Lunch Program | Global Overview: Where Does Growth Come From?

Panelists and Context

• Tony Blair: Former British Prime Minister (1997–2007), youngest since 1812, currently serves as Quartet Representative to the Middle East and engages in private sector consulting and philanthropy.
• Paul Kagame: President of Rwanda since 2000 (re-elected 2010), former military leader who helped end the 1994 Rwandan genocide; credited with revitalizing Rwanda's economy to attract foreign investment.
• Scott Minard: Managing Partner and CEO/CIO of Guggenheim Partners, which manages approximately $200 billion in assets; specializes in fixed income and credit.
• Osamu Nakayama: President and CEO of Chugai Pharmaceutical and Chairman of Sony Corporation; highlighted Japan's aging demographic challenges.
• Wilhelm Buiter: Chief Economist at Citicorp; formerly taught at Princeton, Yale, Cambridge, and the London School of Economics.

Geopolitics and International Relations

• Ukraine Conflict: Blair stated that while Europe is hesitant to impose severe sanctions due to greater economic ties with Russia, both the US and Europe share an absolute interest in preserving Ukraine's territorial integrity; he predicted Europe will eventually align with the US.
• Middle East Peace: Blair affirmed that the Israeli-Palestinian talks have temporarily broken down but remain essential, asserting that "two states for two peoples" is the only viable solution; he praised John Kerry's efforts as the Quartet Representative.
• Scottish Independence: Blair expressed hope that Scotland will vote to remain part of the UK, citing economic and political advantages of unity, though he suggested the US should generally avoid public interference in the vote.
• EU Future: Blair warned that the UK withdrawing from the EU would be a "crazy" mistake that would remove the country from the world's largest commercial market; he advocated for reforming the EU from within rather than leaving.
• Putin's Motivation: Blair identified Vladimir Putin's primary motivation as Russian nationalism, describing it as uncomplicated, though he noted the complexity lies in the international response.
• Post-Wall Leaders: Blair cited Eastern European leaders who implemented necessary structural reforms after the fall of the Berlin Wall as the most impressive figures he encountered, noting they often lost power due to the harshness of these reforms.

Economic Forecasts and Policy

• US Interest Rates: Minard projected that the Federal Reserve would likely hold rates until the second half of 2015, potentially delaying increases into the first half of 2016 if discouraged workers re-enter the labor force.
• Fed Chair Comparison: Minard viewed Janet Yellen as having a bias toward using monetary policy to advance economic activity, suggesting she might accept higher inflation risks to boost living standards compared to predecessors.
• Quantitative Easing (QE): Minard considered QE1 and QE2 appropriate but labeled QE3 a "policy mistake" that sailed into "uncharted waters" without a clear exit strategy.
• US Growth Outlook: Buiter forecast US economic growth of 3% or slightly below for the remainder of the year, with a medium-term recovery returning potential output to approximately 2% absent radical supply-side reforms.
• Eurozone Performance: Buiter noted Eurozone growth at 1.3–1.4% for the year, a significant improvement from previous contraction but insufficient to address unemployment rates exceeding 12% generally, and over 20% in the periphery.
• China's Economic Risks: Buiter warned that China's 7% growth is unsustainable, sustained by a massive credit bubble and construction boom, risking a "sharp and short correction" due to excessive leverage.
• Deflation Risks: Buiter identified Europe as uniquely handicapped by treaties forbidding direct monetary financing, creating a genuine risk of deflation that the ECB may attempt to fake through regulatory loopholes.

Investment Strategies and Opportunities

• Sub-Saharan Africa: Kagame and Minard identified Sub-Saharan Africa as a primary long-term growth opportunity driven by a growing middle class, urbanization, and domestic consumption; investment in regional integration allows capital to flow across borders (e.g., investing in East Africa benefits Rwanda).
• Fixed Income Strategy: Minard advised investors to target specific sectors within fixed income rather than avoiding it entirely, specifically bank loans, asset-backed securities, and municipal bonds, which can appreciate or maintain value during rate hikes.
• Equity Allocation: Minard recommended investing in US and European equities, viewing US valuations (around 17x earnings) as historically cheap, while advising avoidance of emerging markets.
• Pharmaceutical M&A: Nakayama argued that pharmaceutical consolidations are necessary for companies to maintain the $5 billion annual R&D investment required to develop global innovative drugs.
• Japan's Investment Climate: Nakayama highlighted that "Abenomics" has successfully restored investor confidence and driven stock prices up, recommending a selective approach to strong Japanese companies despite recent consumption tax hikes.

Social and Demographic Trends

• Rwanda's Transformation: Kagame emphasized that the global perception of Rwanda lags behind reality, stating the country is ready for investment and that progress is occurring across East Africa.
• Japan's Demographics: Nakayama noted Japan's average age is 45 with 23% over 65, creating a challenge where life expectancy has outpaced healthy life expectancy; he stressed the need to integrate the elderly into the workforce.
• Scottish Economy: Blair argued that Scottish independence would be economically "foolish" due to the damage it would inflict on the Scottish economy and the loss of political influence.
• Washington Dysfunction: Blair analogized the US government to pandas that fail to reproduce effectively due to a lack of practical know-how, suggesting Congress knows what to do but struggles with execution.

Personal Anecdotes and Observations

• Bodybuilding and Investing: Minard attributed his bodybuilding success (bench pressing 495 pounds) to the perspective and health benefits it provides, noting reduced cancer incidence and increased flexibility.
• UK Royal Family: Blair confirmed Queen Elizabeth has a sense of humor, recounting an anecdote where she told a minister her mobile phone might be ringing for someone important.
• Blair's Future Aspirations: The moderator jokingly suggested Blair aspired to enter private equity; Blair playfully recalibrated his response to this prospect.
• Historical Figures: Blair refused to rank former US leaders (Merkel, Clinton, Obama) as "smartest," calling it a trap that would make him the "dumbest" for answering.
• Sushi Anecdote: Nakayama noted the difficulty of explaining why Japanese sushi (specifically at a small Tokyo restaurant) is superior, joking that it was "too expensive" for him to frequent.