i think in a sea of debt crosstalk debates whether a financial life buoy is on the way it's coming your way stay with us. the euro a currency in prices in an unknown future is there a silver lining. if

there is a silver lining to the. and i'm joined by jeffrey summers he's an associate professor at the university of wisconsin milwaukee also we have michael hudson he is president of the institute for the study of long term economic trends and matthew and he's a financial journalist ok gentlemen this is cross i mean you can jump in anytime you want i'm going to be very contrarian we hears all through the media that the. the euro is already been written we're waiting for the funeral ok let's turn it all upside down let's take a look at some virtue out of tragedy number one this crisis could actually create a real european central bank it has limited tools now now give it a lot of tools what do you think about that guys matthew first just in power it absolutely the next thing is the beginning of the year is in deep deep trouble and i have to do something to try and save it and i think they will i mean that the amount of political capital which generation of european leaders have put into this

project means that whatever they can do they will do so i mean the next that they're going to do is they're going to go. and yeah. give the give the more a lot more power to go by the bones of the market whether that's a good thing is much more debatable whether there's going to work either if it will work it will it will be a step i mean it's a needs political will to do it but if you're going to keep the euro go all the way because what we've seen over the last two years but the pick and particularly last few months is just half measures we have lots of political leadership no one really wants to make a political move but that's what is necessary political leadership. there is a false way of looking at the problem so far of course europe should have a central bank that can create credit commercial banks create credit all the time on a computer keyboard the central banks were founded to create credit to fund government deficits that's where the bank of england was founded that's why the federal reserve was founded but the banking interests in europe crippled the central bank

they didn't want to central bank to create credit they say we want governments to come to us and pay us interest and we want to rip off the economy don't have a central bank don't have a public option let us raise your cost of doing business give us the business so of course there should be a central bank unfortunately the way in which you just mentioned the central bank to be perform a function is what it looks like it'll be the central bank is enough to create employment not to run the government deficit not to help the people but to give more money to the banks to bail them out that is rotten that is the central bank lobbyist and that shouldn't happen and if that's so they create a central bank then good for the europeans for saying to hell with angela merkel. i have to concur with michael on this i mean i think essentially what we see is continued rent seeking ever since the lisbon agreement and treaty what we've seen is really going back to maastricht is an attempt to liberalize into privatized

credit creation so we have this rent seeking from the real economy to the financial sector and i don't see things changing and i think all of this to a certain. just on the water the real problem the underlying structural problem that has not been fixed is how do you really recycle capital through the system from rich countries to poor countries and how do you do that in a way but. that wasn't the purpose of the euro zone of course it was it should be now that is really we need to go back to keynes and we need to understand that in order to have any kind of meaningful either international trade or real european wide trade you need national development or you guys are jumping ahead of me michael you and you want to have us that is the word we need to have fiscal school unity we have to have one fiscal policy for the entire years and that's the only way that's going to happen should that happen jeff used the word rent seeking and your audience may not be familiar with that because it's a technical term rent seeking that means get a free lunch or

a privilege right now central bank commercial banks can create credit on the keyboard and they say let us do what are responsible but if a government does it they said look at nineteen twenty one thousand nine hundred twenty one and the hyperinflation happened because of german reparations and debts it was international. the europeans who have let the commercial bank lobbyists shape the discussion into a kind of fake mission fictitious don't work here let us make a whole killing off the government that's a good judge saying go ahead with this i take them out of this and i think there's a there's a lot in there but i think you're giving it too much of an american perspective you're talking about you're talking about a lot of the i think the world economy in general has a problem its financial sector and its banking sector and that's true pretty much way of you know that's true in the us then it's true in the u.k. there's very united states but there's particular problems in the year as i did which is the currency has been put together in a dysfunctional way because it doesn't it doesn't work and it's not particularly

a problem about commercial banks ripping off the rest of the population that may be going on as it goes on in the rest of the world i mean it's a. by the fact that the currency itself is dysfunctional if these economies are not convergent and you have too much debt in the political countries you have the right balance in the industrial development is on the when the different countries and the money comes the gentleman will physically how does he will be. run by the banking sector you will have the most right wing government you will turn your append to a banana republic if you have fiscal unity run like ecuador and like you want to empower the central bank shouldn't be isn't it better to have school unity here's the problem the central bankers are brainwashed with tunnel vision to do what's good for the commercial bankers and if you have a central bank who wants to screw the economy to help the commercial banks then you don't want them to have power you want to take them out in the backyard and very politely say there's nothing personal but we've got to assure you it will be very personal jeffrey with just getting back to matthew's point he actually

inadvertently return to my point which is that we have this divergent development you're absolutely right between the south and the north for the most part and the only way that you're going to address that is to figure out how you're going to meaningfully develop just you just hit the point that i want to go back and it's called is actually risen on the mediterranean they thought they could solve this problem by just ignoring it by looking the other way and have germany and france in the scandinavian countries dump their surpluses into the maintained reasonable levels of employment and that somehow they would eventually be able to repay the debts that were taken to provide to you all how do you get their message and go to ok thatcherism on the mediterranean i think we all would agree with that here but i don't know what the time frame would be a decade two decades but you would have the same you would have no reason to even have a snowy slope you have to have a slippery slope right there you would have ok fine over the next twenty years you're going to help us clean up our debt our infrastructure issues can you change

their cultural attitudes i mean i agree with that it gives the time gives a time frame for the mediterranean countries to get their act together but. should someone be paying for that uni i mean you know it's kind of a fast operation is that because you need the greek economy structural form of course any structural form anyone can see that that's been true for a long time to anybody greece can see if you can do it at a time when you have an economy contract six or seven years i suppose what i mean i you know i grew up i grew up in the u.k. when we had real factories of needed a regional version and it was a great wasn't that much fun but it did the economy a lot of good but the economy was a good drag you had a couple of years but economy was contracting a bit but on the whole the economy was expanding quite fast i thought you had only had thatcherism under tony blair we are you know we can't be carried out of if we still have it we like it a father got a wife but my point is you can have factories and you can have that kind of structural form in the economy was shrinking at six six percent seven percent a year i just i just think it's impossible it's too but it's too much to ask of a population you can have in a popular you could have an economy that's growing two to three percent

a year is still a big ask it's tough for people people lose their jobs people have to change the kind of work they're doing industries have to change it's very very difficult it's easy to sit around a t.v. studio and say you have structural form is actually hard on the ground but to have that kind of intense contraction just because it's not going to let these point is a good one though again about diversion development but the problem is that unlike england you can't have all of east and southern europe turn into an offshore financial zone which essentially london was in london you case economy so it's a fallacy to suggest that you can spread the small where you can it is a beggar thy neighbor policy in the u.k. has been very good at it london has been exceptional at it but not everyone can do it the other problem that you have with southern europe is that actually in terms of the percentage of g.d.p. the rates of taxes collected are exceedingly low unlike northern europe so this this is where we actually need to before i mean greece in some respects is far more democratic than united states the united states only rich people avoid taxes in greece as everyone. so this is what we have to stop in spain as well. all these problems greece spain portugal these all used to be dictatorships and the

dictatorships are left a legacy of not taxing the rich. no you made the very good point look we're in a recession now you'd think that for any civilized country not europe but america or latin america or africa for a civilized area they would say with a recession you would want to have the something bank rate credit to run a deficit to build infrastructure and have employment but in europe they say no you have a recession give more money to the banks we caused the recession now. you give us the money and by the way we know you don't have it let's sell off the pedal the parthenon sell off the water systems privatized everything and let us rip you off all over again now it's time for the big rip off and that's what their idea of a central bank is and this is wrong and it's evil and that european voters see this in america eighty five percent of the voters opposed the bailout to the banks in two thousand and eight and similarly in europe really do the average american is

the average american have a lobbyist in congress no but the republicans in congress knew that the polls were so negative that they couldn't get elected if they ended up the shells for the bank in europe the population is so dead and by your rotten bankers and europe and your rotten media here that they actually the banks think they can do whatever they want and the voters are smart enough to say well we can have a referendum like they had in iceland over whether to bail out the banks the only way we can do is throw angela merkel out and if they had a real election over this and say let's have if you're going to be able to talk a little bit more about it and go over there we get after the break after the break we'll continue our discussion on what to do with the euro stay with our team.

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twenty two look you talk of sky park in the sky now so it's. welcome back to cross talk i'm peter lavelle to remind you we're talking about the fate of the euro all right gentlemen we've talked a lot about finance and banking let's talk about the political angle of this how is this euro crisis affecting political discourse do the extremes and look at the left first i mean it is the leftist party a lot of the steam been taken out of their wins because of what austerity is supposed to mean or does it even energize them do you think that. you know the key political problem is that is that what needs to happen economically is to have a much more powerful european central bank and a common fiscal policy but there's no there's no political support for it so

leaders are absolutely stuck that you know you can say that with your economic advisor ok so you do think it's necessary but it's politically impossible it's going to be the journey it's not the way to keep it keep it politically desirable because there's no political control there's no common you know european political culture you know is the united states you have you know a common country you have a common language of a common media i mean people vote on the issues i'm sure i'm sure i was sort of americans go back months or criticisms as i would have the u.k. the political system but it's you know it's roughly speaking a function a functioning democracy where you have just just just is that there is no mechanism by which for example the european central bank or european treasury ministry of finance basically said incoming fiscal tax policies can have any kind of any kind of democratic legitimacy and it's got to fool that there needs to be more consensus here but as this crisis continues there's less consensus because the germans will say hey we've done enough more than our fair share but what is really necessary is for some kind of political consensus i'm going to stay away from the union right

now we can get there later but there has to be a political consensus is that possible right now because it seems that the the in. the mission is to go in reverse the problem is even worse yet i mean unfortunately the social democrats whether it's in germany or in any other european union country operate under thatcher's maxim that there is no alternative they're not acting as social democrats and they're not imagining any different policy moreover when the public actually does begin to engage these issues they're charged with acting in populist ways and they're just absolutely dismissed the level of arrogance by policymakers in this particular issue is extreme and it's not even permitting any kind of meaningful debate to take place the discourse that very well when you think about it this is exactly the problem. in one hundred years ago nobody could imagine that the social democratic and the labor party are now to the right of the conservatives the left wing is now the right wing it's the left wing parties that have led the fight for privatization and to turn over power to the banks and.

they've somehow been taken over by the banking sectors in their socialist the name only we have to call them faction in america if i can just interject with one more follow point what it's resulted in both in the united states and in much of europe is to confuse the electorate massively so for instance the united states president barack obama who i actually voted for and gave money to has acted in a very center right even right wing fashion when it comes to finance what's happened with the electorate is because he's often charged with being a leftist by murdoch media they assume that he's very leftist and now they need to go very far right and that's why i think you see this oscillation back and forth within european union countries between social democratic governments and conservative governments the electorate is just terribly confused and they just don't see and also you know you know i remember watching a report about a woman in iceland that had a wonderful small business of her own she made designer clothes specifically tailored clothing and then she would during the crisis in iceland she suddenly woke

up and found out she was bankrupt and she didn't do anything wrong at all. she did everything that she was told to do well what i'm getting at here is that they're understanding this crisis and how. we got to it because i think what michael's getting right here is that it's more like banking fascism here but it's been taken completely out of the economy we don't this is not an economic crisis it is a banking crisis it's a financial crisis and how we the european currency the euro fits into. i disagree with the perspective here but i think what confuses people is you had you know the financial crash of two thousand a day and you had the credit crunch and all that stuff which was a global problem and then you have the euro which kind of came along soon afterwards about two thousand and nine because they happen to happen at the same time people sort of think that the same problem but they're not really i think i think the goddess of whether you have the financial the credit crunch or the financial pressure to vaccinate i think the euro because it's a dysfunctional currency because it was badly designed would it would have would

have created all of these problems i just i don't really agree that it's a problem the only way they were really leg was because you had a massive increase in budget deficits to deal with a financial crash which kind of exaggerated problems of yours i but i really think i think that different problems i think after analyzing and lies and separately just on a political point i think one of the big worries about a year of crisis is that it opens up to really quite unpleasant far right parties because they've been amazed because here i was a year ago because it's so dysfunctional because it's a bit like the gold standard in the one nine hundred thirty s. that was created massive deflationary forces of austerity which opened up which opened up a lot of opportunities for the right and in some degree the same thing is happening in finland with the truth not a fascist party but they are a nationalist party marine le pen influence is the only mainstream voice that when i was at mainstream when they strip. you twenty to twenty three percent of what you're in there is twenty three percent of the ten would be mainstream in the center. but the crisis is making very right wing parties you know in the main into

the mainstream and that's quite worrying and it's one of the aspects which is a bad idea if you want to go for your point about iceland is absolutely correct look at. the situation with the social democratic government of iceland the prime minister wanted to repay all the bank debt making iceland bankrupt for fifty years turning iceland into what ireland became the president who only has the function of signing off said if you're going to bankrupt the country for fifty years there should be a vote ninety percent of the people of opposed to what the social democratic government is doing because they didn't want to all be plunged into the bankruptcy that you've just described she tried to do it all over again and again was rejected now this is in a nutshell what happens with the a central bank because you're told in europe the big lie that a central independent central bank is the hallmark of democracy but an independent some bank nobody votes form its control by the only it means drop your democracy let's have an oligarchy that's what an independent central bank means in the long

as you have a central bank run by right wing bankers who will say we want to bring in an anti labor economist like the lady in france who set of the i.m.f. . and we want to be anti-democratic anti-labor and you say that's the hallmark of democracy how on earth are you ever going to have a civilized to suggestions democracy in the euro it is a toxic mix very much so i mean essentially were dealing with a neil version of plato's republic being played out in central banks i mean it's absolutely terrible there is no democracy to just follow up on a point that you made you know i would argue that there is a real structural dimension to this crisis in other words financialization has starved the real economy of capital and entrepreneurial energies that would have gone into innovation previously and as a consequence of that we're not seeing the deployment of as many innovative technologies as we perhaps would have in the past nor the development of the i

think that you're right to a certain extent it's a false crisis but on a deeper level there is some real dimension to it as well going. you know i'm not a bit i mean i agree i mean if you're a general global problem of a financially dominant you know financial services about how bad a banking sector you know but i mean that's that's true ever but i come back to what i said i think at the year at the year i was a currency you know it's kind of its kind of cry similar to the way you know the sort of ha ha ha ha he goes down to the early one nine hundred thirty s. it was working that he imposed you know severely deflationary policies on countries that could could survive it i do think that's a separate issue what do you hate anglo merkel so much i don't hate her it's the fact that you've been beating her up although there are the programs she has bought the banking myth she says we have to give money to the banks and make them solvent if they lose all the money in the bad debt make them good you use the word financialization she doesn't she thinks that the economy needs bankers to run it and to make it work but the bankers product is depth and the reason we're in

a crisis is that the debt crisis because the bankers have created debt irresponsibly she says it's not the government to tell banks to be productive be parasitic that's the free market rip us off hey that's the free market our job is to give the bankers enough money so that when they make bad loans they can do everything they get paid and we're willing to sacrifice the economy year after year we're willing to sell out so what merkel is is an american politician she can deliver her constituency to her campaign contributors and if that's the kind of politics you have a new europe then the american government is also in the right of the eurozone in referring to old europe the way to give it. one point which is the best too scared of the losses of the european banks what would suffer if you know for example i mean it's obvious to anyone that greece should default on its debt yet one hundred seventy percent of g.d.p. it has an economy contract to use have said yeah there's absolutely no way it could be good to repay its debt it actually if you talk if you talk to the people who are

now in the balkans are mostly kind of hedge funds and they know that i'm going to get paid a hundred percent on the present on the year i know that i've been. to get fifty cents on the year i. settled something about but that's a scared of a lawsuit sorry to be empty and there's a bank of the restaurant that allowed it to happen and it would be much better for everyone if they had the peripheral countries to default and then if they need to rescue. you could have a debate about afterwards if you. were going to be if. everything is above board and everyone can see the figures be much better and we have a machine with sweden and a lot of course the swedish banks were terrified as was the swedish government default and i think you're absolutely right matthew we need a debt write down we have to stop maintaining this fiction that these debts are retail they're not but just to just take a huge haircut everybody will know what. the public would actually benefit from this if the banks would take a haircut but just to get back to a point made i mean i think what he was describing was a kind of

a functional outcome of the system michael has used an analogy or metaphor before they're rather like and that is of a parasite that actually convinces its host to act in ways that it wants and so we have this ideology that's present and that's how the system runs in a very parasitic fashion you have a column of those who actually control intellectual production and politicians pick up on that and i think many of them think they actually are acting in the public interest so we're geoff and i disagree with the europeans is that we're free marketers we believe in what adam smith said adam smith said that no government has ever repay its debt and he was right and we believe that the pretense that governments can repay the debts the banks know very well that they can't repay the debts what they want is now foreclosure time is arrived or you can't pay give us the parthenon give us your water supply give us your tourist land this is the big grab and that's finances now doing military with that kind of finance methods and give you the last word kind of kind of finance destroying the real economy. well i

said they said it was in the us i mean the assistance the peripheral countries can repay that day's is absolutely catastrophic for these and for these economies i mean i think you know people just need to look at the figures of what's happening in places like greece and not just the most extreme example the same things happening in portugal and spain you know we've seen recessions in the u.k. the united states but this is a nine hundred thirty style recession that's being inflicted on these countries and it's it's completely crazy is really. very pessimistic not always happens when we discuss the hero i want to thank my guests here on the global policy forum here and yet us love it thank you very much and thanks to our viewers for watching us here r.t. see you next time and remember cross talk rules. the

relation is for mutual benefit. the resolution of the syrian crisis to stand in the way of political and economic. and to find out whether or not prime minister david cameron could have been a k.g.b. agent joined me for details from the. national grid. with the help of russia. triggering a new wave of protests.