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Fareed Zakaria GPS

Interview With Prince Al-Waleed; Interview With Tom Friedman

Aired May 29, 2011 - 10:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


FAREED ZAKARIA. HOST: This is GPS, THE GLOBAL PUBLIC SQUARE. Welcome to all of you in the United States and around the world. I'm Fareed Zakaria.

We have a great show for you today. As you know, the big question mark in the Arab world remains Saudi Arabia. Will the central banker of oil be the next one to face revolt and revolution? A fascinating conversation with the 26th richest man in the world, Saudi Prince Al-Waleed.

Later, who says only Mother Nature can make rain? We'll explain.

But, first up, the chances of peace in the Middle East after the latest round of speeches by Prime Minister Netanyahu and President Obama. I'll be joined by Tom Friedman of "The New York Times," who's just back from the Middle East.

Now, here's my take for this week. We've just gone through an arcane debate about whether Barack Obama said anything new when he called for an Israeli-Palestinian settlement based on 1967 borders with mutually agreed upon land swaps. In fact, that has been the working assumption of all negotiating parties -- America, Israel and the Palestinian authority -- for over 20 years. It is what the Camp David talks of 2000 were based on, it's what former Israeli Prime Minister Ehud Olmert's talks with the Palestinians was based on.

The newsworthy and real shift in U.S. policy was President Obama publicly condemning the Palestinian strategy to seek recognition as a state from the U.N. General Assembly in September. Instead of thanking Obama for this, Prime Minister Netanyahu chose to stage, in the words of the former Israeli diplomat Alon Pinkas, quote, "nothing less than a bizarre tirade at the White House on Friday, educating the president about the plight (ph) and the pogroms of Jews throughout history," end quote.

So why did Netanyahu do this? Does it help Israel's security or strengthen it otherwise to stoke tensions with its strongest ally and largest benefactor, Washington? Does such behavior further the resolution of Israel's problems? No, but it helps Netanyahu stir up support at home and maintain his fragile coalition.

The real revelation, which has been picked up by many in the Israeli press, is that it shows finally that Netanyahu simply doesn't want a deal. He always has a new objection, a new problem, a new delaying tactic because, at core, he has never believed that the Palestinians should have a state.

Here is the young Bibi, 33 years ago, at a forum in Cambridge, Massachusetts.

(BEGIN VIDEO CLIP)

BENJAMIN NETANYAHU, ISRAELI PRIME MINISTER: I think the United States should oppose the creation of a Palestinian state for several reasons, the first one being that it is unjust to demand the creation of a 22nd Arab state and a second Palestinian state at the expense of the only Jewish state.

There is no right to establish the second one on my doorstep, which will threaten my existence. There is no right whatsoever.

(END VIDEO CLIP)

ZAKARIA: Prime Minister Netanyahu's references to the indefensible borders of 1967 last week also reveal him to be mired in a world that has really gone away. The chief threat to Israel today is not from a Palestinian army. Israel has the region's strongest economy and military by far, complete with an arsenal of nuclear weapons.

The chief threats to Israel are from new technologies -- rockets, biological weapons and from demography. Its physical existence is less in doubt than its democratic existence as it continues to rule millions of Palestinians who are entitled to neither a vote nor a country.

Ironically, the young Bibi understood that it was impossible to keep the Palestinians in such serf-like conditions forever. Listen to him advocating that Palestinians should be given citizenship, either in Jordan or in Israel.

(BEGIN VIDEO CLIP)

NETANYAHU: In the event that this negotiation process will continue, I am sure that what we're talking about is, in fact, eventual citizenship of some kind, either Jordanian or Israeli or in any other arrangement.

(END VIDEO CLIP)

ZAKARIA: If the Palestinians were smart, they'd take Prime Minister Netanyahu up on that offer of citizenship in Israel, and then Bibi would wish he had been for a two-state solution all along.

Let's get started.

(BEGIN VIDEOTAPE)

ZAKARIA: So what does it look like to Thomas Friedman, the author of "From Beirut to Jerusalem," winner of three Pulitzer Prizes, "New York Times" columnist.

Tom, this week, whatever criticisms you may have or I may have, Bibi Netanyahu goes back to Israel and he is hailed a hero.

THOMAS FRIEDMAN, AUTHOR, "FROM BEIRUT TO JERUSALEM": There's no question that when you stand up to a foreign power, you assert, you know, your demands, there's going to be a constituency back in Israel that's going to support that. That -- it's good work, Fareed, if you can get it. But what happens next week?

You know, I think we have to step back and really ask the big strategic question, why is Israel popular? Why -- why has this been an enduring relationship all these years? You know, why is that cameraman and, you know, that sound person support Israel, whether they're Jewish or -- or not Jewish?

It's because we see them like us. We see them as a country that shares our -- our values. And, most importantly, we see -- we see Israel as a bastion of democracy in the Middle East.

That's Israel's greatest strategic strength vis-a-vis the United States. And what, you know, those of us who have been critical of Prime Minister Netanyahu on this issue are basically saying is that's precisely what is imperiled if there is no peace agreement that allows Israel to cede the West Bank to a Palestinian authority in a safe and secure way so it doesn't absorb all those Palestinians, so we don't end up with a situation where a Jewish minority is ruling over an Arab majority between the Mediterranean and the Jordan River. We know where that goes. That's called Jewish apartheid.

That -- that would be the biggest strategic threat to Israel. And the way you know that is if you look at the strategy of Hamas, Hezbollah and Iran. What is their strategy? It is to make sure Israel must never leave the West Bank. OK? Because as long as Israel's there, that is the key to their strategy for globally de- legitimizing Israel.

Why play into that strength?

ZAKARIA: But he gets 29, 28 standing ovations in Congress.

FRIEDMAN: Well, you know, there's a parallel between what the Palestinians could get at the U.N. and what the Israelis can get in Congress. They can both stand up and read the phone book and be assured that a bunch of knuckleheads in the audience will stand and give them a -- a standing ovation.

So -- but let -- let's think about how Bibi could have really gotten a standing ovation. That would also have been in his long-term interest.

Let's say Bibi had stood before Congress and said, you know, my fellow friends and my American friends, your president, President Obama, has come to me and said that he believes that there's an opportunity here for a breakthrough with the Palestinians. I have to tell you, I personally don't believe it.

But I know one thing. When our best friend, our oldest ally, our most important strategic partner in the world, comes to me and makes the request, there's only one right answer. Mr. President, yes.

You want a six-month moratorium on settlement building? I've already got 500,000 settlers in Jerusalem and the West Bank. You know what, Mr. President? That's not really a strategic risk for me. The potential payoff of that is so great, I don't believe it. I'm skeptical.

But when you, President Obama, ask me that, there's only one right answer. Yes, sir. We will do that. Barack Obama, this Bud's for you.

Then he would have gotten a standing ovation that would have not just included the U.S. Congress, it would have included Europeans. It would have included Arabs. It would have included people all over America. Said hey, there's a guy who's going the extra mile.

And that's my point, Fareed. I have no idea whether there is a Palestinian partner for a secure peace with Israel, along the lines that President Clinton has laid out. I just know one thing. Given the implications for Israel, if it gets stuck permanently holding the West Bank, it is in Israel's overwhelming interest to test, test and test again, OK? Because that would be a huge strategic threat to Israel if it has no choice but to absorb the West Bank.

ZAKARIA: But you travel there a lot and you know the American Jewish community here. Both those crucial constituencies, it's always struck me that to get peace, you're going to have to convince a majority of Israelis because they have the land. They have the land and the guns, in a sense, that they're the power on the ground.

It's drifting to the right. It's -- they are less interested in the kind of deal you're describing.

FRIEDMAN: Well, you do have -- you have a -- more conservative on this issue, right wing, whatever you want, nationalist population in Israel now between the growing orthodox population and the Russian Jews. There's no -- there's no question about that.

You know, as far as American Jews, you know -- you know, to me, the question, Fareed, is yes, Bibi Netanyahu, because of political reasons and campaign donations and AIPAC's influence, can get standing ovations in the U.S. Congress anytime they want, seven days a week, 24/7.

How many standing ovations do you think he could get at the student government at the University of Missouri? At Stanford? At Harvard? At the University of Virginia? At the University of Texas?

If you went to those student governments, they're the future. They're the future of voters. They're the future people who will maintain the strategic relationship with Israel. And there, I can tell you, as anyone who goes to college campuses knows, that people don't get Israel, what Israel is doing right now. They -- some are alienated. Some -- more -- and this is a bigger part, more just -- you know, I don't know. It's messy. I don't want to get involved in this at all. And, you know, that's where -- what it seems (INAUDIBLE) -- don't worry about me. I mean, I grew up, you know, identifying with Israel very strongly, believing in a two-state solution that -- that the right of the Jewish people to a state in the Middle East, next to a Palestinian state, you're not going to lose me, you know? But what I don't see is people like me, Jews or non-Jews, being emotionally involved in this issue, growing up and caring about it.

So that's -- that's the long term. That's Israel's strategic strength.

But, again, Fareed, I -- I understand. This is complicated. The Palestinians have missed a million opportunities, including with the last Israeli government. And there's a really legitimate question to ask, can they get their act together? Forget for a hard-line deal, for the deal that President Clinton put out, that Olmert, the previous Israeli prime minister -- I don't know.

I just know one thing, you've got to test, test and test again, because the implications of not are strategically enormously dangerous.

ZAKARIA: When you look at Israel today, what I'm struck by is at some level it's so secure. There's -- there's booming economy. It's powerful military. It's gotten more powerful every year. Nuclear arsenals, some of which is on submarines. And yet --

FRIEDMAN: They behave "like a disarmed Costa Rica," as Abba Eban once said, you know, and this is not a disarmed Costa Rica. It is a powerful country, with a -- with a powerful society, a -- a powerful economy. And -- but, again, I understand -- nine miles wide at its narrowest. I wouldn't ask Israel to take any risks, you know, that are -- seem unreasonable.

But, boy, if they could strike a deal now with the Palestinians, when you do have actually a decent Palestinian authority, there's -- that has actually built a security force that the Israeli Army will tell you has -- has been effective.

You know, this is what I've been saying from the beginning of the Arab revolt, Fareed, which is when is the time to make big decisions in life? It's when you have all the leverage on your side. You see farther. You -- you think more clearly.

What did Hosni Mubarak do? He had 30 years of leverage vis-a-vis the Egyptian people to democratize his county. He didn't do it. He didn't use it. And then, in one week, he tried to do what he should have over 30 years. He failed completely. People didn't believe a word he said.

You -- you don't want Netanyahu to be the Hosni Mubarak of the peace process, where Israelis look back and say we had all this time, decent Palestinian authority to test -- I'm not saying cut a deal -- I don't know whether there's a deal -- but to really test whether they can deliver and -- and do what we can to embolden and encourage and empower them, and we didn't use it. We sat back and said, look, I got a good poll from my week in Washington. Well, la-dee-da, I mean, we threw you a fish. What is that good for, you know?

Ultimately, you want to anchor this in a really secure relationship. You don't want to be the Hosni Mubarak of the peace process, where people say what did you do when you had all that leverage? What -- you say to the poll?

ZAKARIA: We will be back. We're going to talk to Tom Friedman about what's going on in Egypt, what's going on in Lebanon, Syria. He's back from the region. In a moment.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

(BEGIN VIDEOTAPE)

ZAKARIA: And we are back with "New York Times'" Tom Friedman, who is back from the Middle East.

You were in Egypt. You were in Lebanon. Let's first talk about Syria, because it's the place that everyone's trying to figure out, and none of us can get into Syria, but Lebanon is the closest you can get.

FRIEDMAN: (INAUDIBLE). Yes.

ZAKARIA: What's your sense?

FRIEDMAN: Well, you -- a couple things strike you when you're in Beirut, Fareed. The first thing that strikes you is how incredibly brave the Syrian people who have been resisting their authoritarian government have been.

You know, when Egyptians gathered in Tahrir Square, one thing they knew for sure. After the initial effort by government thugs to put them down, when the army stepped in, they knew they were safe. They knew they could go down to the square, and they gathered there, you know, by the tens and hundreds and thousands and even over a million.

Syrians, when they walk out the door to protest, they know they're dealing with a government and regime that will gun them down and has killed somewhere between 900 and 1,000 already, wounded we have no idea how many, and jailed, we understand, literally stadiums, you know, being used and big facilities to hold all these people. And yet, they still come out.

And that's -- that is quite remarkable, and it shows you, again, this level of incredible -- not only the tyranny of these regimes, but this deep desire for dignity, justice and freedom, which just transcends everything and spreads across that region. And so that's what's most impressive.

Now, Syria, of course, this is complicated. It's the keystone of really the whole (INAUDIBLE). You know, you change Egypt, you have a big impact in the Middle East, but mostly you change Egypt. You change Libya, you change Libya. You know, you change Bahrain -- like Egypt implodes, Libya implodes, Bahrain implodes. Syria explodes. If -- because if the government there came down, it's not like Egypt.

Egypt, you had the -- the regime and you had the army, a totally separate institution. Syria, they are basically one and the same. So if you -- if a Syrian regime goes down, the whole state collapses. The Syrian state collapses, that affects power relationships in Lebanon, with Hezbollah, Syria's main client.

It affects Turkey, which has -- Syria has a big Kurdish population, a big Alawite population, as does Turkey. There are huge issues there about border. It affects Iraq and the stability of the Iraqi-Syrian border. It affects Israel, and affects Iran, it affects Jordan.

So basically, the whole Middle East would potentially change.

ZAKARIA: In Egypt, we -- we did the show from Egypt last week, and I was struck by how unfinished that revolution seems. I mean, we -- we've stopped paying attention, but you go there and it's still very much an ongoing question about what's going to happen.

FRIEDMAN: We're in a critical moment there, Fareed. And -- and it's one that has to be dealt with not by speech and not by writing a check but with really active, smart and subtle diplomacy.

What is this moment? The Egyptian army -- which is the authority now. Basically Mubarak having been ousted -- has basically set a pathway forward of how Egypt progresses from Tahrir Square.

First, we have parliamentary elections, they said. Then, the parliament will write a new constitution or -- or assign people to do it. And then we'll have presidential elections.

Sounds good on paper. Here's one problem. The only people organized now for the parliamentary election, which has been set for September, are the Muslim Brotherhood, because they've had a party living underground, which now just -- basically, I went to their new headquarters they inaugurated last week. Beautiful building, you know? They're very happy to give you a tour. They're all ready to go.

But the whole strength of the Tahrir movement was that it never had a leader. It was broad based, in fact, deliberately they did it so there was no one to arrest. You had to arrest all the Egyptian people. Wonderful for a revolution, not good for running an election. And that's where we I think really need to weigh in.

Leading Egyptian figures, you interviewed Mohamed ElBaradei. Amr Moussa have come out and appealed to the generals to postpone the elections so everybody has a chance to get organized. I think quietly, subtly, we need to let the generals know that that is where we are going to be.

You know, I have a motto about the Middle East, for -- which is if -- when it comes to elections, the Arab world has had so few free and fair elections that when they have one, everybody wants to vote. Yes. Not just the people in that country. You can beat people in Saudi Arabia will want to vote, with their donations, and in Qatar and in the UAE. And a lot of those are going to go to the Muslim Brotherhood.

All I say is we need to vote, too.

ZAKARIA: And there is a powerful role for the United States. I mean, this is one of those kind of crises we were talking about earlier which was unexpected. But this is going to be a very important defining moment for Obama's foreign policy.

FRIEDMAN: Yes. And, I -- you know, I've had a chance to cover many Secretaries of State, and every one of them has a moment, you know, which in Baker, it was the fall of the Berlin War; with Colin Powell it was the Iraq War; with Madeleine Albright it was Kosovo; with Warren Christopher it was Bosnia.

You never see it coming when you came into office. You know, you go back to their opening -- they never saw it coming. But, ultimately, they are defined by how well they managed it, as much as control they have over it.

I think that would be true for Secretary Clinton. I think this whole Arab spring -- not only for her, but obviously for President Obama as well, how they manage it is going to be very central to how they're -- they're perceived in foreign policy. And that's not -- I don't want to hold the bar up too high. They -- as I said earlier, events on the ground or in the cockpit, but we need to understand, when just a little voice here and a little voice there, like maybe you guys should delay this election three months until the progressives and all the parties get organized, can be hugely decisive.

Because this bus, Fareed, is not going to come around. You're not going to get another Egyptian election, like, oh, we missed this bus. You know, this is really important.

ZAKARIA: Tom Friedman, a pleasure, as always.

FRIEDMAN: Great, Fareed (ph). Thank you.

ZAKARIA: And we will be back.

(END VIDEOTAPE)

(COMMERCIAL BREAK)

ZAKARIA: Time now for our "What in the World?" segment.

What caught my eye this week was a classic flip-flop. No, Newt Gingrich hasn't changed his mind about the Ryan Plan once more.

Once upon a time, in fact as recently as a year ago, there was a country desperate to have membership in an organization formed by its neighbors. The country's president said that his country needed to be included without delay. Today, one year later, the tune is very different. A top official from that country saying this week there's no reason to join.

Can you guess the country and the group?

It is Poland and the Euro Zone. It seems that Warsaw no longer wants to exchange its zlotys for euros. There's surely no greater sign of the euro's plummeting reputation.

Just a few years ago, countries like Britain and Denmark, that had chosen to keep their own currency rather than adopting the new euro, were seen as old fashioned, parochial, reactionary and out of sync with the new world. That was then.

But, over the past year or two, Britain's position has begun to look pretty sensible. The euro has obvious benefits -- no more worrying about dozens of currencies going up and down. But, given how it was set up, it also has many flaws. Let's take a look at them through the prism of one country, Greece, the poster child of the euro's problems.

When it first joined the euro zone, it rode a wave of excellent economic growth, about four percent a year for eight years. That's more than Germany, more than the U.S. Finally, Greece had a solid currency and was able to borrow lots of money at low interest rates.

But that was the problem. It wasn't really Greece's currency. The European Central Bank in Frankfurt was setting rates. Tiny Greece wasn't even a factor, so Athens borrowed and spent like crazy, creating a little welfare state paradise of its own.

But when trouble hit, that same single currency proved to be a straitjacket. Growth has collapsed, Greece's debt is about 150 percent of GDP, and it cannot devalue its currency to make its goods cheap and attractive on world markets. It's stuck with the euro. And rich European countries, chiefly Germany, resent having to bail Greece out because they can't force it to change its spendthrift ways. The fancy economic way of saying this is that the Euro Zone has unified monetary policy -- one currency -- but still has diverse fiscal policies.

So, what to do? Two options are being debated, and those two options highlight Europe's opposing forces. First, the E.U. leadership's plan, stay the course. More austerity for Greece, more budget cutting, and, of course, more loans to tide it over. Ignore the fact that Greece can actually never repay them.

The second option, some top German officials say they don't want to keep bailing out their poorer cousins. So, instead, extend Greece's repayment deadlines, a debt restructuring. But the European Central Bank calls that a horror scenario, with the possibility of bank defaults and a vicious domino effect throughout Europe.

And that is the real worry. This isn't really about Greece. It has a $350 billion economy, about the same size as Michigan's. It's one percent of the Euro Zone. But if Greece defaults, it would be the first rich country in six decades to do so, and it could lead investors to free the other fringe Euro Zone economies, Portugal, Ireland, even Spain and perhaps even Italy, and that would be really problematic.

So the reality is that Germany and, to a lesser extent, France and the Netherlands, will end up spending more and more money bailing out their less prudent neighbors. Countries like Poland that once clamored for euro membership will keep their distance. And the Brits will say, "I told you so."

In fact, they already are. Here's what Prime Minister David Cameron told me earlier this year.

(BEGIN VIDEO CLIP)

DAVID CAMERON, BRITISH PRIME MINISTER: I think we were right not to join, and, while I'm prime minister, we will not join.

(END VIDEO CLIP)

ZAKARIA: Looks like those words in Davos resonated far beyond the confines of the Euro Zone.

And we'll be right back.

(BEGIN VIDEO CLIP)

PRINCE AL-WALEED BIN TALAL BIN ABDULAZIZ AL-SAUD, GRANDSON OF SAUDI'S FOUNDING KING: We want the price to be between $70 and $80. Not only to help the West, but also to help ourselves.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

ZAKARIA: The Arab Spring has been a fascinating story, but one with relatively small, immediate impact on the world economy or on your life in America. But that could change if things were to shake up in Saudi Arabia.

Instability in Saudi Arabia would mean that oil prices would not just rise but could double. So that's the country we need to look at as closely as we can. We do so now through the eyes of perhaps the most famous Saudi Arabian in the world.

Our guest is one of the most successful investors on the planet, the 26th richest man in the world according to "Forbes." He is the biggest foreign investor in the United States, and he is also a prince, a grandson of the founding king of Saudi Arabia. He is Prince Al-Waleed Bin Talal Bin Abdulaziz Al-Saud.

Al-Waleed straddles the worlds of America and Saudi Arabia, two worlds that need each other but barely seem to understand each other. So we are going to try to bridge that gap.

(BEGIN VIDEOTAPE) ZAKARIA: Prince Al-Waleed, welcome.

BIN TALAL BIN ABDULAZIZ AL-SAUD: It's a pleasure to be with you my friend, Fareed.

ZAKARIA: So let's start with the -- with the question everybody has on their mind. You are a prince of Saudi Arabia. How stable is Saudi Arabia? You see this sea of revolution taking place across the Middle East. And it seems the one country that has not been particularly affected is Saudi Arabia.

BIN TALAL BIN ABDULAZIZ AL-SAUD: Yes. Thanks, God, Saudi Arabia is in a very unique situation. The relationship between the king and his people is very close. People love the king a lot. That's one reason, obviously, for not having any civil disturbances over there.

Plus the Saudi Arabia situation, although economically, we are not in A-1 shape, for sure. We have issues like in other country, but for sure the situation is not dire and deep and bad.

So all these reasons will help in explaining to you that why Saudi Arabia's situation is stable and thanks, God, you know, the latest call to demonstrate failed completely in Saudi Arabia.

ZAKARIA: But tell me a little bit about the tensions in the country, because clearly the king and the royal family is worried. When -- when these revolutions began in the Middle East, the Saudi government effectively wrote a check for $40 billion. $40 billion is a lot of money even for Saudi Arabia.

So there are concerns that people feel a certain level of a lack of openness, a lack of freedom, a lack of progress. Do you think that this current system can provide that, or does there need to be significant progress in the next year or two?

BIN TALAL BIN ABDULAZIZ AL-SAUD: You know, Lee Kuan Yew? I mean, you know, (INAUDIBLE) is a very famous man. He's the man who established modern Singapore. And Singapore is a model country in democracy in the Far East. He was having lunch with him one time and asked him what kind of democracy do you have? He said we have our own democracy, Prince. It's not the U.S.-type of democracy.

So what he meant by that is that we have a system whereby the participation of the people is have to -- it has -- it has to be implemented. And I believe that Saudi Arabia will have to enact some -- some new laws whereby the participation of the people has to be done one way or another.

ZAKARIA: What about the Saudi relationship of the Saudi royal family to the -- the religious establishment? Ever since the taking of the Grand Mosque in Mecca, the Saudi royal family seemed to get into a deal where they seeded very important parts of the kingdom -- education, religious affairs to fairly radical Wahabi preachers, because they felt that this would ensure there was no challenge of the monarchy. My sense is over the last five -- seven years, there has been a turn where it was recognized that this was not such a good idea. What can you tell us about that?

BIN TALAL BIN ABDULAZIZ AL-SAUD: Clearly, the last seven, eight years, Saudi Arabia began changing and reforming. Clearly and unfortunately, there are some Saudis who are really extreme, but they shout and scream very loudly. And the West thinks, oops, these are representatives of the religious community and mainstream Saudi Arabia, which not the case.

But as you have rightly said so that the last five, six, seven years, the king has been trying to neutralize them and get them off -- off the system so they don't get Saudi Arabia off track.

ZAKARIA: Is it succeeding? Are these -- are these forces declining in importance?

BIN TALAL BIN ABDULAZIZ AL-SAUD: It's succeeding but slowly. You and I would like this to be expedited. And I think right now, the king, he will say almost on weekly basis but not monthly basis, some of these people -- some of these people are being sidestepped. So really, you know, for example, Saudi Arabia has never had a university whereby women and men could be together. King Abdul established that and some of them were against that, so he axed them out. So -- so slowly -- slowly but surely it's happening.

ZAKARIA: There are lots of people who when they think of Saudi Arabia, they think of the support for very extreme Islamic preachers, Islamic centers, Islamic movements and terrorists. And there's a lot of documentation that says that money did come from Saud Arabia, not always the Saudi government, in fact, very often not the Saudi government but Saudi individuals.

And while I was in Cairo and the people in Egypt said that their Salafis, they're the most extreme religious people are all funded from Saudi Arabia. When will this stop?

BIN TALAL BIN ABDULAZIZ AL-SAUD: You know, this -- this problem is there, was there, actually. But, you know, the Saudi Arabian government's official position is really not to do that, not to support those people at all.

There was -- we encourage the fact that there are some Saudis who are supporting some of those groups that want to be terrorists. I mean, they -- when they were supported, the assumption was that these were not terrorists. They were just only Islamic Jihadists or advancing the cause of Islam. But, clearly, when this turned out to be not the case, Saudi Arabia enforced very strong conditions.

ZAKARIA: And yet when I go to Iraq during the war and with -- you tried to figure out who was funding the most extreme Sunni militants, al Qaeda-affiliated organizations, what we would hear is that the money was coming in from Saudi Arabia.

BIN TALAL BIN ABDULAZIZ AL-SAUD: I think this is a bit -- this is a bit old news in history. I can assure you, Fareed, right now, the situation has changed a lot. I mean, because we were the victim of -- of many terrorist acts. My own center, my Kingdom Center, which is the highest priced tower in Saudi Arabia, was vacated twice because of terrorist attacks, terrorist threats.

And remember also, last November when Saudi Arabia gave a tip to the U.S. government whereby two planes were saved from being bombed by these two bombs -- two bombs that were supposed to explode in midair. So rest assured that Saudi Arabia today is a lot different than it was five or six years ago.

ZAKARIA: Given your financial prowess, I have to ask you questions about oil, because of course, Saudi Arabia is the central banker of oil. Explain to me why price of oil is now averaging over $100 a barrel for the year. You don't have a substantial increase in demand right now.

If you look at China, India, the United States, Europe, growth is actually not as strong as -- as it could have been everywhere. You don't have a particular disruption of supply. There was a little bit because of Libya, but they're very tiny. And you guys, I mean, the Saudis actually increased supply, but then they cut back (INAUDIBLE) when nobody wanted to buy this -- this extra supply.

So if you don't have increased demand, if you don't have reduced supply, why did the price go up 30 -- 40 percent?

BIN TALAL BIN ABDULAZIZ AL-SAUD: Fareed, you ask questions and you answered it also. You're too smart. No doubt the price was hovering around $85. It jumped to $100 after what happened in Libya and Bahrain. And, clearly, there's still some fear factor and there is also speculation factor.

You know, (INAUDIBLE), Bahrain is now stable but still they're not 100 percent sure what's going to happen, because you hear once in a while Iran coming and jumping and -- and antagonizing, intimidating the Gulf region. So they're soaring.

ZAKARIA: But if fundamentals in one place and speculation takes the price higher, ultimately the speculation will -- will fail, right? The price would --

BIN TALAL BIN ABDULAZIZ AL-SAUD: It should.

ZAKARIA: So do you think prices will come down?

BIN TALAL BIN ABDULAZIZ AL-SAUD: The stiff position of Saudi Arabia, we want the price to be between $70 and $80. Not only to help the West, but also to help ourselves. We don't want the West to go and find alternatives, because, clearly, the higher the price oil goes, the more you have incentive to go and find alternatives.

So, really, (INAUDIBLE) to have the price for around $70, $80 which is a price good for -- for consumers and producers.

ZAKARIA: So let's talk a little bit about the economy, the global economy. You're one of the most successful investors in the world. Would you continue -- you're still investing in America?

BIN TALAL BIN ABDULAZIZ AL-SAUD: Oh, for sure, continue. Because, I mean, it's (INAUDIBLE). Clearly, the United States has stable system, has due process, has stability. You know exactly where you're heading. Inevitably, when you go to third-world countries, you have more reward but also more risks (ph). I live in United States (ph), at the end of the -- the United States is down for sure. It's not out.

ZAKARIA: Let me ask you, this new process of electing a new king of Saudi Arabia. Is it conceivable that they will -- the new -- the council will look around and say, well, the most qualified man in Saudi Arabia is clearly Prince Al-Waleed?

BIN TALAL BIN ABDULAZIZ AL-SAUD: You know, in Saudi Arabia, there is a body of 40 people -- 34 people exactly, that once the succession comes, they will meet and they will elect a king in there. I will always serve my country in any capacity, but I'm very happy with what I'm doing right now.

ZAKARIA: All right. Well, if -- if by some chance you were to become the king of Saudi Arabia, I'm going to insist that you come and do an interview, though. In that case, we will go to Riyadh to see you.

BIN TALAL BIN ABDULAZIZ AL-SAUD: I will come to you anyway, my friend, Fareed.

ZAKARIA: Thank you very much.

BIN TALAL BIN ABDULAZIZ AL-SAUD: Thank you.

ZAKARIA: And we will be right back.

(END VIDEOTAPE)

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THOMAS HOENIG, PRESIDENT, FEDERAL RESERVE BANK OF KANSAS CITY: My sense is we erred. We kept interest rates too low.

(END VIDEO CLIP)

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CANDY CROWLEY, CNN SENIOR POLITICAL CORRESPONDENT: I'm Candy Crowley, and here are today's top stories.

Missouri Governor Jay Nixon told me earlier on "STATE OF THE UNION" that 44 people remain unaccounted for in Joplin after last week's devastating tornadoes. The Joplin City Manager told CNN the death toll stands at 142.

President Obama will be in Joplin later today to meet with victims and deliver remarks at a memorial service. NATO is investigating allegations that one of their air strikes in Southern Afghanistan killed a dozen children and two women. The civilians were reportedly killed Saturday during a strike against insurgents who were attacking coalition troops in Afghanistan's Helmand Province.

And Sarah Palin wheels into Washington today. The former Republican vice presidential candidate is kicking off an East Coast bus tour that coincides with the annual Rolling Thunder Motorcycle Ride. The tour fuels speculation that Palin will join the 2012 Republican Presidential race.

And those are your top stories. Up next, more FAREED ZAKARIA GPS.s And then on "RELIABLE SOURCES," Howard Kurtz looks at the media coverage surrounding Oprah Winfrey's final show.

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ZAKARIA: Federal Reserve Bank presidents who run the regional Federal Reserve banks and are crucial advisers to the Chairman, Ben Bernanke, tend to be rather conservative economists and businessmen and the like. They are not known for their rebellious spirit, for their dissenting opinions and for being outspoken in public. But Thomas Hoenig has a bit of all of the above and I think you'll be very interested to hear what he has to say.

He is the president of the Federal Reserve Bank of Kansas City, and he thinks the Federal Reserve is making all the wrong moves as it tries to guide America to recovery. Welcome.

HOENIG: Thank you very much. Delighted to be here.

ZAKARIA: So the most important thing the Federal Reserve does is set interest rates. And by keeping interest rates very low ever since the financial crisis essentially at zero -

HOENIG: Right.

ZAKARIA: -- it has allowed banks, corporations, but also individuals to borrow money cheaply. This has fueled this recovery such as we -- such as it is. You're saying we need to stop that. We need to raise interest rates. There are a lot of people who look at you and think this is crazy. This is the weakest economy since the great depression. You're -- the recovery is the weakest since the Second World War. And in this context, to raise interest rates, would put the brakes on the recovery such as it is.

HOENIG: Well, I think, first of all, it is important to remember that the policy that was implemented that we have today was implemented during the crisis itself. And in that sense, I agreed with that. It's providing lots of liquidity into the system.

But we are well into our second year -- almost in our second year of recovery and we have to think forward from here. And that is what is the consequences of an extended period of zero interest rates for future years? And we already see some of the effects. Not -- not too much just inflation, but in terms of imbalances in the economy. And I'm not advocating for tight monetary policy. But I do think we have to get off zero if we want to avoid repeating some of the mistakes of the past with a very easy credit environment.

ZAKARIA: Is it fair to say that if you look at the -- the charts from the 1980s onward, what happened is that we have achieved a lot of our growth not by dealing with some of these structural issues but by encouraging Americans to spend more money.

HOENIG: Correct.

ZAKARIA: To take out more credit card debt, to take out more housing debt, and that consumption as a share of GDP basically went from about 62 -- 63 percent up to 70 percent. And so we -- we've had a generation of a kind of expansion of credit that was unsustainable because it was not -- it was not coming as a consequence of an expansion of people's incomes or wages.

HOENIG: Absolutely. It's -- we've created a generation of instant gratification because our savings rate, which was running at eight percent for years and years, eight -- between eight and 10, fell to two percent or less.

And if you look at -- if you look at countries, those who stay great, become great and stay great, they have high -- they have reasonable savings rate, not just -- not necessarily high but reasonable savings rate, eight to 10 percent. They don't consume everything they save for the future. And their governments don't carry that. That is nearly 100 percent of their GDP.

So we have to -- we have to step up to that. If we want to be a great nation and continue to be a great nation, then we do have to address our fiscal challenges. We do have to change the incentives. And at zero interest rate, I'm afraid it encourages consumption. Why would you hold on and save your money when you get 0.02 percent in the bank? The incentives are to spend.

And that's why I say, I'm not for high interest rates, but I am for rebalancing, renormalizing policy over a period of time so that you do award thrift. I think it's extremely important we do that.

ZAKARIA: Then in terms of what you said, the one pretty strong criticism that you've made is the conditions that allowed all this to happen, the low interest rate conditions in 2003, 2004, that allowed a lot of this to happen. Is it fair to say that history will look back on Alan Greenspan very differently and more critically given the -- the effect, the consequences of his decision, particularly after the bursting of the tech bubble to keep interest rates very low which clearly created a housing bubble?

HOENIG: I think that is -- I was on the Open Market Committee, so that's something we all have to think our way through, acknowledge -- that at least I acknowledge that I think there were errors. But the real history on that will be years in the judgment, if you will, in terms of all the circumstances.

ZAKARIA: But what's your sense (INAUDIBLE)?

HOENIG: Oh, my -- my sense is we erred. We kept the interest rates too low, one percent. It's not that I want to point blame to myself or anyone else, but I do have to say, this is what happened. What were the consequences? And what have I learned from it? And adjust policy the next time going forward. And it is, frankly, one of the reasons that I'm more, if you will, I use the word "cautious" in the sense of saying we need to not tighten -- not have a tight monetary policy, but to take -- again, to let the markets know that we aren't going to assure them of everything anymore.

ZAKARIA: Thomas Hoenig, pleasure to have you on.

HOENIG: Thank you very much. My pleasure to be here.

ZAKARIA: And we will be right back.

(END VIDEOTAPE)

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ZAKARIA: Our question this week from the "GPS Challenge" is, what unusual British food is on its way to being banned in Denmark? Is it A, jellied eels, those are pretty self-explanatory; B, chip butty sandwiches, that's French fries and butter between bread; C, marmite, that's a by-product of beer brewing that's spread on bread; or D, black pudding, that's sausage made with blood, among other things?

Stay tuned and we'll tell you the correct answer. Make sure to go to CNN.com/GPS for 10 more questions. And while you're there, make sure you check out our website, the Global Public Square. You'll find smart interviews and some takes from some of our favorite experts. You'll also find all our "GPS" shows. So if you've missed one, you can click and watch.

This week's "Book of the Week" is really excellent by "Washington Post" columnist David Ignatius. It's called "Blood Money." It's about the CIA conducting a super-secret mission in Pakistan that goes awry. It's fiction, but it is utterly realistic in its portraits of Pakistan and America and the spy system. You'll feel as if you're reading the front page of the newspaper only much better written. It's a great way to start summer reading.

And now for "The Last Look." How to make it rain. It's a question that's puzzled humans from time immemorial. Native Americans have their traditional rain dance, of course. Some Hindu holy men sit in tubs to ask for rain. And the method in one Mexican village is called the flying rope ritual.

But China, of course, tried a more scientific method this week. It's launching hundreds of missiles into the skies to try to make it rain. It's called seeding, where they shoot silver iodide into the clouds to induce rainfall. According to State TV, the mission worked in the drought-stricken province of Hubei. I'd go out on a limb and say those traditional methods are probably a little safer even if they are less effective.

The correct answer to our "GPS Challenge" question was C, marmite. A shockingly popular British spread made from yeast extract. It is now in danger of being banned in Denmark because it has added vitamins. I personally would ban it on the grounds of its taste.

Thanks to all of you for being part of my program this week. I will see you next week. Stay tuned for "RELIABLE SOURCES."