Fareed Zakaria GPS – CNN 02-15-15

Salient to Investors:

Fareed Zakaria said:

  • The IEA said Russia faces a perfect storm of collapsing oil prices, international sanctions and currency depreciation.
  • The IMF predicts the Russian economy will contract by 3% in 2015.
  • Putin does not respond to higher costs in a rational calculating manner.
  • Military aid to Ukraine would stoke Russian nationalism, and the loss of men and money in a military operation will not deter it. No one believes that Ukraine can win a military contest with Russia. The consensus believes the only possible strategy is to raise costs for Russia.
  • Paul Krugman at the New York Times says Greece is only asking for what the Germans asked for in the 1950s.
  • Within 5 to 7 years, 800 million Indians will be connected to the Internet, versus 100 million today.
  • Steve Ratner said most southern European economies are fundamentally uncompetitive – there are 2,700 pages of labor laws in Italy.
  • Within 5 to 7 years, 800 million Indians will be connected to the Internet, versus 100 million today.

Bill Browder at Hermitage Capital Mgmt said:

  • The Russian oligarchs and government officials were stealing all the profits out of the companies he invested in.
  • Putin arrested the richest oligarch and told the others that if they did not want to be arrested they needed to share their money with him. Putin is the biggest oligarch and the richest man in the world, worth $200 billion in property, Swiss bank accounts, shares, and hedge funds.
  • In Russia, whoever has the power to arrest people is the person in power.
  • The one thing in Washington that everybody could agree on was that these Russians were bad.
  • While in power Putin will run Russia into the ground and cause the West many problems.

Zanny Minton Beddoes at The Economist said:

  • The Greek crisis will go down to the wire. The limited solution is relatively simple and that is more reform in return for debt relief. Greece cannot possibly repay its debt. Germany is wrong in demanding austerity and refusing to think about the debt.
  • The Greek economy has bottomed and is beginning to grow, but just as it appears they have got through the worst, they are throwing baby out with the bath water.
  • It is not clear that there would be massive contagion if Greece left the EU.
  • We will get the typical European solution which is akin to kicking fudge, but the odds of an accident this time are the highest in a long time.

Gillian Tett at Financial Times said:

  • Greece is only asking for what the Germans asked for in the 1950s and which has enjoyed a lot of debt relief in the last century.
  • The question is this Europe’s Lehman Brothers moment or will we see a chain reaction that could be extremely bad for the economy? The chance of an accident is rising.

Rana Foroohar at Time Magazine said:

  • Germany has benefited more than any other country from being in the euro zone, and will benefit from ECB QE because that will make the euro more competitive in the international market. Eventually the Germans will blink but expect much pain along the way and the problem not being fixed this time around.
  • Germany has done enough to create a consumption economy and bolster wages.
  • The political solution in Europe is a United States of Europe with real fiscal integration and more power in Brussels with Berlin holding the purse strings.
  • The periphery European economy needs to have a comfort zone in which they can reform.

Freedom House said:

  • Democracy has been declining for 9 straight years and is under greater threat than at any time in the last 25 years
  • 40% of the world’s population is free, 24% is partly free, and 36% is not free. In 2014, 61 countries saw their freedom deteriorate from 2013, versus 33 countries that saw freedom improve. The Middle East and North Africa are the least free.
  • Autocrats are no longer paying as much lip service to democracy and are returning to old 20th century modes of oppression: e.g. Russia’s invasion of Crimea, while China is detaining activists under stricter conditions than just house arrests and televising people’s confessions, and Egypt sentenced hundreds of political prisoners to be executed in sham trials.
  • Azerbaijan, Vietnam and Ethiopia do not receive the full ire of the free world despite their oppression.

Bill Gates said:

  • We are innovating at a wonderful speed and we will be reducing inequity for the basics faster than ever before.
  • Economists have always had a hard time with innovation because it is exogenous.
  • China’s growth is lower than it was but is still at a level that the US and the world would love to have.
  • Improving economic fundamentals will accelerate in the next 15 years.

Watch the video at http://globalpublicsquare.blogs.cnn.com/category/gps-episodes/ or read the full transcript

at http://transcripts.cnn.com/TRANSCRIPTS/1502/15/fzgps.01.html