Yes that's what it's worth if you do stop. Right. There. Just say a few words about music. Certainly regions there's. No. Wrong with that phrase young. People is. The right. So what exactly. Is. The root of that. What. Can you do. Looking forward to say. No. This is. Really. So today we do for his sake. What is. Right. This. Was. Years. Or. So ago guys together. With us to. Reserve. Words of. Also what he. Says. He also. Did you receive your love. You can be who did. This for us. Let's go. To the C.D.C. let your list. This is all with all of this media your. Fortune magazine Wall Street Journal or series. Past four years. Bob Bob. With. Us. This so we will be listening. For. That reason and not for having some fun to tack. On to the room well I've recently we didn't have a football team but we still don't. But anyway. We don't have competition in that regard with that we do have a little feedback but we don't have competition that regard with the Georgia Tech so that's that'll be fine. If you know I don't know if I want to be labeled as E.F. Hutton talked because E.F. Hutton done exist anymore. And I'm hoping that maybe I'll be around a little while longer but. Anyway. It's kind of interesting because some people make comments Hey I'm hearing positive things about manufacture I'm hearing negative things about manufacturing by the way they're both true and. I'm going to spell out what's going on last year was the first year since one thousand nine hundred ninety seven that in the United States we actually increase manufacturing employment Now having said that you have to understand that in in employment it's more or less like that old joke about you know how to be housed become a millionaire in the airline industry begin as a billionaire. And basically that's where. So what happened is we took a big hit and during the during the fiscal crisis the excuse me the financial crisis or crisis coming up but the financial crisis we took a big hit in that we lost two million manufacturing jobs now yeah we're starting to rebuild a little bit again there is some dynamism developing as I said last year about one hundred fifty thousand new manufacturing jobs in the United States this year every month until last month we had growth in manufacturing jobs Now last month was a problem some of which was seasonality. Basically there are no longer is a model changeover period in automobiles they just roll in the models as they see fit during the year some of them positioning it in September which is the traditional new model some of them positioning it in January and some of them position and when they feel that it's ready to be thrown out of the marketplace so you don't have the basic close downs in July Unfortunately our statistical system still because it does a back cast of what happens in the last five years and so it's back casting and it says wow you know July is usually lay off people because you're redesigning and you're rebuilding your production facilities to handle the new models and so since we don't have the same shutdowns as we had in previous July's of course July we said a lot of people working in the auto assembly actually fewer people were working but more than traditionally work in July so we set out big increase in August came and we said we didn't rehire those people that were off in July what happened well of course we never put them off so we then we are and so with that. It's about half of the manufacturing numbers for August but there's no question that August is slowing down and if you look at the world statistics you can see what's going on because manufacturing and world trade are significantly correlated as you would guess a lot of goods are moving around the world at the present time and two years ago world trade grew more than ten percent. And so obviously you would assume that we'd be able to have a pick up in manufacturing activity not only here but around the world last year world gross slow down to about four percent world trade growth so down about four percent this year we're running at about two percent and there is some fear that by the end of the year we will be negative now what's going on. All right the first question is what's China doing it's always what's China doing because China is now the big player doesn't mean China is the most important economy and by the way China is not the top manufacturing producer in the world the top manufacturing producer in the world is still the United States. We actually produce about twenty percent of all manufactured goods in the world people are shocked when they find out China produces about twelve percent it is number two. But it produces about twelve percent Japan is fading at a little bit less than ten percent now because Japan has had not only the last decade but it now appears it's going to be the last generation Japan has had serious trouble moving its economy forward by way I should point out some of that strength at the latter part of last year we actually were slowing down in other parts of the world before the latter part of last year but mass that because Japan after the tsunami had. Attic repairs that need to be done and therefore tilted the world trade figures Well Japan is now off of the tsunami rebuild on there still a lot of work to be done but obviously the cresting of that activity is done and in fact Japan has now fallen back and may very well be in recession by the end of year if they don't change policies which since they haven't changed in a couple decades I'm not sure they're going to do it now. But basically. It's one of those things if I was but I do from time to time I talk the Japanese people I said Why do you do this self-inflicted wound. Continues to. Restrict the growth of the N in international market the and growing fast enough we got a lot of inflation is yeah you've got inflation because you're importing goods and when the world increases the price of goods like when China was buying everything course goods went off and therefore Japan was forced to import inflation Well that's not what they should be looking at by the way the Europeans do the same thing there's a lot of stupid decision making around the world I'll get to the United States and will but. Actually the United States is the other way around we set up a system that we have to make decisions and won't. So it's a whole different animal that we got here. But I'll get to that. But anyway the Japanese they keep sitting there they I thought they finally had it right because last year what happened in Switzerland. Basically when people think and I say the euro is dead and what do I do especially mom in Europe what or why do if the euro's going to die well I better find some other place to put my finances right and where do you do it well in non euro your P.. In countries Well I happen to Switzerland got overwhelmed their Swiss Swiss franc got way too expensive and as a result there are manufacturing activity was tumbling down then lost dramatic competitiveness in the world economy and they said We can't survive this way this is not what we need to do in Switzerland and so what they did is they link their currency to the euro which by the way that's where it is now so it's still a Swiss franc but it's a Swiss franc euro Junior because it's moving with the euro now at a at a fixed relatively high very I mean Switzerland is very expensive country I go there once a year to talk to bunch of Swiss advisors and. Wow. I remember when I when I was doing when I was seven I would get when I was seven Swiss francs for a dollar now I need one hundred seven dollars for a Swiss franc and that's two years later I mean that's a dramatic change and what's going on and there's no change in the in for underlying inflation rates so this is dramatic changes in the amount of cost of things coming in or out of switch one. Big problem well I thought that the Japanese had learned from that that hey if you're getting overwhelmed in your currency that what you should do is and by the way how's the Swiss fixing their exchange rate they pump in as many fridge Swiss francs as the world. To keep the relationship fixed they don't look and say Hey is that too many Swiss francs out there and so ours are going to create inflation in Switzerland not they don't say that at all they say the world wants a lot of Swiss francs guess what I'm going to give it to him. And the world doesn't want any more I'll absorb them back. And basically just hold their currency Japan I thought was going to do that early this year if you if you. Been watching the currency the end actually went up to eighty five to the dollar. And I thought it was they got it right finally and then the central bank said whoa we're worried about inflation and I'm sitting here is a country that hasn't seen a price increase in two decades and they're worried about inflation actually they've seen some in oil and a few of the imported goods but basically In fact right now in Tokyo the C.P.I. is fall on year over year. And is now down about four tenths of one percent from the previous year they're back into a deflationary environment they had a little spurt because to Nami rebuilding and all that and some temporary disruption of capacity so all of care but now. They're back into deflation and the central bank for some reason is looking at how much he enters out there and not how much the end is out there relative to the man for you because again people remember the Europeans are looking at other European currencies first by the way the Swiss solve their problem at least temporarily Now that's the Swedes worrying about the krona but they're now losing their competitive position and what are they going to do and they're no wages they figure they have enough oil they are the worry about it for a while so they're not although boy don't go to hostile I mean it's a nice little town but boy if you really want to see what expensive it is you go to Norway it's incredible I can't believe that anything is produced outside of Norway I mean if anyone wants anything outside of the way except for their oil because it is so expensive and anyway I don't want to denigrate any individual country and Norway is probably OK because it does have the oil but basically there are problems around the world that you knew why. Wonder why these people are following these policies when they do it why does Japan want to be the foundation or by the way their manufacturing industry is very upset and I don't know if you've noticed but. Auto production is coming back to the United States. Probably the amount of automobiles produced in Japan has peak for this year. I don't mean Toyotas production is paid. I mean there's just build another facility on to their Georgetown facility in Kentucky and they look at our one Allison the development of the automobile industry in the south how many assembly plants we opened up in the last ten years Hund Hyundai a key R.. Mercedez of course started the whole trend B.M.W.. Throughout the names you probably know where the assembly plants are in South Carolina and Mr Obama and now the new plant are opening up in Chattanooga. So you have a lot of automobile activity developing in the south right now and part of that is of course where is your market biggest or will be a market in the world is still the United States that could change sometime in the future the big change would come as more infrastructure is meaning highways in this case is added in China because there's a lot of Chinese and some of them have money. Now not all of them apparently China has it with a communist country. But. What economists who use something called the Jenny Co fishing to look. At the degree of economic imbalance in the country China of all of the industrialized countries and this includes Brazil which also has a similar problem they have the highest Gini coefficient they're a communist country supposedly they have more billionaires in the United States that is right now. OK and are growing at much faster than we are. It's not that A the country is just blossoming and everything's wrong there are parts of that country that are blossoming but not all of a by a large shot and yet you are finding that the but ones that win are winning bit winning big in China so you get extreme measures of income inequality as I say it's the same it's a similar problem and in South America actually in all of Latin America it's a similar problem that the wealthy tend to get more wealthy as you know the richest man in the world right now is a guy in Mexico now it's not the guy in Omaha he took a couple of bad investments. Hit his thirty year return has fallen to about seventeen percent annually. Used to be eighteen and a half but too bad. That anyway and then it's not the it's not the Facebook guy either he was he was wealthy for week. Actually is done quite well all these and by that is he was in the megabit billions and now he's in the only multi-billions. So anyway that's what's going on all right let me. Say this is all in an introduction I got a war myself up you see to get what's going on here because tomorrow is a very important day for The Economist You know it's what's what's happening tomorrow is of some new new economic theories come around I am seeing a lot of new economic theory and thirty year. There's. Hate to say that because I get a lot of papers regurgitating old stuff. Anyway I really mind kind of his colleagues who killed me on that although they know it's true. But nevertheless. Now tomorrow is big because two major decisions will be made and two central banks. Well actually no one central bank and one. One Supreme Court. But tomorrow is huge. Tomorrow after a two day session the Federal Reserve will announce whether or not it will change its policy. OK now what will the Fed Reserve do well a big feeling is and I concur I don't concur with the timing. But the feeling is that hey not enough has been done the stimulate the U.S. economy the big problem obviously is in Washington but outside of Constitution Avenue which is where the Federal Reserve is. So that but the Federal Reserve now is because the other guys are now acting the reserve is being asked to act and it's likely that they will act further. And will act tomorrow. I think it's highly likely that they will act further I think it's not likely the live act tomorrow but I hate to do that because you'll know you know do I have any any validity in my forecasting I could be proved wrong and one day forecasts are usually should make a forecast that they're not able to get out of town before it happens. Anyway. We'll see but why was the Fed do they have you know people say it was what could they do word zero lower base which means that the federal funds rate. Is trading between zero and point two five percent so they really have bout three things they can do number one they D. zero lower base for an extended period of time now there is a lot of confusion about this the Federal Reserve right now is guaranteeing zero lower base. Through two thousand and thirteen their forecasts which they also publish quarterly their forecasts indicate that they believe that interest rates will be unusually low by the way the median forecast is not zero lower base for two thousand and fourteen the median forecast and this is out of the eighteen guys eighteen people there a few women in there. But the women are guys to my language but anyway eighteen people these are the people making those decisions. These are the board and the presidents of the Federal Reserve that when you say the Federal Reserve forecasts that's who's making the forecasts. Therefore they have the power to make their forecasts right. So anyway what are they forecasting they're forecasting lower interest rates for two thousand and fourteen but not zero lower base the median still is point seven five percent so the presumption would be that a majority are at least half of these people think that is likely that will get off of zero lower base sometime in two thousand and fourteen however that's the forecast before the latest employment report came out so and the latest employment report was not a good report there's no even though I already explained away what happened the automobile industry and you can look at those seasonals and by the way some of that also because we used to in the south we used to shut down plants for three to four. Weeks in July basically because it it got very difficult for people who work. And there is a little bit of that still in there that you are finding that hey we expect plants to be shut down in July especially in the south that did not happen course we have air conditioning all over the place now so it doesn't happen anymore but maybe they don't have as much air conditioning should you know and they might have when it gets one hundred sixty you might decide that maybe the workers can go home because you don't want to keel over. So basically some of that does still happen but that's the idea and lot less of that happened so there is some seasonal shift from July to August. Speak honestly about that's that part is almost all done. So you take a look at the figures and those figures were very good and not just in manufacturing and the manufacturing weakness was widespread only thirty two percent of manufacturing industries reported hiring. In August thirty two percent. That's a recessionary level. Of higher. That's not good. OK bad problem. Somebody again the seasonals may have screwed up a little bit and made the figures of bit lower but that still isn't a good number even after you've. Filter out all these problems are so fed is going to do something and then it's probably the next forecast is not going to show a median point seven five it's going to be somewhat lower Now what could there's so we get back to what can the Fed do the three things number one they can increase extend the guarantee remember a zero lower base is only publicly guaranteed through two thousand and thirteen now the markets are assuming that zero lower base will persist into the first quarter to three. Thousand and fifteen. Now actually the Fed could guarantee that and say we're not going to change from zero lower base until the second half of two thousand and fifteen. And that would in fact as a result of that you have the long the short term it's not going to make a lot of difference until we get to that period of time but the long term it makes a difference because long term interest rates are sitting there and saying what are they going to come off a zero lower base I mean right now my ten year bond is competing with zero returns for the first two years if they tell me I got to compete with zero returns for the first three years that means I got to lower my rates on the long term bonds so that's why you would make the guarantee the lower the long term rates. And it's quite possible that they make errancy But remember the long term rates are already feeling out with the market believes So if the Federal Reserve says they are guaranteed through two thousand and fourteen that's a nonevent even though that's a statement of a of a new easier policy. Because the market is back in the go to the first quarter two thousand and fifteen and therefore the long term rate already has incorporated that into it so that's number one they could do they can extend that guarantee I think that's a likely outcome they may even do that tomorrow the number two. They could increase the size Thanks this is what's called quantitative easing the prior to the. Fiscal Kohout the financial collapse and keep saying fiscal But the financial collapse prior to the financial collapse. Federal Reserve held eight hundred billion dollars almost all in short term treasury notes. Some version like less than thirty days so there was very little interest rate. Risk being held by the Federal Reserve and they would have bowed eight hundred billion dollars The crisis came banks weren't lending Federal Reserve thought that because banks weren't lending. To be a direct provider of funds how do you do that by financial instruments and put out the Federal Reserve credits which are notes you know those things are. Things like that those a Federal Reserve. So basically that's what they did. They extended it twice they announced expansions and build it up to two point eight trillion dollars So we went from eight hundred billion that two point eight trillion. Basically was the banks weren't lending. Now Actually that particular problem is slowly being resolved banks will lend. If you sit there and so I don't know I had a discussion this morning with some of the people who are table and basically if you are a an enterprise with a predictable receivables base. You will find banks not only willing to lend to you they will want to lend to you they are looking for Lend they're looking for borrowers they would like to build up their loan portfolio. Days so in point RAD the present time the banks want to land I leased if you have predictable assets. That's what they're looking for predictable assets they're not yet willing to concede that real estate is going to have predictable value. And in fact the appraisers are still because appraisers a backward looking and the appraisers on on real estate are still marking down real estate prices even though we know as economists that in the last. Quarter housing prices started Iraj even Atlanta which by the way is the worst performer of all the metropolitan areas in the. Land a lost twelve percent of its housing value and land a metropolitan area was twelve percent of its housing value in the last year. And the United States right now it's positive over the last year about seven tenths of one percent so this doesn't sound like a big number but remember we went into the year and minus three and a half so now we're positive seven tenth's just think what that means what we did in the last quarter we were running nicely positive in the last quarter and it looks like that trend is continuing and in fact I use my neighborhood as a measure that it's not too far away from here and. We do have a lot of houses for sale but we have one of them that is announced it's sold which I guess means that it's all done in the ready because I mean they already closed but the person has moved in yet and therefore then remove the realtor side so he has a nice old thing to tell people hey I really did it. Anyway and four of them are under contract. Now they can break and we now know that something like fifty to sixty percent of all contracts break because of the appraisal. That they present comes in saying no you can't lend when but you just agreed to buy that house for we're not letting you know that because we don't think the House has a guy by the way we have a thing but we have this. Association that we go to in Iowa or Nebraska or I don't know and on their computers they say prices are still falling. By the way if you don't know that's true I had a friend last month who changed his banker because his banker of twenty years told them we can't make that loan for you because this is they think I mean we could but you've got to put more equity up he's already put in. Twenty five percent up by the way so it sounds hard to buy a house twenty five percent why wasn't twenty five percent you know was the climbing price area. Therefore there are computer models are forecasting the price of going to go down further and they'd simply don't want to make a loan that is going to qualified in the near term. So he found another banker who probably went to the Idaho guy instead of the Iowa guy. And maybe he was not as sharp on figuring out where the previous sales were or whatever the case was are maybe he was clever and he started to look forward which is unusual and he fund who found they said yeah you don't have to put a more down we'll take a loan but yeah real estate still tough because bankers aren't sure of the asset value but they're putting on but if you have if you have predictable receivables a lead the every day. Which is telling you that there isn't a loan problem if you have a healthy business at the present time OK I'm not for that So anyway I only gave you one so I gave you the second thing they could do which is expand their portfolio again go from two point eight trillion to three and a half or four or some really big number the only issue with that is remember what I said at eight hundred billion they had no chance it was very little interest rate risk the Federal Reserve could hardly lose money. When you got a two or already a two eight they only had three hundred billion in short term bills which by the way they're going to liquidate because they're doing something called Operation Twist selling the shorts and buying the Longs and that therefore the three hundred billion will be gone by the end of this year they will have no short term interest rates and therefore they will be subject to losses. What does the Federal Reserve and what do you think is the next problem the Fed was or probably going to face do you think an absence of liquidity that was the legitimate problem when they expanded probably the next problem is going to be that they put too much liquidity into the system and we're starting to get inflation. What would that me that would have to sell out of their holdings when would they be selling if you had increased inflation they'd be selling as interest rates are rising they have interest rate risk on almost all their portfolio they've used. Would this change the behavior of the Federal Reserve would they be more reluctant to fight inflation. In that environment. Now the Fed Reserve says no no it's not a problem we don't worry about profit and loss but guess why right now the Federal Reserve is returning seventy billion dollars a year to the Treasury they are a profit center. Because as you expanded WA they bought bonds got higher interest rates and when they did they gave out paper OK it's good game for reserves no one can play it but it's a good game all right well what they'd have to do is they'd have to record losses and tell the Treasury give us back some of that money and the world is where are the United States is worried about deficits that seventy billion dollars right now is an offset to the deficit. Then you go from a positive seventy to a negative seventy and you think the Congress is going to be happy about this I think they're going to not interfere with Federal Reserve operations Federal Reserve thinks that well. They're wrong. But they don't know it yet. So this is a dangerous game they're playing if they expand it further. But they may in fact the markets are assuming they will. The latest. Is the pond swaps that are being made is that. Be a quantitative. So a Federal Reserve we buy more bonds that lowers interest rates is not clear because remember this increases interest rate risk you then have to figure out do I really want to be selling my bonds to the Federal Reserve what do I want to do here. Dollar want to hold longer I want to hold sure where I want to go and basically at some point I think people will say this has the potential for raising inflation later later on and as a result maybe it won't lower rates at all it will add to liquidity because it'll be another source of funding by the way I said there were third the third thing is right now the Federal Reserve is paying twenty five basis points quarter percentage point. To banks for the posits that the banks are putting at the Federal Reserve they could actually change at the posit right they increase it what will happen is banks will put more money into the federal reserve their PA is lowering their lending activity if they drop it the banks will take the money out of the Federal Reserve and try to find an alternative way to. Raise resources therefore expanding their lending activity so in point of fact that's the third engine that they can do so I took the Fed can do all right and I spent too much time on that but. Beyond in Germany where we have the European stabilization mechanism a five hundred billion euro facility which is going to be the facility that druggy would probably at least have assess the countries that want to. And to buy their bonds of the drug is made it quite clear their drug is the head of the European Central Bank he's made it quite clear that he will take he will take funds. From New York pan central bank and buy the securities if he has to for the good of the euro. And by the way that's what he reaffirmed last week he said it doesn't depend upon the economic stabilization mechanism but obviously the economic stabilization mechanism is a very important part of the stabilization of the sovereign debt problem in Europe. OK so what the Germans going to do. Well the economic stabilization mechanism is being supported that where they get the five hundred billion euros everybody puts the money in OK. Yeah even Italy put some money and they're going to take it more in that back but they'll put some money into. So they all do it but OK so what's going on. The case has been brought before the orphan High Court arguing that you can not use German bonds for non German purposes. OK. And as people have argued this is a non German purpose course drug use argued that it is a German purpose and by the way if we all know in Germany why is Germany willing to bail out all these countries why are they trying to save Europe. Well think about the alternative. OK what's the alternative the alternative is to go back to the Mark what's the problem with going back to them are the problem and right now the euro is a blended currency they've got some of Italy's problems and son with Spain's problems as well as some of the strength of Germany guess what that means about the currency value that is provided for German exports. It lowers their costs. Going back to the market would be devastating to the German export market by the way thirty percent of German G.D.P. is exports. Much larger were ten to fifteen United States much larger as a percentage of their economy and we'll. So it's a significant factor for them that's why they want to your so this is the court could argue that this is a German purpose I would argue it's a German purpose but you know lawyers don't always think like economists. Who knows how it's going to rule out of the rules that you can't use it then of course you can't fund the European stabilisation mechanism and that means you are left only with a druggie and they are criticizing him for going past his mandate. And if they shut that down then Europe collapses. And if the euro collapses. As I say all to Malaya it's not good for Germany but and the Usually it's not good for all of Europe and may not be good for us. Aside from the fact that Germany is a customer I mean of the Europe's a customer so why is it good for us because. There are a lot of Euro contra acts. If the euro goes down how do you settle those contracts but you'd have to settle them with the. Alternative currencies now the Germans would be able to do it easily the Italians buy it without a significant effort the Greeks forget we're not even talking Greece. The Spaniards good couldn't Spanish banks would collapse and by lending the Spanish banks would be in trouble and that includes at least the Big Four American dikes. So we're back into a financial crisis. So the. That's why we worry about it I mean not just that a customer goes bad but that they get contagion from it. And it could be a serious problem so those are why those very important announcements are at. I'm going to go very quickly what do I think has happened I already mentioned attic slowdown and World Trade. What's going on here well number one China after using a stimulus program to in fact excite activity in China coming off of the financial crisis. They are actually over excited they had a and you know on stimulus program about five hundred twenty five billion dollars of stimulus. Mostly roads poor dredging. Improving their communications facilities. Very much infrastructure based stuff so you can move information and you can move goods. And any firm in for structure investment is very important especially for developing countries. A huge debate in the development literature in the in my profession arguing what's more important is that infrastructure education. The evidence shows that at a certain stage of development by the way the earlier stages of development it's definitely infrastructure don't worry about educating you are able to deliver whatever they produce if you can deliver what they produce Who cares about education and the India had educated people for two generations. Who never were able to fully you. What changed then near the Internet because for the first time that body of intelligence was able to reach out to the world. Community prior to that they couldn't they couldn't get their return on education. OK And that could be in the miracle is an internet offer offset. And by the way we're now finding out that that group now is getting fully employed Yes it has helped India but where's the where's the next group. Where's it coming from and the looks like it is still growing it's going to grow almost six percent this year but. I'm going to have some debates about it in a little bit. But nevertheless. That that was one example that education before infrastructure is probably not using your money wisely. And in fact and Latin America you'll find that there was very strong belief in infrastructure development first. Education Now obviously the need to maintain them but you know with limited resources where do you put your heaviest effort. I could I was trained as American economic historian and I can tell you that you know what really created the middle class in the United States. The method by which we handled our ports store in the colonial age. Our poor transportation mechanism and storage mechanism we set up the idea that we didn't have to depend upon the boats arriving we would have the storage facilities in place and when the boats arrived in move them out and therefore new storage as the dominant activity rather than the movement of the boats we still needed to move the boats we knew they were irregular we created regularity. And as a result you got about three tenths of one percent per capita growth per year as the poor it's improved their facilities during the colonial period but that's true. Which. History classes actually I didn't learn much as you got but has been you know we've learned when you teach. People who teach know that it's where you learn but anyway that's with. That's what happened it was infrastructure development although these are very educated people as a rule during that period of time a lot of them were anyway. So anyway. That age and infrastructure development that's what China did it worked beautifully actually worked too well China came out of the financial crisis and in two thousand and ten it was growing eleven point three percent here is the economy in the world growing eleven percent it's gobbling up all the materials. It was taking down sixty percent of all the copper production in the world it was taken down forty percent of all the art of steel production in the world. Guess what was happening we had an explosion the commodity price to number that two years ago that was China. Not was the result of their infrastructure development coming off which by the way negates yardman can government ever do anything useful the answer is if they if they build assets with their stimulus they can do useful things it's when they take money out of one person's pocket and put it into another that doesn't work very well by the way you want to know what country did that. So anyway so it's not government spending is how we spend but I don't think I'm going to be able to pass that argument on to too many people right now because everyone looks at all the deficit Starman and I look at hey the bridges are falling down what are we going to do about it through all of the evidence well what happens at the bridge falls that. We're not managing or are. They Right that's the long story. Enough of that so. The European Union is is critical and it looks like it could be and difficulty tomorrow's ruling is going to be very important. Is it isn't the death knell number druggy could offset even the lack of finance of the European stabilisation mechanism. Five hundred billion euros of expansion in your pan central bank that would be a serious erosion of his mandate. And he might get away with it. Wow And I don't know if you people know who was there before drug trade Shea why aftershave was still there we would definitely have a major recession in Europe and probably a collapse of the euro because he don't touch no matter. It's inviolable in the course drug. And Central Bank what's our first rule stabilize the euro. That's my first rule so I want to be doing whatever is necessary stabilise Europe so anyway enough of that all right let's get down then to what's going on so the Chinese overstimulated and then they got nervous because as a result the overstatements remember all these billionaires and property values got absurd. They had a real and they finally got the real estate bubble. It was just Hong Kong out so expensive no one want to be there anymore. So. They decided it's time to shut things down and here's the problem they did try to shut things down through monetary restraint they kept increasing reserve requirements at the banks and China point where the leveraging of the Chinese banks could only be five to one if you want to know the leveraging a quarter. Two regulations we can be twelve the one in the United States and by the way they ought to be twelve the one in Europe with or about fifteen to sixteen and one. European vice. But anyway. They got it down to five to one which kind of says you can't make money in banking. Venture Lee that slowed down the economy the problem is they didn't figure out that their exports were one of their growth drivers that some manufacturing activity export was one of their growth drivers OK. Are financed off shore. So raising the reserve requirements the local banks squeeze the domestic economy exactly the opposite of what they want it. In. In China took them a while to figure this out but now obviously the growth rates of tumbling China was assuming and this year's forecast by the way China assume that their trade would grow ten percent you know what the trade is doing. Two point seven. Their exports grew to about whether imports are negative right now. Because remember they squeeze down their domestic economy where industrial production is growing about nine percent and that's with their way of measuring it I when I was his way of measuring would say it's more like five. Percent this is for a country like China this is drastic slowing. There are manufacturing facilities in northern China they're totally empty. At present time there's raw materials stacking up in the storage facilities in Shanghai Actually I just read the article in The Wall Street Journal this morning about copper. Not only have the. Sheltered storage facilities filled but they have it outdoors. And they. Are one person walked around and said it. The inventory is now cracking which means that the weight of the inventory is so heavy it's cracking there. So they're not using the raw materials so China slow down dramatically. We're not talking about one or two percentage points slowdown we're talking about Stuart a five percentage points slowdown. Going on probably the third quarter we're going to be at seven to seven point one percent year over year growth in China the number I was eleven three two years ago dramatic slowdown taking place and by the way this is a fact that the rest of the emerging markets the emerging markets are finding a when China was overheating they were doing well and in fact China got is now getting fairly expensive labor costs have gone up the you wan did increase in value so you put the two together and production costs in China. On the board of a company that does soft goods and. We're taking stuff out of China nine percent more expensive than we did twelve maybe fifteen months ago nine percent higher cost so what are we doing looking for alternative places. And by the way we were going to go to Thailand and then the river flooded and that's so down things into Thailand Indonesia now is apparently the preferred place for where do you go at the China if you're looking for low costs. But we'll see how that all that develops and then the news is holding its growth rates it's now growing about so it has been growing seven percent still holding at about seven percent. But everything else careers slowed down the four percent the Singapore was close to recession that looks like it's going to miss that but came close. Taiwan a slowdown you have and of course Japan as. As I said could be in recession by the end of this year so significant slowing going on and a lot of it somewhat tsunami but a lot of the China taking place OK So that's what's going on at present time and Europe which is now in recession euro land actually had a negative growth rate in quarter Now not all the European countries to be sure I mean you take a look at it early and it fell and almost four percent you take a look at Spain and it fell almost six percent these are grand rates. You take a look at Germany to grow one percent. The Germans remember are benefiting from the low euro and the euro is tumbling until druggy made his announcement. We're actually got down about one twenty three now it's about one twenty seven so there has been some improvement and that. The Germans have been able to hold off largely because they've been able to export out of the Euro Zone they're doing OK in the Euro Zone too but they're able to export out of the Euro Zone as a result of the you know you're a valley. So but if you put it all together France is flat. So you add all these economies together and the comes out to a negative one percent and then your rates in the second quarter probably be negative probably more than that in the third quarter and the fourth quarter maybe about the same so it does look like recession there. United Kingdom not quite as clear they were definitely in recession mode in the second quarter and early in the third quarter the Olympics helped them. Certainly change the mood and by the way who knows Marie one. First brick by the way he's a Scotsman. But today's a Brit because he was. The first bread since nine hundred thirty six to win. At tennis championship. We're not counting the guy who shared the championship. At Wimbledon. It was only half the team that was of Bret there but anyway by the way that he was the first with really over that period but nevertheless enough of that. But yeah the mood has changed and it does appear that the British now may have a positive quarter but it's not going to be strong so Europe is a is a significant drag China is blaming York for all of a slowdown not realizing that the extensiveness of its policies against its banks was the primary reason why China slowed down and they have to reverse that in order to get things going and now they are in the process of reversing it but not understanding how much it has created a problem or not as drastic and shifting it back. So the still finding very heavy leveraging I mean are a very modest leveraging and the Chinese banks. Are slowly coming back but it's a it's a slow process and the fact that imports actually fell last quarter as last month is very indicative the fact of the message economy in China is not doing very well at all and that that was the hope that the massive con to me would grow in double digits and bring up China and it's not happening at this point in time but so anyway what does that mean well it means that the world depends upon the United States right now. That's what I mean. Last year we had four point three percent world growth this year we're going to do three point four we're going to end the year depending upon the United States at about three percent growth now if you say well three percent growth that's decent No three percent growth because of the population gross around the world is really minimal. OK now it's not a fundamentally recession but it's close to recession so and that's what's going on so let's now get back to the US What's going on here why don't we have the you know our three big problems are the real quickly I mean we've got the fiscal cliff. What is that fiscal cliff is well that's the that's the three problems with the fiscal cliff is basically number one on December thirty first the Bush tax codes expire and that means that if the Congress refuses that act. That we go to the Clinton tax code that existed in two thousand one. That's twenty eight percent on capital gains to thirty nine point six percent marginal tax rate there is no qualify dividend off sad so dividends go back up to being treated as ordinary income. So you have a lot of changes the estate tax goes to one million dollars All of these things occur. If Congress fails that OK Let me give you the other parts of if Congress fails that number two zero tax holiday the two percentage point reduction payroll taxes that's about one hundred ten billion dollars of infusion into the household sector and a more by the way the lower income groups in the household sector that expires. The extended unemployment program whether it's good or ill that expires that's another forty forty five billion dollars OK and then because the Congress couldn't come up with a long term deficit pro a deficit reduction program we have automatic sequestering of expenditures one point two trillion over the next decade or approximate one hundred ten billion dollars a beginning in Janet. The first. These all occur unless Congress acts if you add up the totality by the way half of that this sequestering is all on discretionary so it has nothing to do with what is creating our deficit problem but that is a problem isn't our entire government programs and by the way it's in first of all it's in a couple areas of the entitlement programs in the same security it's in disability disability is growing three times as fast as the total so Security payouts. Kind of interesting you watch people in their own unemployment there get the unemployment for ninety nine weeks now in order to get unemployment you have to declare that you are ready and able to work. And then the hundreds wake they apply for disability which says you can't work. How can you think this is NOT happen one third of all new disability cases are coming off the unemployment rolls. OK that's fraud somebody is fraudulent somewhere in that position. OK So obviously this is a serious problem this is draining the Social Security system would tightening the disability program solve the some security said no we got to do more but we could solve that that's a solvable problem we would probably have to extend the over a long period of time extend the age. Certainly get rid of the sixty two although there's a big debate is that hey that may save us money rather and cost us money. I still think it cost us money but. Not. Just that move from sixty seven to sixty nine over another long period of time. I really take the cap and I know this is where people should take the cap off wages on so secured those those. Things that would solve the SO SCARED problem will make it solvent for the next seventy five years assuming that to get some control of the disability. OK now. On the medical side. I don't know if you've seen the numbers what we've put out about at an annual rate of about five hundred fifty billion dollars in Medicare. We put out over four hundred billion dollars The Medicaid. Medicaid is growing two and a half times as fast as Medicare and in ten years will be larger than Medicare. We obviously have to control Medicaid we made promises on Medicare we did not well we made short term promises on Medicaid but we didn't make long term promises on Medicaid. Now bought partial no Medicaid is clearly for young sick people. I mean really young people and we really ought to address that. As to what we do with that. Significant amount of Medicaid is people who have exhausted their funds and going to nursing homes. Now you might argue well what should we do with the old people and that is of a relevant issue as to what we do with them but the Basically we do have to recognize that there are restraints. That you can't have open ended entitle Mint programs or simply can't that's was blowing up the budgets open ended so that we promise to those of you show up and you meet the criteria you get paid well what happens if we're not producing enough. What happens is the economy is not growing fast enough still paying by the way the economy slows down your problems actually accentuate as I already indicated on disability and other things. So what happens on those conditions what if you don't have the money what do you do. I mean these are very tough decisions that's what is required by people to figure these things out but that's what's going on are it. Anyway Medicare. We've had some good believe it or not we had some good luck in the last two years while Lockley we could argue whatever it is but medical inflation has only grown about one percent faster than underlying inflation. Historically medical inflation grows three percentage points faster than underlying inflation. There are several and there is a study I just read that indicates that up to seven hundred fifty billion dollars of our total spend a church in medicine are as a result of a whole bunch of and Ministre give up to fraudulent fraud is only about ten percent of the seven hundred fifty billion but there is fraud too in that. Defense of medicines about two hundred billion dollars Bad administration other than than bad administration goes through the lot which is anywhere from requiring to many forms and all this kind of stuff and repeating the forms all the time. Which is very expensive and apparently the doctors. My doctor has since retired because he found it was better to manage rental properties in Paris than engage in. Medicine in the United States and I still have a dubious if it was some other place but Paris I would have said yeah that works. I don't know I've not thought of tires wonderful plays of his dog about the business climate in Paris but anyway. That. When he did his started his practice he had five doctors and three. When he retired he had five ministry of assistance. OK. I. Get an idea that maybe there's something wrong here. Paperwork trying to deal with how you get paid who pays you how much you know how you change your pricing and by the way our doctors don't know anything about business. And. In medicine even though most of our doctors are small business people. They have four hours of business training in their three years of medicine. So they're not a curiae but they don't out of. Some is some grossly. And some of them under charge those that under the charge find out other things to do are they go on a salary the should OK Anyway medicine has serious problems and we're going to have to deal with it and try and figure out how we can bring that number closer because if it's growing faster than inflation what does that mean it means that medicine is growing faster then our normal capacities and pay for it because wages are probably growing in line with inflation maybe a little bit more with productivity gains but that's what you're expecting and therefore your capacity to pay for this is lagging behind the costs especially if it's three percentage points faster because our productivity doesn't average three percentage of even when. Our inflation. In the case in the last decade. But even if it is that charge and that So that's that's the fiscal cliff it's a total of about seven hundred billion dollars Remember what does it require Congress must make a decision by the way they have to make a decision before the end of this year which means since we're not going to make a decision before the end of the election. That people who have been repudiated. By the electorate will need to make a decision. Yes whatever you think about Obama and whatever he got happens that happened he's going to be president when this decision is made. OK that's reality it doesn't matter how you vote. They set up the system Dave we can blame anybody you want Romney is blaming the White House and. Other people blame the Tea Party there's a lot of blame the probably all justified but the point is they have to make decisions and have to make decisions and not a very friendly environment OK so what's all this got to do people are afraid they don't know what's going on their own server so what do we see our last consumer confidence index while people said current conditions is kind of stable is not good but yeah out of this month is about same as last month but then you ask them what do you think about the future there's a home of God Are you kidding. Expectations about the future plunged ten percent in the last. Five. If you feel that I'm much less certain about the future what are you doing about ordering no equipment What are you doing about expanding your business what are you doing about hiring new people what are you doing about taking on more risk. When we can see the results were orders are coming down and that is executing whatever happens in the rest of the world remember China is weakening we're pursuing recession and here we are creating artificial uncertainty because our politicians won't make a decision. Now I am not a political sciences so I'm not going to criticize moment or the other about what the politicians but I'm an economist and I have this. What's the results of that and the results of that as the absence of the citizen making and the absence of the solution making is not good for business. So that's where we are now there is some good news someone is going to make a decision even if they don't make a decision that will go into recession the first half of the year and then come out of it yes it will live we hit the fiscal cliff will go into recession. OK which is why people won't make those rescissions. OK now to be perfectly honest every forecaster including me is not assuming that because were saying there even our politicians will realize that when you get to the precipice you stop. OK. And we're hoping that that's true so I mean it's the same forecast we have for good for Europe which is basically they muddle through they don't solve the problems they keep kicking the can down the road hoping that if they kick it down long enough some solutions will arrive by the way in Europe that might happen. In the United States I don't know but. That's the likely outcome that will kick it down the road that the lame duck main duck Congress Congress will in fact. Just pass everything on its own you know six more months and let's go through it again. And then go home that's the most likely outcome but nevertheless if you're a business person who assume muddling through and by the way six months further does that really solve anything. So you still don't make a decision and that's where we are. My forecast by the way is that after about one and a half percent growth in the third quarter we'll probably do about two percent growth in the fourth quarter there are the housing is turn. And that's a positive and it does look like state governments are now back in balance of the revenues that are reduced revenues. Local governments are still still struggling but state governments look like they're more or less in balance and don't have to do the massive and do it for the last couple of years. And that's a positive again the world economy is sluggish there isn't a lot of growth but if there's no trade growth don't look for a lot of manufacturing growth. OK so don't expect much there there is one saving grace and that is again on more Beals if you take a look at what's been happening around a while now we get into the manufacturing Porton and I know I'm supposed to give you some time for questions on Anyway the manufacturing part if you take a look at the developing countries are growing obviously faster than the industrialized countries and all segments of manufacturing except transportation but a. Major exception by the way and I said transportation of Quitman because I'm including both automobiles and their air activity. So that's where the industrialized countries are showing dramatic growth how can that growth persist Well if you get the credits the answer is yes if there is a facility even households that are struggling and are unsure about the future they will replace vehicles that are not performing the way they want them to perform if they can get the credits. OK Now four years ago I don't know if you remember going if you looked at the ads that we had four years ago leasing disappear there wasn't any leasing program why not because used car prices were falling ten percent a year. Here was you did a lease you thought you knew would use guard prices were going to do you got that car back and you automatically lost a few thousand dollars on a loan. Well this discards you for making more loans. So in point of fact we didn't have the leasing automobile sales fell below ten million dollars a ten million units. By the way one of the programs deeply criticized by most people actually proved to be beneficial. To conquer Bill. Now not because we remove clunkers. We destroy them. That's why and you sit there and have what's the difference the difference is by destroying them they weren't a resale to someone else what did that do to the used car inventory it reduces the used car inventory even as we're selling cars. Whereas mostly when we sell cars we increase the used car inventory like now what do you think is that new used car price now you've got the class what do you think these car prices stabilizing are about to fall. What do you think that's going to do to leasing it is going to tighten up a little bit but right now not too bad because the last year we've had about a three percent increase in used car prices coming on top of a ten percent increase in the previous year. So leasing still pretty strong but the lenders get a little antsy they probably don't know yet that that lease they just wrote that it's going to cost them about the thousand bucks but when they start getting those leases back I'll know it. And that's their big concern OK Right now we have they need to reply we got two hundred thirty million vehicles. You've got to do refurbishing repair and remodeling that's what's driving this economy even the household sector is doing. Repair refurbishing and remodelling they can't sell our houses so what are they doing there remodeling them. So all these things are happening OK. That's the driver we have in the economy right now the driver that's missing is capacity expansion. People aren't doing that and it's taken on more risk hack Why should I make that decision when. They could be nullified by the fair of my elected officials that make decisions. OK not for that but anyway the motor vehicles is where the industrialized country and by the way when I say that if you take a look at manufacturing remember I've painted a slightly bad picture about manufacturing there is one region of the world where manufacturing as a. Manufacturing output is actually performing better than it did a year ago. Fortunately we're not region North America that's the one area where manufacturing doing better is not doing better than any I mean and growth rates not doing better than a year ago and China not doing better than a year ago in India not doing better than a year ago in Korea by the way China India and Korea right now are considered the three most competitive manufacturing areas in the world. By the way who considers that. C.E.O.'s are manufacturing people who have to compete with these people. I how I question the India part China is obvious and I think Korea is becoming very obvious to. But they are the dominant areas if you're competing you're probably balancing against one of those providers. OK one of more of those providers that's probably where your problem is with of I mean Brazil in a couple of areas you're going to. Some problems to. Brazil is considered the fifth and and competitiveness in the world United States is fourth we still hold a position we used to be first were considered the fourth most competitive by the way watch is hurting competitiveness in the United States the fact that off the production line. Our costs are eighteen percent more. Than our competitors. OK That's for compliance that's for difficulties in supporting intellectual properties whatever the issues are in terms of it is the medical programs that employers are financing for their employees. All the of these issues the retirees the legacy benefits that are being paid to people who are no longer producing anything OK. Eighteen percent more so we start with an eighteen percent upside that's also the taxes Japan by the way has cut its corporate tax rate which now makes the United States have the highest corporate tax rate in the world. Which for G.E. doesn't matter. For local business that's what they pay. OK. So yeah it is really amazing who are there what does this mean well who creates the jobs it's the local businesses that's where the job growth comes from those big guys they acquire that's how they grow. They're not the end of Vader's mostly Apple is an exception obviously but they are mostly the innovators. The innovators of them the smaller levels and then they get acquired that's how the big guys grown. And so therefore the foundations had to be at those smaller air. Areas now manufacturing not you're not fundamentally going to talk about one or two people shops and there's a certain size of the probably have to get through to make manufacturing efficient and operational and things of that nature. So so it is a small corporate activity as it's not a big corporate activity it's the fifty dollar million dollar. Sales group is where a lot of the growth is development and even in automobiles while we are opening up some assembly lines and obviously there billion dollar things. OK the big growth is in the parts and some of those are pretty small shops. And so anyway. We do have a problem with our competitiveness and our tax codes are a disincentive we are over I think our productivity gains markable even in the last year although U.S. productivity gains have not been great hacky pass all these regulations do you find that the banking industry has a higher lot of people for compliance. So you know that's not providing service but it requires people it doesn't help productivity. Manufacturing is actually our productivity gains in you to be five percent here which are quite strong and very competitive especially if the dollar falls in value now of course with the euro problem the dollar had been rising in value remember a year ago on a Federal Reserve index our dollar was at ninety five point five today it's at one hundred point five So we actually increased by over five percent the value of our dollar against the world. Now not against Canada which by the way should we shouldn't be building any auto assembly plants in Canada anymore they're no longer competitive not with their chance rates. But anyway. He is no that has shut down existing facilities but you don't open anymore Canada is going to lose the wood but we're already getting the Japanese and now we're going to bring some of those china Canadian activities back into the United States autos and aerospace are clearly our. Areas going on OK. Will manufacturing continue like Obama as a lark heard a million more manufacturing jobs in the next four years and then you kind of sit there and say OK I guess you if you're going to do that number one let's lower that eighteen percent that's that's where you have to start working and looks like tax codes is probably a first part of that. If you're going to really start to create that kind of jobs the best equipped now American industry is creating a lot of jobs around the world. But to create him domestically and that's what he's talking about you're going to have to make the environment domestically a little bit more compatible. That. Maybe we can improve our competitiveness against China we certainly haven't proved our competitiveness against Japan. We're probably struggling against Brazil although Brazil by the way its manufacturing is now off from a year ago it's actually negative year over year Brazil is very close to recession present time. Just have to watch to see what's going on there I was wondering they actually ran for four years without any any significant change in that they have they have a really bloated government sector. I mean Brazil has a very large military I don't know who they're fighting aside from the people in the slums. They have a very large military why they've got to go to war with Argentina. Maybe they are I mean you know every once in. While Chilean proof throw people of each other by the way we never hear it until you get to Chile or Peru they're all talking about it. But otherwise you don't hear about it so there is some atomized but they go yeah very bloated government sector and they haven't really changed that and they do have pension program problems and can in the government sector and they haven't changed that you can work and Brazil government for ten years and then get a full pension. I mean even Chicago you don't get that. Anyway it's it's interesting all right next year I do think trades going to turn around again we have to solve some of our problems if we go into recession the first of the others no question that world growth is going to slow and we're already talking three percent we're already talking on the brink of World Recession. So we could push just down into a world recession something in the woods and world growth rates and under manufacturing will fall. We just can't tolerate that kind of environment. So we have some of these problems. Notice I didn't say we will that we have to. We'll have to are two different things. And I understand when people are making decisions but i only way that's. That's what's going on present time. Now I'm going to give you some time for questions and I'm going to ask me anything guys I got a lot All right we're going to get some interaction here. That doesn't mean I know the answers but. Yeah. Yeah well yeah energy is interesting because All right obviously we were you we don't. At the cheapest energy and she was energies in the Middle East Mexico by the way does have relatively cheap energy and Mexico is coming back slowly but it's coming back if they can solve their corruption problem. I don't know if that's possible but if they could do that then Mexico would be I very formidable competitor. And probably the number two competitor to us as well if you exclude Canada. The Mexico and Brazil would be our big competitors in this part of the world. So they have cheap energy and they're cheap and obviously a cheaper sentimental lease but if you take a look at our energy equation if you look at a rank from one that's handy. Where to where one is Saudi Arabia stamp your foot you've got some oil. Sands by the way is. China and. China. And Japan by the way also these people pay the most they don't have the stuff China has coal but look what coal is doing. And they don't them Day Well I'll guarantee you they won't pay the money to make clean coal. So coal or the is a problem they are more oil they're importing about five hundred million barrels a year now in oil right we import about nineteen but our imports are going down there is a rising by almost a million barrels a year. OK they're taking most of the increase in oil activity in the world. That's high cost stuff we've got natural gas they've got some natural gas but they don't develop it very well. China and Japan energy ten Saudi Arabia one Mexico two. We're about three. Europe as in the sexes. We have we against everybody we compete with the exception of Mexico and Brazil Brazil was a salsa fishing country probably the only self-sufficient country in the world meaning that if the World shut down and Brazil could meet all of its current needs and maintain its current living standards with its own resources and its own capabilities well other country can say that now it doesn't mean they're doing it doesn't make economic sense to do it. They they have works because it comes from sugar cane when you use ethanol from the whole plant. You get more ethanol out of it for any input you put into developing that plant we get out and allow the corn throwaway the rest of the plant. This what that means when you do the ethanol ratio it's about one hundred five the want or one zero five one hundred meaning that for a one dollar input in energy starting from the sea plowing the fields whatever you need to do putting the fertilizer on getting the things out processing the stop putting it in a car and using it OK you've used one hundred five percent of the energy. To save one hundred percent. OK doesn't work why do we have a strong as a what we know what doesn't work how do we know it doesn't work we have a fifty five cent per gallon subsidy and a fifty one cent per gallon tire of. Fifty five cents per gallon subsidy in the production of ethanol in the United States in a fifty one cent tariff so we don't get the cheaper ethanol coming out of Brazil. OK What is the best most efficient ethanol program in the world. Anyway. Brazil is going to be competitive Mexico's going to be competitive there's always rumors that the Middle East will do something other than produce oil but we're waiting to see what that is. Obviously Dubai has financial services and things like that but and that's obvious too because well generates a lot of finance but generally we are very competitive on energy. And we actually are very good do we pay more in wages but we have more skills. If you. Yeah we have some problems finding some of those skills and by the way we're again foolish program and I don't know what you think about immigration but when you have talented people that want to be in the United States we should find a way to make sure they can be here OK I mean you know why do we lump or Vimal Gratian you know are we're going to stop it and therefore let's worry him because you know one third of the illegal immigrants are people who came here legally. And then stayed here illegally and one of the venues obviously tourist visas and student visas is the way to do that. OK. So now we're putting pressure on student visas this Mart Well yeah let's get away from the fraud sure there's some fraud on people they say they're students and drop out in six months and they don't know where they are that happens let's deal with that problem but one of talented people. Let's find a solution for them. When was the United States turning away people who wanted to be here and contribute to our country we're doing it now our current immigration policies are doing exactly that we need to do something to address that program. And by the way if we don't. Have ten years now I'm not Japan they have a cultural problem that I don't think they're going to be a serious risk to us but China will. China universities are getting better every year. Right now one of our great positive contributions is that we have the best university system in the world people still come to I mean this is one of the problem of the hey was Gen them away people come to our universities and that's so they say our colleges but the upper level classes they come to they want to be here and that includes Georgia Tech I'm not sure includes Georgia State but I want to say. OK. They want to come. I was in Japan at the time that the second Japanese ever who was not political or artistic received the Nobel Prize. Second ever by the way while we only have two in a year we think something's wrong. In the United States. They don't innovate and by it was really amazing because I didn't care at the time the papers came out I can't read that someone else read and this is wonderful and then the next day he kind of mentioned he says the reason why I was able to do this is that I left Japan twenty five years ago and I'm in a lab at MIT. And then the papers not say that big about a book but. Yeah there are some cultural things that the for some reason the Japanese are very good at engineering a very bad innovate that creation. Engineering innovation they're good at but actually. They're not good at. Thinking outside the box that. It's not Japanese OK China though is different. They could be world class university I would rather have the best Chinese here than have them competing against me. OK. We do need to have an immigration policy that handles that we did have an immigration we are now working to get. It's a problem so. To some get Otieno part of you who come over here to get dialysis and stuff Len people do. There if you want to find it yes you can announce it. But there's also the fence and we've got to figure out how to deal. OK And we're not doing it present time so. America is good as I say our productivity is quite good now there are different styles you are now finding like like the periods where there are design they don't design products you know none of the old General Motors thing well world will design something because we think it's in the. Week that. Will have. The market was up and that. You would. Get. Almost. Word. For. Your next here. And that's. My. Right there. Your word for sure. Obviously you're a liar and you're sorry what's the next solution. And your life your. Life and your own life is that basically well on your rights to your life so this fire here tonight certainly. Headed back to World with your. Heart right now it is for you and. YOUR of the. Free for one reason why my. Wife my wife. Works. All the life. So. What I. Want for my. Area. Which is what. That little. No two ways more integration moving. More the right way to move towards. The more the. Rest of Your Life about. The voyage great roads. Are good. But I'd say right now your fire department being at your opposite. Which means post. Yeah yeah. Yeah. Well listen listen to this event it's races not heard. It's out. Even if you believe. You never said you didn't. That's the state. This is not. Your business you know you didn't say he will no and he did the artist doesn't appeal for that yeah I'm sure his council the town will now corporate tax rate for the whole world. And maybe it's time for us to do so. You know a couple of something Jesus not Mary got. Was a couple of things to do let's just do something to make sure that you pay a lot of adultery or. Fire. Fire with fire here let's do something else so the small businesses. Wouldn't work wouldn't. You know. It's GILLMOR You know our current system is an illusion again at the example felt right that the people who create jobs get. Quite by accident at birth both regulatory and tax burden and the people who. Are global they're finding out so. Far. As result we're giving away a lot for the legions of people who only dream job only violent. And we're not the people who believe not hiring illegals. Are going to do what I could tell about you know if you're stuck over a new man and. You take the Senate of the house that jumps out. If you're a hit from that sheer dangerous which means you are part of the last so I says out start of those thirty five percent or the feeders that the headline is paying fifteen percent on the feed that is there. Now you sit there and say What was that. This years ago it was a billion dollars Today hedge funds are doing their duty and. Church funds are going on. With an order. While that is out against the tax code which. Is a great. Buyer's it changed my life to believe that it actually it was that was the last problem with the Bush tax cuts but it was such a good ever bridge. That some of the members. Of. It was driven by. Tax codes can create products we have made. I'm a start right now I don't know why people are lower. That doesn't mean I have a result like raising the marginal tax rate on the hiring him people aren't stupid. Yet but one more question. Yeah. Yeah I like the way it did it in the longer term is going to be a power quite. Like I did leave that to look at the corruption of India you look here structure and here you look at the stealing of intellectual property isn't in here which is why. You know all these things get you very very nervous about where it is dark yellow China doesn't steal anyone here is much larger problem there you saw and the result of the French but nowhere near what. Is there so all of these are significant returns. While there's going to be an awful lot of. Like twenty thirty years going to be the most part with the world. That is going from a difference like demographic shift if they continue to have an educational tradition they are now because of the Internet they've opened up the that educational believe is starting to Jonas Olsson India a little pockets to be sure it's not reading me boy one can make kids under twenty years in India will be the chart of twenty years. But obviously they got it wrong roll with itself and the problem right. They got some of what we got in to watch probably something probably right they got to get that socialist team out of the. Government also all those things. Problems are necessary before the real movement that Russia but you notice it there is a here has a lot to do yet it's the wrong finance six percent. And it's a very big country so. Yeah there will be hard but they could be to China for years and by the way. Why are is a hostile or not they clearly mismanaged her economy overstimulated now overcome by not having problems directing what's going on there they're very significant any quality not only joining well but also between eastern and western China also leaving in cities and the rule areas. To wonder that such a new design Yat-Sen come out of the rice fields we've heard. So what about what I can chart on the chart for you whoa yes. And you might say why you hate about it they do it's a momentum right now but the yellow part of it is what I just said about the universe. We're chasing people back to China and China will create world wide diversity if we continue to do that. And you're probably won't although we do have some they do have some tradition and so one well I'm not sure if he would do that. But China could very well if they get to that workplace place and they start him and he starts each other and he's a man that will list while. Things would really change for it. But at present time I would say it's more like twenty years from now I do with endears the big. But they have work to do they have a different to give and I don't think their number two right now but a lot of the property rights. Issues. Thank you very much. Elaine to. Our writers that. Letter was a blast. And. They very much.