World Knowledge Forum

Former U.S. Secretary of State Colin Powell delivers opening speech; Alan Greenspan lectures via satellite TV

Alan Greenspan, former chairman of the U.S. Federal Reserve Board, warned that there are bubbles developing worldwide during his special lecture via a satellite TV hook-up at the World Knowledge Forum at the Sheraton-Walker Hill on Oct. 16-18, calling on the heads of central banks around the world to fight inflation.
Maeil Business Newspaper sponsors the forum every year and this year's main theme was Wealth Creation & Asia.
Dr. Greenspan, who headed the FRB for 18 years, warned that the bubble could burst if nothing is done about it. He said an excess of liquidity caused by low interest rates created a bubble in real estate and other markets in 20 to 30 countries, adding that central banks'anti-inflation efforts, have failed. He added, however, that monetary and treasury policies alone were not always enough to halt the growth of bubbles.
The pressure for inflation has been rising as the price of Chinese products exported to the United States, which have formerly been the culprit for deflation, have hit the bottom and started to rise, Greenspan said.
The former Fed chairman said the U.S. housing market has an excess supply of houses estimated at some 200,000 units, which will put downward pressure on housing prices, raising concerns that the situation could bring a negative wealth effect.
But, he said, the weakness in housing prices have been offset by rising stock prices and U.S. companies'financial results beating expectations. The speed in growth of the U.S. economy will slow down, but the chance for moving into a recession is 30 to 50 percent.
He said the subprime mortgage crisis would not continue to impact the world financial markets much because its effects have already been reflected in the market.
Former U.S. Secretary of State Colin Powell, in his opening speech of the forum, said the two key words for wealth creation are World and Knowledge and that the future state of competitiveness would depend on the capability to create wealth,
not military might. Presently, all countries in the world are competing to create wealth, not develop military strength. In particular, he noted Russia and China's efforts to build up their influence in the world through the creation of wealth and opening their markets rather than through military might.
Powell said economic democracy is growing more important than political democracy. Wealth creation is the new battlefield of the 21st century.
The five CEOs in the Round Table Discussion agreed that private equity funds may lead the growth of the financial market in the future. They also agreed that the PEF market in Asia is likely to continue to grow due to its bulging liquidity, despite the momentary credit pinch brought on by the subprime mortgage loan problems.
Chairman Kim Byung-joo of MBK Partners, a participant in the CEO forum, said the hostility Asian countries have toward PEFs has been changing lately, which is why private equity will have a great chance to take a larger share of the Asian financial market.
He added that PEFs will play the role of a 'knife cutting off ineffective elements in the Asian financial market. He said various unhelpful regulations blocking the path of the PEF are being removed, making private equity a positive factor in the growth of the Asian economy.
Chairman Steven Roach of Morgan-Stanley Asia, who also participated in the CEO forum, said he is optimistic about the growth of Asian PEFs, but quickly added that the credit crisis and current economic trends could be a problem for their growth. He said the lack of means to control PEFs due to their special characteristics would also pose a problem.
The CEOs also saw agreed that Asia takes a negative view of PEFs, despite many business opportunities in the Asian PEF market. This and taxes have been the main problems, Roach said.
John Ridding, Chief Executive of the Financial Times, said Asia should pay more attention to wealth distribution, although they will continue to create wealth.
Zhu Min, vice chairman of the Bank of China, said the creation of wealth around the world is made in the financial sectors, adding that the world should bear in mind that the PEFs, which have been growing as a new force with a large influence, could hamper the real economy. He pointed out that the subprime mortgage problem was brought on by derivative financial products. This, Zhu said, would lead to the doubling in the amount of unstable funds in the next 3 to 4 years, which could block the creation of wealth. He also said the weak dollar would continue for the next 10 years, requiring a new global strategy. nw

Chairman & Publisher Chang Dae-whan of Maeil Business Newspaper; Former U.S. secretary of state Colin Powell.; Former chairman of the U.S. Federal Reserve Board Alan Greenspan.