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People should not be afraid of their
governments. Government should be

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afraid of their people. The American populace
is facing an unconditional warfare scenario.

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This is a challenging time for all Americans.
We're enduring a great national

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trial, and we will prove that we can meet the
moment we can. What sort of a

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financial deal should Obama be seeking

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to strike when he travels to China next month

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? I think this would be the time because you
really need to bring China into the creati...

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a new world order, financial world order.
They are kind

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of reluctant members of the IMF. They play
along, but they don't make

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much of a contribution because it's not
their, their institution

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, their share is not commensurate. Their
voting rights are not commens

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urate to their weight. So I think you need a
new word order

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that China has to be part of the process of
creating it, and they have to buy in.

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They have to own it the same way as, let's
say, United States owns the Washington

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consensus, the current order. And I think
this would be a more stable

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one where you would have a coordinated
policies. I think the

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makings of it are already there. And what
about the American concern that aiding

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and embedding this move away from the dollar
as the world's reserve currency ultimately...

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S. economy? It is not necessarily in our
interest to have the

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dollar as the sole world currency because as
the world economy grows

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, it needs additional currency. If the dollar
is that additional currency, it means that...

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S. has to have a chronic current account
deficit, and that is not appropriate.

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So I think it's in our interest as well to
reform the system.

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I think this is a healthy, painful adjustment
that the world has to go through.

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America doesn't actively take part in this
sort of renegotiation of global finance.

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What will happen? What's your nightmare
scenario? Well, the Chinese will go...

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They already do it. They already have a
clearing arrangement with Argentina

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, and I think they're working on one with
Brazil, and you will find that there

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will be more and more bilateral arrangements.
So the dollar will

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remain the main international currency, but
its use will decline.

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So I think that a world of bilateral
relations is less desirable

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than a continuation of a multilateral system.
But the system

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we have now has actually broken down, only we
haven't quite recognized it.

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And so you need to create a new one. And this
is the time to do it.

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In the United States, how worried are you
about the budget deficit and maybe about t...

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Well, certainly a decline in the value of the
dollar is necessary

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in order to compensate for the fact that the
U.S.

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economy will remain rather weak. will be a
drag on the

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global economy. China will emerge as the
motor replacing the U.

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S. consumer. And of course it's a smaller
motor because the Chinese economy is much...

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So the world economy will have less of a
motor. So it will move forward slower than...

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in the last 25 years. But China will be the
engine driving

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it forward, and the U.S. will be actually a
drag that's being

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pulled along through a gradual decline in the
value of the dollar.

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So there would be a slow decline in the value
of the dollar, a managed decline.

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And that would be the adjustment that it
needs to be accomplished.

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Now it could actually get out of hand. [

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Music]