Addressing a record crowd of delegates, Nobel Laureate Joseph Stiglitz said the current global downturn had been worse than he had expected. “The one ray of optimism in this really dark cloud is that China and India look like they’re going to continue to grow, although somewhat slower than they have been growing,” he said.

Prof. Stiglitz said the U.S. will play a critical role in the recovery of the world economy, and that the key issues would be consumption growth – which until now had been led by “unbridled borrowing” - and the restructuring of the financial institutions. “(Americans were told) if you don’t have income, don’t let it bother you, keep spending, and we lent them money and they kept borrowing and the debts grew,” he said.

Concerns About the U.S. Stimulus Package
Asked about the U.S. government’s efforts to stimulate the economy, Prof. Stiglitz voiced concern that about one third of its stimulus package was made up of tax cuts, while American families are struggling with eroded bank balances, declining share prices and falling home values. “The experience in 2008 February tax cut was that they’re not going to spend most of the money,” he said. “So we won’t get much of a stimulus.”

He also voiced concern about the U.S. government’s latest package announced by Treasury Secretary Tim Geithner on March 23th, to deal with toxic assets in the financial system. “The problem is that the administration has been floundering and the latest proposal is, I think, a really bad one,” he said. “It’s probably not going to work, but (even) if it does it will exacerbate our problem of soaring national debt.”

“A Massive Blood Transfusion”
Turning to the mortgage problem in the U.S., Prof. Stiglitz said the government was “giving a massive blood transfusion to a patient that has been suffering from internal hemorrhage. They have finally started to do something about it, but what they’re doing is not enough,” he added.

Prof. Stiglitz said one solution for the troubled U.S. would be the “temporary nationalization” of the undercapitalized banks. “It’s not a big deal – other countries have done it,” he said. “I’ve seen no persuasive reason that we couldn’t do it. It would be difficult, but what we are doing now isn’t going to be easy.”

Consumer Confidence has Been Deeply Shaken
Douglas Holtz-Eakin, former head of the U.S. Congressional Budget Office also addressed the conference, saying U.S. consumers likely would not begin spending despite the stimulus package, because their confidence had been deeply shaken. Meanwhile the stimulus package brought with it significant long-term fiscal pressures and rising debt burdens, “and I think that is a key risk going forward,” he said.

He also voiced concern about the Geithner plan to deal with toxic assets, saying: “I’m not even sure it will work, and it will be small compared with the necessary resources because of the budgetary constraints and the unpopularity of this. It strikes me as small in scale, with perverse incentives, and it’s not obvious it will work.”

Asian Investment Conference Breaks Record
Credit Suisse Asia Pacific CEO Kai Nargolwala opened the conference, saying reliable information is in demand during these volatile markets. “We've been impressed by the response to the Asian Investment Conference this year,” he said. “Despite the downturn - or perhaps because of it - there is unprecedented client interest: more than 2,000 delegates in total.” “We have, at your request, arranged 5,000 one-on-ones with companies this year. That's a record for us.”