tv British House of Commons CSPAN April 8, 2012 9:00pm-9:30pm EDT
and since she took the helm of the international monetary fund, christine lagarde is called one of the most powerful people in the world today. christine lagarde brings a unique background to urgent challenges. born in france, her early education was in her native country and in maryland, followed by law school at the university of paris and press risk all at the political science institute in provence. she joined baker and mckenzie where she specialized in labor, and mergers and acquisitions. rising to their ranks to become chairman of the global executive committee and then chairman of the global strategic committee. a last six years at baker and mckenzie were spent in chicago. in 2005, she moved back to
france as minister for foreign trade. two years later was named finance minister of france. the first woman to hold that post in any g-7 country. how christine lagarde has broken many barriers in her career. she has frequently been listed on the forms and "time" magazine list of powerful women. they now can see she is also a powerful person. the financial times and named her finance minister of the year and a vanity fair and vogue put her on their best dressed list. turn to facebook and will find frequent posting on akaka christine lagarde page in several languages, punctuated by it videos. on youtube, you'll find her interview with the jon stewart. a dozen years, france and named christine lagarde a chevalier in the legion o f honor. christine lagarde has championed
the need for more women in male- dominated fields like finance saying once that ", there should never be too much testosterone in the room." we will see how she feels about this crowd. the financial questions over which christine lagarde presides have never been more urgent. while there are signs of recovery, she has warned against becoming a "so optimistic that we get a false sense of security." sobering words. ladies and gentlemen, please join me in welcoming to the annual meeting the managing director of the international monetary fund christine lagarde. [applause] >> apologies for my appearance
because i might be breaking ceilings and i am also capable of breaking my knee. good morning. i would like to acknowledge tom curley who is just stepping down as associated press president. and ceo after a lifetime of distinguished service in journalism. and i want to thank kathleen very much for cushiest and her kind words of introduction. speaking of warming up act. it is a testimony to the associated press, because to have a french woman as the opener for the president of the united states. which in french would translate into "the american opener." it takes imagination.
it is important for the imf to have an open dialogue with its membership, particular with the united states. in that regard, the associated press in particular played a critical role. so thank you very much for having me. how you manage, tom. this is very complicated. i came this morning with a simple message. the message is the following -- the world needs u.s. economic leadership. now is not the time to retire or withdraw, and now is not the time to phase out. now is the time to engage. time and again over the last century, we have seen the united states leadership is
indispensable. bringing people together around shared values and abiding vision of human and economic potential. we saw this after the second world war. we saw it again during and after the cold war. and we saw with the u.s. driving the global economy over the past half century. these are trying times. the global economy is trying to emerge from the deepest and most painful economic crisis since the great depression. at the same time, the world is growing smaller and more interconnected thanks to you and
what you said about the fast traffic of information has a lot to do with the way in which we feel so much more interconnected and so much more vulnerable and with many more opportunities. and with this in mind, what i would like to try to do this morning with your is try to answer three questions. the first one is, where does the global economy stand today? at the second is why the united states in particular needs to be engaged? and the third, why corporations are so vital and why does the imf must play a bigger role? let me begin with the global economy. i think it's fair to say that things have improved quite a bit over the last few months. there are signs of an prevent after probably the longest and hardest winter that started back
in the summer, if you look at where this crisis of which the epicenter was europe, started in the middle of august. pretty much like every financial crisis in the last decade. peoples should never go on vacation. some seen encouraging signs of financial stabilization in europe. we are clearly seeing some encouraging signs in the united states as well, not whether you turn your eyes to the employment situation or the manufacturing activity. but as you rightly said, we should not delude ourselves into of sale the sense of security. the recovery is still very fragile. the financial system in europe is still under heavy strain. that is still too high, both public and private -- debt is
still too high. high unemployment is straining the seams of society, and oil prices are another cloud on the horizon. now, it is crucial at this crypto is that policy makers m-- at this point is that policy makers make use of the breathing space to actually put in place the policies and continued the job they have started. i would say it is a matter of completing the job and continuing the job because we will have to respond to more difficulties. remember that we are here not because of random circumstances but because the very strong policies that were decided back a few years ago. let's remember for instance the very strong coordination initiated by the g-20. let us remember as well the bold policy action, much criticized in some quarters, taken by central banks of which the said and the -- the fed and the ecb
lately. what should be done to keep things on a course? i see three dimensions. the first one is stability. we must insurance financial c alm. i welcome the decision taken by the europeans to strengthen their firewall, which should help stop contagion. and this should support a stronger global firewall achieved in part by increasing the resources of more generally, we also need a stronger and safer financial sector that puts the vital interests ahead of the interests of its own sector. this means better and more coordinated regulations. we have already seen some results here. let's look at what the basel
committee has done. it's a step in the right direction. coordinated, better regulation that looks at their risks that were taken and that led us ot the abyss. more needs to be done because it will be a question of coordinate implementation and it is going to be a question of better regulation as well in areas that are still in the dark. i am thinking here of derivatives, clearing, and shadow banking. but also very important, the issue of regulating the resolution of banks that have cross border operations in order to put in place circuit breakers. that was the first objective, stability, particularly in the financial sector. the second clear dimension is growth. in the short run, what matters most for growth is going to be
demand. all right, here comes the canadian approach. demand is fine, but we cannot ossibly let fly by hsupply by e sidelines, because supply is going to take this further in a more sustainable, steady and solid way towards growth. boosting growth means using monetary policy to support activity, especially with no real signs of inflation and any of the best economies at the moment. and also means using fiscal policy to support activity wherever possible. yes, most countries need to bring in their debt down, particularly in the advanced economies. and yes, some of those countries need to take a hard measures now to reduce their deficits now. but those countries that have a bit of space, that can borrow at
very, very low interest rates, can also slow the course, take a bit of time. and i would say this is probably the case to the united states of america. you should not move too quickly, but it should certainly moves steadily in the right direction of cutting deficits and redressing debt. because we cannot be complacent again. the u.s. debt exceeds 100% of its gdp. the country needs a stronger push to fix its public finance in the years ahead, including by curbing the growth of entitlement spending and raising more revenues. equally in the united states, and the recovery is being held back by the burden of household debt. some of the statistics here, and you get them, are mind-boggling.
over 1.5 million mortgages are seriously delinquent. and obviously measures have to be taken to restore the capacity of those households by taking advantage of easier refinancing and mortgage write-downs. the u.s. administration has made some good proposals in that regard. it will be a matter of implementing aggressively and learning the support of larger institutions. because remember, banks were helped to give credit again, while household must be helped to be able to consume again. the third is about jobs. there is no magic bullet. will have to be reinvented from the ground in each and every economy, but it is badly needed because at the moment there are over 200 million people in search of a job. of which 13 million in this
country alone. we have seen those young job- seekers and every country, whether in europe or the arabs spring countries, there is not much renaissance for those looking for jobs to attack the training and retraining is totally ill adjusted to the job needs. is particularly needed in those countries where there is hope. and nothing to match it. americans might think to themselves, why should i bother? we have our own problems. why should we look outside? they can do with their problems. you know better. the answer today is very simple. we cannot afford the luxury of staying in our mental backyard. we have to look beyond.
when we were younger, life was simpler. it is not just about kansas. is our life depended on what we were doing, what our community was about, what our country can produce, but things have changed dramatically. i've tried to take a few examples to demonstrate that. today, we live in the world that is densely woven. since 1980, the volume of world trade has increased fivefold. and if you compare the volume of capital slows between 1995 and just before the crisis, it had tripled in such a short span of time let's take a practical example. the example of cars.
cars are made of roughly 40,000 different parts. but if in any country, such as japan, with the dramatic earthquake and a tsunami, the spare parts can no longer be commissioned because of the shortage of energy. the car dealers around the corner will be short on vehicles to sell. that is one example. the second example which applies to this country because of the size of its financial sector is the financial network, circuits that allow money to move it very rapidly across the world. actually, the financial crisis itself is the story of interconnections. and this is probably due in this country to the fact that the financial sector is of very large and vital sector. the same was true for the u.k.
for the same reason. our analysis shows, and i do not want to get my number is wrong, shows that foreign banks hold about $5.50 trillion of u.s. assets, while american banks hold $2.50 trillion of foreign assets. those are big numbers. and when in that sector there is illness, disease, the speed at which contamination occurs is again mind-boggling. and it is fast and it is deep. let's take a third example -- trade. the united states is heavily integrated into the global trade and the u.s. accounts for 11% of total trade around the world. some people assume that the united states is the economy in an of itself. 11% of u.s. trade of total trade is accounted for by the
u.s. and disconnections are particularly strong with europe. 20% of u.s. exports go to europe. well europe with its own set off countries, 27 of them, account for 67% of trade. the arrests, 27% goes to the united states. out of the top 10 markets where u.s., u.s. companies invest, five of them are european. if you look at jobs in this country, 3.5 million jobs are with european-based companies. so the intertwining, the w eaving between these two regions is extremely strong. so what does that mean? as the european economy falters, then the u.s. recovery and jobs might well be in jeopardy. so america has a stake in making
sure that european economies and world economy does better. and that brings me to my third and larger point. because if integration poses great problems, it also is a promise for great rewards. but it will only be so if there is heightened cooperation between the nations. history has shown us that when nations face common challenges in the spirit of solidarity everybody wins. when they do not, when the retired to their own backyard, when they operate in isolation, everybody loses. we have seen it. as ralph waldo emerson said, the reason why the world lacks unity and lies broken is because man is disunited with himself. now, this concept, two
visionaries back in the last century really got it. harry dextyer white, an american man, and in englishmen named john maynard keynes figured that out because they lived through the hardship and devastation of the first half of the century when countries pulled apart and sometimes toward each other apart. and they were determined to have a better world. who were they? there were the founders of the imf. the idea behind the imf was simple -- if countries were together in a common interest and help each other in times a week, everybody would prosper together. now this idea was important in 1944. it is equally important today. so what is the imf? that is a question i asked myself when i decided to join.
and i had to keep it simple for myself and for everybody else for that matter. sophistication is a while you try to erect to prevent people from understanding. the irs isn't -- the imf is a giant credit union with 187 members, nations. they cooperate together with one single purpose -- better financial stability. and what we at the imf to, and we are a conduit between them so that in case any of the 187 members is in trouble, then the others can come and rescue. so we pull resources, reallocate, loans, not grants, gifts, not donations, loans that are always reimbursed so that any member in trouble can have the benefits of it.
the imf is for all countries. the imf has over 50 programs around the country with many countries that you would not even suspect we have a program with. and the imf, ever since its foundation 60 years ago, has been in the trenches all the time. hoping the members -- helping members overcome all kinds of challenges in order to bring them back to their feet so that they can just face the wynn's subsidy of financing themselves and dealing with their economy. when european nations clutched onto the marshall plan and tried to rebuild their economy from the rubble of the war, we were there. when the newly independent countries in africa and asia
sought to find new footing in the postwar years full of hope and optimism, we were there. when latin american countries struggle to break free from debt in the 1980's, we were there. in the berlin wall came crashing down, and irrigation stepped out of the rubble yet again into a bright new world trying to build institutions from the bottom up, we were there. and when the global economy almost collapsed three short years ago, we were there. so today, the world needs the imf more than ever. why? because they can provide a circle of protection. it will help countries get back on their feet and face sustaining their economy and making sure they create jobs and have a balance of payment that is balanced. but to do this effectively in
today's world, well, we need more resources. i told you i would come back to resources. as i said earlier, now that the europeans have moved first with their firewall, the time has come to increase our firepower. you would not know that. and i asked my team to actually look for it, but the ratio of funds quota, this is the equivalent of the capital of the fund, the ratio of funds-quota relative to global gdp is three to four times less than what it was at the time of the creation upon funds. we have a way to go. i am not suggesting that we go for as much as that, but we certainly need more resources. i must point out that the imf is quite a good investment for all of its membership, including u.s. as i said, the imf does not give
grants. the imf does not give donations. the imf lends and gets its money back. their money, the united states money, your money. it is only drawn upon when needed. your money is used crudely because we never lend without putting in place a program that includes a very solid conditionality is that we check on every quarter to make sure they are satisfied and then only we go into the next trenche. the money is not lent randomly but with conditionality is. that is the best security to make sure the money is paid back. for that matter, no one has ever lost money when investing any imf. under my watch, i can assure you that it will be the same. last point. you all, the prime witnesses of
this tectonics' shift that we are seeing in the global economy. where countries like brazil, russia, india, china and a few others are just itching a stage where they are no longer emerging but immersed. at least on an aggregate basis, not on a per-capita basis. they want to have their seat at the table. the table of the ims. that is the reason why we reassess quota, seats at the table, voices of the country and reforms have been decided that now needs to be implemented by each and every member so that by reaching the appropriate threshold we can implement those changes that will give some more faith, more votes, and a heavier burden on those countries that are emerging and ask for their seat at the table. and it is critical that that be
implemented and it is time on this front to actually engage. and even with these reforms, the united states of america would still remain my lead shareholder with all of its prerogatives, as should be the case for the leading economy which leadership is much needed. of a like to leave you with a three concluding messages. first of all, cooperation can deliver. it has happened in the past. i have witnessed it, laboriously on the european scene. now is another moment where u.s. economic leadership is needed for cooperation to actually work. second, in a world driven by an infinity of interconnections, the ideal of cooperation is as urgent as when you're former president john fitzgerald can it
said geography has made its neighbors. history has made best friends. economics has made as partners. -- us partners. now is another time and that has to be demonstrated, certainly at an economic level. third, the imf was founded by an american and english man who had a vision. that decision is still true today. and the imf continues to serve the community so all i would say to you and the way in which you can actually disseminate news is that use us, work with us, we will serve you and we will work with you. thank you very much. [applause] >> the managing director has
graciously agreed to take a few questions and we are going to let her get a comfortable seat. madame director, spoke eloquently about the needs of the imf. begs the obvious question of how much you need and where do see it coming from? >> there is a sequence issue and then there is a volume. a sequence issue which has been fated time and again by all of the members as let's lecture that the europeans come up with the right set of measures that will make them stronger, that will indicate that they do believe in their current state, and then once that is done, then we will make sure that we participate in the global far wall, of which the imf is one wall, of which the imf is one big