DYLAN: WHY DO YOU THINK WII -- ANYBODY HAVE A THOUGHT WHY WE ABSORBED THESE ENERGY PRICES AS WELL AS WE HAVE?

LAZEAR: I BELIEVE IT'S TAKEN SOME TOLL ON THE ECONOMY BUT IT'S RELATIVELY SMALL. SO THE WAY I WOULD THINK OF IT, WHERE WOULD BE BUT FOR THIS, WOULD BE A LITTLE BIT HIGHER. THE QUESTION IS WHY DON'T WE SEE US DECLINING OR SEEING VERY SLOW GROWTH? THE ANSWER IS BECAUSE THERE ARE SUBSTITUTES. TAKE THE HOUSING MARKET. THE HOUSING MARKET HAS NOT BEEN STRONG. WHERE HAVE YOU SEEN THE OFFSET? YOU'VE SEEN IT IN NON-RESIDENTIAL CONSTRUCTION. THAT NATURAL. WHY? PEOPLE COULD BE BUILDING HOUSES ARE NOW BUILDING COMMERCIAL PROPERTY. THERE IS SOME SUBSTITUTION. THAT IS NATURAL FACTOR. YOU SEE THAT IN A SOCIETY WHERE YOU HAVE MOBILE FACTORS. THE POINT THAT CARLOS MADE EARLIER ABOUT MOBILE CAPITAL, MOBILE LABOR, REALLY iMPORTANT BECAUSE THAT'S WHAT KEEPS US GOING.

GUTIERREZ: tHE PRESIDENT FROM THE VERY BEGINNING BELIEVED IN THE POWER OF FREE ENTERPRISE. THE POWER OF FREEDOM. THE POWER OF OWNERSHIP THE POWER OF LETING ENTREPRENEURS BE ENTREPRENEURS THAT IS WHAT WE ARE SEEING. THIS ISN'T AND ECONOMY THAT'S MANAGED BY WASHINGTON OR THE CENTER. MANAGED BY INDIVIDUAL, BY ENTREPRENEURS SMALL BUSINESSES. 50% OF OUR NEW JOBS ARE CREATED BY BUSINESS THAT HAVE BEEN IN PLACE FOR LESS THAN FIVE YEARS. THAT'S ENTREPRENEURIALISM. THAT IS WHAT IS HAPPENING IN OUR ECONOMY.

DYLAN: LET'S GO WITH THAT fOR A SECOND. THAT ALSO GETS US TO THE CONVERSATION ABOUT CHINA AND THE ENTIRE EXPORT CONVERSATION, RIGHT BECAUSE OF SMALL PERSON PERSON WILL SAY ON ONE HAND YOU'RE POTENTIALLY CREATING THIS HUGE MARKET FOR ALL OF AMERICAN CREATIVITY. I MYSELF WAS IN CALIFORNIA LAST WEEK. VALLEY WAS, IT'S NEVER BEEN BETTER. REALLY, POWERFUL TO BE ABLE TO SEE THAT. BUT AT THE SAME TIME, THERE'S A CONCERN A, EXPORTING OF JOBS AND B, UNFAIR ADVANTAGE THAT IS PERCEIVED TO BE HAD BY CHINA AT THIS POINT AS A RESULT OF THE FACT THAT THEIR CURRENCY IS PEGGED WHICH ALLOWS THEM TO GET THINGS OUT CHEAPER THAN THEY REALLY OUT TO BE GETTING OUT. HOW LONG CAN WE SUSTAIN THAT RELATIONSHIP BEFORE BECOMES REAL LIABILITY TO US AS OPPOSED TO ASSET. START WITH CHINA CURRENCY.

HUBBARD: SECRETARY PAULSON WHO REALLY LEADS THE ADMINISTRATIONS EFFORTS AND ECONOMIC RELATIONSHIP WITH CHINA HAS MADE IT VERY CLEAR TO THE CHINESE PRIVATELY AND PUBLICLY THAT THEY NEED TO CONTINUE TO MOVE TO MAKE THEIR CURRENCY MORE FLEXIBLE.

DYLAN: DO YOU REALLY HAVE LEVERAGE

HUBBARD: WELL IT WOULD BE GOOD FOR THE CHINESE TO DO THAT.

DYLAN: WHY

HUBBARD: IT WOULD HELP THEM CONTROL THEIR INFLATION IT WOULD HELP THEM CONTROL GROWTH SO THEY WOULDN'T HAVE THE EXCESSES MOST IMPORTANTLY CHINA SAVES 50% OF THE GDP WHICH MEANS THEIR PEOPLE ARE NOT GETTING THE BENEFITS OF THEIR GROWING ECONOMY. THEY NEED TO MOVE AND THEY RECOGNIZE THIS THEY NEED TO MOVE TOWARD A CONSUMPTION BASED ECONOMY AS OPPOSED TO AN EXPORT BASED ECONOMY AND AS THEY DO THAT MOVE TOWARD A MORE CONSUMPTION BASED ECONOMY THEY WILL START IMPORTING MORE GOODS AND THEIR BALANCE IN TRADE SURPLUS WILL DECLINE.

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