Meeting of the Economic Nobel Laureates at Lindau

It's a beautiful day in Lindau German, located on Lake Contstance.  Gathered here are 299 students of economics who have been accepted to attend this prestigious educational meeting.  Over 58 nations are represented by these up and coming economists-- comments being make all morning that surely another future Nobel prize winner is amongst the attendess.

The morning session was a panel moderated by David Wessel, deputy bureau chief at the Wall Street Journal.  Panel participants included Dr. Daniel McFadden, Dr. Myron Scholes, Dr. Joseph Stigliz and Dr. Muhammad Yunus.  The opening question to the panel was to get each economists take on the current financial crisis. 

Dr. Scholes made 3 statements in his opening:

1. we need to examine how the system handles "shocks" from the failed risks taken

2. Accounting systems need to be revised and updated

3. Any consideration of revised financial regulation due to the crisis needs to seriously consider the impact in innovation

Dr. Stiglitz observed that from a macro aspect that when the dot com bubble burst, the housing market bubble began-- and that we went from one bubble mode to the next.

He observes that the current crisis is a massive failure of the reigns of economy-- and the inability for the financial markets to properly manage risk-- he feels a major lesson that needs to come out of this crisis is that banks cannot manage their own risk properly.

Lastly, when Stiglitz was asked by a student about regulations, he answered that the central bank--and it's head fill a govt. agenda and that Greenspan, not a fan of regualtion, would not have stepped in to put forth regulatory agendas when the housing bubble starting in the late 90's.

Dr. McFadden spoke of his father, an S&L banker in the 50's and 60'swho stated to his son, that the role of the savings and loan is to help the community by loaning them money that improves their livlihood and thus the overall community-- it was an opening statement to say that the financial markets have lost that mantra and have become involved in the processes of enriching investors-- sometimes with bad results.   He believes that lack of regualtions and aggressive financial markets led to this crisis and with regards to the future-- we need more oversight in the financial community. 

Lastly Dr. Yunus spoke about the effect of this crisis on his area of expertise, the underdeveloped world.  His take is that the housing bubble along with the oil crisis and the food crisis have large implications for the poor.  His main point during the session was that financial institutions must have more transparency about what the financial bundles are along with proper identification of the risk these bundles have.

The most lively debate was between Stiglitz and Scholes regarding future regulation in the financial markets with Stiglitz a strong proponent of the creation of a Financial Safety Commission and Scholes who belives regulation must be carefully considered and that the possibility of impeding innovation is the byproduct of commissions. 

After a quick break the stage was turned over to Dr. Mohammad Yunus, the Nobel Peace Prize winner for his work with the poor and the popularization of micro loans.  Though I am very much aware of Dr. Yunus and his work-- I have never heard his story directly and was (as was the rest of the audience) very taken with his passion and his mission.

He is clearly out to change the world-- and if he attends enough of these types of meetings he just may create a huge sea change in the way we view poor, economic conditions and the rights of all.

I love that he started this burgeoning industry with a total of $27.00 out of his own pocket.  He described his coming home to Bangledesh, after teaching in the US for many years, and discovering so much poverty in his hometown.  He discovered that loan sharks had driven fear into most of the poor through small loans-- and that the total of this bondage like situation was worth a total of $27.00.  He personally paid this and in his words freed many of the poor in this community.  But he went one step further and then began loaning the money himself until he formed the Grameen bank-- and he only formed this after begging the local bank to loan to the poor rather than the loan sharks.   Yunus is proving that the poor can be lifted out of poverty, not by charity, but by opportunity and that it should be the mission of everyone to help this process along.   

Yunus speech grabbed a hold of all 299 young economists and he received the longest and most enthusiastic applause of the day.  Well done Dr. Yunus!!