i think crucial point is as you get towards full employment as the output gap shifts, they call it a phillips curve for a reason, and you start to see the convex element of the slope show the pickup should be there or should begin, maybe not quite to historic degrees, so we have to be cautious but should come, and if you look at wage behavior in the u.s., in the uk, some of the other -- well, maybe i shouldn't speak for other economies, but you see that firming of wages which once you adjust for productivity growth and some

underemployment and up until very recently a low level of churn in the labor market, it starts to fit together as least directionally so there's element that's pushing up and the second element pushing towards normalization i should say of policy, the second element is that healthier, more investment as part of recovery so investment picking up relative to savings and we've seen, as you know, a big shift in fiscal policy. i think on advantage advanced economies a 2% to 2.5% drag now adding, fending on how you add multipliers, adding to growth maybe half a percent or so on average, somewhere in that zone, but that's a big, big swing so investment up. savings down and pushing up on the equilibrium rate of interest. the third element of that i would highlight is just the

stance of policy as a whole of if i could use the term for these purposes the g-4 so the members of the g7 who were practicing quantitative easing, and if you look at the flow of net fiscal issuance minus the bonds being taken out of the market by asset purchases, whether it was the boj or the ecb or bank of england or the fed, we've shifted from collectively 2013 to 2017 basically no net flow or even bonds being taken out to this year on the order of magnitude to about $1 trillion of net issuance based on announced plans and potentially that going up to 1.5 trillion or higher next year so that one would expect to push up on rates. so in the context of normalization you have sort of a real economy providing some

support for it. you have some technical factors which play into it. you have a very tough judgment to be made about where is the equilibrium rate of interest which has been very, very low and arguably should be raising a bit. you can make an argument about direction but certainly with not any precision about degree. one has a sense of direction i would say as a whole for the central banks, a regime shift in terms of towards normalization, but a requirement for each of us to be quite prudent and patient as appropriate in making those judgments. the last thing i will say and i won't expand on that unless you want, the uk is in a relatively unique situation in that over the course of the next year as the negotiations with the eu 27 progress, we're going to find a lot more about what the supply capacity of the economy is in the near term and what the right level of the exchange rates

should be, whether or not they are going to be there for other trade costs and how all of this affects demand and of course it is all of those factors together which determine the appropriate stance of monetary policy. >> let me ask one follow-up question because i go to the -- >> i was trying to run out clock. >> i'll come back to that in a moment. >> yeah. >> you have had a central role through the financial stability board in the strengthening the global financial system. i get and every time i write on this sort of hundreds and hundreds of comments below on the lines of, these crazy central banks have already, and if they haven't already will soon have created the most unmanageable asset price bubble ever, the omni bubble. it will burst, probably when you -- as of when you raise rates, you collectively, and the

crash will lead to a total meltdown. >> yeah. >> and this sort of thing. >> on a scale of 1 to so how likely is that senator. >> which way? >> you can choose. one zero risk, essentially all of you go away and not worry at all and 10, run away and get a big umbrella because the house is going to fall down on you. >> right, two points. it's a composite probability. what's the probability there will be an adjustment in asset prices? yeah, that probability has gone up. if you look at corporate bond spreads, high yield spreads, near all-time lows, last seen before lkccm, just before the global financial crisis in a rising rate environment, one would expect adjustment there. other asset prices accordingly. i think the big question is not the market will find the right level for assets. the question is whether the core of the financial system is in a

position that's going to amplify those movements in an rad verse way and there will be a feedback to the real economy, and on that component of probability i would put that as quite low because it's not just the regulators. it's the financial institutions represented here and across the world that have really transformed the liquidity and capital positions of the institutions. give you very quick numbers, if i may. pre-crisis, the coverage of short-term liabilities for banks, the major banks particularly in the uk, plus their access to central bank facilities was 10%. now that's 110%. so they are fully covered. both their own liquidity and access to the liquidity on all the short-term liability and second figure, and we've had healthy debates on it, but the overall level of capital standards have gone up ten times but actual levels of capital have gone up about five times for the major banks, apples to apples comparison in terms of

capital. that's a huge shift and the type of shift in the judgment of the bank of england, and i'll be around if this judgment is tested, that would allow that system to sustain a shock of a disorderly brexit and we're confident in terms of the magnitude because we've tested it and we're not all that way there in too big to fail but we've made a huge amount of progress in terms of reshaping and institutions reshaping their business lines and being able to separate their high street or retail component of the banking and adding on top of all of that capital big layers of debt for the uk and i'll stop with this. the major banks have 25% total loss-absorbing capacity, so even if they go through that capital, there's another layer of securities that are held by institutional investors, some of whom are represented in this room, who would find out that they are no longer debt holders but are equity holders, so all

of this provides real shock-be a shoshing capacity for the core of the system. that's not to say that asset prices couldn't change, but it's to provide a measure of confidence that if and when they do, even if they are sharp changes, that the system isn't going to amplify that impact. >> i think this is hinn credibly important so the conclusion that i would draw, too, one is that all those commenters and one or two in the audience who are worried that the whole world will fall apart in the next couple of years because of policy normalization and asset price collapses should calm down and feel completely and utterly relaxed, and the second conclusion which is completely personal, that if there are any politicians in the world who are telling us that the continually rising stock market is an indication of how successful they are, they might find the central banks are going to get

in the way. let me turn to -- let me turn to you, carrie lam. tell us about how the world looks from your perspective both in hong kong, a core part of the asian economy and financial center and if you can about the rather large place with which you're closely connected and to your north. >> yes. >> yes, as a small and externally oriented economy and one of the most freest and competitive economies in the world hong kong personal benefits from the global economic recovery so we're doing very well. last year, we are projecting full-year growth of 2017 at no less than 3.7% in real terms which is considerably higher than 2% in the preceding year. that is 2016. christine kept on reminding us that while the sun is out, i'm

pleased to tell you that i've not discovered a leaking roof in hong kong yet, but similar while sun is out it's always good to strengthen the foundation. strengthening the foundation enabled hong kong to seize many opportunities arising from china's economic policy and also asia because asia's growth now account for 60% of the gdp growth worldwide and china alone is 30% contribution. so this session is about global economic situation. i would not be doing justice if i talk more about the economy of hong kong so if one looks at the china economic policy which will be very relevant for hong canning because president economy jinping said he'll support the central government hong kong being integrated in the national development strategy.

last year the presidency delivered two very important speeches internationally. one, of course, is in in forum at last year's davos. in january last year, but at that time i suspect that the global economic recovery was not very certain, so the president was talking about leaders in various economies should shoulder shoulder joint responsibility to propel the economic growth globally. and then in november last year, which christine and i were also there at the aipac meeting, ceo summit, at that point in time, i think everybody was very assured that there is now very bright signs of economic recovery. so president xi talked about that we should really seize the opportunity of a global economy in transition to accelerate the growth of asia-pacific. so putting in that context, i try to summarize for our

distinguished guest a gist of the economic policy of china in my view based on my reading of the two species and how china will continue to uphold free trade and economic globalization. that we should adapt to it and guide it and cushion its negative impact. and deliver its benefits to all because if economic benefits are not shared by all, all economies will face one problem or the other. and it should be more reinvigorated, more inclusive and more sustainable. so wig that in mind, since the world is now seeing some driving forces for growth, i feel we should take this opportunity to improve governance, to focus on more trade rules, to have more regulatory collaboration between central bankers and regulatory authorities, to put in place sound social policies to address issues that christine has

reminded us also, poverty. income disparity and lack of opportunities, particularly for the young people. so i would just like to say that in this term of a government, i will embrace those values and although we do not practice state planning under the basic law, we are still a free capitalist economy, but we will embrace those values to put in place the necessary social policies to make timely investments in education. so enhanced connectivity with the rest of the world. especially with asean. last november we signed an agreement with asean and we are negotiating several free trade agreements at this moment. i remain very optimistic about the short to medium term future of hong kong. because we are so externally oriented, please keep the tsunami away from us and we will be safe. thank you. >> this is difficult but i don't think we can avoid it. can i just ask one follow-up

question and i'm also going to discuss this with mary. president trump when he spoke here, i think the most substantive thing, think for this audience and this panel, is what he said about trade policy. and he said two quite interesting things. one of which was new. we'll come to that in a moment. and one more traditional. he talked very explicitly, and it's not new, about countries, though he didn't name names, which are perceived to misbehave on intellectual property and countries that are pursuing industrial policies with government subsidies. i think he used that word. and it's surely no great secret that when he said that he's thinking about china. and there are those of us who are very concerned at the risk of serious trade conflict. we have, of course, at the

beginning of this week seen relatively minor actions in this regard. from your perspective, running a very open economy, great trading place, connected to china and, of course, to the u.s., too, how concerned are people where you are that this actually might prove a very destructive development? how do you perceive that risk? >> well, of course, as i mentioned, being such an externally oriented economy and so dependent on free trade, we would not like to see any trade conflicts or trade wars, so to speak. but trade deficit is not something that we are not used to. i remember at a session that i shared with president trump at aipac, i gave him a figure. i said, mr. president, the largest trade surplus that america has is with the small economy called hong kong at $31

billion u.s. a year. he seemed to be quite pleased with that. >> and you didn't threaten him with protection? >> he did not mention this word just now. so coming back to china, as i mentioned, from president xi's discussions in the two speeches, china is still a developing economy so it will evolve and build in those things that will make trade more transparent, fairer to everybody, but the fairness must be to everybody. >> if i may turn to you, mary erdoes. i'm very much interested to see if there is anything in the overall picture that has been presented by the distinguished officials of t officials that you disagree with. i would be interested from your perspective on where you on on the impact of the tax reform, which is obviously a very big

issue, and possibly financial f fragility as a leading -- >> you know, i can't help put sit here and we're all in this audience. this is the last panel of the 2018 davos event. and when we think about where we've come from and what we just heard from all the major economies around the world, i think we first and foremost have to thank mr. and mrs. schwab for bringing us together to be committed to improving the state of the world. because the vision to bring together, not just policy-makers in one area and central bankers in another and ceos in another and philanthropists in another, but all together to import and export the best thinking so that, and especially after the great financial crisis, how do we get back on a road where we don't have a boom and bust

cycle? and here we sit nine year later. we could be in our second recession post-then had we had the regular upts as and downs ae have a global economy that is expanding almost universally and it is because you look at the people up here on stage and the other central bankers and policy-makers around the world and you think to yourself how incredibly complicated this was to pull off. nine years. $11 trillion. put back into the system. but not in an unthought-through manner. so we are sitting here and having people who have worked tirelessly. it is so incredibly complicated to have gotten this right, and what you've done for all of us, especially the investors of the world to be able to invest in that on behalf of all the pensioners around the world who will benefit from that as they move towards their retirement, i cannot thank you enough for that

and i can also not thank you enough for giving all of these government jobs such a fabulous prestige and something that i know all of us now perhaps aspire to do even more son s. t in the past. we thank you for that. >> that was fantastic. >> thank you. >> that's the nicest thing i've ever heard said about central bankers. >> so thank you all for coming. [ laughter ] >> the official sector should feel extraordinarily happy. i'm waiting for the but. >> there is no but. >> oh, okay. >> the -- and -- and, therefore, it is incumbent on us as investors to watch what they're doing and to not miss a beat and not sit here and think about the greatest worry in davos that i've heard for the past several days is that there is not enough worry. people are worried that people aren't worried. and it's okay to not be worried. it's okay, as ma dam lagarde

said to where we are, how we got here and people can benefit from investing. so people all around the world can have access to public markets can be able to participate in the recovery of what's happened and continue to do so. the opportunities, we can talk about them in the u.s. they're almost everywhere, u.s., europe, emerging economies, being able to have participation in these companies, taking these policies and putting them back to work and reinvesting in their own communities and in their own products and services and exactly what our job is to do. >> do you want to say anything about the great tax cut and how it's going to impact the u.s. and the world? >> you know, the great tax cut is really the great tax normalization, the u.s. was just out of whack. so the fact that we got to done was a very important move for the u.s.' competitive nature. how that goes back into play i

think is the thing that is so exciting for the rest of the world because what happens in the u.s. can often be contiguous for other companies that exist in a multinational fashion or just in their own nations. so the fact that the ceos in the united states of america are not just doing one thing with those tax cuts but doing multiple things, they're taking that money and they're helping the shareholders. you see more buy-backs. you see more dividend payments. they're helping the customers of the companies. you will see much more m & a to get more products and services. much more cap x. more importantly, they're helping their employees. it's not just the one-time bonuses we've heard about. it is the wage increases. it is health care support. it is being able to help them and increase their retirement benefits. so it's being able to help them continue to participate in that, and then additionally, companies are also taking that money and putting it back into their own fill thorpic efforts that they serve and the job retraining.

if you continue to see that across america, that is what capitalism is all about. >> i'm going to move on now to -- unless somebody wants to add on the shorter term risks to the longer term opportunity. i think the inf was the first to say we should fix our roofs while the sun shines. i think it's -- the fund has been rather good on metaphors of various things of this kind in the last few years. so i like that. and it's no longer the new mediocre, which is nice. so the big issue people are focused on is the feeble state of productivity growth. some people seem to think tax cuts will be enough. but what is -- what is your view, christine lagarde, of the

agenda of fixing the roof when there is a cyclical recovery will be turned into an uptick in trend growth across the world? >> thank you, martin. a couple of things that i would like to point out, too. one is the productivity numbers that we have are not satisfactory. productivity prior to the financial crisis was about 1%, which was not particularly high. it's now down to 0.3% in the advanced economies. so that needs to be addressed. second point is, the potential growth needs to be improved as well because while we are in a sweet spot at moment, it's not going to last forever and clearly many of the economies that are growing nicely at the moment are growing above potential, which in and of itself presents risks. so growth potential enhancing reforms, whip ach are going to

country specific. i'm not going to give you a laundry list, each country has a roof of its own, need to focus on those two aspects. if i can just focus on productivity for a second, and that will touch on something i mentioned earlier on as one of the downside risk, which is lack of international cooperation. to address productivity or the lagging productivity that we have, we need to invest in research, development and facilitate innovation. no question about that. we need more trade rather than less trade. because trade encourages competition, fosters innovation and actually is conducive to that improved productivity. and that takes me back to my concern about lack of international cooperation. to have more trade, better trade, fair trade, free trade, reciprocal trade, we need international cooperation.

and the concern i have at the moment is that we tend to see a degree of common denominator, which is, yes, we all need that, but it needs a reset. we need to look at state-owned enterprise subsidies. we need to look at sharing of intellectual property rights. we need to look at constraints imposed here and there. yes, and the imf agrees with all of that, but it needs to be looked at in a cooperative way and through international cooperation. i think that should happen. i was particularly pleased to hear that president trump mentioned wto. it's one of the forums in which those things can and should happen. and hopefully through improvement there, innovation that we've heard many of the leaders in the last few days focus on and identify as one of the areas where they want to invest, we will improve that productivity. final say, while, mary, i want

to thank you so much for recognizing the efforts that we've endeavored, i don't think that we've completed the job. having growth is good. improving productivity is good. but making sure that the results of that growth are properly allocated, properly distributed and the growing inequalities that we see in advanced economies, many of them, and still very high in emerging market economies are a threat to sustainable growth. we've done multiple research on that. >> i can't imagine why but we don't seem to have any professional politicians on these panel so they can't respond. one tiny follow-up. >> yeah. >> i was very interested, and this came up yesterday already, but president trump repeated it just now. he said, if i understand him

correctly, that under the right terms, the united states would consider negotiating to re-enter the tpp as a multilateral endeavor. >> yeah. >> i think that's the first time i've heard this. you would have to regard that in terms of the trade agenda we've been hearing so much about as really rather remarkable and encouraging development, wouldn't we? >> yes. i think we -- i think we -- i agree with you. it's not multilateral in is essence, it's plural lateral. i think that's a really good indication. one more area, if i may, where international cooperation is key and favored by many countries, including the united states, i think, actually. it's the fight against corruption. we haven't talked much about it and i don't want to spend too much time on it, but it's one area which combined with the fight against tax evasion and

profit shifting and all the rest of it is actually vital to give more hope and encourage our economies. >> mark carney, i think you wanted to say something on this. >> you want to speak structural so i'll try to concentrate there. i'll start with the cyclical point which is that we should be seeing a pick up in productivity, particularly with capital deepening. but another factor in the cyclical sense that leads to structural, we have had up until very recently quite low job churn, particularly in the united kingdom, and part of the difusion process in their new application and learning at one firm and moving to another firm and setting up a new company. so we should get that, and particularly at a time of great innovation, that's where you get the productivity pickup. as you're well aware, and you've written on this, we have a very long tail in most of our economies of quite substandard firms. i think that's one of the

elements of it. it then goes to sort of structural policies, but the elements that facilitate people to move up and set up new firms. last point on structural, which is around trade. i entirely agree with christine's emphasis there and sharing the gains of trade, and one of the things i would suggest that could be some more thought given is the nature of the trade deals, how they can immediately provide a dividend because it's the nature of the companies that benefit. people have put on in this forum over the recent years free trade for smes being an objective. actually, we've got the network effects and the financing ability to change that. all of a sudden that's an element of globalization that works for all, brings productivity and brings instant defusion but also for trade in services. when you think about having a positive set of discussions around trade, the lagged liberalization of services where most of our populations work, it's not all tradeable, i know,

but most of our populations work, trying to bring that up to the level of liberalization that has been accomplished on goods, at least directionally, has that bigger impact or has the potential to have that bigger impact. >> does anyone else want to add something on the structural before we move on? >> thank you. in the japanese context, the most significant challenge faced by the economy is demographic change. working age population in japan is shrinking every year by half a million to a million, so since the economy is growing by 2% or so, well above the growth potential, not just the unemployment rate has declined

to 2.7%, but, really, a significant labor shortage is developing in almost every sector of the economy. and now -- no manufacturing sector, which was compared with u.s. nonmanufacturing sector is less efficient is now investing heavily in high-tech labor-saving technology and investment. and also robotics and a.i., whatever. in japan because of a labor shortage, not just business but also workers and trade unions, they are in favor of those new

technologies and labor-saving investment being made. and that is really improving labor productivity significantly, particularly in the nonmanufacturing sector. so in some sense, this makes prices -- to respond rather slowly to the very strong economic growth. but in the long run, this improvement of labor productivity and growth potential would make the economy sustain relatively high growth in coming years with, hopefully, price stability target of 2%

being achieved. >> can i turn quickly -- and then -- because we're going to have to have time for at least three question. mark carney, if i can ask you a risk we haven't discussed, which has interested you a lot, and i think others here, and that the private sector -- i want to ask about this again very, very briefly. the internalization of which i think you called the tragedy of the horizon, namely climate change. and which most of the world still thinks is a big problem. and how do you think we're getting -- is the private sector people here beginning to have some recognition that this has significant business implications? >> short answer, yes. and i think -- and to make it tangible, let me use one example, which is the task force on climate financial disclosures, which was something that was set up at the request of the g20, g20 leaders.

run by the private sector, chaired by mike bloomberg. bottom line, with the summit of president macron in december, the middle of december, i'll just give you some numbers of the investors numbers that have signed up to this with an expectation that climate disclosure is going to improve for those whom they invest and whom they lend. the top 20 globally systemic banks, 8 of the 10 world's largest asset managerers and the two major shareholder proxy firms, glass lewis and iss all signed up. $80 trillion. 8-0. $80 trillion balance sheet with an expectation that working with the users are capital we're going to get into a much better place in terms of the disclosure of not just static risk but strategy and governance of those

risk and hugely importantly, the opportunities over time so that whether you're a sceptic or a true believer in technology or a denier, we need a market in the transition to a lower carbon future and now the private sector, and i absolute the private sector on this because they were passed the baton by the public sector and now they're delivering it and now the question is implementation and improvement. >> is there anything else you would like to add very quickly? >> what mark said at the end is very important for the private sector. it doesn't matter while you believe in climate change or not. you can have a majority of this audience understanding and believing in the issues, it's not universally felt. therefore the investors of the world have to figure out how to do that. it's about the prevention of what happens when you have all these things that are happening in the world that must be addressed irrespective of what you believe in. if you look at a city like amsterdam, its infrastructure is set to protect itself for a one

in 10,000-year chance event. new york city, a one in 100-year. the problem is we keep having these one in 50-ye0-year events the united states of america. if you look at hurricane katrina, it cost the government $120 billion to fix something that had $10 million, $10 million been spent by the army corps of engineers to figure out that there was ten feet of wall that should have been expanded and built underneath. we could have saved $120 billion. so you have to invest in infrastructure to protect yourself for things in the future. i think what we're going to see from the u.s. government is the next phase of big investments in infrastructure asking for public-private partnership, and i think that's the next exciting wave of what's to come. >> thank you. that's very encouraging. and certainly true that the dutch do really understand the danger of water. so i'm going to take three

questions. they must be one sentence. i'm very bad on timing. say who you are. you can address it to one person. i probably won't be able to give more than one person an opportunity to answer anyway. does anybody want to ask? somebody right there. yes? please stand up and say who you are. >> julio, minister of finance of guatemala. just a question, the productivity's been going down over the last ten years. isn't there an element that the speed of urbanization has also slowed down and the social license needed for infrastructure projects has become much more complicated? so that it's not just innovation, not just business productivity, but social productivity and the capacity to agree on doing things. which has slowed the capacity and the speed of productivity. >> you said slowing urbanization, is that what you said? >> yes, in developed economies. it has slowed down. >> i understand. does anybody else want to ask a question?

is there a woman here somewhere that i can't see? >> oh, yes. i think there should be gender equality. let's go for you. >> good afternoon. juliana. the world has changed. do you think the target of 2% inflation is still realistic? >> is the 2% inflation target still realistic? and, okay -- and i apologize to all those i won't manage. >> thank you. paul from peek global. knowing what we know now about the lessons from the financial crisis, are there any fundamental changes that you would like to see made in the macro economic policy framework? are there any major things we still need to do to improve it? >> this has the great advantage of being just the envelope for the second question. so we don't have much time. so may i start with you, christine lagarde? the suggestion was made that

productivity growth is slowing in part because some of the fundamental drivers, particularly urbanization is slowing. i think that's very important. so we shouldn't be surprised that productivity growth and slowing emerging in developing countries. on the other hand, there is still a huge backlong of productivity enhancing investments they can make because so many of them are still relatively poor. how does the imf see the balance here? >> a bit like you just did. >> have i answered the question? >> you steal the answer. no, i think urbanization when it comes to infrastructure projects, the lag time between the beginning of the project, the financing the implementation and so on and so forth, that is clearly a slowing down factor. i think this is not just it. there is population aging. maybe not so much in some of the emerging market economies. there is also, you know, delayed investment over the course of the last few years, which certainly has not helped. so the multiple factors that are actually affecting it. but increased urbanization is

certainly one of them. can i just say one word on the 2% inflation because i think that's really an interesting one. that 2% inflation was not decided randomly. i think it was very carefully calculated on the batesis of multiple factors. there are areas in the world where certainly from our perspective we consider that to arrive at an average 2% inflation targets about there about in a particular currency zone. it might be appropriate for some of the countries in that zone to tolerate higher inflation than that 2%. >> i'm going to ask the question about the inflation target of you, governor. since you've finally agreed it, after, as you said, almost two decades of deflation. and now it seems to be suggested by some that 2% is too low and really it should be 4%. so you've got plenty of room for

maneuver. what is your view where you are now? are you actually trying to hit a very hard target that is already outdated? >> i think 2% inflation target or price stability target is still meaningful republican relevant and useful for managing monetary policy. a few points. one, as you may know, consumer price index, whatever price industries tend to overestimate real price development. so if your inflation indicator shows 1% differentiation, but in reality there may be 0% inflation. so you must aim at achieving some positive inflation target

rather than 0 inflation. second point is, there will continue to be some cyclical movement and when you need to implement accommodative expansion in monetary policy, you have to have sort of policy room to do so. and in order to do so, i think you have to keep reasonable inflation targets under which your policy rate would be some positive level and you can substantially reduce a policy rate in case of need and so on and so on. so policy room, monetary policy room is necessary. third, after many years of trial

and experimentation, almost all central banks in the developed world have adopted 2% inflation target, and i think this has become a sort of global standard and then the fixture of medium and long term exchange rate relationship between major currencies tends to be stable. so all in all, i think 2% inflation target or price stability target has been well-established. and although some economists are now arguing for higher inflation targets or price stability target or nominal gdp target and so on and so forth, there may be good reason to consider, but at

this moment i think after ten, 20 years of experience among major central banks, i think this 2% or so inflation target should better be maintained for price stability and sustainable economic growth. >> 30 seconds. >> very quickly to the last question. you know, ben befornanke idea o targeting prices and making it very clear that's a possibility is an interesting idea. we looked at it in the uk in the throws. it's hard to do because of the quality of the data. also, it's tough to do in the middle of that circumstances. and obviously what ben and charlie evans previously had proposed is different than that so it merits some consideration in, you know, quiet seminars in good times. it's an example of potentially

fixing the roof while the sun shines. >> the only point i would make, if i may, is i don't think the monetary policy in the macro policy tool was the mishandled element, and i've been saying this now for ten years, the mishandled element was fiscal policy. we really have to go -- it was used very effectively very early and it was withdrawn, the stimulus was withdrawn much too soon and that created some very big problems. now, i have minus ten seconds so i'm going to summarize our wonderful discussion in the following five unbelievably quick points. one, we have a wonderfully strong recovery, which is certainly cyclical and we want to make structural. second, there is a consensus on this panel of those who are not responsible for all of this, that the official sector has done a wonderful job in getting us here. and since -- this is a time to

be generous i'm going to go along with that fully, but, of course, in all other days when i write my columns, i'm definitely not bound by that -- by that recognition. but i think it is fair. it could have been very much -- very much worse and in the interwar period, it was. three, this is -- provides us with a serious opportunity to improve policy on a whole range of dimensions and christine lagarde particularly has emphasized some of the most important, which includes the distribution of the benefit of growth. fourth, the only thing to fear is the absence of fear itself. well, there are many other things to fear, but the absence of fear always terrifies me, particularly when it's in the markets. though we have been told very confidently by someone i always believe, mainly the governor of my own central bank, that the

financial sector itself is pretty strong. and, finally, if we're thinking about fear beyond the financial sector and the possible meltdown of asset prices, whatever that might do, there are plenty of significant domestic political, global geopolitical and global economic challenges such as trade policy, and beyond that we discussed climate, so if anyone leaves this hall feeling the in the wrong jobce ence of fea and in the wrong place. with that, may i thank the panel for a wonderful discussion? >> thank you, mark. thursday morning, we're live in montgomery, alabama, for the next stop on the c-span bus 50 capital's tour.

del marsh will be our guest on the bus during "washington journal" starting at 9:30 a.m. eastern. thursday evening, supreme court justice ruth bader ginsberg sits down for a conversation with the editor-in-chief of "forward" magazine. they're expected to talk about the intersection between law, media and jewish life. our live coverage begins 7:00 p.m. eastern on c-span 2. and at 8:00 p.m., we join president trump as he makes remarks at the republican national committee meeting at the trump hotel in washington. that's live, 8:00 p.m. eastern on c-span. for nearly 20 years, "in depth" on book tv has featured the nation's best known fiction writers for live conversations about their books. we're featuring best selling fiction writes for our monthly

program "in depg" fiction edition. join us with colson whitehead. author of "the underground railroad" which was awarded the pulitzer prize and the national book waertd. our special series with author colson whitehead, sunday, live from noon to 3:00 p.m. eastern on booktv on c-span 2. next, deputy homeland security secretary elaine duke speaks to the nation's mayors about disaster preparedness. this was part of the u.s. conference of mayors' winter meeting in d.c. it's just over an hour.