Former US President Bill Clinton was hosted today by National Bank of Kuwait (NBK) for their annual international symposium. He delivered his keynote speech address various political and economic issues globally. I was lucky enough to be in attendace and was really looking forward to it for many reasons, mostly the timing of the event which comes in the middle of the global financial crisis.
The event started off with Mr. Dabdoub giving his opening speech welcoming the guests and the speaker, and then Clinton talked for almost 40 mins with a Q&A session held afterwards.
I tried to catch as much as I could from his speech, and I am not a fast writer, but I type quickly, and I got as much as I could by typing everything on my BlackBerry, so its not 100% but if I don’t have it as quoted then its not a direct quote but the idea is correct. And the picture are courtesy of a friend of mine, thanks!
I will not write my opinions because this is long enough as it is.
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He started off by congratulating Kuwait on rebuilding relations with Iraq and our economic success, which he says is proven through the market’s decline. He explains that our local market going down as much as it did proves that the central characteristic of our times is that the world is interdependant. For example, China has 2 trilion in cash, Japan 1 trilion, but even countries with large cash reserves are not immune!
He then started off recounting how the global financial problem started. Unlike the previous 98 crisis which was set off from Asian countries, this crisis began in the US and spread outwards. It started because the economy had too much risk, too much leverage, and little regulation and transperency.
He focused very much on the housing market. He stated that too much money was going to homes and housing related products and instruments. In fact, as of very recently, 40% of US spending came from the housing market while consumer spending was 60%!
Risk was improperly valued, and there was no limit to leverage. The US enjoyed its biggest gross income since the 1920s. Even with that phenomenal growth, the wealth was not spread equally. 40% of the gross income went to the top 1% of the population! Median income is actually $2000 less than it was 12 years ago in 1996.
The housing and consumption both reached their limit at same time. This was the start of the problem. Leveraging limits were very relaxed to the point that Bear Stearns was leveraged 33 to 1 before it collapsed. Bill Clinton said that he disagrees with the US treasury decision on not intervening on Lehmann Bros. According to him this was a purely political decision, and the market has suffered and has gone down since then (Sept 15th).
The troubles staretd spreading around the world starting with Iceland. The banks there felt the hit and the banking sector started suffering. Banks stopped lending to other banks. Soon afterwards construction projects were put on hold because there was no financing. And global markets kept going down. Then it spread from Wall st to main st. Banks stopped lending individuals, depositors took their money out, and institutions started calling loans from good companies.
Clinton was positive about the recent G20 meeting and said “I’m glad G20 worked to establish standards of transperancy”. Its a good start, but not enough.
Then Bill Clinton set out his recommendations on what President Elect Obama should do to help with the financial crisis -
Continue to pump liquidity until confindence comes back. This financial crisis is an economic problem but is largely a matter of people losing confidence in all investments. This needs to be addressed.
- A great example of this was his story about WalMart. Most shoppers at WalMart have less than $100,000 in their bank accounts, which means that their money was guaranteed. Even though that is the case, the week the law passed to increase the guaranteed limit, the biggest increase in sales was for home safes!!
Again, Mr. Clinton repeated that even though the financial system had some problems, and that the economics were not perfect, the psychological aspect of this is very powerful.
Trilions of dollars disappeared globally. For us here in Kuwait, we were hit most by the drop in oil prices. He says that the decrease is psychological more than economic. Just as speculators were overoptimistic when oil was at $110 a barrel, now at below $60, this is more negative sentiment than rational. According to Mr. Clinton, the price for oil based on supply and demand should be around $80, and he believes that prices will go back up.
He also believes that the US should pass stimulus package. As of next January 20th, when President elect Obama is in office, the stimulus program should be revved up because of the democratic majority.
Mr. Clinton’s three most important steps that should be taken -
- Keep people’s homes. 1.5 million homes were lost last year, and 2 million this year. This is a priority.
- Help the auto industry. If GM goes out of business, this means a couple of million jobs lost through the different channels.
- Direct stimulus programs through infrastructure investment. The government should invest in creating broadband technology throughout the US, an electrical grid system, electronic medical records everywhere. He said that the more we invest in different projects, the more likely we will come out of it more productive. Stopping big projects until the economy bounces back would be a big mistake.
He ended his speech by stating that we have to worry about global deflation. Even though the US is in a much worse state than Kuwait, they’re doing the stimulus package because of the fear of deflation.
His final note was an anecdote from his days in the White House. “I was attacked in the house of representatives because I was too conservative, and one member stood up and wagged his finger at me and said ‘you’re the most conservative president since Clevelend! I replied that I always liked president Cleveland. I prefer financial prudence.”
Q&A
- I didn’t catch the first question, but in his answer I was very interested with the topic of multipolar order. “Building a world of multipolar economic and political power”. No country can solve their problem on their own any more. We need a larger group of people to consult through a multipower world. That is why it is in our best interest to advance as many counrties as possible.
- There are rumors of Hillary Clinton being offered the role of secretary of state by president elect Obama. Should she accept? This happened after I left the US to come here. We talked about it on the phone but I cannot say much. It is between him and her. She had no ambition for that position, but if she accpets, she would be great. Even if I know, I wouldn’t tell you since I have no business in doing so, but I really do not know.
- Should the new US government talk to Iran and Syria? What would Turkey’s role be? We should maximize posibilities for diplomacy. I believe and hope that next year the Israelis will resolve their problems with the Palestinians. If that happens, half of the terrorism threat will go away. If we do want to start dialogue with Iran, we should always consult our allies. As for Syria, its up to them, either go to Iran or to everyone else. the Iranians said that Mr. Obama would be great as president, then a few days later they said he won’t be different than any of the past US presidents. “they are confused at an america that doesn’t want to be their easy devil.” We should always consult the turks, and any policy should come through serious consultations with our allies. As usual in politics, plan for the worst, work for the best.
- New US energy policy? Obama will ask congress to increase energy independance and greenhouse emissions policy will change as he pointed out many times in his campaign. Will that effect Kuwait? It shouldn’t. If we are more energy efficient, we would buy less oil but that wouldn’t dry up global demand for oil from China and India and we want to keep our relationship with the oil producing countries like Kuwait. Extraction is cheaper here so we would rather have that than build new fields. No country believing in scientific facts can do anything other than what Obama has said. “If I was u, I would think on how to use the reserves to begin economic diversification for kuwait.”
- One thing u wish u did before leaving office? I wish I would have been able to make Arafat agree to the peace deal I offered. I was very optimistic that he would and I was told from reliable sources that he would, but he didn’t. If he did, we would be in a different world. I also wish I got universal healthcare in the US back then, and I wish I stopped the Rwandan genocide. But the thing I hoped for most was the peace deal.
- Balance of power between Russia, EU, China and India? Russians are likely to have a cooperative relationship with Europe and the US. The Russians don’t want to go back to communisim or empire days, but they define their greatness in part by escaping the sense of total helplessness and ability to control their borders. This is a powerful and great nation historically that has gone through two invasions from Napoleon and Hitler in the past 200 years. This affects the country’s psyche, so the money they have now is a reaction to the humiliation from fall of berlin wall. Their problems with the southern Muslim states are mostly down to the Russians worrying about disintegration, so they would rather use a strong hand than a weak one. I expect to work through with them. As for the EU’s strength, it depends on them. There is still no unified identity. Old countries need to give up some things for maximum influence as a unified group. China, if it follows the same pattern it has been following, then it will become more powerful. They are not an expansionary power and I believe we will work out any differences. As for India, if they stop spending on weapons to fight Pakistan, then they could grow quicker than China.
- Main Challenge facing the Middle East? If we look beyond the Palestinian and Iranian issues, the resurgence of the oil states is the most important and exciting factor in the Middle East. How well will the countries define their future? Can they keep their culture and go forward at the same time? For example, if we look at Saudi - how will they find jobs for the millions of youths they have? How far will they go to fix their radicals? Will they buy them out and backfire? Will we pretend that oil will never end or are we going to move and plan for the future? Qatar bringing schools is a good example of how planning for the future could be. Prince Turki foundation in Saudi is another example of good focus on future. Another important issue is wether there should be a regional pact to help non oil companies in the region? “how will the process of modernization unfold or not in the countries of the region.”
- Do u think the US will find the weapons of mass destruction in iraq (jokinly)? I think this is worth clearing up (seriously). The UN records show that there were weapon stocks of biological material. The fact they couldn’t account for it, doent mean they didn’t have or get rid.
