Hillary Clinton’s Goldman Sachs Speech In Its Entirety.

Thanks to our friends at zerohedge.com and also of course Julian Assange at WikiLeaks, you can now read what Hillary Clinton doesn’t want you to see. Here is her entire speech to Goldman Sachs (actually a conversation). This is part one of two because it’s so damn long. It’s not really the most exciting reading in the world. War & Peace is much more entertaining!

1 – – – – – – – – – – – – – – – – – – – – – – – x GOLDMAN SACHS, CO. 2013 IBD CEO ANNUAL CONFERENCE KEYNOTE SPEAKERS: FORMER UNITED STATES SECRETARY OF STATE HILLARY RODHAM CLINTON and LLOYD BLANKFEIN – – – – – – – – – – – – – – – – – – – – – – – x The Inn at Palmetto Bluff Bluffton, South Carolina June 4, 2013 8:05 P.M. Before Patricia T. Morrison, Registered Professional Reporter and Notary Public of the State of South Carolina. ELLEN GRAUER COURT REPORTIN CO. LLC 126 East 56th Street, Fifth Floor New York, New York 10022 212-750-6434 REF: 104014

2 MS. CLINTON: Let’s start with the chairman.

  1. BLANKFEIN: China. We’re used to the economic team in China. We go there all the time. The regulations — and then every once in a while you hear about South China, the military side. How do you from the state department point of view — less familiar to us — think about China, the rise of China, and what that forebodes for the next couple of decades?
  2. CLINTON: Well, you start off with an easy question, but first let me thank you. Thanks for having me here and giving me an opportunity both to answer your questions and maybe later on some of the questions that some of the audience may have. I think it’s a good news/maybe not so good news story about what is going on right now in China. On the good news side I think the new leadership — and we’ll see more of that when Xi Jinping gets here in the United States after having gone to Latin America. He’s a more sophisticated, more effective public leader than Hu Jintao was. He is political in the kind of generic sense of that word. You can see him work a room, which I have watched him do. You can have him make small talk with you, which he has done with me. His experience as a young man coming to the United States in the 1980s — going to Iowa, spending time there, living with a family — was a very important part of his own development.
  3. BLANKFEIN: His daughter is at Harvard?
  4. CLINTON: Yes. They don’t like you to know that, but most of the Chinese leadership children are at American universities or have been. I said to one very, very high ranking Chinese official about a year, year and a half ago — I said: I understand your daughter went to Wellesley. He said: Who told you? I said: Okay. I don’t have to punish the person then. So I think that the leadership — and for me that’s important, because you’ve seen the clever moves that he’s made already. He not only went to Russia on the first trip, he went to Africa and then to South Africa. Now in Latin America. Some of it is the same old commodity hunt, but some of it is trying to put a different phase on that and to try to assuage some of the doubts and some of the concerns that have been bubbling up over the last couple of years about Chinese practices, both governmental and commercial. So he’s someone who you at least have the impression is a more worldly, somewhat more experienced politician. And I say that as a term of praise, because he understands the different levers and the constituencies that he has to work with internally and externally. That’s especially important because of the recent moves he’s making to consolidate power over the military. One of the biggest concerns I had over the last four years was the concern that was manifested several different ways that the PLA, the People’s Liberation Army, was acting somewhat independently; that it wasn’t just a good cop/bad cop routine when we would see some of the moves and some of the rhetoric coming out of the PLA, but that in effect that were making some foreign policy. And Hu Jintao, unlike Jiang Zemin before him, never really captured the authority over the PLA that is essential for any government, whether it’s a civilian government in our country or a communist party government in China. So President Xi is doing much more to try to assert his authority, and I think that is also good news. Thirdly, they seem to — and you all are the experts on this. They seem to be coming to grips with some of the structural economic problems that they are now facing. And look, they have them. There are limits to what enterprises can do, limits to forcing down wages to be competitive, all of which is coming to the forefront; limits to a real estate bubble. All of the cyclical business issues that they’re going to have to confront like every other economy, and they seem to be making steps to do so. On the not so good side there is a resurgence of nationalism inside China that is being at least condoned, if not actively pushed by the new Chinese government. You know, Xi Jinping talks about the Chinese dream, which he means to be kind of the Chinese version of the American dream. There has been a stoking of residual anti-Japanese feelings inside China, not only in the leadership but in the populace. It’s ostensibly over the dispute that is ongoing, but it’s deeper than that and it is something that bears very careful watching. Because in my last year, year and a half of meetings with the highest officials in China the rhetoric about the Japanese was vicious, and I had high Chinese officials in their 60s and 50s say to me: We all know somebody who was killed by the Japanese during the war. We cannot let them resume their nationalistic ways. You Americans are naive. You don’t see what is happening below the surface of Japan society. Riots that were not oppressed by the police against Japanese factories, against the Japanese ambassador’s car — those kinds of actions that were acting out in the sense of nationalism, which could well be a tool that the new government uses to try to manage some of the economic changes. Divert people’s attention. Get them upset at the Japanese. Not upset the party. We’re a little concerned about that.
  5. BLANKFEIN: Does it make any of the other Asian countries nervous and therefore gravitate closer to the US?
  6. CLINTON: There is a lot of anxiety, but it’s a schizophrenic, I guess is the way I put it. On the one hand, no nation wants to be viewed as hostile to China. That’s not in their interests. They have — if you’re Japan or South Korea in particular, you have a lot of business that you have to do. So you’re going to want to keep the relationship on an even keel at the same time this assertiveness, which we first saw most particularly around the South China seas starting in 2010, kind of ended the charm offensive that Chinese were conducting with all of their neighbors in Southeast Asia and the assertion of control over the entire sea. If you Goggle up what the Chinese claim is, it’s the entire South China sea. And I would have these arguments with the state counselor, Dai Bingguo, with the foreign minister, Yang Jiechi, and I would say: You know, if you believe this, take it to arbitration.
  7. BLANKFEIN: An unfortunate name.
  8. CLINTON: Which one?
  9. BLANKFEIN: The South China sea.
  10. CLINTON: Yes, it is. And there are a lot of people who refuse to call it that anymore. The Filipinos now call it the Filipino sea and the East China Sea is called the Japanese Sea. So yeah. We’ve got all these geographic and historic challenges that are coming to the forefront, which seems a little strange when you think about the economic development and growth that has gone on in the last 30 years, to be harkening back to the 1930s and the second world war at a time when you’ve surpassed Japan. You’re now the second biggest economy in the world. It really does raise questions about what is going on in the calculus of the leadership that would encourage them to pursue this kind of approach. Nationalism, of course. Sovereignty, of course. And if you want to go into it there is — I can give you their side of the question on what the Japanese called the — you know, you can go into why they are so agitated about it. But the fact is, they have bigger fish to fry in the South China Sea and elsewhere. So why are they intent upon picking this fight and asserting this at this time? Why are they slamming into Filipino fishing vessels? You know, a poor country that is just desperately trying to get its growth rate up and making some progress in doing that. So it bears watching, and obviously it matters to all of us.
  11. BLANKFEIN: The Japanese — I was more surprised that it wasn’t like that when you think of — all these different things. It’s such a part of who they are, their response to Japan. If you bump into the Filipino fishing boats, then I think you really — while we’re in the neighborhood, the Chinese is going to help us or help themselves — what is helping themselves? North Korea? On the one hand they wouldn’t want — they don’t want to unify Korea, but they can’t really like a nutty nuclear power on their border. What is their interests and what are they going to help us do?
  12. CLINTON: Well, I think their traditional policy has been close to what you’ve described. We don’t want a unified Korean peninsula, because if there were one South Korea would be dominant for the obvious economic and political reasons. We don’t want the North Koreans to cause more trouble than the system can absorb. So we’ve got a pretty good thing going with the previous North Korean leaders. And then along comes the new young leader, and he proceeds to insult the Chinese. He refuses to accept delegations coming from them. He engages in all kinds of both public and private rhetoric, which seems to suggest that he is preparing himself to stand against not only the South Koreans and the Japanese and the Americans, but also the Chinese. So the new leadership basically calls him on the carpet. And a high ranking North Korean military official has just finished a visit in Beijing and basically told: Cut it out. Just stop it. Who do you think you are? And you are dependent on us, and you know it. And we expect you to demonstrate the respect that your father and your grandfather showed toward us, and there will be a price to pay if you do not. Now, that looks back to an important connection of what I said before. The biggest supporters of a provocative North Korea has been the PLA. The deep connections between the military leadership in China and in North Korea has really been the mainstay of the relationship. So now all of a sudden new leadership with Xi and his team, and they’re saying to the North Koreans — and by extension to the PLA — no. It is not acceptable. We don’t need this right now. We’ve got other things going on. So you’re going to have to pull back from your provocative actions, start talking to South Koreans again about the free trade zones, the business zones on the border, and get back to regular order and do it quickly. Now, we don’t care if you occasionally shoot off a missile. That’s good. That upsets the Americans and causes them heartburn, but you can’t keep going down a path that is unpredictable. We don’t like that. That is not acceptable to us. So I think they’re trying to reign Kim Jong in. I think they’re trying to send a clear message to the North Korean military. They also have a very significant trade relationship with Seoul and they’re trying to reassure Seoul that, you know, we’re now on the case. We couldn’t pay much attention in the last year. We’ve got our own leadership transition. But we’re back focused and we’re going to try to ensure that this doesn’t get all the rails. So they want to keep North Korea within their orbit. They want to keep it predictable in their view. They have made some rather significant statements recently that they would very much like to see the North Koreans pull back from their nuclear program. Because I and everybody else — and I know you had Leon Panetta here this morning. You know, we all have told the Chinese if they continue to develop this missile program and they get an ICBM that has the capacity to carry a small nuclear weapon on it, which is what they’re aiming to do, we cannot abide that. Because they could not only do damage to our treaty allies, namely Japan and South Korea, but they could actually reach Hawaii and the west coast theoretically, and we’re going to ring China with missile defense. We’re going to put more of our fleet in the area. So China, come on. You either control them or we’re going to have to defend against them. MR. BLANKFEIN: Wouldn’t Japan — I mean, isn’t the thinking now what is going to happen? But why wouldn’t Japan at that point want to have a nuclear capability?
  13. CLINTON: Well, that’s the problem with these arms races.
  14. BLANKFEIN: Nuclear technology –
  15. CLINTON: But they don’t have a military. They have a currently somewhat questionable and partially defunct civilian nuclear industry. So they would have to make a huge investment, which based on our assessments they don’t want to have to make. You know, there is talk in Japan about maybe we need to up our economic commitments to our military forces. Maybe we have to move from basically a self-defense force to a real military again, which would just light up the sky in terms of reactions in China and elsewhere. So the Japanese have not — and with Abe trying to focus on the economy and deal with the political problems with the structural reforms, he doesn’t want to have to do that. But there are nationalistic pressures and leaders under the surface in governship and mayor positions who are quite far out there in what they’re saying about what Japan should be doing. And part of the reason we’re in the mess on the Senkakians is because it had been privately owned. And then the governor of Tokyo wanted to buy them, which would have been a direct provocation to China because it was kind of like: You don’t do anything. We don’t do anything. Just leave them where they are and don’t pay much attention to them. And the prior government in Japan decided: Oh, my gosh. We can’t let the governor of Tokyo do this, so we should buy them as the national government. And I watched the most amazing argument — you know, Hu Jintao was always so impassive in public, especially around us. And I was in Vladivostok last September representing the president at the APEC meeting, and they had the leaders in a holding room, and we were all in there waiting to go out to some event. And you had Hu Jintao in a corner screaming at them, and we all were listening because their interpreters could translate from Chinese to English to English to Japanese and vice versa. So we got to hear the whole thing. And so we tried to prevent the problem. That’s why we bought it. That is unacceptable. We never should have done it. The national government should never own these things. But we can control it better. It wouldn’t be in the hands of a nationalist. I don’t care. This is breaking the — it was really fascinating. You can actually have four translators in your home. This is something that most families –
  16. BLANKFEIN: The next area which I think is actually literally closer to home but where American lives have been at risk is the Middle East, I think is one topic. What seems to be the ambivalence or the lack of a clear set of goals — maybe that ambivalence comes from not knowing what outcome we want or who is our friend or what a better world is for the United States and of Syria, and then ultimately on the Iranian side if you think of the Korean bomb as far away and just the Tehran death spot, the Iranians are more calculated in a hotter area with — where does that go? And I tell you, I couldn’t — I couldn’t myself tell — you know how we would like things to work out, but it’s not discernable to me what the policy of the United States is towards an outcome either in Syria or where we get to in Iran.
  17. CLINTON: Well, part of it is it’s a wicked problem, and it’s a wicked problem that is very hard to unpack in part because as you just said, Lloyd, it’s not clear what the outcome is going to be and how we could influence either that outcome or a different outcome. So let’s just take a step back and look at the situation that we currently have in Syria. When — before the uprising started in Syria it was clear that you had a minority government running with the Alawites in lead with mostly the other minority groups — Christians, the Druze, some significant Sunni business leaders. But it was clearly a minority that sat on top of a majority. And the uprisings when they began were fairly mild in terms of what they were asking for, and Assad very well could have in my view bought them off with some cosmetic changes that would not have resulted in what we have seen over the now two years and the hundred thousand deaths and the destabilization that is going on in Lebanon, in Jordan, even in Turkey, and the threat throwing to Israel and the kind of pitched battle in Iran well supported by Russia, Saudi, Jordanians and others trying to equip the majority Sunni fighters. I think that we have tried very hard over the last two years to use the diplomatic tools that were available to us and to try to convince, first of all, the Russians that they were helping to create a situation that could not help but become more chaotic, because the longer Assad was able to hold out and then to move offensively against the rebels, the more likely it was that the rebels would turn into what Assad has called them, terrorists, and well equipped and bringing in Al-Qaeda and its affiliates. The Russian’s view of this is very different. I mean, who conceives Syria as the same way he sees Chechnya? You know, you have to support toughness and absolute merciless reactions in order to drive the opposition down to be strangled, and you can’t give an inch to them and you have to be willing to do what Assad basically has been willing to do. That has been their position. It pretty much remains their position, and it is a position that has led to the restocking of sophisticated weapon systems all through this. The Russians’ view is that if we provide enough weapons to Assad and if Assad is able to maintain control over most of the country, including the coastal areas where our naval base is, that’s fine with us. Because you will have internal fighting still with the Kurds and with the Sunnis on the spectrum of extremism. But if we can keep our base and we can keep Assad in the titular position of running the country, that reflects well on us because we will demonstrate that we are back in the Middle East. Maybe in a ruthless way, but a way that from their perspective, the Russian perspective, Arabs will understand. So the problem for the US and the Europeans has been from the very beginning: What is it you — who is it you are going to try to arm? And you probably read in the papers my view was we should try to find some of the groups that were there that we thought we could build relationships with and develop some covert connections that might then at least give us some insight into what is going on inside Syria. But the other side of the argument was a very — it was a very good one, which is we don’t know what will happen. We can’t see down the road. We just need to stay out of it. The problem now is that you’ve got Iran in heavily. You’ve got probably at least 50,000 fighters inside working to support, protect and sustain Assad. And like any war, at least the wars that I have followed, the hard guys who are the best fighters move to the forefront. So the free Syrian Army and a lot of the local rebel militias that were made up of pharmacists and business people and attorneys and teachers — they’re no match for these imported toughened Iraqi, Jordanian, Libyan, Indonesian, Egyptian, Chechen, Uzbek, Pakistani fighters that are now in there and have learned through more than a decade of very firsthand experience what it takes in terms of ruthlessness and military capacity. So we now have what everybody warned we would have, and I am very concerned about the spillover effects. And there is still an argument that goes on inside the administration and inside our friends at NATO and the Europeans. How do intervene — my view was you intervene as covertly as is possible for Americans to intervene. We used to be much better at this than we are now. Now, you know, everybody can’t help themselves. They have to go out and tell their friendly reporters and somebody else: Look what we’re doing and I want credit for it, and all the rest of it. So we’re not as good as we used to be, but we still — we can still deliver, and we should have in my view been trying to do that so we would have better insight. But the idea that we would have like a no fly zone — Syria, of course, did have when it started the fourth biggest Army in the world. It had very sophisticated air defense systems. They’re getting more sophisticated thanks to Russian imports. To have a no fly zone you have to take out all of the air defense, many of which are located in populated areas. So our missiles, even if they are standoff missiles so we’re not putting our pilots at risk — you’re going to kill a lot of Syrians. So all of a sudden this intervention that people talk about so glibly becomes an American and NATO involvement where you take a lot of civilians. In Libya we didn’t have that problem. It’s a huge place. The air defenses were not that sophisticated and there wasn’t very — in fact, there were very few civilian casualties. That wouldn’t be the case. And then you add on to it a lot of the air defenses are not only in civilian population centers but near some of their chemical stockpiles. You do not want a missile hitting a chemical stockpile. We have a big set of issues about what is going to happen with those storehouses of chemicals since a lot want their hands on them. The Al-Qaeda affiliates want their hands on them, and we’re trying to work with the Turks and the Jordanians and NATO to try to figure out how we’re going to prevent that. The Israelis are –
  18. BLANKFEIN: Israel cares about it.
  19. CLINTON: Israel cares a lot about it. Israel, as you know, carried out two raids that were aimed at convoys of weapons and maybe some other stuff, but there was clearly weapons. Part of the tradeoff that the Iranians negotiated with Assad. So I mean, I’ve described the problem. I haven’t given you a solution for it, but I think that the complexity of it speaks to what we’re going to be facing in this region, and that leads me to Iran. Our policy — and President Obama has been very clear about this. Our policy is prevention, not containment. What that means is that they have to be prevented from getting a nuclear weapon. Now, the definition of that is debated. I have a very simple definition. If they can produce the pieces of it and quickly assemble it, that’s a nuclear weapon, even if they keep three different parts of it in different containers somewhere. If they do that it goes back to Lloyd’s first point. The Saudis are not going to stand by. They’re already trying to figure out how they will get their own nuclear weapons. Then the Emirates are not going to let the Saudis have their own nuclear weapons, and then the Egyptians are going to say: What are we? We’re the most important Arab country in the world. We’re going to have to have our own nuclear weapons. And then the race is off and we are going to face even worse problems in the region than we currently do today.
  20. BLANKFEIN: What do you — I’ve always assumed we’re not going to go to war, a real war, for a hypothetical. So I just assumed that we would just back ourselves into some mutually assured destruction kind of — you know, we get used to it. That it’s hard to imagine going to war over that principle when you’re not otherwise being threatened. So I don’t see the outcome. The rhetoric is there, prevention, but I can’t see us paying that kind of a price, especially what the president has shown. We’re essentially withdrawing from Iraq and withdrawing from Afghanistan. It’s hard to imagine going into something as open ended and uncontainable as the occupation of Iran. How else can you stop them from doing something they committed to doing?
  21. CLINTON: Well, you up the pain that they have to endure by not in any way occupying or invading them but by bombing their facilities. I mean, that is the option. It is not as, we like to say these days, boots on the ground.
  22. BLANKFEIN: Has it ever worked in the history of a war? Did it work in London during the blitz or –
  23. CLINTON: No. It didn’t work to break the spirit of the people of London, but London was a democracy. London was a free country. London was united in their opposition to Nazi Germany and was willing to bear what was a terrible price for so long with the blitz and the bombings. Everybody says that Iran, you know, has united –
  24. BLANKFEIN: Many — they held out for an awful –
  25. CLINTON: They wanted — yeah. But I mean, people will fight for themselves. They will fight for themselves, but this is fighting for a program. I mean, the calculation is exactly as you described it. It’s a very hard one, which is why when people just pontificate that, you know, we have no choice. We have to bomb the facilities. They act as though there would be no consequences either predicted or unpredicted. Of course there would be, and you already are dealing with a regime that is the principal funder and supplier of terrorism in the world today. If we had a map up behind us you would be able to see Iranian sponsored terrorism directly delivered by Iranians themselves, mostly through the Revolutionary Guard Corps, the operatives, or through Islah or other proxies from to Latin American to Southeast Asia. They were caught in Bulgaria. They were caught in Cyprus. They were caught in Thailand. They were caught in Kenya. So it’s not just against the United States, although they did have that ridiculous plot of finding what they thought was a drug dealer to murder the Saudi ambassador. They really are after the sort of targets of anyone they believe they can terrorize or sort of make pay a price because of policies. So the fact is that there is no good alternative. I mean, people will say, as you do, mutually assured destruction, but that will require the gulf states doing something that so far they’ve been unwilling to do, which is being part of a missile defense umbrella and being willing to share their defense so that if the best place for radar is somewhere that can then protect the Saudis and the Emirates, the Saudis would have to accept that. That is not likely to happen. So mutually assured destruction as we had with Europe in the ’40s, ’50s, ’60s, ’70s, ’80s until the fall of the Soviet Union is much harder to do with the gulf states and it will be unlikely to occur because they will think that they have to defend themselves. And they will get into the business of nuclear weapons, and these are — the Saudis in particular are not necessarily the stablest regimes that you can find on the planet. So it’s fraught with all kinds of problems. Now, the Israelis, as you know, have looked at this very closely for a number of years. The Israelis’ estimate is even if we set their program back for just a couple of years it’s worth doing and whatever their reaction might be is absorbable. That has been up until this recent government, the prior government, their position. But they couldn’t do much damage themselves. We now have a weapon that is quite a serious one, and it can do a lot of damage and damage that would

— MR. BLANKFEIN: Two miles before it blows up or something?

  1. CLINTON: Yes. It’s a penetrator. Because if you can’t get through the hardened covering over these plants into where the centrifuges are you can’t set them back. So you have to be able to drop what is a very large precision-guided weapon. Nobody wants either of these outcomes. That’s the problem. And the supreme leader, Khamenei, keeps going around saying: We don’t believe in nuclear weapons. We think they are anti-Islam. But the fine print is: We may not assemble them, but we’ll have the parts to them. That’s why we keep testing missiles. That’s why we keep spinning centrifuges. That’s why we are constantly looking on the open market to steal or buy what we need to keep our process going. So that’s what you get paid all these big bucks for being in positions like I was just in trying to sort it out and figure out what is the smartest approach for the United States and our allies can take that would result in the least amount of danger to ourselves and our allies going forward, a contained Iran or an attacked Iran in the name of prevention? And if it were easy somebody else would have figured it out, but it’s not. It’s a very tough question.

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