Welcome to the special Bloomberg television debate. I'm Susan Lee today. We're gonna try to tackle the question Ready for crisis is Asia ready? We had the German and constitutional court ruling on the ESM But as we know and the consensus is the European sovereign debt crisis has a long way to go Also Chinese growth might be coming in at his lowest in 22 years What does that mean for the world economy when you have the growth the engine of the last decade declining? And of course over in the u.s. We have the looming fiscal cliff at the end of this year And we have a special panel of guests today from different backgrounds and industries to answer this question So let's get ready First off to my left a man that really needs no introduction The man who led one of the largest economies around the world's the longest-serving chancellor of the ex-checker in UK modern history The honorable mr. Brown. Thank you so much Pleasure to be here now to his left for a view of one of the largest emerging economies across the Asia Pacific of course from India We have a SP Shukla who is the president of global strategy Mahindra Mahindra Which is one of the largest it is the largest tractor maker in the world I want the largest non-banking financial institutions in India good to have you with us They like it to be and of course we need the Chinese view as well and An academic that is well known for one of the best universities across the country And for the former dean of the prestigious Guanghua school of management. We have professor Zhang Wei Ying joining us today Now we need a banking financial view. Don't we Certainly do and the man that represents the industry today for us is mr. Rodney Ward Who is the chairman of investment banking and corporate lending at the Bank of America Merrill Lynch, and at the End of our panel finally a man that also needs no introduction mr. Fred Hochberg Of course who is the head of the US agency the export and import bank of the US which helps These industries that need financing that can't usually get it Get some money some access to money good to have you with us So we're gonna start off this debate talking about the question at hand ready for crisis Is Asia Pacific ready for yet another global economic shock? Let's put that question to our panel now and mr. Brown. What do you start us off? I hope no I hope we're not gonna have another shock I think that Asia has done remarkably well coming out of the global financial crisis And I think that we're going to see a slowdown in global growth I think it is partly because we're in this transition From an economy that was previously dominated by the West to an economy where the center of gravity is moving to Asia And if you like the producers are in the majority in the emerging markets The consumers are still in the majority in America and Europe And we are having to deal with an unbalanced world economy as a result. My worry would be Financial, I don't think we've learned the lessons from the global financial crisis I don't think we've got sufficient transparency in our financial system I don't think we're able to track what is actually happening Whether in a shadow banking system or in the formal banking system I don't think that we've got standardized rules that should apply in my view to the whole of the Global financial system and that means that the next time there is a crisis people will look back and say Why didn't we learn enough from what happened in America and Europe? During the global financial crisis and apply global financial rules That gave us some standards by which all financial institutions should be working So my fear is still that another financial crisis will arise Because we have failed to deal with the problems that we knew Existed as a result of the last financial crisis Mr. Shookley said five years on we're still talking about crisis. Yes Let me first begin by saying that I'm an eternal optimist and Anyone who has studied economics Optimism itself decides and influences economics. I do believe and I do get views from 150,000 employees in our group who come from 104 countries All Levels of preparedness are relative So I speak right now for India only not for Asia in general and not for emerging economies at all. I Think India is better prepared than many nations today To handle a financial crisis if it comes though I hope as mr. Brown said it doesn't come we are better prepared why I would say There are three factors we can take on that one It sounds very simple But we are still growing at five to six percent It may not sound much in the context of India where we are talking about nine and ten percent But it is still better than most of the world second Financial flows have slowed down. They have now to a small trickle Nothing can go worse than that Whether it is investment flows portfolio flows. They are at such a low level now today in India Coming money coming in from outside that it cannot possibly get worse than that and Third if you talk about social tension, I'm covering the brief which you have given in India we do not have a social security It is a handicap for the society but when seen in pure economic terms in India Governments do not borrow To pay people who are not working I'm putting it in economic terms in social terms. It has many other implications. I'm not getting into that So when that situation does not happen, there is no direct financial impact on government finances of any such Upheaval happening in financial markets when you see these three factors together We believe that our institutional systems are quite well prepared to withstand any shock if it happens at all professor John I think China is not yet ready Lot of decades in terms of economic growth China Is a best decade when it is of social problem? It is worth decades in terms of Reform it is a lot of the decades Or so it's a whole to understand this is why China has had these high growth without Some fundamental reform in past decades Many people miss and stand it. They saw this we have already had good models so called the China model What is China model government? You'd fear he called me state secretary is a very powerful that's quite good but I do why my understanding is why China had a growth high growth because China had Reform before you know first two decades. That is a very important because reform dividend China had you joined this reform dividend What is the Trouble is that not because last decade is a no fundamental reform. So China has already exhausted this reform dividend so it's next the decade will be very difficult I think very difficult for China and Like banks they join the big profit. They saw that they are already efficient They saw they already have good governors, but that's a total wrong They are profitable because they join monopoly Because financial markets know that it open some other state sector like China Telecommunication like oil they all you join monopoly, but they saw they are already efficient So that is trouble and also private sector. I think it's Many people many Privacy people are not very confident about the future because today they still face some Government policy which is quite discredited against the private sector So I think you saw China not just the economic growth will go down and also there will be some I think Other troubles particularly the whole to change this you stay to it There is much depends on what the next generation or on our next government will do Yeah, that's a bearish view on China that you have professor John Ronnie, what's your view? Thank you very much Susan. I think first of all I start off with the view that unfortunately I do think we're going to be in for another financial shock and I can't see Frankly any easy way of avoiding that Secondly, I would say that the financial shock that we've been talking about historically started in 2007 when the two best money markets effectively imploded and So you've had five years already of quotes shock To deal with and if you look at Asia and how Asia has survived those five years It is actually survived those five years Pretty strong and robust When I look ahead and say to myself What will happen in the future? I am very much persuaded by three or four basic factors one Asia has the ability and flexibility on the monetary side If you look at the EU if you look at If you look at the US they have zero interest rates, so they have no capacity Effectively to have any easing They're also in the EU locked into one currency So they can't even allow their currency to take the heat the great thing about Asia is they have the capacity 3% plus Interest rates to reduce interest rates and they have floating currencies which they can accommodate They have enormous fiscal capacity if you look at the US I think the US debt to GDP ratio is around 90% in Europe around 95% if you look at the PRC It's something like 17% if you add on the provincial debt It might take you up to 40% but it's still a huge difference So and I take China as the biggest economy the others are even in more robust situation So they have huge ability to inflate to ease to stimulate their economies and And that's a source of great Comfort to me and also the fact that they have major reserves reserves that they've never had Historically before record reserves throughout the region thirdly demographics Asia has got a young population The one country that might have to worry about that apart from almost a Japan is China China is coming up to its peak labor population in the next five to ten years Apart from China all the other countries who've got huge young mobile people. What does that mean one? Not many old people, but those old people are not expecting entitlement programs the young people much more mobile Look at the EU you would hope that with a common market that there would be mobility But there isn't because there's no language Communality and labor laws are different. So when you look at that Asia has a huge advantage on the demographic front If you look at the banking side I heard what my friend here said ten years ago the banks were effectively organs of the state They have loan loss ratios of something like 20% or thereabouts today If you look at the banks, they're not non-performing loans are less than 1% and I'm talking about the big five banks obviously Less than one fight a lesson 1% They have the capacity to lend if you look at their loan to deposit ratio Huge capacity to lend something like 58% Loan to deposit ratio where you would take 1% as well 100% as being Relatively lend so huge capacity there and then finally I think what we're missing here is huge growth of Inter-regional trade which means much less vulnerability to what's happening Externally and great growth in consumption. So those would be my comments. Okay, Fred from the American perspective I'm a little more optimistic You know for decades the global economy and the US economy relied on the US consumer and a lot of debt That's changed. We're looking much more at an infrastructure play globally Well, it's going to be invest north of two trillion dollars a year China's obviously led the way in infrastructure, but India Vietnam Indonesia are all putting in large infrastructure projects building power plants satellite systems rail networks airports So I think we'll be looking for more balance President Obama in his national export initiative said we need greater balance America needs to consume less produce more and I think that infrastructure is going to pick up some of that slack and China is making an effort as is much of Asia on developing more of a consumer market So I think longer term medium term three to five years. I think things are good You know, I'm not so good at predicting six months at a time But I think that I think it's rejected a lot of the marks are going in the right direction So I'm a little more optimistic than some might go panelist You're sounding very optimistic But when we talk about crisis and financial shock what type of shock could it be? We're talking about something political say from Iran Israel are talking about the euro blowing up What in particular what what crisis might be looming? See? I think we've learned over the last few years that you can have a Macro-economic position that is relatively good. You can have low inflation in American Europe You can have relatively stable growth But if underlying it there is a financial weakness then things can go very very wrong So if you'd looked at the inflation figures if you looked at the growth figures You might have thought they were growing too fast But you would have you would have thought that the kind of crisis we had in 2008 would not have happened And so we've got to be very careful in to look at the volatility within the financial system And I I think I agree with that the rest of the panel that if you look at the macroeconomic position We're going to have lower growth that globally it is going to affect China and the rest of Asia The reason is primarily that Europe in America is not They're not recovering as quickly as they they should have and they're not consuming as much And have got themselves to export as was just being said if they're going to be a balanced and strong growth economy in the future So on the macroeconomic picture you can see problems, but you don't see crises at the moment But on the financial side, I think we've got to be very wary after the experience of 2007 a things look good on the surface And you've got to dig down all the time and look at what is really happening What are the underlying trends that are happening now? I accept everything that's been said that China has got very big reserves that the the defaults and the and the bad debt Ratios look as if the the underperforming assets look as if they're not a problem at the moment But I do sense that we haven't Applied the lessons that we learned in 2008. You see when we set up the G20 In 2008 to manage the crisis We had three aims the first was to get to prevent a depression and we managed to do that The second was to repair the financial system and the third was to get back to stable global growth and the second and the third have not been fully achieved And it's the second that worries me most because in the last two years While we committed ourselves to global standards and global rules What we've actually had in practice is each national regime Deciding to go its own way and so instead of having a common pattern and a common playing field around the world In the management of our financial systems America is doing one thing Part of Europe is doing another thing the rest of Europe is doing another thing Asia is doing another thing and I think in that lies huge risk for the future And that's what I would be most worried about that you can look on the surface and see that things are going very well but in practice you've got to dig down and look at how Resources are being allocated what risks people are actually taking and even if you have very substantial reserves You've got to still worry Because as we knew the debt ratios and the government debt in Europe was not that high at the beginning of the crisis Is exploded at because of the crisis and it's mainly because of a financial crisis that is fed through to the real economy Can I just say that on the financial crisis? I mean it's very interesting if you look at the assets to GDP ratios in say Switzerland They are 470 percent if you look at the UK even the UK is something like 400 plus percent If you look at the US, it's just 70 percent if you look at China. I think it's about 150 percent So there's something wrong when so much of the assets Actually being deployed in non-productive means and I would be interested in you your views on that as chancellor as Whether or not you don't feel that means Inevitably for the foreseeable future That certainly Switzerland and maybe the UK will have to shrink and continue to shrink Their banking systems because they're unsustainable as they are at the moment some some countries as you know have International finance at the heart of their economy and therefore it's bound to be the case I know bound to be the case that Their banks have major major liabilities But of course you've got to look at the regulatory system in each country and the lesson of course we've we've learned In the United Kingdom is that we should have been tougher in our regulatory system But the lesson I learned more generally is that unless you have a level playing field around the world Then there is always a danger that the problem will move from one place to another And I don't think we've thought at that through we've got a global financial stability board We've got a G20 set of recommendations But let's be honest they're not being followed at the moment and we don't have global financial standards that we can be proud of and I keep saying people will say the next crisis Why didn't you deal with it in the last crisis and let's be honest we have not yet dealt with these problems If I can come in there you made a very interesting point about the regulation of the financial markets I think again, I bring the perspective from India a large emerging market When it comes to housing finance which caused many of the problems in the world None of the banks in India will loan you unless you put 30% upfront for your house Only after that the lending begins Bank has absolutely no risk They cannot lose money on lending money for any house now it may keep the growth little lower But risk to the banking system does not exist Similar things prevail our central bank has been so conservative that in its effort to balance growth and Controlling inflation it has been raising interest rates for almost two years today in India Companies pay anywhere from 9% to 12% rate of interest Depending upon the rating of the company That gives a that's the point Rodney made That gives so much leverage to the country that tomorrow if government were to take a view to stimulate the economy a Country where people are used to paying 9% and 12% interest rate even if you are to shave off 2% That is a whole good kicker for the economy But of course RBI is reserve bank is balancing the inflation expectations and therefore keeping the rates high There are so many reserves in place Which can be released if the need be But the bigger problem I see for the emerging economies is that they do not have enough capital Formation and they still depend a lot on external flows and that is where risk lies to Countries which have to import foreign capital to develop their own infrastructure So while pent up demand both for consumer goods as well as capital goods and infrastructure is very high in India if Financing of those needs does not happen that may become a constraint in growth, but by no means it will lead to any crisis Professor John. I think Why China had a no financial crisis when global had financial crisis because Prime Minister To India solved that problem before global financial crisis he used the state budget and he used for reserve Eject big money into all these big four Banks commercial banks that was very important, but now I think it's Next few years will be I think something change Particularly, I think you know more and more companies face a problem because of the pay That's as a non-performance low your increase. I think the Chinese bank. We all also face new problem of Non-performance that is not Not so good as today The only thing I would say about that and I understand the point is that the Capital adequacy ratios of the banks in China have been substantially enhanced pre-buzzle 3 They're still up to 12 to 13 percent That's huge change from where we were 10 years ago so Capital adequacy the strength of their balance sheet the strength of their Non-performing loans there is a shadow banking system. You're absolutely right that probably accounts for 30 odd percent of the lending in China, but that is really targeted at SME smaller Organizations, which frankly the bigger banks are just not equipped to deal with it doesn't mean that those shadow banking loans are bad loans Many of them are very good loans. It's just that unfortunately for the very big banks They don't move the needle in financial terms. I Was just gonna add I think that you know Europe and Asia have the financial wherewithal as well as the United States to Solve its problems. It's a question of political will in different parts of the world So I mean it's not a lack of capital. It's not a lack of resources It's a question of how voters perceive it how leadership Shapes that so that people can have a common purpose and move forward on that. That's true in Europe That's true in the United States. You know, we have it We have some budget and deficit and fiscal issues. It's a question of President Obama has a view Republicans have a view how we find common ground and move forward So it's more about finding common ground whether that's in Europe or whether that's the United States and whether that's as China evolves into More of a consumer economy. It's a question of moving in that direction. So I think that the resources are there It's a question of whether people gonna move there Now mr. Brown you said that we could be on the precipice of another Crisis and we haven't learned the lessons from the past. Can you share with us back in? 2008 when the financial crisis hit as a prime minister of the UK What lessons did you learn and what would you tell Asian leaders right now to do to prepare for another shock? Are they doing the right things in your view? Maybe I give an example. I was at a meeting of the Euro group That's the all the leaders of the countries in the Euro in October 2008 Just after laymen brothers had collapsed and Britain was not part of the Euro as you probably know But I was invited to the meeting because we just recapitalized our banks And we went around the table and listened to every European leader talking about their individual position And they said all of them that this was an American crisis It was Anglo-Saxon if you like Britain had made a mistake because it had gone With a similar financial system to that of America and Europe was really Being infected by what had gone wrong in America and the assumption was that there was very little wrong in Europe And that if only America would sort out its problems then things would be fine And it was only over a period of years that Europe came to recognize that first of all its banks were actually more Highly leveraged than those of America and we just talked talked talked about about that And clearly also it had a competitiveness and growth problem, which is still Not resolved that Europe's got a smaller share of the world economy now As a result of the rise of Asia, of course, but Europe is not sending enough exports to the dynamic Emerging market sectors of the world and therefore Europe is facing a problem about its ability to grow And what I'm really describing here is that even as the crisis hit the world Layman's had gone Bear Stearns have been months before There was still not a recognition that things were quite Fundamental and had to be sort sorted out So you've got to think very clearly of all the time That's the lesson I learned about what are the weaknesses and vulnerabilities in your economy Now what's going to happen in Asia over the next few years is something that the world really has never seen before We're going to see the rise of the global middle class the middle class Will be a majority of the world's population by 2030 if We're right in the predictions we've made most of the expansion is in Asia 40% of global consumer spending will be in Asia in 10 years time only 20% of it in America So you've got this massive expansion taking place and as that expansion takes place You've got to be certain that your financial fundamentals are strong and I accept that Asia particularly China of course has very big reserves and therefore you can fall back on Reserves if things start to go wrong But I'm not certain That faced with this massive expansion huge amount of foreign investment coming into Asia an equity market That is not as strong as the rest of the world Banks being relied on more than in other parts of the world to lend money to businesses The need of businesses who are expanding to get finance I'm not so sure that you can say definitely that all the issues in the financial system Have been thought about and can be dealt with and that's really the point I'm making that you could be sitting here thinking things are fine But underneath there are issues in the financial system that we found out about in Europe too late And America found out to its cost with a terrible shock But at that time it seemed reasonable to invest in housing in retrospect It was a mistake to allow the subprime market to develop and so look at the fundamentals look at how strong they are And I'm absolutely sure when I look around the financial system that not enough has been done to learn the lessons of 2008 So that's that's what I draw from my own experience. Yeah, professor John I just wanted to tap your view of China because you are very bearish basically saying that the next 10 years are Questionable for Chinese growth. Are you saying that China's headed for a crash right now? I would like to say I think we needed to learn right license from all this crisis in 1997 1998 that was the east Asian financial crisis And we learned the right license that the government inferred too much controlled too much chronic capital in but in this global Crisis we learned the wrong license People are most many people saw this gun market field So government has done quite a lot But I think the causes of global crisis was the government Bring the too much money to low interest rate.  But today we use is a wrong method To solve this problem that will be our major cause for our future trouble The proper will come from current the government policy Yes, I Was thinking if we look at more social economic context rather than financial context Then some of the issues of emerging economies will be More crystallized in the mind India has been getting growth. So have many other large economies in the emerging world The problem is less of a growth and more of inclusive growth You talked so well about rise of middle class. We need a far bigger middle class than what we have today It is still a small proportion of overall economy So while we talk about India's middle class being 200 million strong What we forget is that it's a 1.2 billion people Often people call it billion people, but I keep correcting them that you're forgetting 200 million this 1.2 billion people Now 200 million is too small a part of overall economy still There are many many others who deserve to be there who ought to be there and are not yet there it is this aspect which is what is holding back economies like India and That is what leads to lack of formation of consensus on urgent economic reforms There is something which one has to remember that we have to first live in the present before we think about the future So very often while building economic consensus on any matter Concerns of present have to be taken care of and the sections the interest which represent those sections They will vociferously put forward the point and as a result present wins Against the future in many of the initiatives in many of the discussions It is that which I believe is an outcome of slowing economic growth. I'm not talking here about crisis I'm talking about constraint As a result growth which could be achieved by economies like India on a pure economic rational Sometimes is partly sacrificed because present has to be taken care of of those who have not yet made it to middle class This is a reality and I do believe that fine-tuning will go on at various levels to handle this We're gonna make this a very interactive session as well. So there will be a Question and answer period where we invite the audience to ask questions to our panels But please wait for a microphone to get to you introduce yourself and then ask your question So we have microphones roaming right now. Would anybody like to ask a question? This lady in front Lin Li from Peking University My question is for mr. Brown. I know you had that down. You did a great job during the crisis Also, you shall experience with the Chinese I Allow me to say more is I Don't very much agree with mr. Zhang's opinion because he seems quite Pessimistic I'm more optimistic about China's future. Actually, I think nobody ready for the crisis The key thing is how what's the ability to deal with the crisis. I I believe Chinese government and the Chinese they have the ability to deal with the crisis They are quick learner. They're hungry to learning and also they work very hard But the back the question for mr. Brown is During the crisis, you know What do you want to do and what you can do given the political structure in the Britain and the compare with the Chinese Political system. So what advice you can give to the Chinese people for the future crisis Or maybe my question is not clear enough is if you suppose you are the Chinese What do you deal with the crisis? Thank you? I know the Chinese are choosing new leaderships at the moment But I don't think I'm being considered I Think what you're asking is is really relevant it I Sense that the Chinese leadership and the Chinese economics Leaders particularly Are thinking very carefully about the next five ten fifteen and twenty years And you may have seen a report that was published jointly with the Chinese government and the World Bank called China 2030 and it itemized all the challenges that China has to face in a way that I think was very Honest and upfront about Inequality being a major problem in China the education system being in need of reform and improvement and having to move faster to get children into Secondary school and to get secondary education and then the ambition. I think of having 300 million University graduates by 2030 and Then it did look at the financial system as well And some of the problems that I'm raising were actually raised in in the report itself about how the financial system could cope with this massive expansion, so I think it's to China's credit that you are Not taking a short-term view. You're taking a long-term view and that you understand the social and economic changes That are needing to be made rural wages The loss of manufacturing jobs which were relocated to other countries where wage levels are at the moment lower than those in China The need to replace these with knowledge intensive capital intensive More technologically sophisticated jobs for the future. So yes. Yes I think I think that my my caveat about financial volatility and the need to be more cautious about the problems that arise from that Which can surprise you is Understood in that report But I think the phenomenal growth of China over the next 10 years is actually going to be something even greater than we've seen in the last 10 years and the development of the Chinese middle class will of course be Probably drive the consumer patterns of not just China and Asia, but drive consumer Patterns of spending right up right across across the world But that means big change and that means you've got to be prepared For the financial aspects of that as well as the social and economic changes that are taking place Next yes My name is Dheeraj Nair. I'm from India my journalist my question for professor Zhang I've been here in China for six days and What I've gathered is that the situation facing the new leadership now Is different from the earlier leaderships one factor social media so people are expressing the discontent more Second is the China's export run Investment run model is run out of steam doesn't that reduce their ability to deal with a crisis should it come in the next five years? What is it about the new Chinese leadership, which would be different given that they've grown up in the same system over the last 30 years How will they deal with these new factors or the technological or economic? I was cited two things most important first ideas What kind of ideas you have what do you believe? second is the leadership you know if we Think about the China's problem in terms of these two issues Lot decades. I think China lost its ideas Before that, you know, China had a strong ideas, you know how to reform or how to have market-oriented reform But your last decades is on people Thought very differently you could be leaders thought of very differently. That is why we lost I cause I would lost decades and also I think that today is more difficult for China's leaders To have enough authority Even they have good ideas. They have they may have not Enough authority to do that. They are to do that. Yeah, what they want. That's also a Problem, but I hope the next Leaders You all do something. I think differently particularly China needs to restart Interrupted reform particularly like privatization of state sectors That is I think only when you know your game more resources to Private sectors like those private entrepreneurs be more confident and China will certainly I think you have good future I'm not a very pessimistic. I just means everything depends on leadership and ideas. What are you will do? No, if you just continue current policy, I think we'll be wrong. China will have no good future Yeah, so that is the other means I like to get change with the times. Yeah Yes, this lady over here Thank you. I'm from Phoenix, Venice. I have one question to ask Mr. Brown And as we all know the dispute island between China and Japan is very seriously now And what do you think the truth and how to prepare for this crisis? Thank you It's between China and Japan Well, this has to do with the political entanglement over disputed island. Of course look look in any region of the world as As you find there are periodic disputes about territory about Historical events that are misunderstood and have to be reinterpreted about historic Problems that have never been properly solved The question is not whether there will be these disputes. This is bound to happen and whether our natural resources involved the disputes are likely to be Quite immediate and and and obviously they involve a lot of Resources and finance the question is whether you can solve these disputes and we have painfully in Europe Had to find means by which we resolve disputes between countries that historically had a history of grievance and animosity and I think the question in Asia is whether the mechanisms that you are developing for regional cooperation Are going to be effective in working in the future and there are many attempts. Of course that regional economic cooperation Many attempts also have been made for security cooperation And I believe that you will find over these next few years that the The pressure to resolve these disputes amicably in the interest of preventing either a loss of income or preventing Further damage Will be will be great. So I think what will happen is that you will develop over a period of time far better mechanisms for dealing with these disputes and the lesson From the rest of the world is that that is something that should be given priority Because you do not want to let problems that are Obviously there get get out of hand. So I look forward to seeing these mechanisms for cooperation developing more successfully over the next few years Thank you. Good afternoon Gerard Lyons, I'm chief economist at standard charter bank based in London question I'd like to ask is about inclusive growth After the financial crisis the annual meeting the Asian Development Bank highlighted that for Asia to move from export Led to domestic driven growth. It needed three things deep and broader bond markets Help to small medium firms to create jobs and also a social safety net to discourage people from Saving too much and to encourage them to spend more. I'd like to ask former Prime Minister Brown Whether he's got any lessons he thinks from Britain and Europe that Asia should heed about setting up a social safety net and The other four speakers as to whether they think Asia can afford the sort of social safety net it might need in the future Thank you Well, one of the fascinating pieces of research that has been done recently and this is about the whole world and not just Asia is How little it would take to remove Everybody in the world from absolute poverty Because we've made huge advances and principally in China in taking people out of poverty Then it is possible with a limited amount of resources to guarantee people that they would be out of the Absolute poverty that still afflicts about 1.4 billion people as far as Safety nets are concerned. I mean 80% of the population of the world is not covered by a safety net at the moment But I see all the developments in India with the guaranteed income and you may dispute how it is actually working in practice But the idea in China with the provision of pensions with a provision of health care I see all these innovative ways of trying to develop a proper safety net And I think it comes back to this question. How much Inequality are we prepared to to tolerate without act acting and there is no doubt that Inequality has got worse and worse in the world Some people argue that that is one of the causes of the financial crisis the pressure particularly on the American middle class To borrow money because they had very little additional earnings As most of the wealth in America in the last 20 years went or the additional wealth went to those at the very top So there is this issue about inequality And whether it is detrimental to growth and you get to a certain level of inequality in your economy That is actually Threatening the stability of your your society and I think that is a serious question that's going to be dealt with in Asia So progress on removing poverty and we now know we could do a lot more But for an acceptable amount of money to get people out of absolute poverty progress and safety nets and of course You know, there are different models the British National Health Services a taxpayer-funded health care system where health is free But other systems are private public partnerships or simply private But I think we've got to get to this question of What level of inequality is is acceptable or unacceptable in a modern economy? And at what point does it actually? Damage the efficiency of the economy and the stability of your society And I know in China that the levels of inequality are now similar to the levels of America And that is I think something that you've got to worry about And I know in India that levels of inequality have got substantially worse And therefore that is a problem about social stability Of course as well as a problem about what effects it has on economic efficiency and it would be really good I think if we could have a genuine open debate about the acceptable levels of Inequality as well as the need for social safety nets and to deal with poverty The only thing I would add to that though I must say is if you look at the United States today You have got baby boomers of around 28 percent Coming towards their entitlement programs social security Medicare and all those related things and the reality Is that this comes at a time when the United States has very little room in which to pay for these Programs, so I actually think that you're going to find and it's the same in Europe for different reasons the social Security entitlement programs are not affordable and so we're going to have to make some very tough choices And I think those very tough choices will involve a curtailment of some of these Very I won't even say they're very generous, but some of these programs if I can come in here Social security has to be seen from the point of view of what is it we are talking about? There is a gross problem of unemployment and What am I doing? I can't Tell anything new to achieve economists, but I'll make an attempt Is the problem giving food to the people or is the problem giving work to the people? So in India social security has been devised that food for work program What the government has done in last two years is a rural employment guarantee scheme named after Mahatma Gandhi and it says that in every family One able person will be entitled to that many days of work in a year Which will be guaranteed to him in rural areas and for that certain minimum ways will be paid It is a work guarantee program and not a non-working work guarantee program So government is not borrowing money To keep people who may be working not working out of choice out of compulsion. I do not know but if they do not have work Government will guarantee them work Certain number of days in a year and they will get paid certain minimum wages And they have an incentive to keep looking for work Which is better paying so that they move out of this minimum wage program to a better paying program I believe that social security is far superior to a social security which says you don't work I will pay you so much every week or so much every month So you keep borrowing across the generations or you keep transferring from those who work to those who don't work We are in the last five minutes of our debate So we have to sum this conversation up now with our panelists and I'm gonna end this conversation Looking forward and also maybe taking in the present as well We're gonna start with Mr. Hockberg at the end What keeps you up at night right now? And how do you see that playing out in the future? What keeps me up at night? I Think there's a lot of uncertainty in the world and when there's uncertainty people don't make decisions And I think that's what's immobilizing. I think from the European debt crisis Some of the issues face the United States is immobilizing business people for making decisions government leaders for making decisions And I think that's that's what keeps me up a lack of decision We're better off making some decisions and moving forward and having some mid-course corrections Then simply being immobilized and not making the proper decisions whether that's in China about moving more towards a consumer economy Whether it's about putting the right infrastructure in place or therefore more people in India have power All of those those types of programs. We need to just go move forward. I think that's what keeps me up Mr. Ward brief final thoughts. I think the thought of listening to you at 6 30 in the morning is one of the more daunting things that keeps me awake Aside from that it would be to be honest Some of these fat tail risks that we've been talking about what happens if the euro cannot be resolved How long can we kick this horrible situation down the road? And I don't think it can be for For very much longer What is going to happen in the United States where you seem to have a paralysis of government and you see that in the Disaffection of people generally around the world. I don't see Extraordinary exuberance or euphoria you get euphoria one day and gloom the next day And I think people are having a real Concern about the organs of government and their effectiveness And what can we do to rekindle the confidence of people that actually government is working for them? Sensibly and intelligently to resolve some of these huge problems that we're looking at That's jam. I think the most serious crisis we face today is not economic but leadership crisis Everywhere There's no real leadership American European China same and we need people like Ronald Reagan Mrs. Sacher Gordon Brown and the Deng Xiaoping That is I think most important. Those people have very great ideas But the currently I think you said I'm we are we have politicians Let's just deal with the world short-term problem. They will create more problem Let's talk about baby or face Wow, so how do you follow that? Yeah? Actually business confidence is one of the most important things needed today in most economies Most of the large companies at least in the country I come from are sitting on large piles of cash and Hesitating to invest on the other hand small medium enterprises have lack of access to capital because interest rates are high and interest rates are high because We want to control the inflation and keep the financial systems robust When you look at all things put together what it comes down to is that? We have imported successfully many of the worries of the global system and rightly so Business confidence will only improve if there are signs of government giving stimulus to the economy and Government will feel confident only if it sees this revenue is rising and inflation coming down So it has become a vicious cycle of one thing feeding upon another and Something has to give to break the cycle and get things going again Mr. Gordon Brown, well, I think what will keep people awake at night is listening to pessimism if If we can I'm actually far more optimistic about the future I if we can solve the problems that we've talked about and they are real financial volatility the euro Problem, I think probably the biggest problem the lack of global coordination Which is perhaps what what you're referring to in our policymaking when we do have a global economy Then the level of technological progress in this world is such The advances being made in medical science are such The dynamism of the entrepreneurs that we see around the world is such that you can only be optimistic about the future So it's a question of solving what are practical problems to enable the technological genius the medical advances the entrepreneurial flair To to make a real difference to the quality of life and the standards of living of millions of people who stand ready to benefit From the changes that can be brought about over the next few years So for these reasons I would be optimistic about the world But it is a challenge as I think you rightly said both to politicians and to those interested in the public good To deal with the real problems that we have and not to ignore them or avoid them or bury your head in the sand If we can do that, I think we should be optimistic Mr. Gordon Brown, Mr. S. P. Schuchla, Professor John Rodney Ward, Mr. Hawkeberg. Thank you so much for your time is taking part in this special Bloomberg television debate at the world with Economic forum and thank you all for attending today. That does it for this conversation. I'm ready for crisis Our Asian growth markets are ready for another global economic shock and we'll see you next time. Thank you so much


Well, hello, everyone. Welcome to this series of presentations. What we're going to talk about is something very exciting. So we'll look at international finance. We're going to have a journey together, examine what our financial markets go through, all the process of how to raise funds, what are the different types of funds that could be raised, how can organizations and governments find the capital to finance their operations, finance their projects. And then we're going to move on and learn a little bit more about financial crises, the genesis of financial crises. And we'll learn even about monetary unions and see what the future of finance looks like. Today, what we're going to do, we'll look at the very first basis of finance and international finance. So we'll look at financial markets. We will examine what financial markets are, the different types of financial markets. We'll also look at bond markets and try to differentiate between the two. So without further ado, let's get started. Our course of faction for today, we'll start first with learning a little bit more about what financial markets are and then we're going to differentiate between the different types of financial markets. After this, we'll move on to understand a little bit more about bond markets, what bonds are, where bonds are traded. And then we will understand what are the different forms available to raise capital. So we'll learn a little bit about equity financing and debt financing. After this, we will see, we will focus on equity financing for a little bit. We will see what kind of shareholders do we have, what kind of rights do shareholders have, what are the different types of shareholding. And then after that, we'll end up with a differentiation between equity financing and debt financing and the rights that are awarded to each real financiers and investors. So first things first, when we talk about financial markets are a very broad umbrella term that encompasses different elements to it. So the very first thing about it, the very first thing that comes into mind is that these markets are places where securities, financial assets, all types of financial assets are basically traded. It is a place where buyers of these assets meet and as well the issuers of these assets meet. So buyers and sellers meet in these places to trade with these different assets. But what are these assets that we're talking about? So these have different forms. They could be either equity or debt. Now in general, what we trade with, we could trade with stocks, shares, bonds, currencies or even derivatives. And if we're looking at these markets, what we will look into is basically how they are classified. And then from there, looking at the classifications of these markets means that we will be looking at what kind of instruments are traded in these two different markets. So we have money markets and then we have capital markets. Normally money markets are dedicated to sell or to trade with short-term debt securities that have maturity rates of around one year or maybe even less than a year. On the other hand, we have capital markets. Capital markets are mostly long-term basis compared to money markets and they trade with maturities that have a little bit longer than a year. So we're talking here about anything above one year goes directly into capital markets. On the other hand, anything that is a year or less is considered as a money market. Now, when we talk about money markets and capital markets, we will try to focus now on capital markets. And the capital markets, these they are normally divided into two main sub markets. So we have primary markets and then we have secondary markets. Primary markets is basically the markets where issuers of the shares or stocks or securities do it for the very first time. And so when you issue a stock for the very first time, it goes directly to a it's directly considered as a primary market. Think about IPOs, initial public offerings. Now, after the security is traded, after this security is issued for the very first time issued through an initial public offering, it then is able, it is then tradable in secondary markets. So secondary markets are basically those same markets that would take that would trade in the securities which were initially offered for the very first time. So assume that you as an organization, as a company decided to issue stocks for the very first time, you will issue it to a group of investors to do an initial public offering to the public. Basically, the very first people who buy into your shares consider I bought into your shares. I was one of the very first ones to buy into your shares. I become directly the holder of that share. Now, if I decided to take my share again and sell it to someone else, this will go through the secondary market. And so an example of the secondary market would be NASDAQ, for example. Now, if we want to look further at the role played by financial markets, it is basically a place where you could raise capital for the organization.   And as we will see later on the difference between debt and equity and how they play a role in financing operations. Now, the important thing to understand as well from a perspective of an investor is that through money markets, you as an investor will be prone to risk. And so the risk and the measurement of risk would very much be dependent on how you hedge the different instruments and how you hedge the investments and money market financial markets would help you try to manage the risk by basically trying to hedge these risks through investing in different different instruments, different financial instruments. And again, these are things that we're going to examine together throughout the series of presentations. Now, to take this a little bit further, and for you to understand what are the different categories of financial markets, you will see that we have something called stock markets, and then we have bond markets, and then you have the foreign exchange markets and the derivative markets. All of these are under the financial markets categorization. So stock markets, for example, where you trade with shares, bond markets on the other hand are, as we will see, a debt instrument. So bonds are debt in their nature. So we're talking here about loans when organizations want to issue loans to finance their operations. Foreign exchange, where basically you trade with currencies, with international currencies from different, from all of, from all across the world. Derivative markets is basically when you trade in financial instruments that derive their own value from a different underlying asset. If we're looking at securities markets, here we're talking about a market that trades with bonds and shares altogether. If we're talking about the commodities market, a commodities market are basically places where buyers and sellers trade with material, with raw material. We're talking here about coffee, gold, oil, any agricultural products, all of these are traded under the commodities market. And then we have also the options market, futures and the futures market. So the options are basically contracts between buyers and sellers where there is a right for the buyer basically to buy an underlying asset, to sell an underlying asset or even buy it on an agreed on price, predetermined price basically between the bars and the sellers. And then you have the futures market as well, where basically you trade in contracts that have an obligation to the buyers that basically requires the buyer to purchase an underlying asset again at a predetermined price. But this is basically for the future or on a future date. And then you have something that we refer to as the OTC or over the counter market. And these are more of decentralized markets. These decentralized markets trade with securities that are not necessarily listed in regulated exchanges. And we were talking about regulated exchanges. We're talking here about the New York Stock Exchange, for example. Now a good example of these decentralized markets or over the counter markets would be NASDAQ. Now moving forward, if we want to talk about bond markets, bond markets on the other hand are basically financial markets that trade with bonds. Now bonds are so way that these financial markets, the way that these financial markets or bond markets function are very much similar to other financial markets like the ones that we saw. So it is a place where buyers and sellers of these bonds meet. And in our case here, when we're talking about bond, we're talking about a debt instrument. And its capacity as a debt instrument, it means that it is a loan, is that the issuer of these bonds undertake to pay on a future date in full, plus the payment of interest. And so the issuer of the loan is basically could be an organization, it could be a company as we said, or it could be even a government agent. It could be a government. Either way, when the issuer of the loan wants to sell these loans or sell these bonds, they would go into the bond markets to allow basically themselves to raise the capital that they need to finance their operations. And so in our case, investors in bonds are basically those who provide the loan to these institutions, either companies or maybe the governments, and they are interested in investing in these instruments because in the end, they are going to get the full payment off, the full repayment off the bond, plus they will get an interest on their bonds on yearly basis until the date of maturity. We will look together at what maturity date means. We will look also at the different jargons and different lingoes that are associated with the bond markets. Now, what we need to understand is that bonds are normally fixed income securities. In that sense, they pay a fixed interest rate, a fixed rate of interest that goes until the date of maturity of the bond or the date of expiration of the bond, could it this way? Bonds, they could be traded on normal exchanges, so unregulated exchanges, or they could be traded on of the counter exchanges like what we saw now. So now we know the difference between regulated and unregulated or over-the-counter markets. So if we want to compare the bond markets with the capital markets, what we will see is that bond markets are normally less volatile than the stock market because, again, the risk element here is not as high as it is in the securities market. This is from an investor's perspective. And again, the prices of these bonds and their yield normally move not in the same direction, rather in the opposite direction. The prices are not determined by only supply and demand, but also determined by other factors. The yield of the bond is basically what reflects the year, the yield of the bond is basically a reflection of the type of risk that it encapsulates. So if we're talking about bonds with higher risk factor, then here the yield that these bonds are going to generate normally are basically going to be higher and vice versa. So if we're having a less volatile or less risky types of bonds, then that means their yields are going to be also lower. Bond ratings, on the other hand, are very much a way to assess how strong the issuer is, how reliable in terms of their repayment plan or their creditworthiness of the issuer, how strong it is. Because again, in the end, these are factors that are going to play an important role in how risky the bond that is issued for the investor. In the end, investors want to understand what are the risks associated with their investments and whether that risk basically is worth the investment or not. Now, what are some of the examples of bonds? Basically, bonds could come in different forms. Here are some of the very prominent examples of bonds. So if we start with treasury bills or T-bills, as they are known, treasury markets where these bills are traded, and T-bills are short-term government securities that are issued basically by the government. On the other hand, if we're talking about commercial papers or commercial paper market, these are markets where they trade with promissory notes that are basically dedicated for organizations or for corporations to help them finance their operations. But this is basically for short-term basis or short-term financing rather than a longer time. On the other hand, we have also something that we have a market that we refer to as the federal funds market. And the federal funds market is basically a market where banks and financial institutions who are required to hold deposits at the Federal Reserve, they would invest or they would basically lend or borrow these excesses of reserves on an overnight basis. Now, for us, what we want to look at and what we want to understand from a bond's perspective is what maturity date means for a bond and what coupon rate means for a bond. So a maturity rate for a bond is basically the date or the expiration date of that bond. So basically it is the date when the full repayment of the bond is required or is expected. On the other hand, if we're talking about the coupon rate, it is basically the interest that these bonds are paying to investors throughout the duration of the bond or until the maturity of the bond. Now, from an investor's perspective, investors look at three key points. They look at the coupon rate, they look at the bond term, and they also look at the yield to maturity. Now, we already saw what the bond rate is, but what is the bond term? A bond term is basically the time that these bonds have until maturity. Remember, bonds function very much just like securities, just like shares. You can sell shares for the very first time through an initial public offering, and then these shares will be traded in secondary markets. Same thing with the bond. Bonds could be issued for the very first time, and then owners of these bonds can resell them again in secondary markets. And so for these new owners, they will be looking at the term. So how long does the bond still have to mature? Now, the bond term is basically the time until the bond matures. So what is the expiration date? If you remember, if you recall what we just said, this is important. Why? Because again, you have to keep in mind that bonds function very much in the same way like securities function. Meaning that if you issue a share for the very first time, it goes through an initial public offering, and then the owner of that, the very first owner of that share could resell it in the secondary market for someone else and to a new interested buyer. Same thing with bonds. So after bonds are bought for the very first time by an investor, this investor may be down the line, maybe a year or two years down the line after they purchased the bond or invested in the bond, they might decide to resell it to another interested investor. And so that person who is interested in buying it again would be looking into the time until maturity, the time that they will have until the bond matures or the bond reaches its expiration date. Now, the other thing that investors will be looking into when they invest in bonds is basically the bond yield to maturity. Now, this is basically the return that this bond is going to generate on annual basis. So this is through the interest rate that it might generate. And then at the end, the reason that they want to look into this is because they want to understand what kind of potential this bond has. Is it going to generate a good return on investment? Does it justify the pricing or this investment or not? Now, if we want to look at the different types of how organizations could raise capital, we would be looking at two different forms of financing. We'll be looking at debt financing and equity financing. Let's start first with debt financing. So debt financing, as the term says, is just all about issuing loans. So the organization and by organization, we could be referring to either a government or maybe even a company. The organization would be looking to finance its operations through borrowing money from potential investors. Now, why would they want to borrow money from investors? Because again, it would allow them access to capital to finance their operations. And at the same time, they wouldn't necessarily be giving out some shareholding or power or control within the organization or within how the organization is managed. Now, as we said, bonds is just one of the many forms of debt financing. We have also bank loans and then we have lines of credit. Now, lines of credit are basically a form of debt financing that is available for companies where companies basically have access to a pre-agreed-on or pre-determined set of money just to finance particular aspects of their of their projects or maybe the way that they run their businesses. And so it could come with its own unique conditions. So these loans are attached to a particular set of conditions and, again, to a pre-determined amount of money that these organizations have access to. Now, if we look at equity financing, on the other hand, when we talk about equity financing, we're talking about here the potential to partner, the potential to become an owner or part owner in an organization. Equity financing means that you're selling shares within an organization. So you're selling ownership rights within that organization. And the reason that organizations would be looking into this or would be interested in issuing securities or in issuing shares is because they wouldn't want to necessarily finance their operations through debt financing. Again, if you remember that financing means that there would be interest repayment, interest payment plus the full repayment of the loan at a particular maturity date. Whereas in when you issue shares, you don't have to repay whatever money you've raised or whatever capital that you've been able to generate and raise through issuance of share as an organization. But in return, what you give to the shareholder is basically you give them dividends, as we will see now. And obviously, you give them shareholding within the organization. So they become part owners. Now, there are different types of equity financing. We've talked about initial public offering. And I'm pretty sure most of you would know what initial public offering is. It's basically when you sell the shares or issue the shares for the very first time to be traded and to be sold. And then we have what we refer to as public private placement. Private placement is similar to initial public offering. However, when the organization or the company decides to issue its shares, rather than going to the public, it would issue these shares to a preselected group of potential investors. And so they will have initial access to these shares, rather than these shares being offered directly to the general public. Finally, we have right to offering. It's basically similar to initial public offering. It is a way or it is a type of security or a type of share that would allow investors or current shareholders who actually own these shares right now to have access to buy new shares that the company issues but at a discounted rate. Now, what are the different rights that shareholders get or receive from owning shares in the organization or in the company? Basically, the main thing that we'll be looking into or that investors are looking into is voting powers. Because these shareholders now become owners in the organization, they have the right to vote in how the organization is managed. And they have basically decision making powers for how the organization should proceed in the future. Now, along with that, of course, they are entitled to receive dividends. Dividends are basically whatever profit that the company was able to generate throughout the year, they would be receiving a portion of that profit, depending on the percentage of shareholding that they hold within the organization. Of course, because of this, their liability as well is limited very much to their shares. So if they do, if there is anything that went wrong in the organization, let's assume that the organization was considering liquidation and was liquidated eventually, then what that mean, there won't be any access to their own capital. So liquidators or debtors won't have access to the shareholders' capital and rather their exposure to the losses are limited to the amount of shares that they hold within the organization. Now, these are just the general rights that all shareholders have. However, because we have different classes of shareholders, we have two main classes of shareholders. These classes have different sets of rights that are awarded to these shareholders and so it is very much important for us to understand what are these classes, to understand basically what kind of rights these different shareholders would have. So to make things clear, we have a preferred shareholders or preferred shares and then you have common shareholders or common shares. Of course, if you have someone who has invested in preferred shares, they basically receive higher dividends than they would get if they were investing in common shares. They however give up their own voting rights so they don't have a say in how the organization moves in the future and what kind of decisions. They don't have powers to make any decisions or to influence any decisions. This is what they're giving up for the higher dividend as well. What they get in return is something very important. Basically, if we proceed with the example that in case the organization or the company liquidates, normally the people who would or the classes of investors who would get access to the capital first are debt financiers and then whatever is left goes to the equity financiers, so to shareholders. Seeing that we have two classes of shareholders, two classes of shares that were issued by the organization which is liquidated. We have the preferred shares, preferred shareholders and then we have the common shareholders. One of the important things that preferred shareholders will have that common shareholders won't is basically the access, the early access to the funds left after liquidation. Now remember when we said if an organization liquidates, if the organization goes into liquidation, then debtors or those who provided loans to the company will have to receive their money first or we have to get repaid first and then whatever left will go to shareholders. Now the priority to access this pool that is left would be to prefer shareholders over common shareholders, which means if preferred shareholders had this access and then let's assume that there was no money left after that, the common shareholders won't receive anything in return. So preferred shareholders have a higher right than those common shareholders. Again, same thing applies in terms of dividends. Dividends is always paid first to the preferred shareholders on the expense of common shareholders. So preferred shareholders get their dividends and their dividends as we said are higher and then after that the common shareholders will receive their dividend. Now if we're talking about preferred shareholders could come with a benefit or with an advantage for their shareholders. Basically some of these preferred shares would come with the right but not the obligation for the preferred shareholder to basically turn their preferred shares into common shares. So from that they can reclassify themselves or they can become common shareholders rather than just preferred shareholders. So at some point if someone down the line decides that okay you know what I don't want to be a preferred shareholder anymore, I want to have voting rights, I want to have control over the organization and I want to be active in the decision-making of the organization then at that point they could become common shareholders so that they could have access to all these benefits that common shareholders would have but if they do then they will lose whichever benefits they had as preferred shareholders. If we're talking about the pricing of these preferred shares basically their prices are more stable than those of common shares. Again because the dividend is higher because the risk here is a little lower and the benefits that they get in terms of monetary incentives are much higher than are higher compared to common shares it makes the prices a little bit more stable than it is for common shareholders. Common shareholders on the other hand they have access to dividends just like preferred shareholders however as we said their dividends are the dividends that they get paid are a little lower than basically preferred shareholders but what they have that preferred shareholders don't have is voting rights into the organization which means that they have full control or they have control over how the organization is moving in the future on the decision-making they have influence on the decision-making of the organization and because of that they have a huge potential and an advantage for them that would allow their shares to be priced higher if the organization moves into the right direction if the demand on their shares and on the products and services that the organization being invested in picks up and becomes higher then their potential of growth is actually higher than that of the preferred compared to preferred shareholders. Now if we want to differentiate between debt financing and equity financing debt financing is basically an easier way to acquire funds or to acquire capital it is it is a rapid loan basically but this rapid loan has a maturity date on its own as we saw with bonds what you give up here or what you don't have here as an investor is basically your ownership rights into the organization these loans what you will receive in the end after that what you will receive in return is not only the full repayment of your interest of your of your loan but also an interest you will be repaid your interest you give up your voting rights in the organization of course you don't have any control rights into the organization but you also get priority access to the to the funds of the organization in case it was liquidated as we saw just a few minutes ago in case of liquidation it's first those who have who have lent the organization money have priority access to the pool of funds in case of liquidation and then it goes back again into shareholders and at the same time if we're talking about tax treatments for debt financing or for for those who invested in debt instruments they get a preferable tax treatment because again they don't have to pay tax on the interest whereas if we look at equity on the other hand equity financing is very much all about becoming part of the organization becoming a part owner in that organization and so as a part owner of the organization you could have a set of voting rights and you could have a control within that organization and because of this also you have access to dividends and you can share the profit and losses of the organization this is basically everything that we wanted to have a chat about today to introduce you into the world of finance to introduce you into the world of to introduce you into financial markets and understand a little bit more about the difference between debt instruments and equity instruments and to understand what are the different categories of shareholding or equity financing now before we leave have a little thought about this scenario do your research and look at it and try to analyze everything in light of what we've discussed today what do you think would be the most effective way to finance to finance the operations of an organization we have three different categories of organizations that you could look into what do you think would be more suitable as a financing strategy for a business that is growing and then what do you think would be most suitable as a financing strategy for a business that is struggling what do you think would be the best course of action in terms of a financing strategy for a state or a government think about it and we'll have a chat next time


I'm Rasha Joyner and we are navigating the journey. Navigating the journey is dedicated to exploring the options and choices for the end of life care. But today we're going to venture to Maui for a visit with Melinda Gong, the founder of the Martin Luther King Jr. Peace Poem Project. As project organizer, she participates in the Millennial Peace Day at the United Nations in New York in 2000. The annual competition is to honor Dr. King, the civil rights leader who promoted nonviolent means to achieve social justice. The International Peace Poem Project has sponsored the Dr. Martin Luther King Poetry Competition in all four counties of the state for the past 18 years. So much of what we think and do comes from our family narrative, our stories, our history. So much is lost when we do not pass our stories, especially today when everyone has a smartphone and people talk in 140 characters. In many schools throughout the United States from Alaska to Hawaii, we have had teachers take part in the Peace Poem Project. Poetry is a vital language. Poetry depends on the writer's sensations, their history as well as perceptions, so every person has the background needed to write down poems. Because poetry draws from the senses and the senses give deep access to memories as well as feelings, poetry writing is applicable and exciting. Poetry is inked. Our guest today is Melinda Gong. Founder of the Martin Luther King Peace Poem Project, as well as the Maui School Teacher and a dear friend of mine for the last 20 years that we have, I have participated in her project and it is such an honor and a privilege to have Melinda all the way from Maui. Hi. Hello, Marcia and hello, everybody. Thank you for listening to our story. I'm Melinda Gong and I'm coming to you from some of the homes of our supporters here in Maui. I'm up in Kapalua and gosh, I'm so excited to be able to share our message with you. We feel that we have an important part to play in the culture and the recognition of the creativity of children and we want to really help them to believe in themselves as a possible peacemaker in the future, that they themselves have a role to play in their lives and it will reach beyond them and beyond us because we all are hoping for that great central ideal of peace in our lifetime and to have the children ages kindergarten through 12 in every school across this great state, public and private, homeschool and church and everything in between invited to join our contest has brought us a unimaginably rich harvest of poetry that has- I remember- Into a voice of their own. Let me tell the audience that we're doing Skype and I knew it Skype. But I remember the very first year, year 2000 and we had 300 students maybe statewide, something like that. And so he asked the mayor, Mayor Jeremy Harris, if he would acknowledge the students and so he blocked out 15 minutes in his schedule and we had, I don't know how many children show up, mamas and tutus and aunties and cousins and everybody with cameras and the mayor took the time to shake hands with every child to greet, to take pictures and every mayor except the current mayor has done that. Every mayor on every island and they have been wonderful. So we went from what 300 children to nearly 3000 maybe. Well, this year we had over 2,200 students, 2,339 I think joined the contest this year statewide. We ask every teacher in every school to send us poetry in honor of Dr. King. But then what we do is we pick winners from every class. So every student has a good chance of being selected and then we arrange awards assemblies on every island and recognize the children that have won the contest they receive a certificate of honor from the mayor of that county or an official and a prize from our project but every poem wins because every poem goes into our peace poem project. We're creating the world's longest poem so every child is a winner always. Every poem is important. How many poems are in the projects total that over the last 20 years? How many do you have? How many lines of poetry do you have? We are standing roughly at about 186,000 lines of original poetry. Now the world's longest poem is Mahabharabha and it was written in India from 200 BC to 300 BCE and it's approximately 200,000 lines. And it's actually more of a war epic in terms of its poetic content. So we decided we would change world history and create the world's longest poem and every year, every child, every peace poem is treasured. And of course we also have everyone else on earth is invited to participate in our poetic experiment on peace but we are really focusing on the children. They're our hope for the future. Well today we had the award ceremony at the city council for the second place winners. Oahu of course has the most entries so that we did the first place winners a couple of weeks ago and today was for the second place winners just because there are so many. On all the other islands they do them all together. I remember one year, gosh I don't remember ages. Anyway, we had one kid that won when he was in kindergarten he won again first grade, second grade and third grade. Yes. Yes. Same kid but he gets better and better and better every year. Well the other part and I think this is the beauty of our project is it's our job, it's our focus to find and to help young poets because poets are often neglected in our society. They're a small, small segment of our society but their message is huge and so we are really fostering this but quite often we'll have children that will be there several years in a row and we see them returning and so we have found them. And these, the judging in our contest is every year the judges are different and if you know the school or the teacher or anybody in that group you're always asked to take another group. So this is something that is really amazing and it comes across the board. This year's grand prize winner in Maui was a four time winner. She's been to the awards four times and every year she climbed up a little higher. She was chosen as a winner and then she made the golden circle and then she made the grand finalist circle and this year she became grand prize winner for Maui County. So there's this wonderful recognition but we have found these poets and when I see these small, like an eight year old child that's been to our awards more than once or twice that child has talent, that child is real. Today we had one little girl. She was just precious and I would have sworn she was a toddler, she was so tiny but she was so proud and her tutu was so, all the family was just thrilled to death. She is just, I'll send you the picture. She is just tiny, tiny, tiny. I'm gonna ask our control people if I can show the award. Can we get a picture of this? Is this, can we get a picture of this? Is that, is that shown? This is the award and it's absolutely gorgeous. Is that sunrise in Maui? Yes, at Haleakala. At Haleakala, it's gorgeous, just gorgeous. And I want you to know the prizes are all donated by famous artists and photographers. They're just gorgeous, lovely pictures, just lovely prizes. Everything is donated incidentally so we spend the year begging. Yes, we do, yes we do. Yes, and so the people you are staying with to do the Skype, they are donors, are they? Yes, I'm happy and proud to tell you that Manny and Robin are two of our finest supporters and they've supported me and encouraged me and believed in our project over all these many years and we're so fortunate in our support system here on Maui and throughout the islands because we're a small group of people, we could not do this without our volunteer teachers and the volunteer poets here in Maui that help us do the judging. Now this year, for instance, I said we had 2,349 students join the contest. That means we had 2,349 poems to read and to judge and to pick the winners of and so every year I have these fabulous people that come and donate their time. These are teachers, artists, writers, poets themselves, people of very fine caliber, I couldn't pay them but they volunteer their time because they believe in our project and the artists and the donors, they feel too that they are and they are because we could not do this without their help. So it's a grassroots effort in the most profound way. We do not have corporate sponsorship.  It's crazy. We never have anything left over but somehow we almost have almost enough. It always takes some extra effort on the part of our founders but our supporters like Rand, Robin and Manny and I'm here in their home because they have a Skype and they have the technology for me to be here speaking with you and I'm so grateful. Maui is limited in some ways. Well, we won't tell people because we don't keep it limited. We want to keep the country country. You don't want to look like Honolulu. Now, speaking of the donations and how we, all of us, everybody gives a little piece of whatever it takes to make this happen. I want to shout out to the governor, every governor we've had since we started and all the mayors on all the islands except this last one, but that's a different story. And how they have really given, they do all the certificates, all of the awards, the time, the energy to be a part of this and even last year, when we had on Molokai, what was it, 57 little children whose poetry was in Hawaii? Yes, and this is a landmark. This is a watershed moment for us to, in our work, to be inspiring children to write in their native language. And quite frankly, we have special Hawaiian language awards that we give statewide and we're always, always waiting for Hawaiian poetry to come in, but it's Molokai. And historically, Molokai was considered the richest Hawaiian island because it has the most water. And now, all these many years later, I think in many ways, it's our richest poetry island because it is giving us the water of the Hawaiian language, poetry in Hawaiian. And for me, as a linguist, studyer, and admire poetry all my life, I just think it's so profound that these children are writing in their native tongue. And to hear Hawaiian poetry ringing through our awards ceremonies. Oh, it gives me chicken skin to use a local saying, and it's true, it does. It's a great accomplishment for our project. And we need to go to break and we'll be back in a minute. Thank you. Thank you. You're watching Think Tech Hawaii, which streams live on thinktechhawaii.com, uploads to YouTube, and broadcasts on cable OC16 and O'Lello 54. Great content for Hawaii from Think Tech. Some say scuba divers are the poor man's astronaut. At Dive Heart, we believe that to be true. We say, forget the moon. Dive Heart can help children, adults, and veterans of all abilities escape gravity right here on Earth. Search diveheart.org and imagine the possibilities in your life. We're back. Today is just one of those magical days when we celebrate young people, little ones, big ones, but young people with young ideas, young poetry. Some of it is so profound, it is hard to believe that it comes from these little people that are just magic. It is magic. There's one young lady that was in middle school when she won the Peace Prize, the Martin Luther King Peace Poem Project Prize. And now she is teaching English in Taiwan. Beautiful, beautiful young lady. So her mother stops me on the street corners and wherever she sees me and she tells me all about her daughter, she is so proud. And she said that that in her resume when she applied for all of these universities, that made quite a difference, the fact that this award, and I've been told that by so many, so many parents and grandparents, how proud they are and what it made a difference, how it made a difference in their lives. Can we get back to Melinda? There she is. Hi. Hi. I know it makes a difference in a life. I've seen so many evidences of that. Now, we have honored personally 300 children, this 350 children this year and last year and the year before. I mean, we've personally honored thousands of students for writing on peace and nonviolence. And I ventured into a restaurant last year after a poetry reading and it was an Asian restaurant and in the customs sometimes the children of the family wait on the table. This young boy, about eight years old, came up to the table to bring us our water. And as it happened, he had been a winner in our awards two years earlier when he was six years old. And he said, wait, Miss, wait. And he ran within three minutes. He was back at my table showing me the prize. He had won at our awards. And I know that he must keep it by his bedside. I mean, he wasn't gone three minutes. And I was so touched knowing these are hardworking people as many Asian people have their own businesses. They live nearby or above. So there he was helping his mother and yet so touched that he would run to show me his prize. I know we helped that child. As you say, the children that get into the colleges because they have our certificates, but I think the day to day seeing the children who win the awards and now I'm an English teacher. And so for me to teach the children poetry and then to have my children selected as winners and believe me, I have nothing to do with the selection. I'm kicked out of the house when the poetry judging goes on, but to see what it does to your own students and to see how, and quite often the ones that are chosen are surprising because poets are surprising. It's not what you'd expect. These are the forgotten ones, the awkward ones, the ones that are shy and suddenly they're a winner. And you can see the difference in their aspect and their courage and their belief in themselves. So I think that our project works in many, many ways. The voice of peace and freedom that Dr. King gave is wonderful that how it continues to impact our children is our future. One of the things I noticed this year, at least here on Oahu, we had a really plethora of religious schools which we had not to had before. It seemed like there was Saint, Saint, Saint, Saint, Saint. All of these, Saint Teresa, Saint Joseph, Saint this, Saint that. And they were beautiful, not religious poems, just beautiful, spiritual from their heart and they were delightful young people, just delightful. And Lutherans were wonderful as well. I agree. I'm so delighted with our growth in the private sector. Unfortunately, we were having phenomenal growth in the public sector. And five years ago, we had the largest poetry entrance in our records. We had over 2,500 students into our contests that year. Unfortunately, the next year, the state adopted a new English program in its curriculum which ties teachers to a certain schedule, leaving them no time to venture outside a subscribed curriculum to do projects within the community. And I have a number of public school teachers who had been with us year after year and I can cite you chapter and verse, but they have said they cannot continue because they cannot do their curriculum. Their principals do not want them doing anything other than what state mandated. And so unfortunately, the public sector has not been growing, but the private schools know and they have no such constraints. And so in those venues, in those schools, in those districts, private schools, and not just religious, some Montessori schools, and in that direction, those schools are all there and a lot of homeschools. This year we had a homeschool student win on Maui. Well, for the first time in our contest history, it's a wonderful thing. But again, we would welcome back all our public school teachers. Some of them have continued with us even though they may have had some problems. They have continued because they believe in our project and they know what it does for the students and how it augments language and creativity and the personal growth. Well, tell me this, you're the expert. When they take out music and poetry and art, doesn't that take away something from the child? Isn't that a part of the whole music, literature, art, aren't they part of the human being? Isn't that, what do we lose when they take that away from the child? Well, we have known for some time, I'm a teacher and I've been well-graded as a teacher. I'm actually licensed to teach two different fields as a public school teacher. But what's been shown is that if children take music, if children paint, if children dance and sing and do an active creative piece, science scores go up, math scores go up. It's been proven over and over again. So this is something that I know just in terms of my training as a teacher. I also know it as an individual because when you get the blues, you have to be shaken out of the blues. If you're sad or you're stuck or you're depressed, you have to do something that makes you happy in order to have the strength to return to the problem. Belief in yourself. So I know after 20 minutes in my classroom, I make the kids stop and stretch and take a deep breath and we start over again because you just need a break. You need to refresh. And the creative side of the brain has been shown over and over again to excite the other side that understands logic, but has to be moved towards logic in a way that is sustainable to the human spirit. Well, now with the new superintendent, do you suppose that we have an opportunity to have her visit with this whole concept of poetry, poetry, music, art, and have it reinstated in the curriculum? We have this whole thing of mindfulness and it's being used in schools across the mainland. How can we, in a place as beautiful as Hawaii, how can we not incorporate all the beauty that poetry and music and art bring? Well, poetry, music, and art are interwoven and here in Maui, it's such a small community, all the poets and the artists and the musicians, we all know each other for the most part because it's a small community and we all work together and have these leaping moments of understanding off each other and that's what the children do. That's what writing and the creative spirit is all about and getting back to Dr. King, that is why he was so successful and one cannot be forgotten because he appealed to the better part of ourselves, that creative part, the belief in the human spirit and poetry and art and music emphasize those parts of the human spirit that continue to grow like a wildflower and may I remind you, wildflowers do not always grow in gardens, they are wild, they are exceptional, they are unlooked for and poetry is exotic, it's like a rare animal, hard to find, hard to keep alive once you find it. So we have to have a campaign, I guess it's what it's called, to make sure that all children, regardless of public or private schools or home schools, that they have this opportunity again because when I was a child we did and that's been, you know, I'm 79 so that's a long time ago, but we had all of that in school and to see it disappear is just sad, it's sad. So we have to not only do another 20 years of poetry, but the really campaign to have all of this back in the school. Yes, and I think perhaps our little winner on Maui said it best this year because her name is Iris Riverstone and coincidentally she's just gotten a scholarship to go to a private school in Oahu. So this has maybe something to do with all her work with our project, she's won three times, but basically she said, I said, why is a Dr. King project important to you, Miss? To you, Iris, and she looked at me and she simply said, because we need poetry, Miss. Thank you, we need poetry. Thank you, Melinda, it's been a pleasure being with you and I like Skype. This is wonderful that we get to talk to people other than those here on Oahu. Thank you for all you've done for the last 20 years and I look forward to another 20 years. Again, thank you so much. Well, you just keep living, Martian, so will I and we will take poetry to the children and again, I want to thank all of my Maui supporters, all my Outer Island supporters. I want to thank Manny Guzman and Robin Reath for making me able to speak with you and for all their help and support and all the help and support of you, Miss Marsha Joyner, over all these years, you've been my spiritual advisor. Your work with Dr. King has made your efforts ring within our community here and abroad and thank you for your help all these many years. Aloha. Aloha.