markets. find out what's really happening to the global economy for a no holds barred look at the global financial headlines to name two crimes a report. at three thirty pm moscow time these other top stories on our t.v. nato says it plans to continue its presence in libya as the alliance keeps bombing the towns of sears and main program southeast strongholds in the now mostly rebel controlled country meanwhile people on the ground claim belabors threat to their safety comes from weapons falling into inexperienced hands. russian authorities say two of the suicide bombers who carried out deadly attacks in the capital of the chechen republic has been identified multiple blasts rocked the grounds me on tuesday evening leaving at least nine people dead and over twenty

injured. and israel trains are reported the arms west bank settlers ahead of you on both of recognizing palestinian statehood in september but experts warn it's the anticipation of violence that could actually spark a conflict in the settlements. up next our debate so close talk and this time host peter the bell and his gas argue over the role of the u.s. federal reserve amid the continuing to deteriorate the world economies crosstalk is coming up in just a moment. we'll . bring you the latest in science and technology from the realms. we've done the future of coverage. if.

you think it's. a low in the welcome to crossfire crime peter lavelle the u.s. federal reserve has made been 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 they get 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 council institute hard gentlemen this is cross talk 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 lacking going to announce that there would be further quantitative easing was so close and caviar there was something in it for almost everyone the fed can 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 a more liable the fed does have to go they have to go back later and to change it because it promised us something that it can't deliver 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 can it do more well it's what happens if it doesn't and most of the economic policies that support robust economic growth in the long run are outside the province of the central bank. there is still the widespread view that the fed will act to provide monetary stimulus beyond the july statement that it would keep u.s. rates at record lows for up to two years but there is also the 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. so with the european situation there is definitely. there is some lack of coordination and 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 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 a char and i for crossed party. ok mind if i go 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 box is he really because quantitative easing really hasn't helped the economy grow 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 nation of bankruptcy of the united states because a reality is the us is sitting on a fiscal path of two hundred and eleven trillion us dollar and fiscal debt was really is a number you need to look at not the mickey mouse figures they use was a national debt numbers because they conveniently include a lot of things of exclude a lot of things from though official book so if you look at all the unfunded liabilities including social security medicare and many other items they have already committed to buy that all actually have the funding that's the fiscal gap calculation 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 condit of easing measures of bell very

inflationary nation 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 are there are banga may not actually anymore as over the most powerful central bank that by that maybe 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 relation on a dollar put on this probably that might happen early as already the number one car producer number one car market number one commodity consumer and so on so far so rethink the u.s. and the rest and countries generally i am decline 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 debt forever 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 and i guess you could make the case some people have kept the

economy from going into free fall but can't seem to grow the economy really. 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 access 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 non-point anshul 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 are terrible and 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 the one nine hundred seventy s.

style stagflation what america needs to do is dramatically reduce the burden of government spending we heard that they care 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 so a 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 pattern if i go to you in warsaw 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 gold 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 lots of traders because these traders they regarded as being superman now and 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 that martin i mean again you know where the also quantitative

easing just created asset bubbles all over the world in the united states is exploring its problems there everyone and where you are in china they're not very happy about that. here definitely i think that's that's the major risk globally that we're going to see in our lives the two dozen 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 bonds 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 service so i like to put us in a year survey or so actually gold and silver down by thirty to fifty percent. there they're recognized as a safe haven and 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 so

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

a lot of emerging market countries do a lot a lot better ok daniel we ask you to do much too much. do you decide to break free of u.s. economy in the global economy i mean are we asking too much of berlin and 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 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 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 the solution is to do more of the same right before you go to the make patrick what do you think is that is the root of the of the fed is it 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 greatest central bank the world has ever seen i 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 and it's a disaster for government ok when i'm not the government and the second now after

a short break and after that cerberus will continue our discussion of the global economy state. and.

download the official anti allocation of your money for the i pod touch from the i.q. saps just see life on the ghosts video. on cheese minefield costs an r.s.s. feeds now an apology. question. can see. the same. welcome back to crossfire i'm here with ultra mind you were talking about her name she's fat the same can say.

ok and i could start off again with martin martin that led the interesting thing in jackson hall the informal meeting that was extremely formal it looked to me and i think it is a lot of evidence to bernanke is saying don't look at me anymore ok it's not my job it's you people in washington in your gridlocked politics this is why we have this problem and on top of that we have an election cycle going on right now is very lanky 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 that it 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 by inflating the economy by keeping rates artificially low and i don't think those entertainers have done a lot of roads since inception of the federal reserve. and the united states so

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 and clearly there needs to be some other political solution because i don't think there's any is a greater fix that as i mentioned are 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 norm and ruining the eurozone but bailing out every eurozone country they can find on every bank left and right is that a smart again records are not of italian debt spanish debt italy is sitting on two trillion euros of bad 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 to to give that same awful old saw 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 quantitative easing without even calling it at least in the u.s. they are polite enough to say oh really i want to do another round of quantitative easing although i said before work in the eurozone that printer and if you know without even announcing in their german america ministers distracting people by talking about that he doesn't want the euro bonds while at the same time the e.c.b. is actually buying our wired lee any any government bonds from picks countries they can come up with as i just mentioned so clearly no i'm afraid it is ruining the eurozone just as it's happening with the united. country. isn't really a place where you would like one with it ok daniel it's interesting bernanke is known as an expert on the great depression of the one nine hundred thirty s. and you know and not to defend bernanke your the fed in its policies but at least we had in the one nine hundred thirty s. i gigantic political figure known as franklin d.

roosevelt and he could create a consensus he could get things passed in congress you know he 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 greenspan's or bernanke use. well a couple of things i would say first i would agree with what was just said the fed caused the current economic troubles 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 they exaggerated baited and worsened the great depression with all of his spending the higher tax rates more government intervention i mean 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 gridlock is a problem because we had desperately need to fix these entitlement programs this giant unfunded liability but the politicians have given us and that's clearly not an issue for the thread that's something that has to be done in the real sector of the economy so i am not optimistic i think america a less 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 figure if i did i'd probably be a rich wall street guy but i know that the the prognosis is very grim ok patrick you know that 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 there it's not it there's not a 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 is the best in 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 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 put no concept of economics no concept of economies and they're busy destroying the euro's only 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 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 the washington mafia is doing is telling 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 one joe biden was in china just recently to try to mend some fences i know that there was a basketball game right but i go 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 it impacts china in a really really big way. first of all i really agree this was what was said about the eurozone the us. and 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 physical production wanting 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 are 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 a consumer not a but also obviously 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 we think there actually is they're

buying treasuries so far because they don't want to let the u.s. follow a cliff at least not all of a sudden before they replace their exploits visit a local consumer market but that's what they have been working on clearly and surely they would also have reminded joe biden that's. concerned about the u.s. spending and would like to improve the deficit situation but clearly i would saying they have just been buying time to develop their own consumer market to address their own issues they have 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. of a problem than the rest and also tax revenues are quite strong so we're quite hopeful that a lot of the wealth 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 we

do have to be coming up in september if we go down the track if you don't get out of quantitative easing is that a level of desperation in your mind. ranki is a political animal and he wants to keep the white house happy so do i think q e three is possible yes have going for here we have three years from now we might be talking about q e seven but it's not going to work the analogy i said before i like pushing on a string and 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 in 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. back to you same question to me 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 did locke's going to come to an end anytime soon would that be bernanke he saying capitulation you know i do nothing else we could do he claims he has tools in his toolbox 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 with a disaster he's supposed to be looking after the economy the last thing we want is a politician of this job and of course he's going to through anything out of 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 built her for martin so that no one had ever heard of suddenly appear for what looked like a very mediocre democratic pack 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 bernanke is going to do anything he possibly can to try to rescue the economy or at least to keep his political masters happy and the problem with that 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 or from half of been unemployed 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 to my guest today in hong kong warsaw and in washington and thanks to our viewers for watching us here are to see you next time and remember cross talk rules .

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