From our studios in new york city, this is charlie rose. It is a pleasure to be here. Christine lagarde, let me begin by saying what do you hope to accomplish here in this meeting . There will be 188 representatives of the membership of the imf. Pretty much the Global Economy is in washington for three days. We are at the point where the economy has turned the corner or is turning the corner of the Great Recession. We know that everybody has more to do so they need to talk to each other to explain what more they are going to do, how it is going to impact their respective economy, and how it will affect the others economies. There will be one particular issue which i hope we can address which is the reform of the imf and making sure that we find a way forward to strengthen the institution and to make sure the membership stay together, including with the leadership of the u. S. I assume the fact that there are central bank people here, finance ministers here. Part of the message that comes out of here is for the larger community, a political community, as well as an Investment Community that exists outside of government and nongovernment organizations. Where are we in terms of the Global Economic recovery . Global growth we have gone from 3 to 3. 6 to probably 4 . There is progress. Not Strong Enough but it is positive. It is turning the corner. The u. S. Is doing reasonably well. Our assumption is it will deliver a 2. 8 growth in 2014 which is not of potential. United states can do better than that. It can certainly create more jobs. At least it is moving at a reasonably good speed. The private sector is beginning to unleash and to return to investments and to job creation. The eurozone is finally turning the corner as well. It is turning positive. It had been negative for a few years and it is now positive. The core of countries are now doing better. Germany is the best of the lot. The countries of the eurozone such as italy, greece are finally delivering positive growth results as well. If you look at the emerging market economies, they are slowing down a bit, but they are still proving at about five percent growth which is almost double the growth of the United States. If you look at the size of the Global Economy, they are at 50 now. 50 of the Global Economy is in the hands of emerging markets and developing market economies. If you assume they grow at that five percent, they are all gaining traction, strength. They should play a larger role in the imf . That is one consequence. You are right. It also means their policy and the impact of the fed Monetary Policy matters, not just for themselves but for the Global Economy given the size they represent. We have had some tapering in the United States by the federal reserve. You have urged the central bankers in europe to do what . For quite a while, we have encouraged the European Central bank to be very attentive to the risk of sustained low inflation which we believe would be hurting growth, jobs, and not particularly helpful for the service of debt. I was very encouraged to see that after having praised the imf last week. My friend, mario, has indicated that low inflation risk he would be prepared to take measures as appropriate and in due course and i trust his judgment to do the right thing. You seem to be saying to the world and to the Global Economy, lets make sure that we maintain low Interest Rates. We are saying that we fear that interest will remain low for longer than we think. Than you think is necessary . And that everybody expects. We have to be very attentive to the risks it creates on the markets when you have very easy financing. At the same time, growth picking up. That could create, you know, spots on the market whether it is a little bit too much acceleration. The big question here and the big question for the United States and the big question for the Global Economy is how do you create growth . As a subset of that, a key consequence, how do you create jobs because you still have two hundred Million People looking for jobs in the world. It is a task that the president of the g20, the australian president has decided to tackle with the australian energy. The australian president has decided to modernize and improve Global Growth by two percent over the next five years which would put everybody in a much better position. We did do that. We identified what should be done in terms of key Structural Reforms. In terms of normalization of Monetary Policy. In terms of rightly paced fiscal consolidation. That coordinated approach can deliver two Percentage Points more in five years. Countries the Global Economy . What are those Structural Reforms that are essential . They will differ by country by country basis. You have countries where unemployment has been almost structural. If it is structural, then a reform is needed. You have countries with dual labor markets where the protected people under contract have the benefit of longterm employment. All the others are on fixed terms, limited terms. That is a dual employment that is not conducive to growth or to job creation. That is one set of reforms. It will apply to a country like spain which has undertaken that reform. It would apply to a country like south africa that has had endemic unemployment and to a few other European Countries for sure. Other Structural Reforms take two countries like brazil or india that have big bottlenecks. You want to create a big new retail system in india. Fine, but you need to have the infrastructure, warehousing, the way to take stock from where they are stored to the retail sector. Brazil is tackling this issue because they have the world cup and the olympic games. Those bottlenecks have to be cleared and that is not so much in the structural reform, i read a recent piece by larry summers. That is good reading. He was talking about the idea that the most important thing you can do today for growth is investment in infrastructure, not only because it will create some demand in the economy and jobs, but it helps the economy expand. You share that view with him . I dont think that we have a onesizefitsall solution and it will work. It is a bit more complicated than that. It is on a per country basis. Given that there is low cost financing still for the moment and given that the Capital Investments have been low over the course of the next five or six years when countries have really tightened their belts and forgot about investing in infrastructure, forgot about investing in capital. For some other the countries, those that can afford it, it is not a bad idea. The u. S. Is one that could look at it. Germany is one as well. One would think, germany . Germany can invest in improving its electricity grid system. Speaking of europe, has the imf taken a different attitude about the British Economic reform and its program of austerity so that you are not how should we say this . Admonishing them . We revised our projection for the u. K. Significantly. It is a very high revision. It is a high projection. Frankly, we are delighted that the u. K. Is growing at that speed, at that pace. We hope they can strengthen that growth Going Forward and make it three engines powered. For the moment, it is driven by consumption. The u. K. Has to export more. The u. K. Has to invest more. I am sure they will be looking at this. The numbers are beginning to rise which is good. Two things about reform that you talk about. One is women and what they add to the job force. I just saw the women in the world conference in new york. Help us understand what more ideas to make sure that women are more involved in the workforce will do for the Global Economy. I will give you the example two countries. One is japan. The other one is korea. I could pick other examples but those two are critical because they have the same aging phenomenon. Two societies where people are aging, where tolerance for immigration is not very high, and where they are short of womenpowered force. The way to resolve this issue is to make sure that women can join the job market. That they can access where they deserve to access which is high because they are as educated as their male colleagues. There is this cultural reluctance to accept the idea. I was really pleased to see that the Prime Minister and the president have decided to include women into the workforce. Making sure they have access to facilities and day care centers. I was talking to the finance minister of japan who assured me it will be in the next appropriation in june and that many cities in japan are putting into place infrastructure to facilitate that. It is going to make a significant change and we have numbers to document what were the result would be if women were given same access as men to the job market. The Economic Growth rate for japan is about 1. 4 they could certainly do with a bit more. Are they on the right track . They have planned on doing this three arrow strategy. The first, they wanted to double the monetary amount. Purchasing massively by the central bank of japan. It is showing results. The second arrow was to address the fiscal situation because they have a clear deficit and they need to have a base in which to raise revenue because revenue is not very high in japan. They just did that on april 1. They need to do more. I asked the question to the Prime Minister, what about the third arrow . Are the Structural Reforms underway . He showed me they are under way and that many of them will be appropriated in the month of june. We are following that very carefully. You also talk here at this meeting about income inequality. What can be done and what is the impact of it and what is the risk of it Going Forward. We are looking at income inequality because we believe it is macrocritical. It is raising the point where it could have a detrimental impact on the growth of economies in general. We have done two critical studies in my view because were looking at this not from a political or ideological angle, we are just trying to understand the relationship and the correlation. The two studies are one is inequality, excessive inequality, huritng growth. The answer seems unambiguously yes. It is hurting sustainable growth. The second study which we did which goes against conventional wisdom was redistribution of policies if adequately articulated, is it a break on growth . Everybody assumes for a long time if you do redistribution that people will not be attracted to producing more, earning more because the more is going to other people. They talk about when you raise minimum wage, is that going to have an impact on employment overall . We have looked at redistributive policies articulated around progressive taxation. More progressive taxation. More spending on education, health care to make sure people have equal opportunities rather than unequal opportunities. Those studies really clearly indicated that that level of distribution is supporting growth. You have also said that it is important to come to almost closure with respect to certainty on financial regulations. Where are we . By the way, charlie, it is one of the very, very few issues where i am in agreement with the Financial Market players. They also want certainty. Why is certainty necessary . So that they know how much reserve they much keep, how much capital they must trade, what is the level of liquidity, and what will be the powers exercised by supervisors. They need to know where they are operating. We are three fourths of the way there. The job is not completed yet. As usual, the trickiest points are left for the last hour. I would put in that category the crossborder resolution regime. The resolution applicable to the very large financial institutions. The Global Financial institutions. I would put in their the appropriate control and supervision of shadow banking which has significantly increased in the u. S. And china. I would also put in there Real Transparency and clear regulation and supervision of the derivative markets and the clearing system. Do you believe that the United States and dodd frank is a movement in the right direction . For any piece of legislation, i dont want to say it is good or bad, but it is not yet implementable. There is still a lot of interpretation. It is voluminous. Yes. The interpretation is going to be even bigger than the dodd frank act. Im not sure it is very broadly applied or understood. Let me come back to the imf and increasing the membership and responsibilities and the agreement. Where do we stand on those very important things about the 21st century . You hear more and more that if you have as large economy as china has or brazil it should have a large seat at the table. Is that going to happen . It was initiated in 2010, strongly pushed by all members and United States. We agreed on a reform that is supposed to be completed in 2012. We are not there yet because the u. S. Has not ratified. I am being very blunt because we have been cute about it for a while. It has been because the United States is not satisfied. Is there a difference between the executive branch and the legislative branch . There was a perennial difference, but for some reason we have seen the Collateral Damage of that difference. The United States is my biggest chair holder. It exercises leadership in many situations and when it did historically, it was quite often helpful. Now we are stuck. I very much hope that the leaders who were attending the meeting this week, Prime Ministers and president s, will be calling on the United States to do this. There is proper representation of the membership so that china has the right seat at the table. Brazil is duly represented. South africa has the right seat and so forth. And, the imf has secured longterm resources rather than being the fireman who is asked to turn the tap. Loan money when you have a fire. I am trained in the law as you are. I always thought that inflation was a bad thing. But, it seems to me there was a conversation about inflation that i dont quite understand. What is it that we need to know about the impact of inflation on the Global Economy today . First of all, i regard you as highly read and trained in all sorts of matters. To discount your economic understanding is an understatement. Mine is probably not better than yours. I certainly hope so. [laughter] common sense sometimes is worth more. Back to inflation. I think it was a few decades back, particularly when monetary policies were declared flexible. A certain amount of inflation was determined as good and helpful. Helpful for growth because if you know that it might be a bit more expensive tomorrow or next week, it prompts you to spend. You buy clothes. You buy the car you want because it is one step for tomorrow. Shouldnt be too much of it because otherwise you run into a very disruptive scene. A certain degree of inflation is good which is why quite a few monetary systems adopted either the objection of inflation or a target like the fed. Some of them keep inflation so that it is under control but high enough so that it stimulates growth Going Forward. I also thought that low Interest Rates are good and that was good for a lot of reasons because what happened in the Great Recession in america is because of tight money. Too tight money was not always a good thing. It is a question of measure and balance. Obviously, inflation rates and Interest Rates go together and have to sort of balance out. There was a tradeoff between the two. What is the most surprising thing about the economy youve learned since you have been managing director of the imf . What i find amazing is how the situation can change. If i look back only four or five years ago, everybody was in this terrible, dreadful situation. Everything was negative. Everybody was downbeat. If you look now, we are only five years into it, some might say it is a terribly long time but the situation has changed incredibly. It is the action that individuals, policymakers, that players can exercise on the general situation that i find quite remarkable. It is not enough, too slow, not even as it should be. It is moving. There is the impact of culture in terms of how a nation reacts to economic factors. It is so imbalance between the state and the private sector as factors in the economy. Ukraine. Tell me what the imf can do, will do, wants to do. Whatever order you choose. [laughter] what we want to do is help. If the country wants our help and the country wants our help and the help of the international community. We are here to serve ukraine is a member. They are paying its reimbursement because it is in debt with the imf so we want to help. What have we done . The moment we were called, we sent a team to the ground. They are Crisis Management experts. They know how to look under the skin of my country. They know how to look at the books and checked against the reality. They did all of that. They move into negotiation mode. We have now what we call an agreement between the ukrainian authorities to address of the key issues.