sure is that so much later maybe you would like to hear the real. victims. all across the globe countries one after another claimed foul play of the race for . top stories claims that. legacy that is endangering people's health the italian government and the alliance keeping the public in the dark. the growing gap between rich and poor in the us is driving. the underprivileged the so-called

economic disobedience is more subtle than demonstrations and is mainly taking place underground. drug users push for legalization of methadone treatment. therapy. will lead to one addiction simply being switched for another. half an hour's time but for now it's out of a show cross talk and ahead of the chinese leaders visit to washington this week host asks his guests whether there's still a risk of a global currency war between the u.s. dollar the new one and others thanks for watching.

can. blow in welcome to cross talk i'm peter lavelle in issues that simply won't go away the prospect of currency wars all across the globe countries one after another plane foul play in how others are valuing their currency is the global recovery in danger. can. discuss global currency imbalances i'm joined by martin henniker in hong kong he's an associate director at the tykes group in washington we go to daniel mitchell he is a senior fellow at the cattle institute and in new york across the michael hudson he is president of the institute for the study of long term economic trends and another member of our cross-talk team on the hunger all right gentlemen cross talk

rules are a fact that means you can jump in anytime you want martin you've been on the program before so i'm going to go to you first all right before they were right on the eve of the visit of the chinese president to the united states and tim geithner joe a few days before through the chinese a bone as it were saying you know well maybe we'll consider our ban on selling high technology. products to china as kind of a you know a sweetener to kind of nudge the chinese along to appreciate their currency a little bit faster do you think this is the chinese will bite i mean is this just a snow job because the u.s. doesn't have a lot of leverage here. first of all clearly more and more the chinese are in the driver's seat so there can be no doubt about that actually even independent research association based in the us in new york maybe mike it and also tell us something about it if you know them that's the conference board they recently came out is a projection of saying that china at the size of the chinese economy in real terms

of physical production terms when you adjust the currency for the undervaluation of on the purchasing power basis then china may overtake the united states next year to become the number one economy and also projecting if the growth rates that we're seeing are continuing for the next nine ten years we might see china making up twenty four percent of the world economic output by two thousand and twenty and the u.s. about fifteen percent of china will be fifty percent larger in nine to ten years from now than the united states and that's i think from from the perspective of many western us still the size of china is totally underestimated because on the purchasing power of the asian on our currency basis it is this about a ration of the currency people saying the chinese economy really is a lot smaller then there is just because the price is low as they are saw china is in the driver's seat but in pool your particular question that you were asked if a guy who really can achieve in the chinese to lead surrender to be honest i'm not

quite sure if he if you really do wants to do that at all because what that really benefit the united states who have already become to a large extent dependent on t.v. imports from china they would just become more and more expensive as the renminbi goes absorbed i don't think this is hitting the relational i really think the u.s. dollar doesn't really have much of a future the u.s. economy is in shambles and china is looking larger stronger when you think about michael i mean even if the chinese appreciate their currency it's not going to necessarily create jobs in the united states is it. there's a false assumption underlying this debate and the assumption is that the balance of payments between china and the united states is a balance of trade but that's not the case at all when i'm in beijing and and when i'm in brazil they're talking about two things that have nothing to do with the trade balance or u.s. prices number one military spending for twenty years military spending accounted

for the entire u.s. balance of payments deficit secondly capital flight american money managers are moving their money out of america they're jumping ship and they're moving it into the bric countries brazil russia india and china so this movement on capital account and on military account has nothing to do with with the trade account when it comes to the capital account the united states has told china we want to buy out your resources we want to buy your companies but we will not let you buy companies in the united states we're going to have a double standard we want to buy other countries and that's what's causing our capital outflow but you can't use your dollars for anything the united states treasury now owes four point five trillion dollars to foreign central banks with no visible means of paying because the u.s. is running a chronic trade deficit an escalating military outflow to surround china with military and a balance of a capital flight into china so what the united states is saying we're going to

increase eighty military bases around your country we want you to pay for them we want you to pay for them by accepting all of the dollars we won't let you buy us technology exports we won't let you buy us companies even filling stations and refineries and you're going to have to pay for our cost of surrounding you and china says that's absolutely absurd we have no intention of doing that and they have a lot of other options such as using the dollars to buy old american industries in china. he won't let us buy american industry we'll just buy your holdings in china at the register but they'll you want a free enterprise economy that's that's what we're going to do you know it's interesting daniel i mean that in listening to he just heard very often when we what we hear in mainstream media is the grievances the united states has with china but i just heard a lot of grievances the chinese have with the americans. my view was

a pox on both their houses there's no question the united states during the bush obama years has been a profit nation overspending and gauging and reckless irresponsible monetary policy printing more money and making government bigger has never been a recipe for prosperity now on the other hand that doesn't mean china is wearing the white hat i'm a little bit concerned that china has a bubble and there are economists i hope i'm wrong i hope they continue to prosper and grow but i think there are still far too much government intervention and china i think the chinese government is deliberately keeping down domestic consumption impoverishing their own people in order to maintain sort of a government designed export led growth strategy and sooner or later that may very well blow up on them so as far as i'm concerned the politicians on both sides of the pacific are doing the wrong thing ok if i go back tomorrow i mean there again if we go back to back to mainstream coverage of this here i mean the chinese for

all the discussion about the undervaluation of the chinese currency the chinese that it's this is kind of just goes right over their heads i mean they're concerned with their own domestic economy like every other country in the world is concerned with their domestic economy and inflation comes to mind first of all i mean they're going to get their house in order we before they get to think about other people because that's exactly what everybody else in the world is doing with their economies he absolutely in my view they're just trying to buy time by not letting you of as far as that as a way of what and by not i think the u.s. fall as fast as they are as well as what i mean i totally agree it is standing out and lighted on what they have said on the retina spending on the united states and clearly everybody who knows a little bit of basic economics one of one knows that the u.s. deficit is totally out of control and that this is a massive crisis but yes china first and foremost as interested in their own economy is that's and also to replace the export and then disclose of their domestic economy and they are more in line. cheating that is if you're looking at

the december export impose a trade studies that come out of china that actually had a year on year growth of thirty nine percent of imports of as export growth of thirty one percent so they're looking fundamentally quite good in our view and the one thing i would disagree though is the government intervention that daniel was just talking about in china obviously has been working quite well i don't say that the chinese are angels in everything they do but certainly they have and they have achieved through and precedented lift out of a good big part of the population out of poverty into the middle class and the government interventions so far has been working quite nice if you're looking at the us well alan greenspan the central bankers have been doing assess stalking bubbles with. liquidity they have been stalking the housing bubble saying there was no housing bubble not trying in any way to call a dollar and suddenly it just blows up in china there are more and more that you see even last week you saw again the chinese central bank increasing the reserve ratio for banks one was trying to prevent things from happening and we think

they're actually managing the economy well prudently and much better than then you see in the euros and also in the united states we just brought up something interesting and i'd like to ask you a provocative question if the chinese free care of their economy better than the u.s. has taken care of its economy over the last thirty or forty years. i wish i could be as optimistic as he was if you went back to two thousand and six in the us the politicians here would say oh they're managing the economy really well look at how strong the housing market is and it turns out that the bad monetary policy and the corrupt system of fannie mae and freddie the days those government created entities that all blow up now i hope that's not what's going to happen with china i am concerned about some of the intervention and some of the currency manipulation and the suppressing of domestic consumption but maybe they'll be

smarter than the us it wouldn't be difficult american politicians democrats and republicans have made major mistakes by trying to have the government allocate resources instead of letting private markets work michael what do you think about them right before we go to the break i mean i mean i almost want to say because the americans can learn something from the chinese and managing their economy i mean they have clearly gone through this recession and of course i mean they're not alone things could still happen in the world which we'll talk about in the second part of the program but i mean they've learned quite a bit about how to manage their economy and being relatively new to capitalism. every successful economy in history has been a mixed economy america got rich in the nineteenth and early twentieth century by being a mixed economy. now it's become ideologically neoliberal and that's destroying the american economy as much as it destroyed the russian economy the baltic economies if you want to see where the us is going look at the model it's taking in europe is

taking latvia and iceland the problem with the mortgage market and america versus china is here it wasn't fannie mae that did it it was the massive fraud by commercial banks shame on them. on the banking system it was fraud that brought it down and nobody has been sent to jail at all in fact the fraudsters have been rewarded in china the banks or state banks and others are you sure there is no you actually say. you actually saying that are you actually saying that the united states over the last ten years has been moving in the direction of free markets we've had the most incredible explosion of government spending government intervention bell outs handouts subsidies i mean this isn't neo liberalism and a classical liberal sounds this is video shows it is. going to do you want to break real quick gentlemen after a short break we'll continue our discussion on currency war stay with our.

repairing a broken. highway construction humanitarian aid. budgets. it's the people who pay the price. profiteering here. drug trafficking.

from around. welcome back to crosstalk i'm purely about remind you we're talking about currency manipulation. but before let's see what currency russians choose to save in terms so war the time required by. brazil's finance minister is unfolding the world economy has deliberately weakened their current says to increase trade surplus on the back of the monitor was taken away so mr mom told the believes tell us the war may turn into a trade war the russian public opinion research center asks such as what congress

say they prefer for their savings most respondents to stick to the russian ruble eleven percent prefer the u.s. dollar and another eight percent keep their savings in your roles carlos a manipulation said to be on the g twenty edge into this year. ok gentlemen michael and daniel before the break they got into a little brouhaha about ideology but i'm going to martin here you live in hong kong part of china i live in russia here and one of the most refreshing things about living and watching the economy develop in russia is it is not ideological at all it is in intensely pragmatic they make mistakes they still have big problems but there's no there's no model that are saying oh but according to this theory in this book and you know bubble they really don't i mean in the end it is trial and error at times but they get it right more times than not an expression of how they went through this this global recession they're on the up and up here i mean in

reflecting upon what's going on in the united states in the in the in the debate here just before the break i mean is this one of the successes of china. here is that it doesn't have to have a certain. playbook that it down downloads from the internet yes i would say absolutely yes what you just said about russia being pragmatic and moving on this business of china is a very business very business friendly and in many areas it actually gives a lot of freedom still business is there whereas i mean i would very much agree this was daniel what you were saying earlier there that america is actually removing a lot of freedoms and you have a corporatism more than more and more becoming more and more apparent as the bank bailouts of mathabane by all its government is intervening in all sorts of sectors on the massive scale they're all they say we have a model of freedom and democracy but is it really. as free as ed it seems to be or as it is held up to be in many areas that our view is more business friendly

they're getting since. everything is perfect but i think that's one of the reasons for the success of china and again. you know i sponsor the management and again what i said it's not a particularly difficult to be the policies or be what the u.s. has been doing over the past ten years where there isn't any responsible management the deficits that have been run up who are the trillion fiscal gap is what the u.s. is sitting on can clearly never be repaid the year the chinese government on the us and has a very very low so over in debt so again i think a lot of the preconception about china and also about countries like russia are wrong in the western media often poor taste quite a biased picture on those economies to really not justify you know michael it's interesting i mean again just looking at the western mainstream media you know in about the visit of the chinese president i mean in looking back at the mid-term elections i mean blame china blame these people blame everybody americans just love to blame everybody else but they don't want to look inside and look at themselves

and to see what they have done wrong every country makes mistakes and hopefully countries have the ability to learn from their mistakes is the united states doing that because as this trip is about to happen i just see again really just people who simply have no idea what they're talking about. here's the problem that's being missed every economy since the stone age has been a planned economy the question is who's going to do the planning if the government doesn't plan you're still going to have a planned economy but the planning is being done by the financial sector in the united states some planning is passed into wall street which is much more centralized than government planning so what the cato institute calls the free market economy is really a centrally planned economy planned by wall street and essentially in this situation you have a government that's been taken over by the financial sector and i hate to say it

but by crooks in the financial sector who plan with a view towards making money by getting the rest of the economy into debt and that's really the problem by the u.s. the u.s. idea of planning is to let the banks extend decide where to extend credit where to fund things and the financial advantage point is the short term vantage point basically of asset stripping so you have the banks stripping assets and stripping income in the united states imposing debt deflation this is what china is trying to get rid of and of course they're going to move much more towards the internal market simply because the market in the united states and europe is shrinking so one way or another given their productive capacity of course they're going to use that to raise living standards that's the only way that they can maintain a market for the for the policy and in a mixed economy with the government playing a role along side business to create an environment where business can serve the

public interest you're going to have a much more efficient allocation of resources than you have here when the market is planned by banks with a view towards how much can we get the private sector the families the business and real estate in the debt this becomes self destructive when the whole bubble collapses you know daniel it's interesting i mean china still officially is a communist country and it does have a polish bureau a part of the communist party but it sounds like wall street is the politburo of the united states. if we disagree with michael what he does. i want to disagree a bit with what he said in the sense of the cato institute we were completely against the wall street bailout we are completely against what was described as corporatism because there is a lot of that corrupt and to relationship between washington and wall street we want genuine free markets where there is not any sort of central planning there spontaneous order based on the interaction of millions of consumers and millions of

businesses if i have to choose what's going on i want america to follow more of the hong kong model han kang is rated by the economic freedom of the world and x. and the end of economic freedom as the freest economy with the least amount of government intervention and government spending and taxes that's the model we should be following unfortunately bush and obama and geithner and the fed are following this model of crony capitalism of corporatism of having the special interests in washington sort of this corrupt if we've all heard of the iron triangle this is an iron rectangle because it's bureaucrats lobbyists politicians and special interest groups all getting rich at the expense of the american people that should outrage and upset everybody and it happens unfortunately not just in america it happens in europe with the special interest and i worry it is happening in china where you know as they make this evolution to

a free market system that's been great hundreds of millions of people having higher living standards but i do worry there still are these improper relationships between the powerful and the government tilting the playing field aren't you look like you want to jump in there. yeah yeah just when i say firstly i mean i just want to come to hong kong if he likes it so much so i would really invite him to i do think that living here i mean because the way they alighted states is going and europe is going i mean seriously i think moving maybe one of the option i mean financially as a financial advisor as you know there's something that you can do to protect yourself precious metals not being in debt that and so on but but ultimately seriously as things get worse moving my might be an option and asian countries as you say you probably also like singapore there. may be maybe not targeted for you and so if you want to buy let me know but generally i also see that there are a lot of the americans like yourself and even mike i agree with

a lot of things he absolutely the two of you and i am i am positively surprised normally what you hear from the mainstream americans is quite the opposite but generally also what i what i can maybe at those and i have to say a lot of those americans who are wary aware of what's going on and generally they're equally critical of what's happened in china but on the ground if you look at it i mean of course you have a lot of special interests a lot of powerful political figure in conjunction this business is doing funny things very because happening all around the world but generally all over it if you're looking at the anti a picture really the fundamental development the development of the physical economic production which is at the end of the day what really counts is not a financial sector it's really the physical production moving forwards in technology and so on that's that's a very. soviet thing asia is looking very very different and be able to hold on there and that really one part of the world at least can go through this crisis and

move towards a better future for the ok i mean we were talking about currency wars here michael you know is with this trip coming up and it's considered you know a whole mark thirty years because most were driven thirty years with this bilateral relationship what do you think the americans or the chinese are going to walk away with any kind of better understanding or they're discounting to be sold in their positions. they'll agree on what to disagree about ok nothing is going to come out of it because you're having a loggerheads since you mentioned hong kong that's the element that has not been introduced into this discussion is tax policy hong kong got rich basically by the nineteenth century ideal of having a real estate tax a land tax rather than taxing labor in the united states the tax has been shifted off real estate basically on to labor in industry and this is not lowered the price

of american real estate because the rental value has been paid to the banks instead of to the government and the un taxing of real estate in the united states in contrast to hong kong has rendered american cost of living. and doing business much more high priced ok we're almost out of time you know anybody danny want to give daniel a last word go ahead the u.s. used to have a good argument against china about currency manipulation but because of things like kili too because you are engaging in this reckless inflationary monetary policy the us doesn't have any moral standing so i suspect we're not going to get any agreement at of this meeting between u.s. and chinese leaders because both of them are probably doing something wrong ok martin you want to say five or five or ten words go ahead. just quickly i think that may actually come out something from this meeting but probably we will never hear about it maybe behind the scenes they really are discussing the deborah

structuring of the united states as they're having towards bankruptcy but again you won't hear it in the media but i don't you know i doubt that they really just discuss about the renminbi exchange rate the relations are totally different from the puppet theater that's being run by her between will be our future mr five hundred will be a future with the leaks when there are many thanks to them i guess it today in new york washington and in hong kong and thanks to our viewers for watching us here are to see you next time and remember cross talk. to you. steve.

in indonesia. in the ground church a media hotel the ritz carlton hotel motel hotel new millennium hotel in china you can see a sensor tell mccown rocks hotel my car on grand hotel macau phoenician marco resort hotel who sought asylum.