find can some of that greece may be heading for default saddlebreds gargantuan. and staying with the euro crisis peter about his guests in cross-talk house course next for the current supporter which now seems to hold the e.u. and even the world's economy to one. oh in the welcome to cross talk i'm peter lavelle the euro a currency in crisis in an unknown future but is there a silver lining. ok let's take the terman if there is a silver lining to the euro crisis 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 obituary for 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 guy's matthew first just in power it absolutely i mean the next thing is germany has the right of beginning 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 the amount of political capital which our 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 combine euro bonds are going to try to have a single fiscal authority and yeah i'll give. a lot more

a lot more to go by the bones of the market whether that's a good thing is much more debatable whether that's going to work i don't think it will work. 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 picture. the 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's 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 why 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 enough to run the government deficit enough to help the people but to give more money to the banks to bail them out that is rotten that is the central bank lobbyists 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 and 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 extent is just full momma water the real problem the underlying

structural problem that it's 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. i 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 wanted to have evidence that if there were a need to have fiscal school unity we have to have one fiscal policy for the entire euro zone 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 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 think mission fictitious don't look here let us make a whole killing off the government ok we think that's a good judgment go ahead with this i take it out of this and i think there's a there's a lot in there but i think you're giving it too much for an american perspective you're talking about you're talking about a lot of the problem that i think that the world economy in general has a problem of its financial sector and its banking sector and that's true pretty much way of you know that's true in the us then that'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 problem by the fact that the currency itself is dysfunctional these economies are not convergent and you have too much debt in the political countries have too great you have the balances in the dust of development is on the when the different countries and the money comes the journalist will physically how does he will be. run by the banking sector you. you'll have the most right wing government you will turn your append to a banana republic if you have fiscal unity run like ecuador and the like but i really 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 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. the point that i want to know about these gold is actually risen on the miniature amy is that they thought they could solve this problem by just ignoring it by looking the other way and have germany and france and the scandinavian countries dump their surpluses into the maintain reasonable levels of employment and that somehow they would eventually be able to repay the debts that were taken to proper you know 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 you don't 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 you need i mean it is kind of a fast opportunistic are you need the greek economy structural reform of course you need structural form anyone can see that that's been true for a long time but already greece can see if you can you can do it at a time when you have an economy contract to get 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 and you know the image of us. and that was a great wasn't much fun but it did the economy a lot of good but the economy was a couple of years but economy was contracting a bit but on the whole the economy was expanding quite fast i thought you only had thatcherism under tony blair we are you know we can't be carried out of if we still have a we we got a white but my point is you can have factories and you can have that kind of structural reform in the economy was shrinking at six six percent or seven decide to you know 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 puppet you can have an economy that's growing two 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 that 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 hot on the ground but to have that kind of intense contraction just because it's not as many as 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 in the 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 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 sum total bank create 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 no. you give us the money and by the way if we know you don't have it let's sell off the pebble 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 oppose the bailout for the banks in two thousand and eight and similarly in europe they're going to 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 polls for the bank in europe the population of so deadened by your rotten bankers in 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 the if you're going to talk a little who are going to go over there we go after the break after the break we'll continue our discussion on what to do with the euro stay with our team.

decades back in tottenham one thousand miles from the north pole. the arche keep mistaking you on a trip to spitzbergen on compelling go. where twenty years after the us was ours collapsed the soviet way of life is still going strong. for the world's northernmost statue of lenin presides over a ghost town where the sewage heritage has become a tourist site for those overcome by the cold war in the style of. the close up special edition on our t.v. . like millions of americans i've lost thousands of dollars in retirement funds and i haven't had as bad as many that's not just about them it's about me to.

me man brad man ya gotta show. santa. and say i am. santa. and g.-d. . needed. but now he. says this is my film i get the last word this financial crisis will not be turned off like a light switch. 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 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 in energize them do you think matthew. you know the key political problem is that is that what needs to happen economically as 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 and impossible it's going to be the journey it's not the way to put it to put 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've sort of americans go back now to criticisms as i would of the u.k. the political system but it's you know it's roughly speaking a function in a functioning democracy where as europe just just just isn't there is no mechanism by which for example the european central bank or european treasury ministry of

finance basically setting coming fiscal and 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 contain. news 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 differ is that possible right now because it seems that the inclination is to go in reverse the problems even worse 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 a 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 dismiss the level of arrogance by policymakers in this particular issue is extreme and it's not even

a 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 find that's what's happened with the electorate is because he's often charged with being a leftist by murdoch media and they assume that he's very left 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'd 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 there is 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 would the european currency the euro fits into. a slide disagree with the perspective here but i think what confuses people is you had you

know the financial crash of two thousand and eight 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 got the same problem but they're not really i think i think the goddess of whether you have the financial or the credit crunch or the financial pressure to fascinate 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 league was because you had a massive increase in budget deficits to deal with a financial crash which kind of accelerated the problems of years i but i really think i think that different problems i think after analyzing and lies and separately just on the political point i think one of the big worries about a year a crisis is that it opens up to really quite unpleasant far right parties because they're in the maze because here i was a year ago because they're so dysfunctional because it's a bit like the gold standard in the one nine hundred thirty s. that was creating a massive deflationary forces that 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 of the fascist party they are

a nationalist party and influence is the only mainstream voice that mainstream main . twenty to twenty three percent of what you know is twenty three percent of the vote who would have on its head would be misuse not mainstream in the sense of acceptable views but it but the crisis making very right wing policies you know into the mainstream and that's quite worrying and it's one of the aspects in which it's 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 cum country for fifty years there should be a vote ninety percent of the people of opposed 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 where the independent some bank nobody votes for him is going to hold by the only it means drop you democracy let's have an oligarchy that's what an independent central bank means in the long as he will have some run by right wing bankers who will say we want to bring in an anti labor economist like the lady in francis of the m.f. we 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 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 of the real economy of capital and entrepreneurial energies that would have gone into into. 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 them so 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 you're going to jump in i don't know 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 got a year at the year i was a currency you know it's kind of it's kind of cry similar to the way you know the sort of ha ha ha ha he goes down to the only nine hundred thirty s. was working that he imposed you know survey the deflationary policies on countries that could could survive it but 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've used 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 it 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 the most of the right of the eurozone

in referring to old europe the way to go. one point which is the best far too scared of the losses of the european banks what would suffer if you. for example i mean it's obvious to anyone that greece should default on its head 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 people in the balkans who are mostly kind of hedge funds and they know that i'm going to. be present on the year i know that i've been lucky to get fifty cents on the year right. but that's a scared of the losses. and there's a bank of the rest of it 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 the same issue 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 a right was canceled the public would actually benefit from this if the banks would take a haircut but just to get back to the point 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 their 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 idiology that's present and that's how the system runs in a very parasitic fashion you have a column of this 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 where jeff 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 debt the banks know very well that they can't repay the debts what they want is now foreclosure time is arrived oh you can't pay give us the power. give us your water supply give us your tourist land this is the big grab and that's finances now doing military wasn't are you thinking of that kind of faith in smith even give you the last word that kind of is that kind of finance destroying the real economy. well i said they said it in the us i mean the assistance that peripheral countries can be paid at days 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 that's 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 is being inflicted on these countries and it's it's completely crazy right it's really i don't have all ended on a very pessimistic note always happens when we discuss the hero i want to thank my guests here attending the global policy for me and yet us love it thank you very much and thanks to our viewers for watching us here r t c n x time and remember

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