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tv   [untitled]    August 31, 2011 5:30pm-6:00pm EDT

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slash r.t. america and if you want to hear from me between now and seven and we have another show follow me on twitter at lauren with star and also yes that. culture is the same as it was me i mean it's even exists here in the real me it's not the whispered reserve of his may be decided little as the global economic recovery slowed now it's time for congress and the president to take. the news today violence is once again flared up. these are the images the world has been seeing from the streets of canada. trying to corporations or the day.
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hey tom are in here broadcasting live from washington d.c. coming up today on the big picture of. the world. bringing you the latest in science and technology
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from around the world. the future covered. download the official policy allocation your money phone called touch from the i.q. sampson. like. video on demand. for old girls and r.s.s. feeds now in the palm of your. machine. called. the a. lead. hello and welcome to cross talk i'm peter lavelle 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
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optimism. lead. to cross 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 crossed again you mitchell he's a senior fellow at the cato 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 extraction hole. in the end his lack of an announcement that there would be further quantitative easing was so close and 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 the more liable the fed is have to go they have to go back later and change it because it promised us something that it can't deliver on the questions
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behind any further action by the world's most important central bank remain and will dominate economic discussion for months to come can we do more well it's what happens if it doesn't most of the economic policies that support group boost economic growth in the long run are outside the province of the central bank. there is still the right spread view that the fed will act 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 the view that it needs to keep something up its sleeve in case the euro zone's fight to prevent the financial system meltdown is a. european situation there is different and the like or. there is some lack of coordination and it's the you know 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
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circumstance is largely to prevent further meltdown i with american politics as divided as that are and the role of the fed becoming more contentious there isn't any sign of a strong recovery on the horizon my char and i 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 tool box 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 national bankruptcy of the united states because a reality is the u.s. is sitting on a pair of two hundred and eleven trillion us dollar and fiscal there was really is a number you need to look at not the mickey mouse figure as they look for official
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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 their unfunded liabilities including social security medicare and many other items they have already committed to why they don't actually have the funding that's the fiscal gap that's two hundred eleven trillion of missing funds is not too different from the situation they greece is in and if they go on praying if they don't engage in many many further quantitative easing measures that there are very inflationary nature down the road then that's what they now face a national bankruptcy and on that note i would also say maybe as he said before the federal reserve bank may not actually be anymore as a. central bank that but that 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 happen early as already is the number one car producer number one the number one commodity
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consumer and so on top of saw rethinking the u.s. and the rest and countries generally on decline china is rising and more of a crisis is coming down the road particularly in the west and one market and the currency market because money printing is what they have to do to get out of is that for if there anything. 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 it kept the economy from going into free fall over can't seem to groove your car to be really. the federal reserve has 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 where that winds are just sitting back at the fag 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
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more than one trillion dollars that non financial companies are just sitting on the problem in our economy isn't the lack of liquidity in the world's awash in liquidity it just doesn't know where to go japan's long term prospects are terrible 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 so are politicians that like to make government bigger because that's how they make themselves better off ok let's talk about the political
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dimension of the second factor if i go to you in warsaw we want to see 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 out salute me 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
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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 the also quantitative easing just created asset bubbles all over the world in the united states is exporting its problems to everyone and where you are in china they're not very happy about that. yeah definitely i think that's that's the major risk globally that we're going to see in our lives that was in a financial crisis where everybody was panicking out of stocks and panicking out of commodities going for the perceived safe haven of the rest and southern bonds now
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to some extent this has happened again now as the first reaction to the crisis news until 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 our and i put arsenic actually gold and silver down by thirty to fifty percent this time around 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 in iowa but as an investor one knows what resides an effect of this crisis and that this time around the bond market we're not we're not to be the ultimate safe haven got more of a trap and one can go for the position for that but clearly i think everybody agrees here the federal reserve policy. and particularly good ones are one thing i would say it's maybe also even too late to save now and then tags obviously rule
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because if they're if they're 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 as a result probably. be slowing down more at least in the short term and i can't really afford that at this moment because the deficits are already out of control as i was saying some form of better reorganization s. as you 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 all a lot of emerging market countries do a lot a lot better. and we're asking the fed to do much too much is it really the rainy do decide to break the u.s. economy in the global economy i mean are we asking too much of bringing in 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 after he has the right idea and they have
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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 miffy later 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 glora words outnumber lenders and at the end of the day that gets you in trouble and unfortunately their
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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 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 on 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 we're talking about the government only the second now after a short break and after that short break we'll continue our discussion on the global economy state are. still.
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there conduced child it was a political discussion. these two feel the fear they say. every second of the slave. will remain in their memories and hearts forever. and do some soul. link ups. british science. market. find out what's really happening to the global economy
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with mike's cancer for a no holds barred look at the global financial headlines to cause a report on our key. limitations free credit take should free transport charges free. range from the free. three stooges free. download free broadcast quality video for your media projects a free media don carty dot com. you can. still. welcome back your hostile computer a little to remind you we're talking about burning fat. you can start. ok and i to start off again with martin martin
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the interesting thing in jackson hall the informal meeting that was extremely formal it looked to me and i think you know there's a lot of evidence that 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 to blame for quite a bit of it you know that i mean there isn't there is a big difference between a different federal reserve chairman and if you look at alan greenspan he clearly caused the housing bubble by inflating the economy by keeping rates i've officially low and i don't think the central bankers have done a lot of course since the inception of the federal reserve as a matter of fact in the united states so clearly
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a lot of the blame. should be going for them on the other hand zone now or already you're seeing this very high deborah clearly there needs to be some other political solution because i don't think there's any is a great a fix and as i mentioned apart 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 and the federal reserve in my opinion clearly that's not. the moment ruining their eurozone but bailing out every eurozone country where i can find in every bank left and right as they just bought again records amount of italian debt spanish debt italy is sitting on two trillion euros of their best no it's absolutely impossible even if germany was going to spend all their money there paragon and italy it still wouldn't be enough to to keep placing afloat 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.
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there they are polite enough to say oh we are going to do another round of quantitative easing although i said before work in the eurozone that. you know without even announcing a no there are german and america ministers distracting people by talking about that it doesn't want the euro bonds while at the same time the e.c.b. it is actually buying a wildly any any government bonds one takes. place i just mentioned so clearly no i'm afraid the c b is ruining the eurozone just as it's happening with the united. state. country. isn't really a place where you would like to invest it ok daniel it's interesting i'm bernanke he is known as an expert on the great depression of the one nine hundred thirty s. and you know and not to defend bernanke he or the fed in its policies but it least we had in the one nine hundred thirty s. i judge gannett political figure known as franklin d. roosevelt and he could create a consensus he could get things passed in congress you know we had
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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 he's. well a couple of things i would say first i would agree with what was just said that 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 had 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 exacerbated 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
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is that we do have gridlock because gridlock at least stops politicians from doing additional stupid things now and the long run gregg luck is a problem because we had desperately need to fix these entitlement programs this giant un kind of 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 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 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 there it's not it there's not a
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a monetary solution is a political solution and it has to have leadership in washington and i would say in europe if 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 that in the right place 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 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've 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
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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 invented costs in the economy and ultimately all that the 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 what joe biden was in china just recently to try to mend some fences i know that it was a basketball game fight but. 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
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and in the euro zone impacts china in a really really big way. first of all our personally i agree with what was just said about the euro zone the us and then about asians and some emerging markets under is really running to work and looking at the physical economy so that's what's happening in china they are focusing on technology and physical production wanting to work running two programs 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 they are focusing on the production of course china now is clearly really worried about what's happening in the united states and europe they're not only because it's a 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 they're actually is they're buying treasuries so far because they don't want to let the u.s.
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color clear and all of a sudden before they replace their ex-partners their local consumer market but that's what they have been working on clearly and i'm sure they would also have reminded by then that. they are quite 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 their issues they have some local government in china something that also talk a lot of odd but if your post was a national debt they have much less. of a problem than the rest and also tax revenues are quite strong so we have well hopeful that a lot of the that's not in the united states or in the eurozone really having a chance to survive this crisis and we're getting out of it relatively unscathed. if he has a q e three it's been hinted out there and if we do have the meeting coming up in september if he does go down that path continue down the path of quantitative
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easing there's actually a level of desperation in your mind. bernanke is a political animal and he wants to keep the white house happy so do i think q e three is possible yes heck we're looking for here 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 hugo chaves anything america's problems and for that matter europe's problems are in the real sector of the economy and 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 teacher 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 canned goods and ammo. ok . same question to me if he does go down this path of q e three and we continue
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with this political deadlock in washington there's no reason in the world why going to come to an end anytime soon we've got the bernanke saying capitulation you know i do is 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 poll let it go would a disaster he's supposed to be looking after the economy the last thing you 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 undocked something which obviously helps. i don't interfere martin so that no one had ever heard of suddenly appear for what looked like a very mediocre democratic party and beat an incumbent president more than twenty years ago and right now like 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
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and rescue the economy or at least to keep his political masters happy and the problem with daddy's 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 hoth 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 and hong kong warsaw and in washington and thanks to our viewers for watching us here r.t. see you next time and remember proscar rules.
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