a little angel on our cheek. i welcome back with us to you live from moscow where it's now eleven thirty am a quick recap of the top stories now nato says it plans to continue its presence in libya as the alliance keeps bombing the town of sort of the main program duffy's stronghold in the now mostly rebel controlled country meanwhile people on the ground claim the latest threat to their safety comes from weapons falling into inexperienced hands. multiple suicide bombings rocked the capital of russia's chechen republic on an important muslim holiday leaving at least eight people dead over twenty injured before you say two terrorists have already been identified.

and israel reportedly trains and the west bank settlers ahead of a u.n. vote on recognizing palestinian statehood in september but experts warn it's the anticipation of violence that could actually spark a conflict in the settlements. and i want to stay with us here and up next is our debate show cross talk at this time a host of people bill and his guests argue over the role of the u.s. federal reserve and the continuing to teary ration of the world economy cross-talk its right. to. review the latest in science students. from. the future. keep.

a low in the welcome to cross talk computable about the u.s. federal reserve has met and decided little as the global economic recovery slows now it's time for congress and the president to take things from there given the deadlock in washington and the debt crisis in europe is there any reason for optimism. to cross-talk the prospects for the global economy i'm joined by martin henniker in hong kong he's an associate director at the tight group in warsaw we have patrick young he's the executive director at divi advisors an editor of the gathering storm and in washington we cross to daniel mitchell he's a senior fellow at the capitol institute all right gentlemen this is crosstalk that means you can jump in anytime you want to very much encourage it but first let's

look at the fed's recent meeting at jackson hole. in the end ben bernanke is lack of an announcement that there would be for the quantitative easing was so close and have yes there was something in it for almost everyone if they can't tell us specifically what it's going to do because it doesn't know specifically what's going to happen so the more specific the fed makes a promise to my libel the feds have to go they have to go back later and change it because it promised us something that it kept a lever on the questions behind any further action by the world's most important central bank remain and will dominate economic discussion for months to come carol do more well it's what happens if it doesn't most of the economic policies that support will boost economic growth in the long run are outside the province of a central bank. there is still the widespread view that the fed will actually provide monetary stimulus beyond the july statement that it will keep us rates at record lows for up to two years but there is also a view that it needs to keep something up its sleeve in case the euro zone's fight

to prevent a financial system meltdown isn't it. so that your appearance and situation there is definitely a lack of leadership the recent lack of coronation in these. certain markets the bigger issue is that as bernanke himself has acknowledged there is no fiscal side to efforts to support the world's largest economy the role of the fed in this circumstance is largely to prevent further meltdown but with american politics as divided as ever and the role of the fed becoming more contentious there isn't any sign of a strong recovery on the horizon most of chardonnay across our team. ok mark if i'm going to you first in hong kong what do you think he was so coy about that because he says he said he still has some tools in his toolbox is he really because quantitative easing really hasn't helped the economy grow at all it hasn't created jobs certainly made

a lot of people rich on the stock market. well maybe it's not it's not at all about recovering or stimulating the u.s. economy but it may be much more about preventing the next you know bankruptcy of the united states because the reality is the u.s. is sitting on a fiscal gap of two hundred and eleven trillion us dollars and fiscal gap is really is a number that you need to look at not the making of figures they do as far as official national debt numbers because they conveniently include a lot of things of exclude a lot of things from the official drop so if you look at all the unfunded liabilities including social security medicare and many other items they have already committed to it by they don't actually have for funding the fiscal gap that's two hundred eleven trillion of missing funds is not too different from the situation they're greasers in and if they don't print if they don't engage in many many further quantitative easing measures a very of very inflationary nature down the road then that's what they may face

a national bankruptcy and on that note i would also say maybe as you said before our federal reserve bank may not actually be any noise over most of all the central bank that but there may be china now the i.m.f. predicts that china may be the number one economy in two thousand and sixteen the i.m.f. is always cautious in real economic output on this probably that might have been early as already as a number one car producer number one car market number one commodity consumer and so on top of us saw rethinking big u.s. and western countries. china is rising and more of a crisis is coming down the road particularly in the western bond market and the currency market because money printing is what they have to do to get out of this that for if they're anything ok daniel in washington what is the role of the fed right now i mean again we look at quantitative easing part one part two maybe it will be three out there but it doesn't seem to have an impact on the economy except for maybe you could make the case some people have kept economy from going into

freefall but it can't seem to groove your car be really. the federal reserve is in a difficult position because the more they try to follow an easy money policy is just like pushing on a strang they just create more money but that winds are just sitting back at the fat in the form of excess reserves deposited by banks banks have more than a trillion dollars of excess reserves at the fed that's of course on top of the more than one trillion dollars that nonfinancial companies are just sitting on the problem in our economy isn't the lack of liquidity in the world to watch a liquidity it just doesn't know where to go japan's long term prospects or care of all european welfare states are collapsing and of course the big government policies of bush and obama have made the united states very unattractive so i really think the fed is completely out of the picture all they can do is make things worse by giving us i guess nine hundred seventy style stagflation what

america needs to do is dramatically reduce the burden of government spending we heard that they grew about the giant level of unfunded liabilities in america we need to do the entitlement reform to reduce the long term pressure of medicare medicaid and social security unfortunately washington is a corrupt town where politicians that like to make government bigger because that's how they make themselves better off ok let's talk about the political dimension of the second time for you if i go to you in warsaw i mean what did you what has quantitative easing actually achieved except for make rich people richer. well that's exactly the point actually peter i mean it's really achieved absolutely nothing the thing that's interesting about quantitative easing is that when it first came out the fed had to make a large argument about the fact that the economy was in danger of deflation and actually there was no real danger of deflation even before quantitative easing the fact that america night has an element of inflation ok it's only a few percent but it's there has meant that effectively that girls club has had to

be thrown away from the armory of tools that they can potentially use and you're absolutely right peter i think the thing is that in many ways i mean the issue has been one of the fed trying to do two things first of all in the post lehman world there was this idea that we had to intervene to prop up the banks the best way to do that was actually through quantitative easing it was a way to throw money at banks that were flying during that we're going to draw on of course the problem is the banks themselves weren't terribly intelligent so they took the free money they made a great deal of profit out of it and then lo and behold they decided that they'd pay huge bonuses to a lot of traders because these traders they regarded as being superman that was very unfortunate because ultimately if you give me money for nothing it's very very easy to make a profit from it and that's all quantitative easing has achieved for all of us what do you think about me again you know where are the also quantitative easing just

created asset bubbles all over the world in the united states is exporting its problems there everyone and where you are in china they're not very happy about that. yeah definitely i think that's that's the major risks globally that we're going to see in our lives in a financial crisis where everybody was panicking out of stocks and panicking out of commodities and going for the perceived safe haven of the west and southern downs now to some extent this has happened again now as a first reaction to the crisis news and to people realizing that the crisis isn't quite over yet but some of that money has started to flow out and back into gold and serve us or and i put us in a years where you saw actually gold and silver are down by thirty to fifty percent this time around there they're recognized as a safe haven we think other commodities and also stocks to some extent there particularly in the emerging markets that don't have or don't suffer from this excess debt burden this may be recognized increasingly as the new safe haven saw

obviously it's not a nice and now you know what as an investor knows what really is a result and effects of this crisis and that this time around the bond market will not will not be rewarding not safe haven but more of a trap and one can be a physician position for that but clearly i think everybody agrees here the federal reserve policy is. particularly good ones all of one thing i would say it's maybe also even too late to save now and then take as obviously a rule because if if there is a u.s. economy and if the u.s. government is trying to implement massive saving measures very very difficult because they increase taxes and cut spending what will be the result probably the economy will be slowing down more at least in the short run and i can't really afford that at this moment because the deficits are already out of control so i was saying some form of their reorganization s. as we have to happen in the eurozone is probably the only solution for those western countries going forward but it's not all it's not there are

a lot of emerging market countries gulag a lot better ok. we are still the fed to do much too much is it really the rainy do decide to make or break the u.s. economy in the global economy i mean are we asking too much of the fed right now. the federal reserve should focus on one thing and one thing only which is to maintain a stable dollar european central bank actually has the right idea and they have a single mandate now they're not maybe not doing a great job of it but their single mandate is to preserve the value of the euro we have what's called the dual mandate in the united states where the fed is supposed to somehow preserve the value of the dollar but also be an economic manipulator and somehow try to generate more employment and more growth and that's where we get these easy money policies and things like that which of course as we've already discussed don't really work or if they do work they give us inflation which of course is actually

a net negative in the long run so the problem is the legal dual mandate isn't you know that's a problem but the real problem is that the politicians and the central bankers can't resist the temptation to try to artificially goose the economy there's always this pressure to artificially lower interest rates because borrowers outnumber lenders and at the end of the day that gets you in trouble and unfortunately their solution is to do more of the same right before you go to the meantime patrick what do you think is the root of the fed is it playing the right role in this economy. look the problem we've got is that for many years the fed told us that it was a brilliant arbiter of central banking it was the grid a central bank the world has ever seen and know what's happened is after the growth faded we suddenly have a crisis and the fed sits there and goes oh well actually we can't do anything to help you i'm terribly sorry it's a cult fight and it's a disaster for government ok when i'm not the government only the second out after

a short break and after natural break we'll continue our discussion on the global economy they are. zoe. lose. its tz . see.

see. see. smudge can see. the future. say. welcome back to crossfire i'm here with ultra mind you were talking about learning to use fat slow . economic slow. ok and i could start off again with martin barnett look at the interesting thing in jackson hall the informal meeting that was extremely formal it looks to me and i

think it is a lot of evidence to burn and he is saying don't look at me any more ok it's not my job it's you people in washington in your gridlock politics this is why we have this problem and on top of that we have an election cycle going on right now is for nancy passing the ball and say look it's a fiscal problem too not just a monetary one. well it is by very clearly the federal reserve is the is to blame for quite a bit of it you know that i mean there isn't there isn't a great difference between a different federal reserve. and if you look at alan greenspan he clearly caused the housing bubble. inflating the economy by keeping rates artificially low and i don't think this entertained us have done a lot of gods since inception of the federal reserve as a matter of fact in the united states or clearly a lot of the blame. should be going for them on the other end zone now or as we are already seeing this very high debt bargain clearly there needs to be some other

political solution because i don't think there's any easy way to fix it as a mention of from some form of debt restructuring but one point that was made earlier i do want to comment on also though is that the european central bank is any better than that i reserve my opinion clearly that's not. the moment ruining the eurozone but bailing out every eurozone country they can find in every bank left and right is that desperate again records amount of italian debt spanish that italy is sitting on two trillion euros of that there's no it's absolutely impossible even if germany was going to spend all their money that they have got and italy still wouldn't be enough though to keep saying afloat so right now the eurozone is in the process of total disintegration as a result of those policies and the e.c.b. is already doing quite a bit easing without even calling it at least in the u.s. there they are polite enough to say oh we're we are going to do another round of quantitative easing although i said before work in the eurozone that they're you

know without even announcing in their german and america ministers distracting people by talking about that it doesn't run the euro bonds but at the same time the e.c.b. is actually buying a liar lee any any government bonds from picks countries they can come up as i just mentioned so clearly no i'm afraid it is ruining the eurozone just as it's happening with the united. safe. country. isn't really a place where we would like one with it ok daniel it's interesting i'm he is known as an expert on the great depression of the one nine hundred thirty s. and you know him not to defend bernanke you or the fed in its policies but at least we had in the one nine hundred thirty s. by gigantic political figure known as franklin d. roosevelt and he could create a consensus he could get things passed in congress you know we had a majority and that's why it's very different right now because obama is very weak and we have a very disorganized and i would say you intensely selfish congress i mean. it's

really is just as much their fault as it is alan greenspan's or bernanke ngs. well a couple of things i would say first i would agree with what was just said at the fed because the current economic problems by inflating the housing bubble and i also agree that the european central bank even though theoretically they have a good single mandate of price stability these indirect bailouts they're doing are reprehensible but my main point is that franklin delano roosevelt extended and a disaster baited and worsened the great depression with all of his spending the higher tax rates the more government intervention and the hoover and roosevelt between them were two terrible presidents that kept the economy in the dumps for a long time now the only good thing i can say about the current political situation is that we do have gridlock because gridlock at least stops politicians from doing additional stupid things now in the long run gregg luck is

a problem because we had desperately need to fix these entitlement programs this giant unfunded liability that the politicians have given us and that's clearly not an issue for the fed that's something that has to be done in the real sector of the economy so i am not optimistic i think america i left something dramatic happens we are basically baked into the cake as we say we're going to become another greece within ten twenty thirty years i mean i don't have the exact a year if i did i'd probably be a rich wall street guy but i know that the the prognosis is very grim ok patrick kennedy there are some pundits out there and experts who say that this is really a political problem ok obviously that's if there's a financial crisis going on here but it's of their if it's not it there's no way a monetary solution is a political solution and it has to have leadership in washington and i would say in europe we don't have leadership in either areas. look the situation is exactly that

peter i mean you know you and i we were educated on opposite sides of the atlantic but we both know those great stories there in the white house in the oval office at fifteen hundred pennsylvania avenue that's the place where there's the desk and the buck stops here and frankly it's sickening having to listen to the american president blame storming everybody else for the nation's woes night before the united states of america suddenly get on the backs of europeans at least there is somebody who vaguely seems as if he's in charge of the picture in the united states of america the euro zone is a fiasco we have a series of politicians who got no concept of economics no concept of economies and they're busy destroying the eurozone in one fell swoop and all of this is ultimately only helping the world go east this is a huge political economic problem it's being driven by a large number of politicians who've got no idea what they want to do what they're trying to do all they're trying to do is desperately hold on to control and actually that's the nub of the problem because they need to get out of the picture

they need to run away from it they need to help us entrepreneurs get out there and be able to invest and the reason we're not investing in the united states of america at the moment is because in the new europe such as poland where i'm speaking to you today all the way through that wonderful crescent of russia all the way down towards china and hong kong that's where the opportunities are because people want to work they don't have incredible entitlements there are huge embedded costs in the economy and ultimately all that washington mafia is doing is killing the united states of america the greatest economy we've ever seen in the world and that's a tragedy martin here in hong kong joe biden was in china just recently to try to mend some fences i know that there was a basketball game right but beyond that what do you what are the chinese saying behind closed doors to people like joe biden because the mess that continues in the united states and in the euro zone impacts china in a really really big way. first of all i really agree this was what was said about

the eurozone in the us and then at odds. and say you know some emerging markets countries really wanting to work and looking at the physical economy so that's what's happening in china they are focusing on technology and physical production running to work wanting to progress whereas the physical production has really given way to the gimmicks of finance in a large part of the united states and then in europe as well so while they're focused on the production of course china now is clearly way worried about what's happening to the united states and europe not only because it's the consumer market but also obviously there are there are quite a lot of treasuries but i think the consumer market is playing the most important role and that's really the only reason why the thing there actually is buying treasuries so far because they don't want to let the us fall or cliff and all of a sudden before they replace their exports visit a local consumer market but that's what they have been working on clearly and

surely they would also have reminded or buy it and that's. concerned about the u.s. spending and would like to improve the deficit situation but clearly i would think they have just been buying time to develop their own consumer market to address their own issues there are some local government in china something that also talk a lot of all but if you add those to the national debt they have much less out of of a problem than the rest and also tax revenues are quite strong so we are quite hopeful that a lot of the art that's not in the united states or in the eurozone will be having a chance to survive this crisis and we'll be getting out of it relatively unscathed us. q e three it's been hinted out there it is good we do have the meeting coming up in september if we go down that path continue down the path of quantitative easing is actually a level of desperation in your mind. bernanke he is a political animal and he wants to keep the white house happy so do i think killing

three is possible yes hat going to him if he were here to be a three years from now we might be talking about q e seven but it's not go in to work the analogy i said before i like pushing on a string you don't achieve anything america's problems and for that matter europe's problems are in the real sector of the economy governments that are too big governments that are depressing private sector economic activity governments that have giant unfunded liabilities which of course raise the threat of giant future tax increases which just add to the downward spiral and economic performance that's what needs to be fixed otherwise we're all going to be in this very dystopian future where you might as well stock up on bottled water and goods and ammo. if your project is the same question to be if he does go down this path of q e three and we continue with this political deadlock in washington there's no reason in the world why going to come to an end anytime soon would that be he's saying

continuation you know i do nothing else he could do he claims he has tools in his tool box but i don't see him look that's a great point that's just been made the whole concept of this he's a political animal would a disaster he's supposed to be looking after the economy the last thing we want as a politician in this job and of course he's going to through anything out it because the one thing that i think is still in the d.n.a. of the democratic party in the united states of america is if you want to win elections it's the economy stupid and that's something which obviously helps. i don't are from arkansas that no one had ever heard of suddenly appear from what looked like a very mediocre democratic party and beat an incumbent president more than twenty years ago and right now if we look to have an incredible reversal of fortune that's exactly where we sit her ninety is going to do anything he possibly can to try and rescue the economy or at least to keep his political masters happy and the problem with out is ultimately he will do anything even if it's completely the wrong thing

and it has no merit whatsoever to the general economy or the nine point one percent of americans who are unemployed of whom half the pain on employed for more than a year and that's a travesty ok gentlemen i saw no optimism in this program thank you very much many thanks and i guess today in hong kong warsaw and in washington and thanks to our viewers for watching us here r.t. see you next time and remember crossed our rules.

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