if you join us very welcome this is from the russian capital top stories now this new finance ministers meet in brussels to consider the bailout fund and experts warn the amount of money to help struggling economies will say. also waste in the water claims that a big area. is poisoned by sunken nato weapons spots. that people's. national unity government widespread protests toppled the previous president who's now in exile the regime will be hoping that

economic development will return the country to its position as the beacon of stability in the region. should be with you as the news continues in less than half an hour from now in the meantime it's a debate show cross-talk ahead of the chinese leaders visit to washington this week people have guessed whether there's still a risk of a global currency war between the u.s. dollar. and others stay with us for crosstalk that's next. we'll. bring you the latest in science and technology from around the clock. we've got the future covered.

and you can. blow me and welcome the 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 claimed foul play in how others are valuing their currency is the global recovery in danger. and you can. start. to discuss global currency imbalances i'm joined by martin henniker in hong kong he's an associate director at the tike group in washington we go to daniel mitchell

he is a senior fellow at the catto institute and in new york we cross to michael hudson he is president of the institute for the study of long term economic trends and another member of our crosstalk team on the hunger all right gentlemen cross talk rules are a fact that means you can jump in anytime you want i'm our new but on the program before so i'm going to go to you first arrived 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 i threw 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 the size of the chinese economy in real terms of physical production terms when you address 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 their odds are projecting if the growth rates that we're seeing are continuing for the next nine ten years you might see china making up twenty four percent of the world economic output by two thousand and twenty and the us 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 the perspective of many western us still the size of china is totally underestimated because on the purchasing power to asia on a currency basis it is this about a ration of the currency people are 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 when tool your particular question that you were asked if a guy who really can achieve in the chinese to lead to run the big 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 it was absorbed i don't think this is hitting the relational i we think the u.s. dollar doesn't really have much of a future the u.s. economy is in shambles and china is looking like 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. saying you 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 in listening to we 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 engaging in 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 to you i mean there again if we go 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 europe fall as far as their eyes are wide what and by not letting the u.s. fall as fast as they are as well as what i mean i totally agree as to any of that my thought 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 of and then this growth of their domestic economy and they are more in line. cheating that is if you're looking at the december export impose a trade statistic 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 and 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 us us stalking by this artificial. liquidity they have been stalking the housing bubble saying there

was no housing bubble not trying in any way to call it down 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 rethink actually managing the economy prudently and much better than then you see in the euros and also in the united states and we just brought up something interesting and i did ask you a provocative question if the chinese take 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 today's 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 almost want to say use the americans can they 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 and that europe is taking latvia and iceland the problem with the mortgage market and america versus china is here it wasn't fannie mae that 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 of the fraudsters have been rewarded in china the banks are state banks and others are you are there is are you actually say. you are 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 neo says it is ok to. break real quick gentlemen after a short break we'll continue our discussion on currency war stay with our. wealthy british sign of. the time. market why not. find out what's really happening to the global economy with max cons or the no holds barred look at the global financial headlines tune

into cars a report on our key. would be soon which brightened if you knew a song from finance to pressure inside. don't come. cheap. you can. welcome back to cross talk i'm purely about remind you we're talking about currency manipulation. but before let's see what currency russians choose to save in turmoil so war the

term choir and why guido month ago brazil's finance minister is unfolding the world economy is deliberately weak in their current increased trade surplus on the back of the monitor as speculations missed them on top of the believes peloso war may turn into a trade war the russian public opinion research center also such as what currency they prefer for their savings most respondents eighty eight percent stick to the russian ruble eleven percent prefer the u.s. dollar and another eight percent keep their savings in euros carlson manipulation said to be on the g twenty edge and this year. ok gentlemen michael and daniel before the break. we 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 that it is not ideological at

all it is an intensely pragmatic they make mistakes they still have big problems but there's no there's no model to do saying oh but according to this theory in this book aimed you know they really don't i mean in any it is trial and error at times but they get it right more times than not in expression how they went through this this global recession they're only open up here really reflecting upon what's going on in the united states in the in the in the debate we were 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 full business very business friendly and then many areas it actually gives a lot of freedom still business as well as i mean i would very much agree that it is daniel you were saying earlier that 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 might the bank by all its government is intervening in all sorts of sectors on the massive scale to all this a model of freedom and democracy but is it really. as free as and it seems to be or as it is headed up to be in many areas that our view is more business friendly they're getting sense. again not everything is perfect but i think that's one of the reasons for the success of china and again microeconomic you know it's totally irresponsible management and again what i have said it's not about they're going to be difficult to beat their policies will be what the us has been doing over the past and yes there isn't any responsible and management the deficits that have been run up to are the trade. what the u.s. is sitting on. never been a chinese government on the eyes and has a very very low so and so i think a lot of the preconception about china and also. wrong and of western media or poor

taste quite a biased show on those economies. are not justified 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 the mid-term elections i mean blame china and blame these people blame everybody americans just love to blame everybody else but they don't want to look at 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 all that really does and 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. 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 a bubble. collapses you know daniel it's interesting i mean china still officially is a communist country and it does have a poet bureau part of the communist party but it sounds like wall street is the poet bureau of the united states if we disagree with michael what he does.

i want to disagree a bit with what he said and the defense 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's 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 in 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 interests and i worry it is happening in china where you 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 martin you look like you want to jump in there go ahead. 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 they're 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 a maybe not targeted free will so if you want to buy let me know but generally i also see that there are a lot of americans like yourselves and even mike i agree with a lot of things he absolutely the two of you and i and i am positively surprised normally what you hear from the mainstream americans is quite the opposite it's generally also what i what i can maybe at this and like 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 if you're

looking at the anti a picture really the fundamental development 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 deal with a whole foot 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 and the chinese are going to walk away with any kind of better understanding or they're just going to stay 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 the 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 and 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 the quote i were almost out of time you know anybody 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 killie too because we're engaging in this reckless inflationary monetary

policy the us doesn't have any moral standing so i suspect that we're not going to get any agreement that out of this meeting between us 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 adding 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 thrown in there between well maybe they'll be a future of yourself i don't want to be a future wiki 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 r.t. see you next time and remember cross talk. to you. steve.