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of the latest in science and signal of the world. the future of. the it. is today violence is once again flared up. these are the images the world has been seeing from the streets of kandahar. can start. hello and welcome to crossfire peter lavelle a currency in crisis european finance ministers central bankers and politicians

remain at odds on how to rescue the euro as pressure mounts for another greek bailout and investors worry about italy is the hero of dysfunctional currency and who will ultimately foot the bill. to kick. start. the process not the eurozone crisis i'm joined by dennis gartman in virginia he is editor of the gartman letter in singapore we go to jim rogers he's an author in financial commentator and in washington we go to sherry's odd raymond she's professor of international business finance and international affairs at the george washington university all right folks this is crossed i'm going to you can jump in anytime you want there are different points of view here like here beneath the dentist if i go to you first. i am i asked the question before we go to you the facts of that are at hand with the euro i pose the question is it a dysfunctional currency what do you think about that. i've always thought it was a dysfunctional currency i thought quite honestly that the only reason the only

rationale for the euro to begin with was was to do something on the part of the northern european countries to tie the great german giants down with as many bureaucratic ropes as they possibly could they have done it to this point i think it is an eminently unsuccessful attempt i cannot imagine that that germans working as hard as they do as many hours as they do saving as much money as they do find anything. of equal nature with the greeks who simply don't work as hard as they do don't save as much as they do and avoid taxes like they do so quite honestly i think at the core at the edges of this cloth the thread is being ripped and that cloth is finally coming apart jim singapore go ahead i was going to go to you anyway go to peter that. peter the concept of a unified european currency is fabulous and the world needs something to replace or to compete with the u.s. dollar unfortunately execution has not been very good they brought in people like

greece and and portugal and ireland who weren't paying there are paying their bills and who weren't paying their bills and that's led to the problem i'm like dennis i cannot conceive of why honest hard working australians and dutch and friends should have to pay for a bunch of greeks are sitting on the beach drinking too so i and greek banks i find this is outrageous ok if i go to you in washington ok we have two euro skeptics are huge amounts and i'm a little bit. i'll try to be much the bottom line is this this this is a good project to begin with if the membership had been correct greece portugal ireland spain were never supposed to join and if it was a reasonable six countries bedded down we would have had a pretty successful project but in the you know we've got some in the eurozone at this point this is not healthy and i agree with them that this situation is now but it's done it's legalized and no one can step out and no other people can you know

sort of change the rules at this point so the germans have to pay the piper they show in this document and this is the repercussions are no. they all have a right to it and if you do it yourself they do. for the germans the germans stop the germans don't have to pay the piper let greece go bankrupt it would be good for greece it would be good for the europe would be good for the world if greece went bankrupt and rose to the heart of pay their bills and stop lying then you would have us everybody would know it's a strong sound currency based on a strong sound economy while i'm out and go bankrupt listen you know you're in america we've had stage called wait until you're in cities go bankrupt we've had counties go bankrupt it didn't in the united states and it didn't in the u.s. start ok. i'll tell you why because of the four hundred billion dollars of debt that greece has fifty percent is held by german and french banks and those countries don't want to take a second in the financial markets it's that simple. why

should why should taxpayers bail out banks since when the taxpayers have to bail out mistakes made by banks the taxpayers didn't make those mistakes when i make a mistake i can i come to you and let you bail me out next time i start losing money all right dennis go ahead jump in well you should not blame us government. well i'd absolutely agree with jim on this or in this instance why can't they allow them to go to go bankrupt we in virginia understand our rights as virginians compared to anybody else i think that you have the right if you are a country to opt out of that circumstance i think the germans have absolute the right to say we have given up we have watched this for a decade it has proven to be unworthy we are simply stopping the payment to the greeks we're going to stop payment to portugal they have to get their own act in order let them go greece will be far better off it allow them to go back to the

drachma make their economy stronger again let tourists move that go back to greece again we were talking about this beforehand it's too expensive to go and nobody is there greek is a tourist spot and no tourists are there let them become a tourist but by going back to a devalued drug might tell you ok serious i mean it was i think you brought up a very interesting point i think we have to go with it still here is that if this president is same with greece then you have this is a knock on effect of this contagion and it is about banks here i mean we cannot we can all criticize the banks but i mean the banking system in germany in france wants to survive this is well i mean it's damned if you do damned if you don't that's the problem absolutely very plainly serious you know first letter your first going to go bankrupt shares i'll go ahead. well the problem is that if you let them go bankrupt and then through default and this conclusion spreads and probably going to see people respond in heart writing to me where we are still grappling with it today then you've got a real problem this is not

a domino effect in the eurozone this is a break for the rest of the world that's been thrown and his death is going to affect our markets look the europeans can make up their minds hang on the europeans can make up their minds over a two day conference we took eleven trillion dollars in the global capital markets for that and don't think we will get he if he gets it and it's too big to fail at this point and use ensures i care as i do you. know you may have been going hundreds of years. the point there is jarrett banks have been going bankrupt one hundred shares our banks have been going bankrupt for hundreds of years we have made horrible mistakes over the past thirty or forty years in the united states we have been made unbelievable mistakes in our financial situation so we've got to pay the piper of eventually as dennis says when do you stop are you going to run this down for another five years of eventually the market's going to say you know they're you going to have a major crisis it's you that i deal with at least if you have

a crisis now you can organize it and let some people go bankrupt and by the way did as i wouldn't pull out of the euro of my will greece i just go bankrupt and reorganize i think the euro is good for greece you know they reorganize this topic craziness ok shares and if i can ask you if you want to continue from head to head teachers are going. well i just wanted to say you know clearly i think i agree. with jim that clearly greece is future is within the eurozone but i'd like to ask john and it's both one i think as americans if the u.s. government had not stepped in and then our one trillion dollar bailout where would you be right now you were so grateful that these guys stepped in because we were hemorrhaging the markets are frozen and everybody knows you're no no no no i was never a prayer of any of this bailout what are you talking about i would have let them all go bankrupt in two thousand and eight in two thousand and nine it is outrageous what we're doing people who tried this such as the japanese have now have lost two decades the japanese refused to let anybody fail they have zombie banks zombie

companies and twenty years later their stock market is down seventy five percent this approach doesn't work americans already had one last decade we're going to have two or three at the rate they're going. to do these two want to jump in there one of the things i'd like to ask everyone here is that all these governments are going through austerity i mean including the the italians as we speak right now and but can austerity create growth in these can you can we do you agree with that because i can't think of too many examples where i steer it is because if you want to pay back these loans you're not generating enough wealth i mean again it's a damned if you do damned if you don't approach inside the eurozone. spirity austerity doesn't create growth governments don't create growth low taxes getting government out of the way letting markets work that creates growth my favorite example of this is what happened in new zealand in the early one nine hundred eighty s. when they turned their back on everything with the i.m.f.

it said they cut taxes across the board they did what they could to strengthen the new zealand dollar and the next thing you knew you were running budget surpluses you have a trade surpluses they went that far the proper way of allowing the market to freely function if we would do that we would be with many of these problems simply subside. i don't go away so austerity i'm afraid is not the problem is not the problem it's a government is the problem getting in the way putting too many blocks in the way of people doing the things that in their own best interests serve everybody else ok well you think about that germany's austerity this and why did you go ahead in the early and the early and the early one nine hundred ninety s. scandinavia had the same problem huge problems and in scandinavia a lot of people went bankrupt they reorganize they had a horrible two or three years but since then scandinavia has been one of the great growth region so the country sweden is probably better off than most nations you know as we speak in two thousand and one south korea had a problem at the end of the ninety's people went bankrupt they had horrible pain

but since then they've had a booming economy the list goes on and on people who've taken a pain accepted reality done something about it and then started over this idea of doing what the japanese did doesn't work doing what the americans have done doesn't work ok shares i don't think everyone's talking about a selective default i mean is that just double speak for when it comes to a country like greece i mean i just don't want to call it default is this selective i mean is because it's not built into the euro zone you can't have it happen to me so i just trying to kind of fake it and say it's a default but it's not a default. you know we're very close to the line the bottom line is that a restructure will happen and it's going to happen you can't call it a default if a restructuring actually does happen the credit agencies have a different view on this they believe that private participants are involved they will consider default but just step back for one second you know austerity needs to

happen in a lot of these countries obviously too much austerity will stifle growth has got to be some balance here some some mechanism to grow down the road or there's no hope i you know unfortunately both examples jim and dennis are giving are in the past in the eighty's in the ninety's when two thousand and eleven the financial markets have mutated we are in a very different environment right now we have a crisis of fear and fear has no economic logic to it and once it spreads it spreads like wildfire and everybody looks like greece portugal ireland spain italy and now and the consequences are quite devastating we destroyed the american middle class wealth right here is an agenda here and we break and actually watch. you could use your discretion of yours ok. ok. if you want to eat.

with the end of the boer war and the going away of the soviet union many people thought that nuclear weapons disappeared. the risk is not zero that something that might be going off by mistake special it sounds a little nuclear weapons on hair trigger alert. puppets of the victims could use it as a trip all as an extra bit but you know if you keep spending a trillion dollars a year on weapons of eventually you're going to blow everybody up you can't you know people are dying from these weapons but until we actually see it people don't make up most of the weapons or a bill. that represents all of the firepower of the second world war this. is the equivalent firepower of the world's nuclear arsenal

today. wealthy british style. sometimes tirelessly. market finance. find out what's really happening to the global economy with much cause or run no holds barred look at the global financial headlines tune in to kaiser report on our keep.

kids. safe. welcome back to rostock computable to mind you we're talking about the eurozone crisis. story. ok jim and i to go to you is the is it too expensive to let the euro or is it to expensive to keep it going well first of all i should tell you i own the euro for a variety of reasons but we'll come back to come back to that that and then i want to go to share point. for hundreds of years hundreds of years we've had bear markets and when you have a long period of excess somebody has to clean out that he says you cannot just keep going and going and going and going and pouring money down a rat hole the world doesn't work that way nothing wrong with

a bear market bear markets have been going on for hundreds of years they clean out the excesses in the system and you start over it's usually like a forest fire when you have a forest fire it's terrible but it cleans out the underbrush it cleans out the deadwood and then the forest can grow even better the same way with recessions depression depressions then and even a bear market ok but if you're a zombie strange thing i mean the analogy of the fall of the forest fire is nice but we're talking about people and governments and elected officials and this is where it gets really really sticky doesn't it. because i was in the movie are you going for heat i don't want to taste and i'm very happy with my situation right now . the bottom line is you know a crisis is different than a bear market in a crisis you know it's like a victim that has just been hit by a bus and is hemorrhaging through a major artery on the road what you want to do is stem the hemorrhaging and then decide you know then taken to hospital and then decide what you want to do but

you've got to stem the hemorrhaging because in that hemorrhaging you lose your middle class and you lose your middle class you have decades and decades of pain ok then if you are if you could see you want to jump in there go ahead. yes i did want to jump in shares i brought up the idea that jim and i supported what happened in the united states and that's just not true and jim and i may argue about one thing i think that what the united states government did in october of two thousand and eight when when the financial system really was about to seize up the central bank acted as central banks are supposed to do through history supply reserves in excess in order to accommodate that circumstance and get you past that two or three week or a two month period of time what we've done since then however by and by continuously yelling the central bank to expand its balance sheet and supporting that expansion of those monetary observes i take issue with that i think we needed to have stopped quite some time ago we did the right thing in october two thousand and eight applying liquidity to the system but continuously doing it and supporting

industries that probably shouldn't be supported by supporting businesses that probably should have been supported gets in the way of progress gets in the way of allowing those businesses that really need that new capital that will be created to move forward so i take exemption we need to do the right thing at a at a that a period of time of anik but panic has ended panic has done now you need to tell the greeks greeks stat i just pay the taxes levy is right this is actually just beginning and it's coming back with a fury right now shares that if i can ask you a question well no if we look at what's going on with italy and then we can look at spain and then it gets worse and worse and worse and it's perceptions it's a very important share is that if i can ask you this monetary union it's monetary there's no fiscal side to it is that which needs to be done to fix this because i think well maybe all of us would agree that you just can't keep pouring money into a system that isn't structurally change it's not fixing the problem you're just dealing with the element of time of the moment and it's called fear. that's right

and i think that what you've got you hit it on the head right here it's about perception the problem has been that the european leadership has been so bad that they have mangled the process for the last eighteen months clear decisive action would have calmed the markets a long time ago and we would be talking about a second bailout in ireland or in portugal and talking about financial crisis hitting italy at this point so the problem is there's no clear decisive action a lot of domestic politics going on and when you have a union like this you can't behave like this it's that simple oh you invite disaster can you assure us now you're right this is not a fiscal union but they have fiscal constraints when you join this union and i think that they're now coming aware that the fiscal part of this is war critical in the monetary part at this point ok jim you want to look like you want to hear is our. strategy i want to ask peter as sure as i want to ask you to ensure over who's going to pay for all of this who's going to pay you know america's the largest debtor nation in the history of the world right now you know who's going to pay for

europe to be bailed out all of the west who's going to pay for all of this now you shares are you peter thank you. very much you can see the germans and. so do all the time they did breach of the very interesting point and i mean at one point the germans are going to say enough is enough and i think everyone would feel that's justified after the danger we have here. yeah it sure is a when you say decisive action what sort of decisive action should have been undertaken decisive action on the part of government always frightens me what sort of decisive action would you have said would have been proper. it's a clear message that clear message to the market that a fund has been created the bailout will happen the restructuring will happen everybody's aware that we cannot pay the money back instead of saying you know what one year from now they're going to go back in the private markets that was not

going to happen even today the european central bank is not talking about restructuring they don't want private investors involved in this plan and the bottom line is everyone knows it has to go that way so the delay the confusion the different talking heads are not helping the situation and creating more confusion in the market when the market gets confused it starts and if you think about it jim is it shares i mean everyone can jam the first go jim. every one of the italy greece portugal spain or belgium. all of their debts are going up over the next few years and none of those countries have declining debts their current deficit this is just getting worse it's not getting better and five years from now we're going to look at each other and say my god now the world is coming to an end because the debts are too staggering for anybody to deal with issues one of the biggest problems that is the biggest criticisms of the of the euro zone is that it doesn't really promote a lot of fiscal responsibility because you can there's moral hazard out there or

you could just see you know just wait for the for the lifeboat to be you know to rescue you because you don't have to be responsible i mean is this something that needs to be changed where people are meeting held accountable because like you said when the middle class is gone who's going to be paying taxes. look you're absolutely right and you know they they believe that peer pressure and public pressure could keep these companies in line but it didn't work and i had no idea it was is presumptious that that we thought it would work and this market failure the markets believe it could work and you know what what possessed the markets to believe that greek risk would be the same as german risk so it was market failure clearly now there are calls for for example the european central bank is calling for a european finance minister and the purpose of this finance minister is really not to represent all of the eurozone countries but basically watch over the bailed out countries so it would be like a mini i.m.f. within the euro zone for conditions attached to countries that are bailed out and

that's coming there's no question ok jim how much of. what role should i mean could one of the things the germans are saying for more bailouts are looking at greece particularly the most private sector has to get involved in this the i.m.f. is agreeing with that but there's not a lot of other there's not a lot of consensus across the eurozone on the how much should a private sector be involved in dealing out these governments i happen to agree with the private or private sector made mistakes the private sectors made the loans to the greeks made the loans to all these people take your losses i mean you made the mistakes for taxpayers and then when that austria didn't make the mistakes why should they have to pay for all of this i mean this is a great this is terrible economics and it's horrible morality and i think politicians care about morality that's for sure. if you think about that how much is a private so maybe all of this i made a bad. i made a bad trade yesterday and crude oil shares are would you help bail me out please oh

no i think i'll go to the germans and ask them to bail you out i don't have a legal this is the same the same already you and i had a legal agreement if you and other married that i didn't hear us on that we were not serious are you bring up an interesting way to see this is this is a very different kind of leverage of the euro zone is ok go ahead jim go ahead hold on that's exactly what i meant hold on guys there is a link there was a legal agreement with the european union called a mastery treaty you were supposed to keep your debts with your deficit under three percent you were supposed to run a sound contract a sound economy these guys violated the law they violated the treaty and now you expect me to bail them out oh pleading are you going to let they all know you're going to bail me out of there i have a good jersey the bottom line is you're absolutely right this is violated there's no question they violated the cheated on the books they did all sorts of things that were not kosher but here's the catch a legal contract was signed between seventeen countries and now it's a catholic marriage they can get out of things ok it's interesting i mean for

a minute wait i know jimi jimi ask you a question here i mean again you know we focus on these national economies ok but really it's go back to really work it's the banks that want these bailouts they want they want governments to bail out these countries so they can pay banks money to them so it's really not about people is it it's about making sure banks get their money back private individuals in many cases. peter maybe i haven't made it clear i would make the banks take their losses i would make them suffer they're the ones who made the mistakes that made you jim a deputy director was a consistent wall street was bailed out because everyone we were all told that we need a banking system so that we're getting the same thing called play now we the banking system much the rationale i'm not saying i agree with it. you said the operative words we were told yes you know who told us that the banks the banks were panicking they called ever said save me save me save me come on let them i want to repeat

banks have been going bankrupt for hundreds of years it's not the end of the world it may be a depression but you know if we let more people go bankrupt in one thousand in two thousand and eight we probably have it behind us by now other countries have it's been three years we would have had a horrible three years perhaps but you know when i in two thousand and eight out there and oklahoma and texas they were doing fine it was only on wall street that you had these staggering problems ok shares i'm going to give you the last word what's the future of the euro five years from now five years from now i think that had to clear here as there has been the have nots ok dennis what do you think should be you would you would you like to see it around in five years. i think it will disappear in five years i think cher's out is right i think there will be a northern fiscally responsible europe and i think in the southern states that have proven themselves to be fiscally irresponsible they will all go their own way and

we'll be back to the eschewed oh look back to the drachma we'll be back to the era ok all right let's see what the future holds for the many thanks and i guess a day in virginia washington and in singapore and thanks to our viewers for watching us here are to see you next time and remember of crosstalk will. be. a charming here broadcasting live from washington d.c. coming up today on the big picture.

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