i don't know but the consensus is in europe or asia or anything like that about donald trump but i think that's only puts him in a bad light and that was a man to carry reporter for the daily caller and that is going to do it for now i'm christine for sal the alona show is up next in thirty minutes alone by our newest show adam versus than them. i live in a country that don't understand that there's more violence in the streets of this country than there are in the streets of baghdad. one of them of this. young man breaks a. bottle of. her. from her for. some. crowd gathers

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feeds now in the palm of your. question on the quality jobs come. we welcome across time peter little on the brink of bankruptcy time is running out for the american budget deficit failure to raise the debt ceiling could have catastrophic consequences not only for the u.s. but for the entire world how can piling on more debt begin to solve america's fiscal woes. discuss america's out of control debt situation i'm joined by martin henican hong kong he's an associate director at the tight group in cambridge we have jeffrey frankel he's

a professor of capital formation and growth at the harvard kennedy school and in new york we cross to joe weisenthal he is the deputy editor at the business insider all right gentlemen this is crosstalk that means you can jump in anytime you want but first let's have a quick look at america's debt mess. going broke now going for growth wanting self-confessed of the unless a fourteen point three trillion dollar debt ceiling is lifted by need me on the lines of course the u.s. is on the wanted so courage in money leaves public debt more than fourteen point two trillion dollars and rising by four wheel and all there is then a massive iou to the next generation forty three cents of every dollar we spend this year. we borrowed against the future of the eleventh hour compromise boarded a us government shutdown with agreement on the largest single spending cut in u.s. history but thirty eight billion dollars is small change against the slice of the

debt and last month the all three largest one trader said it was all off u.s. treasuries smiling trillion dollar deficits as far as i'm no skin sneak some concert with the world's largest economy has to go for growth and even better is it impossible can it handle that but wanting christmas is an author learns on strategy and spiraling prices for anything priced in the greenback on the line having confidence in the u.s. dollar and the global economy that. that if you wish. artsy. ok. and i do go to you first i'd like to read something to you the united states of america if we didn't have the dollar is that if the reserve currency of the world we'd be greece i mean we are broke bankrupt really bankrupt and now is former treasury secretary james baker how do you reflect upon those words.

well bill gross of us was saying that the u.s. is actually out of creaking we greeks because if you add all of the unfunded liabilities to the national debt figure i mean the national debt figure. here isn't really what this is really about but really the unfunded liabilities are the so-called fiscal devil that's two hundred and two trillion us dollar so in many ways that's worse than greece the budget deficit is very small as the same as crazy of ten point eight percent budget deficit and the eurozone was formed or not that's a eurozone is any better i mean they're just blowing up right now to all we have to be seeing again pressure on greek and pigs government bonds and even in germany and france increasingly looking shaky on the government there as well but just as a reference on the eurozone was for and there was a limit of three percent a budget deficit as a percentage of g.d.p. that is normally considered as a maximum sustainable so the u.s. is now at ten point eight percent clearly as we have been warning they are beyond

the point of no return and we don't really see that they could solve the problem in any other way then then it's now are. estimated by most analysts they greek greece will have to do it basically in some form of default or restructuring or of very very high inflation in respect of currency to get really out of this debt saw we say stay out of the u.s. dollar stay out of any form of medium to long term u.s. treasuries but by the way also euro zone doesn't look better again saw the rest we are very optimistic on it ok jeffrey in cambridge of anger view is that too bleak of a picture there i mean the past the point of no return i should morning sir. well absolutely not and i'm not sure i heard that right there is there's no chance we're going to have a restructuring of the debt and we have a very serious long term debt problem we've had it for quite a while and it's long term in two ways one that the problem is the deficits the moment the problem is the retirements and the rapidly increase in. health

spending that if you're in social security that are going to come over the next few decades that's a problem it's also long term in the sense that we we've been facing this problem for thirty years many people like myself have been worried about this for thirty years there's nothing magic about about this year the only thing that's magic about this here is it's become a political issue this year the american political system kind of is arlee swings back and forth between not being concerned at all about the problem and making it much worse with huge tax cuts like we did in the early eighty's when james baker was working for ronald reagan or as we did in the bush administration versus times when all of a sudden we're concerned about it i'm happy that i mean if we're concerned about it fine let's take advantage of that political crisis to solve the problem but if you look at. the willingness of foreigners to hold u.s. treasury securities there isn't the slightest sign that they know that they're getting tired of it so to use

a phrase. that crisis is to my mind absurd five years ago i don't feel it is better to read it as they have been crying a lot of he would get yeah because nobody has buying. ok i was just telling us look at sawyer a lot of other china's buying and we know i mean it isn't just the u.s. federal reserve lots of other central banks like china are buying i might say at some point they're going to stop and i'm worried about that too but at the moment they're not slowing down their purchases foreign central banks ok joe where you. were you know this you know this is really the view it's the crisis is totally overhyped i mean this idea is like well if we didn't have the dollar we would be greece but we do of the dollar and. we have a fundamentally different monetary system that greece greece doesn't control its own currency they're suddenly borrowing and someone else currency they have to build up a surplus and pay it back we have a fundamentally different system than that and to compare us to greece or ireland or any other trade the comparison is just wrong and i think look this is something

that politicians freak out about and yeah you know the other guest said all the sudden it's become a political issue but if you actually i look at the market i look at what the market is reacting to america is that everything is known and all the math is known and everyone's figure out about how we're bankrupt the market doesn't seem to care and is not concerned so i really tend to think the issue is mainly a lot of ok i want to go back to martin i mean the market the the market didn't isn't particularly concerned by it but it seems to me when everything gets goes sour the markets are the ones that are saved the bankers are the ones that are saved i mean if there is a crisis they're going to come out on top like they did in the last crisis here i mean are politicians. underestimating this problem because it's just so gigantic i mean i have a calculator on my computer and i can't get fourteen trillion dollars on numbers or digits by it's a big number it's a really big number and believing that it's going to be cut down when the budgets

continue i mean the defense budget continues to expand i mean if we reach the point where it where there's going to be a clash of this system you can't keep borrowing forever everybody knows that. but obviously most of them put it in stone and really seem to understand the situation . there well maybe they do and therefore for other reasons out for it to raise their voices or if they do they're marginalized in some way or another all gone now and more recently you see those raising the issue of skating a bit more attention finally because this has now become this political issue but obviously that was the ongoing before but i would just like to come back to jeffrey it's going to go on the market the market isn't seeing the danger because that's a very important one but if you're talking about the markets through things to look at the one the stock market had one market and the commodity market where so actually three in that way but mainly if you're looking at stocks market because i would put it into the basket of real assets because stocks represent firms

companies was really behind them or services will be second increase the prices and i'm disinflation and commodities also represent tangible assets so if these markets and warriors are gold and silver they're going up a lot well you already will see a void i mean i think the more broadly it's a market get so god is sovereign debt crisis and the resulting inflation hyperinflation because that's the only way they could possibly get rid of the debt the more roads and market gets the higher you see commodity prices rise gold and silver rise as a hedge against this possible bankruptcy or very high inflation as a result of bankruptcy as well as an indirect bankruptcy and also the stock market could actually rise on inflation expectations so really what you want to watch there is that going market and you're right to some extent we haven't really seen a celebrate yet but that's why for investors now as bill gross the story it's absolutely now the time to get out on any long term. and even if anything when we would even shot it because you're still in the dollar and the dollar may just

suffer through the devaluation saw no i don't really see that the market here isn't getting adjusted to one another but that's going to come now no no no gradual you want to jump in there jeffery so are you want to do the bill gross or the. yeah i mean joe for you to move to the selling bonds is it is drastically misunderstood everyone saying oh he's selling bonds because he thinks the government is going bankrupt or what not that's actually know what's going on because he anticipates the end of q e two essentially rate hikes the fed goes back to normal zero interest rates and so the negative interest rates that's essentially a rate hike and historically that would be a good reason to sell bonds if you actually look at what his partner mohamed el lariam is saying elsewhere is like oh the ten year yield got a bit higher we pry actually buy bonds again so this is another thing people look at his move it and start to freak out and say oh this means that you think the government is going bankrupt is actually really nice and easy to assume anyone else and all your buddies think this rising. so you how do you possibly think you even

say right interest rates are going to be on the rise how do you possibly saying business that numbers are high interest rates are going to be unbearable by the united states government so that's one issue i want to jump in here and the general just going yeah i think. so i seem to be between the other two panelists in a sense number one we definitely have a long term fiscal situation which we need to address and at some point if we don't there could be a crisis certainly there is the risk that eventually could be ten years from now there could be a sharp increase in inflation and interest rates and on the bond market we want to avoid that we can do it it's not it's not impossible if we have a balanced kind of a program to address it and for my money president obama recently is recent speech addressing it just broadly speaking with a kind of balance we need to do

a little bit of slowing the rate of growth of entitlements we need to cut the metal spending we need to cut military spending we need to do something i think excite we need to do a little bit and maybe we'll succeed in doing that we certainly can if i sat down with economists you know a group of economists are both parties we could we could solve it pretty quickly but i'd be doing very very and i don't know when that means each event that we go to a short break here and after the actual prick we'll continue our discussion on steve markey.

i tell marvin here broadcasting live from washington d.c. coming up today in the big picture. i. can say. welcome back eurostar comparable to remind you we're discussing if the u.s. will default. lead. to. the. ok jeff i want to go back to you because you said something really interesting if you could could get members of both parties together you could solve this here

isn't really a revenue problem and not a spending problem how to generate revenue. it's quote i said if we get economists together. now it's. time to. go. you know i mean the good the good even though it's there's at the moment somewhat surprisingly i would say the markets are completely relaxed there's no sign that they're nervous about holding us and as long as they go on doing that we don't have a crisis but we be foolish to rely on that forever that's that's so that. that's one point it's kind of nonsensical that at this moment in history two thousand and eleven is when american politicians are suddenly doing this as a crisis they would and much much easier much much better to have just half of the support for fiscal stabilization ten years ago or five years ago but we are where we are the good news is maybe we can take advantage of this all this political

ferment to address the problem the bad news is that one other two political parties is speaking nonsense from an arithmetic viewpoint the republicans think that they can solve the budget deficit by tax cuts and i mean it's just a complete nonsense and we've shown this over and over again reagan thought the same thing and the budget deficit got much worse he could triple the national debt george w. bush thought the same thing and the budget got much worse he doubled added created more debt than all twenty thirty previous presidents and his father and reagan combined so now the republicans are saying exactly the same thing we're going to we're worried about the budget deficit so we're going to cut taxes it makes no sense ok jill what about that because you know there's a you could take the united states there's a lot of. wealth in the sense of financial speculation and things like that isn't it years ago the concentration of wealth here i mean i know it's politically incorrect to talk about taxing people in a bad time but there are some people that have

a lot more than others ok and if so if the country is so concerned about debt then you know generate a little bit more revenue over a ten year period or something like that i mean the rich are going to stay rich. yes i totally agree that this idea that we face. catastrophe and we're going to become the next greece and have all this and yet this is so severe and it could threaten our prosperity for generations but we can't raise taxes slightly on anyone who's an absurd level of sort of split thinking it seems completely contradictory i think what this basically exposes is that most of the debate is actually just a pretense for getting it it's the whole thing is a pretense for getting something else so it's a pretense the republicans want to use the debate as a opportunity to weaken some of the social safety nets and cut taxes the democrats want you know what agree with the republicans that the debt is an issue and they

want to use it as an opportunity to raise taxes and cut defense spending so this big problem that everyone agrees that it's a huge problem and. it's really just an opportunity to push whatever vision they already had on everything else you know joe it sounds like to me that everybody wants to go to heaven but nobody wants to die martin if i can go to you i mean it really is a political football and i would agree with our that you guessed it is a political football here because somebody wants something for something ok but isn't this really like the the people on the make arguing over the seating order on the top deck because it's still get worse and worse. absolutely there even this debate here i mean that is drawing jeffrey i think politically getting carried away in these idle ideological debates and arguing this words by the totally ignoring what actually the numbers tell us and because we're also talking

about the rating because there be a rating downgrade on the united states on the way to end potential bankruptcy and also just want to say not all of the rating agencies are stuck in this type of thinking and giving the u.s. a aaa but actually the chinese rating agency. has downgraded its in november last year the united states plus it is a negative outlook and i just want to give you a call because he also does gave me one from the chairman of the dugong global rating agency and he is saying that western rating agencies are politicized and highly highly ideological and they do not have here to object to stand the u.s. insolvent cases bankruptcy as a pure destination by the rating agencies still give it a high rating and drinking so again you know this debate about being about fuel billion dollars heading there is totally irrelevant i think if anything i mean one hole that i do see for the united states even in the in the near future now it may be our great kiters our great state that in trade with china the projections are

now dead this china is going to grow it's going to double over the next five years and you look at what this has done to brazil saw their lightnings but certainly not their budget deficit again i don't see a way out of his short of a restructuring everything as you know. from people who don't understand basic economics jeff if i can go to you because the structuring is now grant grant there are so many ways we could start restructuring the restructuring is nonsense we want to avoid a situation where ten or twenty or thirty years from now with we have a huge year all the revenue is growing and we're borrowing from abroad the prime nanse medicare and we want to avoid a situation where we might be forced to adopt. twenty years from now the idea that there is any chance of a restructuring you know within the next few years that i'm sorry is just nonsense i don't understand why my thought analyst is saying that yes yes it's a serious problem yes we should address that and there's all kinds of ways we could address that they're politically very costly very dangerous the politicians don't

want to say them but you know it's if we had. a value added tax or greenhouse gas emission permits together with steps that many of us have proposed to slow the rate of growth of spending in title nantz have to trim defense spending in addition to domestic spending do a little bit all around. it can be done the problem is a political one it's not an economic problem joe if i can go to you if you think there's a mindset that's going to i was going to say this isn't there just the mindset in the united states is that the dollars just too big to fail is just too important in the world and we'll just put it off in a few more years like a lot of noise about lifting the ceiling and it let it somebody else worry about it because as jeff pointed out you know ten years from now twenty years from now thirty years from now nobody in office today is going to be in office then. actually i kind of think the opposite there's a there is that definitely this idea that you know we are too big to fail but what i think is actually more interesting is this kind of opposite strain of thought

that's happening this kind of liquidation is like let's not raise the debt ceiling now let's just bite the bullet in the fall let's restructure our debt let's just pull the rug out from under the u.s. banking system and under the dollar right now that's a kind of a surprising new strain that you hear more and more of what if there is no reason to restructure actually you know people say oh the debt situation is getting worse and worse even by some metrics it's not interest payments as a percentage of tax revenue or interest payments as a percentage of g.d.p. have actually gone down because interest rates have gone down over the last twenty or so years so it is we are we have this big we have there's a lot of people want to take something incredibly painful want to do something drastic like not raise the debt ceiling when there actually isn't any kind of extra or forth that suggests we need to do something like that jeff you want to jump in there. well yeah i want to i want to make clear that the only reason why

words like default are even are even mentioned by anybody is not because we're in a great situation but rather because the two parties of congress are playing a game of chicken a deliberate game of chicken which i mean it's almost like holding holding the capitol building hostage it's not directly related to the issues involved we're not running out of money i mean other countries raise their debt all the time and as long as the debt isn't increasing too rapidly for example if it's coming down as a share of g.d.p. or you know it's not that high is that that's not that's not an issue we happen to have this all kinds of corks in our political system and one of them is that if one of the two parties chooses to you know pull the pin on the hand grenade and say if you don't give me my way on what i want then these other issues like you know prohibiting abortion and stopping abortions the district will obviously irrelevant things i'm going to blow us all up i don't hear anyone anyone a single person in the united states saying we ought to restructure our debt rather it's it's going to blow us all up if you don't give me my way you know martin it

seems to me that to me if the u.s. isn't financially bankrupt it's intellectually bankrupt according to and i'm not the kind of extrapolating from what jeff had to say but again you know i mean the thing is is that people are using this is a political opportunity there may be a crisis that may not be a crisis but i'm going to get what i want a portion was mentioned i read that earlier before i'm going to do this program here but there's a lot of other things that people just want to you know a lot of horse trading and again is going the titanic is going to its final destination people now waking up to what really needs to be done just mention some very good things. yeah i mean definitely i think good baiting or maybe even even sunni would have said invade and raising the debt ceiling are not raising the debt ceiling but why this is being debated and saying they are thaw it he who can really decide on whether or not they're going to raise the debt ceiling of the u.s. is that one market and of course the major blunder investors saw i think that's really interesting to watch we have been watching the euro zone one market where years in the beginning also rising very slowly and then suddenly spiking and if it hadn't

been for the bailouts of now it's really yours on countries they would already be history and this can go very very fast or for bond investors and but again this is something to watch a very very careful you know u.s. years going up and we're just last week actually out of the u.k. you know an advisor to the central bank saying that's it within one year a u.k. interest rate might quadruple so if this is something that's going to happen around the world as a result of the rising inflation which you see reflected in commodity prices gordon or silver has been surging like there's no tomorrow and part of this is the fear of the rising because way rising potential bankruptcies and also as inflation and if that continues again as inflation rises interest rates will have to rise because one investors demand it and this is something to watch very carefully but as or not we believe the u.s. will go bankrupt or not go watch the rates they will probably tell you earlier so what's going to happen all right jeffrey i'm going to give you the last word we're

going to be a really be having this conversation a year from now. yeah yeah well i mean the fifth we should be afraid that met some point investors get tired of their current eagerness to hold us bonds and there will be a decline of us bond market an increase in interest rates that is not a default or restructuring i do not understand why that word those words have been used at all on this show all right gentlemen we've run out of time here many thanks to my guests today in hong kong cambridge and in new york and thanks to our viewers for watching us here on arche see you next time and remember across not three.

rachel martin here broadcasting live from washington d.c. coming up today on the big picture. wealthy british scientists are. right. market why not. come to. find out what's really happening to the global economy with mike's concert for a no holds barred look at the global financial headlines tune into cars

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