much. wealthy british style it's spent on such guys on. the. market why not. come to. find out what's really happening to the global economy with much stronger for a no holds barred look at the global financial headlines tune in to conjure reports . soon which brightened if you knew about song from phones to impression made some.

news for instance on t.v. dot com. this is the seat of the headline. no bond for a day's work the presidents of russia and china signed multi-billion dollar trade deals with even more in the pipeline that finalizing a thirty year multibillion dollar gas deal as well as discussing international issues including. has no place for gadhafi in post war leave it that's the message russia's peace envoy delivered while meeting officials in tripoli the talks took place amid a fresh nato as tribes have been even capital and rebel offensives along the cards . and americans role in the military intervention in

could come to a grinding halt as congress that threatens to block funds and accuses the white house of breaking the law will make it here is a bomb extended the u.s. commitment to the operation without their consent which they claim contravenes the war powers act. that's coming up next crosstalk. and his panel of guests discuss if there is any future for the deadly troubled you're broke. stood. alone and welcome to a special edition of crossfire i'm peter will. be your always in crisis will appear with this ten years from now. still.

to discuss the fate of the euro here at the st petersburg international economic forum i'm joined by alec since he's a professor of economics at yale university and roland no she's a senior partner in chief investment strategist at verne zero capital all right gentlemen crosstalk rules in effect that means you can jump in anytime you want roland i want to go to you first the euro is having another very bad few days here markets are still. bankers who i'm going to ask you the big question are we seeing the end days of the euro and if not what can they do you know a greek tragedy generally speaking has many twists and turns and i don't think we're at the end of that process yet the markets are beginning to price but i think we're we're still a little bit of distance from from that how much has more if there's more hesitation now on another supporting quote bailout remember the first one wasn't called the bailout where you know greek tragedies what are they always end and they

always ended in tragedy and i think that that is going to be the endgame here unfortunately markets right now are beginning to price perhaps the greek. of of debt and that's the latest euphemism for the default whether that actually you know what was going to happen after that that's going to be where the lead come out here i'm going to press you now ok in nobody wants to talk about the end here i mean now we're seeing the risks so high right now and in the new. armisen mounted indecision going on there's so much double talk and how to deal with this problem here and now the markets are all more or less agreed there's going to be a default now what does that mean when if and when it's probably when greek defaults and the greeks say we want the hell out of this project what it what what kind of precedent is that established for the eurozone i actually am very positive on the euro zone in general i think it's far docs of where this crisis is going to

be good news for europe in general so what we're seeing now imagine new says good news the bad news is good news is actually on the stand because if well look at greece for a look at spain portugal was saying that for the first time in many years they dealing with the structural underline the reforms which will cause faster growth over the medium term going to pay for all of the germans going to say hey we'll pay for it we will always pay for it i mean really that's where push comes to shove here and merkel has an electorate ok i mean if if some something isn't done the going to have their own tea party movement i feel the feel the first person actually i've heard say that this is this is good news for the year i think the problem is that they're trying to address right now and not the actual problems to exist in the in those countries you know by providing more money than not really solving the underlying problem and they're trying to force countries through to revalue their currency through through changing domestic prices you know at the

height of recession forcing these countries to go through yet another round of austerity and that's that's that's the wrong how can you find growth when you're when you're doing that when you're in the gutter how do you find growth by going by having more austerity and then random started oxic where there are large fiscal consolidation may be expansionary not not contractionary i think the congress search points out. the period there have the same effect on the induction off the special spandau. no the increase in that fiscal consolidation that last not all of that action on that but also sustained if it can increase and grow the devil is in details and. for investors and for bankers it's not in many ways are we at the point now where everybody has to accept a haircut because there's a way to avoid that the banks are safe because i've always said maybe with a lot of cynicism here these are not sovereign problems these are bankers problems ok and they want their but their money back in return on top of it and so this is

where the sovereignty and the risks that countries were allowed to make in the bankers need to be get their money back ok i mean is this would be the next the complications of the next bailout is that going to bail out the banks still again credit is always a big problem right i mean that they're owed this money and they need germany to to effectively bail out the brutal countries the bailouts the banks and if that doesn't happen then the banks are left holding the baby and that you know that doesn't solve any of europe's problems you know the banks themselves all pass all the euro monetary system and you know again fundamentally right now peripheral european countries have exchange rates which are not competitive and that's how you have said i want to talk about the big zoom in and other what's the difference between an orderly unwind and a disorderly went online i love this newspeak that is being used by the financial media and by bankers what is the difference between the two the key for me is rather the on wine list or the increase in the uncertainty was when no is important

and what has been i think a stark stark clear during the the big financial crisis we're had is i think reason on certain parts of the market in the certain person growth in general so i think what policymakers are worried about is how to get on the wind without increasing the overall uncertain all of it all and all wrong can you do both can you have both because unwinding is unwinding i don't care if it's orderly or disorderly you have the potential for a domino effect we. seen this in many other parts of the world in the past major in one thousand nine hundred seven rusher and in one thousand nine hundred eight if you unwind one part of what is a very complicated problem the danger is that you start a series of domino effects and it moves from greece to other countries we're already seeing that if you look at the bond markets what was wrong with the first bailout of greece because was it inevitable that we have to do it all over again and plus we have ireland we have portugal spain is knocking on the door i mean what was it all about. what what was wrong with this partial or that i would have

preferred to assume that at the bailout to be a last or for europe i would i would like to see more on the imposition of was it a struggle to rebuild that way moral hazard that's my biggest patient roland my biggest issue has always been moral hazard i think the if you provide an endless stream of money coming from another source of financing then it doesn't put enough pressure on two countries to to to restructure but you know at the moment i do believe that greece and spain and portugal and ireland i mean they are doing quite a lot to try and deal with this issue problem is they're addressing the wrong types of issue right now that they need to change the value of their currency so i can change the value currency i'd like for i think is going to very difficult for greece to live in you or i just don't see the op side for the grace of that so surely will be able to devalue a car instead but they'll probably get hyperinflation lose all the time consistent so that part of you are bought for value on the john d.

or so i think the costs are going to take you know you can't win for losing i mean i don't i can't see any potential upside at all in doing that either you have to make a decision one way or another it would be it's painful to stay in the eurozone it will be painful to be out of it but at least you have control of your finances what's better role and what's worse it's the it's the place the least worst option and you know before a country devalues it always seems much worse than often. country devalues russia still that in one thousand nine hundred ninety eight and you remember everybody said russia is too big to fail you know b. level and to russia or a guy in the last generation if the ruble devalues in one thousand nine hundred eight and what actually happened well you know after the devaluation six months later of really want to lend to russia again obviously greece is a different type of situation the political capital there is much greater but the economics i think are actually quite similar. they're going to sound similar by.

the positive sign that i'm seeing is that at this now the mani are common with strings attached the money icon in the way the necessity to do structural reforms and of the structural reforms happen especially on the part off cuts in spending cuts got in the box whether you would call punch comes in doesn't it i mean because you walk away from your sovereignty in a financial sense ok part of i mean that's the unspoken rule of the eurozone but then there's the political side of it i mean there are people that are elected ok i mean how do you how do you marry the two or do or quietly divorce the two paradoxical i'm on the perience office a convoy of the large fiscal consolidation in or a city over the last twenty years there is no evidence that a large fiscal consolidation leads to a loss at the polls so i think anybody who is saying. i don't know if i'm critical information improve how do we found the great except i don't know i mean i think recession in general is home to politicians and you're already seeing you know

politicians being elected out of office so forth out of office and seen it's in some regions in motion early in our lives so you know when you try and implement austerity really difficult austerity actually there are big strings attached now to these loans and you try and implement that at the height of one of the biggest recessions in the last hundred years i think is going to be political consequences from what is the what it what are we seeing here is this a liquidity crisis or a solvency crisis i think it's it's it's a solvency crisis i don't i don't see that this is a pure. ron on the banks or on on greece it's the crisis which came from the sustainable economic policy. of the great it's not that different from a comment like i'm confident of that everybody is throwing their own and nobody wants to get on with the interesting thing was the unsustainable policies were a direct result of the way in which the euro was set up so you've got to go back to nearly a point that you would like to you know the credit is themselves they have to take some blame for this i mean they were the ones that were making the loans to to the

greeks banesh and what it turned out to be an unsustainable economic situation like the pericope will happen i think the markets are a price on this and i think what the markets are not pricing and you know is that the structural reforms can lead to higher medium term growth well that saskia so the bankers get bailed out and everybody else has to pay for it that's why we have the riots in the streets here i mean is that tenable and it's certainly not tenable in the short term what is going to be learned from that because people are this going to say we'll just have a better euro it's going to be hard to convince someone this unemployed or their family is going to be unemployed for the next decade i mean structural reforms have a very large cost associated with them you know spain already has twenty percent plus unemployment there are already people out on the streets in greece and you know i tend to agree if the structural reforms are successful and they could be if they can be forced through very quickly then that doesn't prove competitiveness and maybe can these countries can grow out of this situation but the key question is is

it politically sensible to expect these structural reforms to be to go through at a time like like now when these countries are facing real deep economic pain you certainly wouldn't expect a country like the u.s. or or the u.k. to go through something like this and we saw it happen in two thousand and eight when they were going through deep recessions there was a big monitor in this one stimulus and that's the because of all right we're going to jump in here when we return we'll continue our discussion on the fate of the states are today. live.

just live. from a live. still . to.

welcome back to cross talk i'm peter lavelle right before we were to the break room we were talking about how the euro is. how some people think it is collapsing in europe big specially if you're unemployed in greece but one of the implications internationally i mean the chinese are very very unhappy about this the united states is just about to end its quantitative easing its part to how do the i don't all three of these fit together i don't think it was really interesting we were talking about the weaknesses in the in the euro but actually the euro has been strengthening against the u.s. dollar and you've got to ask yourself you know why a country or want to redefine what is it well actually i think because it's a competition is a race to the bottom between the dollar and the euro the both are going to have to fight to the bottom of it they both have a lot of very deep structural issues the u.s.

is dealing with them on land the the europeans are trying to deal with it in another way and so far three your q e two story had a senate q do you think you already said they were going to three are we going to throw a fund manager sort of political to carry through you know q e two was that there was the simplest way to try and solve some of the issues in the in the u.s. and other ways to devalue the dollar against the euro now we're seeing in peripheral europe is trying to devalue the euro against the dollar. out of the chinese looking at this you know how worried are you so i think that the big the right way this from my point of view to think about the constitution but when you are on the dollar is from the point of view of the global imbalances that has been after the financial crisis one of the key things that has happened here is the dramatic reduction on the supply of. the safe assets think about just how the two thousand and seven what had a wonderful triple a mortgage or so they had all kinds of mortgage backed securities which were

supposedly safe now what you have is you have a long term view as a government that which may not be perfect it has all kinds of issues with that but it's still safe for them and watching this can produce especially for the long term securities so what we're seeing is despite all the problems in the developed markets in europe and in the ass there is still so difficult to replicate this long term instruments it's a unique x. part that you asked because there's an alternative is out why there were any intrinsic value just think about for example a thirty year i think thirty year bond one your issue a thirty year bond what you're selling is yes alan that in thirteen years your economic policy is going to be pretty good that the country is not going to collapse that the inflation is not going to the pound and you can only sell that kind of expert if you had

a long history of political system which is consistent with good economic policy making by any estimation of the united states is on the verge of bankruptcy i mean would you buy those bonds i'm not asking you personally but would you advise an investor to do that i think on the verge of bankruptcy is probably put a little bit of really good strong but no easy answers your question i would not be buying u.s. u.s. treasuries right now i mean it is still the safe haven al that but it really is a lack of alternatives and you know you made the assumption that china didn't offer any sort of long distance you cured so you've been in the us you know obviously the track record of the u.s. is much greater than in china over the last one hundred fifty is good but you know i'm not sure that you can make the argument now the china doesn't offer longer term security than in the u.s. given the economics of the two regions of money ok let's go back to the euro zone here oh i don't we have just the two tier. or three tier euro system it was premature we know that the greeks lied openly lied about what they did frankfurt

knew about it brussels knew about it but it was the great project that had to succeed well it is under failure by many accounts by many different people here why don't they is it time to rethink the project completely where it's much more rational where there is some countries are going to be at the children's table in some countries will be at the adult table about the theory of why and how my mind three unions work one of the key puracal as a in addition. to the common currency is to have synchronized business cycles and to go with economic rules particularly the fiscal rules so you are bob the credibility of the monetary policy it was outsourced to european central bank so now you have the crisis would lead to better fiscal policy i don't want to say this war but european fiscal a story that and this could mean that you are worried that a lot of people in the euro zone afraid of expression i mean someone said to me

once for all in which all that was really quite interesting is that everybody should stay in the euro zone except for the germans they should lead the euro zone and then things might work out better what do you think i think they've probably benefited more from the eurozone than than than anybody else and i think the euro zone actually is a great political invention and has been very successful actually politically if you think about european history and what do you have that's you know that's the heart strings i mean i used to be a professor of european history i can absolutely agree with you i mean creating unity here but can you do that look to can you do that monetary really and maybe it just takes a much longer time than they had expected i mean we have countries like poland that are kind of stepping back now thinking maybe this is not necessarily a good idea if we say at this point in time you can have roland if i go back you you can have political union without monetary union we you know there was something like the european economic community that didn't work out. back ok it was a great up political ambition. the the floor part of it i totally agree with that

if the floor part of it was on that was on the economic side you can't have monetary union without some kind of centralized to school or forwards and that's exactly what's being proved now why don't you take the tools away from sovereign governments to fix their problems when you have something like no you can't default you can't build up dead in the first place and that's that's the issue it was it was the ability of governments to use and private sector to use low interest rates over a very sustained period of time to build up debts that proved to be unsustainable david that's very profitable isn't it for some people to do that the model works for some works doesn't work for a lot like a lot of other discussion before the introduction of your so many people were saying that it would never happen that it will have low inflation it would never happen in the country that sort of under still a towel you can find it very somber and it's about why seeing that at this for me of the euro was a much more successful project that i thought it would be outsourced the monetary policy to the technocrats of the european central bank which were more conservative

than the average population of europe and that's something like that happens in sort of a policy i think your euro project and european project in terms of policy as are all the same kind of work out while growing can they stop the containment now or is it more likely now or less likely everybody's generate ok i think it's i think it's going to be really really difficult now to stop the whole contagion you know they've already tried it several chances in the past they've put a lot of money several hundred billion trillion. euros into into defending the the region it hasn't been enough and markets have been and now pricing more aggressively. expect a default in greece portugal ireland and i think i think spain as well so what happens when the contagions starts. it's it's great march here i mean we'll have you. well we have more than pigs. because there is a significant danger all the contagion the on what's price in the markets.

i think is going to be i think the market's a two percent mistaken too short term looking on the whole european situation again i'm going to come back to what i was trying to say in the beginning that the period of fiscal consolidation and all done propaganda structural reform would be positive for europe in general so i think the risk of contagion is relatively small you know what about this slippery slope here ok moral hazard i mean if there's always going to be a bailout. you know it has to there has to be a contradiction there i mean the money runs out eventually the question is that the question is. if it is just a bailout then you know structural reforms don't take place so if it's money that actually results in structural reform then that then that is the exit i just think this is where we really disagree i just think that trying to do structural reforms right now is politically unfeasible in the market so you just reporting money in

some kind of stabilization then go for the structural reforms so let me disagree actually whether on on on on that i think this is exactly the right time to do the structural reforms i think the kind of people as a fairy or because you think it's i mean i'm looking at a man and woman and child on the street right now is it going to be a lot more pain that way before there is a different god for the compared to japan japan is in dire need off structural reforms to get it out of the last decade to try to sell it to japanese that they have to do all the painful reforms to grow faster why they're h. they're growing at one or a huge economy that's more of your continent but they could grow faster try let's try to think of all the u.s. is doing ok there is no crisis there is no acute crisis no good debt crisis and it's that's why it's so difficult to portray that all structural reforms in the production or for exactly now wound the europe was so badly used the time to push

for this along you know the reforms that made the european economy sausage you know really looking at from the elections across to europe and we've seen a lot lot of wild cards coming out a lot of nationalist parties doing much much better of course is going to be the element of immigration that always pops up there but there is the euro issue as well and the sense of sovereignty here do you think that the reform reformist for the for the eurozone have enough cards to play to start. of off. a growing political reaction because we see that we and i go back to the germans and they say you know you know we didn't screw this up you know we can use that you've rightly pointed out germany has done quite well by the euro in the longer term but it is certain point they're going to say it's politically not viable for us to do it because of the moral hazard that's still out there we're going to bail out the belgians next but that again is the point i mean it is up to the germans tonight

the conditionalities side strakes that is does not consider to be a bailout they haven't done that yet and then it comes down to a point about you know is the other governments in place or can they be governments in place that are able to follow through on that strict conditionality given the current circumstances that exist in those countries and you know when i look at places like spain right now and the way in which you know the regions are finding it very difficult even to make payments you know there actually is known payments growing in some of the american states in washington. it's a politically very difficult very difficult thing to do and i have to say the although i feel like a very good point and it's and they said necessary to time to do the reforms i'm not sure it's a feasible time to do the reforms and i guess that's the thrust of the last last question where we are where you say you're going to stand a year from now i think it's so difficult to predict the one thing we have learned is economists so difficult to predict the carcass of the best forecast in fact is the value of the current set today so that's going to be my forte well i can't

believe it we ended the note on a positive positive position and i want to thank both my guests here in the studio and i want to thank our viewers for watching us here are going to see you next time and remember across town for almost. any. story. you can. download the official tee up location to your ipod touch from the top story. lunch on t.v. life on the go. video on demand ati's minefield costs and r.s.s. feeds now in the palm of your. question on all t.v. dot com.