all right good evening and welcome to the capital account i'm lauren lyster here in washington d.c. today police arrested occupy oakland protesters and cleared out as world wide protests continue over the global financial system and the occupy wall street protests began four continents proof for one economist that economic leaders have gotten it all wrong. you heard a man fresh from occupy sydney we'll hear from economist steve keen news coming to us from down under meanwhile u.s. housing is still in the doldrums and consumer confidence there with it home prices in twenty major cities ball more than predicted and consumer confidence slumps to its lowest level since the spring of two thousand and nine when mind you the u.s. was in a recession this as us president barack obama announces efforts to try to revive

a sinking program that aims to help underwater mortgage borrowers and in response mortgage bonds plummet to a new six month low meanwhile european finance ministers cancel a meeting on the debt crisis scheduled for tomorrow casting doubt that a grand plan will come to weak u.s. lawmakers met today in congress to talk about the eurozone crisis themselves will break down the lesson they should be taking away and after wall street solved profits a rebound in two thousand and nine thanks largely to u.s. government aid and bailouts some big banks now are seeing profits think executives are reportedly warning about a great depression or the end of street but yes but it's not suffering according to analysts banker bonuses all right let's go to the capital account.

occupy wall street protests spans four continents now and it's not just average folks frustrated with the global financial system and the leadership it is economists to listen to that's. actually. going to. they have a bet with steve keen an occupy sydney so what does that mean as we see policy leaders trying to find solutions as we speak to the eurozone debt crisis or as we see you less leaders come out with new plans to try to help say the housing market here in america well economist and professor dr king himself is up early in

australia to talk about it all with us his new version of his book did bunking economics the naked emperor dethroned is on sale in the us today but you can get your preview right here professor king thanks so much for being on the show a lot of news on this all right so first let's start with europe because we've heard a lot of bad news today in the sense that the leaders will still need tomorrow but now people were all up in arms this morning because e.u. finance ministers won't need everybody's worried that we're further away from a plan to address the eurozone debt crisis i want to know if you think the girl's own leaders are on the right track with their solutions to begin with. another has to be on the tractor was going off the edge of a cliff this is like watching a bunch of women following their own of the bus all they're doing really is trying to solve the debt crisis by creating more deaths now crowd public good does to some extent character private does that they completely avoid him you should do this is actually initially and always will be fundamentally private that process so then

what do they need to be doing differently and your view of. fundamentally when this is what i brought up i'm so pleased to see the new york eye wall street movement coming in and being around this politics and government by the interest of the creditors and the lenders and that was exactly the same situation the gators the financial process in the first place so they're putting putting me a little in the financial system at the behest of the lenders is what gave us the process and what they're trying to do in the aftermath of the process is rescue those same lenders unfortunately those lenders lent far too much money irresponsibly they have to take massive cuts the ones being talked about grieving for greece are only beginning and that's what they should be organizing and they should be trying to resuscitate the real economy with the deadest proper time primarily lives rather than putting austerity on top of it of course has been a lot of austerity measures passed in greece but at the same time we have the reports that now add the people that are negotiating the euro zone solution are asking great bondholders to take i think the percent haircut now this is far

greater than what was originally agreed upon which was around twenty one percent i believe so is this a step in the right direction in your view to punish the lenders. yes it is. one of the things that on average ridiculous about all people's comments about is being irresponsible bought a borrow a cigar or two much money in the ocean to where do you program for it and this is a major i mean people have against rescheduling get it both in america family lenders as well as the european states. this is like not at all should not what this signing when i signed the document put together by a thousand lawyers and written up with instruments run by two hundred ph d. students. his bet is not a thesis contests but once you should have known what they were going through fundamentally the lenders clearly they didn't and they have to take a haircut and so long as the the private debt levels remain silent on the sun only individuals who oppose this out the consumer collapse we're seeing in america will

continue and we could be talking about two decades worth of bliss so we have to shift politics from being in favor of the lenders to being in favor of the debtors to decades of what exactly are you protecting. well if you take a look at japan as the best possible model what's going on right now i had a debt finance kabul stock markets and real estate leading up to ninety ninety literally the very last day only do not in ninety nine and it did in good stead with us in japan in a two decade long slump because they thought i also address the behavior of the banks they found to shut down the zombie banks write the debt off cetera et cetera exhausted american politicians and problems including ben bernanke were getting them back then what are we doing now trying to keep the zombies a lot of now we're doing it from a position where in america's you know good level of profit big ridge three times america's annual judy. and that is one point seven times as high as the debt level triggered the great depression so talking to begin the process now of them now the

great debt crosses the great depression took something like this to news and a will to get the devil hills back down to fifty percent of today i'm talking profit. if we sussed starting from the high level of that we close a longer period of private sector to leverage and while that continues of out of aggregate demand we normally should averages for contribution from increasing debt financing genuine investment won't be there and this continued under-performance of the american economy and ultimately global economy will continue so if i said choice between twenty at least twenty years i would say holes to provide a lot of of a slumping economy or addressing it but we have to change the politics and look at it as on top i want to get to that and you think a going back to the great example of that that's a good move to ask for a larger haircut third rate bondholders but my question to you that is what happens to greek banks that hold so much to with debt but if they are awful. they need to be restructured right we companies got to go about us and they go into receivership

they reorganize the rest it's old and it's taken over is going concerns that of one of the profit group that's a common cause event in a cow. it was economy if it didn't happen we wouldn't have dynamism the economy in general has when it comes to banks that happens when their own small style with their non-systemic in it will do exactly the same thing that's regular out of the prada uses you'd know if a new cycle of banks that have been shut down for mortgage or various religions in america. we stop doing it when it becomes systemic and that's the trouble because we get to systemic problems what's caused the level of debt in the first place we have to say ok businesses them excel you have to do that at a systemic level and then write it off but do not lose that the deposit is lose their money the big mistake for the right to question was living that a lot of those in those banks so you just heard a lot of them talk to others money with them and that's why the process was so deep back then one of the reasons has been so deep this time around so we have to

fundamentally abolish large parts of the dish behind the money that was created by the banks in the last twenty or thirty years but fundamentally financed ponzi schemes wrought with real production so we're not about health reason is that when you talk about abolishing the debt are you talking about some kind of large scale debt do you believe or a debt forgiveness yes i am we have we we have had irresponsible lending has been an issue in given history. right back to the missile tony and pierrots and as michael as an obvious in this eclipse any unreal is knew more about mathematics than the finance and modern economists say because they saw that if they let this extension of growth and it continue alternately they'd lose their entire military for all speaker good to have gone to the had to have freeman sorting out their armies the solution of the missiles the new rules was jubilees and also wrong cuts for the debts of the lenders now i'm not suggesting alaska but i'm certainly suggesting you have to abolish it it should never be incorporated in the first

place it's real because of financial system in the process make banks to what they should do which is limits honest working capital firms and innovation license genuine industrial innovation not the financial engineering that got into the last two decades then we will see we will reduce the scale of the process and length that lasts but will still be in the process because this whole process to date is going along with the industrialization the cheekily of america england and australia and professor cane i want to get more into that because you've been talking about solutions at occupy signee as part of this larger occupy wall street movement i also sense you are so keen on what's wrong with past economic thinking i want to get your a settlement of something that dr larry summers said about the role of spending versus debt because i think we're going have something interesting to say about it so i want to ask you to stick around we're going to come right back we will have much more with dr stephen cain.

right now but a fun part this is time for word of the day where i break down a financial term or concept for our very smart of your but perhaps not a financial expert so whereas with a lot of the back. the bearer of the good news hello i'm doing well sober it's nice to see you all right before we get to this word of the day i think you have a little bit of a word of the day what is the color of your shirt i'm told it's it's in the pink family but it's not very purple it's pink mist mixed beads are all right well we're enjoying i'm sure our audience is enjoying your pink mist shirt and when they're done they can enjoy this because we are going to talk about deflation think it's over which is very important because i was just talking a little bit about that with my last guest when he was talking about japan and just

to give you another contemporaneous example the bank of japan is expected to release of core cast indicating the economy will remain in deflation for the next two years making it more likely the central bank will stick to its ultra easy monetary policy until spring of two thousand and fourteen so what is deflation exactly well let's look at the definition so it's a general decline in prices often caused by a reduction in the supply of money or credit declining prices if they persist generally create a vicious spiral of negatives such as falling profits closing factories shrinking employment and incomes and increasing defaults on loans by companies as well as individuals. all right so none of that sounds good but it's not always necessarily a bad thing for example for consumers deflation has allowed the price of computers and other technology to drop even though quality has increased so there is one bright spot but deflation is really a problem when debt is involved

a massive burden of debt like we've seen in japan and like we see in the united states and western europe as my last guest was just talking about now as deflation happens and prices and wages fall and does g.d.p. contracts the size of the debt doesn't shrink so that's a problem debt stays the same or grows but it weighs on whoever has to pay it the interest grows and it becomes. it's harder to tape to pay back and that debt reaches a point where it becomes unbearable and it eats into new economic growth this guy cannot hand hold up the weight of that debt that essentially it's what we saw in japan in the one nine hundred ninety s. and the two thousand you probably heard references to japan's lost decade and it's what many including our guest keen argue is a problem today and europe and the u.s. . all right to get it right here in the capital account because we will talk to dr steve keen again about occupy wall street what decade possibly have to do with that

and first their closing numbers. to. the world. what you. make of. the way.

please read to me. what the test nobody seems to know. that i never appropriate the face but part of the argument that they're being overly dramatic. are welcome back to capital account we are talking to professor steve keen from the university of western sydney now before the break we were talking about financial

crisis about debt now the reaction to it with occupy wall street dr king before i get to that i want to ask you about this this quote that stood out to me from dr larry summers the he wrote a fanciulla times yesterday and he said that the central irony of financial crisis is that well it's caused by too much confidence too much borrowing and lending and too much spending it can only be resolved with more confidence more borrowing and more lending and more spending so this is totally contrary to what you're saying that you can't solve debt with debt so what is he missing here. he's missing that when in guy i'm like most economists he has no knowledge of how in midstream and this he argues that if you capitalists economy you get very wrong find genuine what you michael shear in and distinctly the true creative destruction but you have ponzi investing on top of that with people borrow money to gamble and assets

process and drive them up that you share prices if you're serious and booms and busts where you ratchet that little time and you get into i'm on across not going to call a not being not use in america or i'm not across is that what you're in now and then you get out of that are recovering and you then have a rise again in the ratio products and jaded. but you finally get to a point with some much that it's taken on the you simply cannot repeat that process of rising did and then from that point on it's all down hill and that's the great depression now larry sonna wasn't an order nor was a lot of posts a lot of experience it right to question but that wisdom is what you can question in your definition of. to go from from within to shop and he pointed out you get a certain level but it's so great if you simply controvert on the process of debt is reducing it to little. actually drives the economy and demand down and it happens happens there in the decade sun's world is drastically reduce when do we reach that point where the burden of debt in say the united states and western

europe is death so much that it triggers a great depression. i'd say we hit a dead level of debt was pushing us no direction on the moves in the early two thousand and one of the great tragedies of the looting neoclassical economists from new colony is that as usual alan greenspan of late have been making jump in and rescue the financial sector and expectantly and charging to continue lending or to find another class a part of it was the lens so a driver stock will cost that much and that's why i think we're in such a big crosses because with no i don't think i'd better have probably human history a period where the level of private debt has been so much in the annual income and your annual production of the economy so we've got not just say a major cross not just on to the great depression but i think probably in the history of humanity will looking back will notice on a period when it was hurt and so on and fundamentally it wouldn't have got if it wasn't for all the rescues of straight will have been a q and greenspan so you ultimately that kid is the economic leader is very nice

period of bringing the modern world to the worst point with regards to debt. yeah and the integration is the good german speaking that ignores this is that this is our irony if you were actually causing a catastrophe by fixing something you don't even realize you're affecting when it hits you completely basra and this is what actually happened with the national cross they had no idea but a big mogul overlooked it not a good idea i feel a bit like max trying to explain quantum mechanics through maxwell again this is the second to go into the nonsense century when i try to explain to them that the level of private debt and the rate of change probably didn't match up and they have a blind spot that simply says well did it is a line from a person who's a cycle person is a borrower unless there's a major difference and it's a propensity to consume they'll be nomadic microeconomic impact out of it and i try to say look you look at a slice of time what matters is going through time or rawson

a little of it actually adds to it demand so if you have suddenly go from rising debt and fall in debt as we have done with this crisis you have a dramatic swing and aggregate demand that's the kind of what's going on now there's still not even looking at that because the blind spots it is don't consider upper level of a profit it doesn't matter. how crude and most recently in a paper in two thousand and ten i think i want to get in here because we are almost at a time but quickly you were at occupy i think we are talking about how economic leaders have gotten at ron do you think that something like occupy wall street can change any of that. yes my dear it's not necessarily the fact is going to try and rid but it is that is certainly dispersed a lot of your expression american or some with us or them stroke spring is happening is this movement and it's really signs of politicians who long of being afraid of wall street and in the pockets of world straight it's about time to go to try to look out like mine to do and you can help wall street out of the political spectrum so you're going to say really big one that doesn't but it certainly does

that has since the spring but that necessary political change and want to see what does come of that because one of the big argument that these protests if you've got to get money out of politics before anything changes and i don't know about going to change in the u.s. any time soon i certainly appreciate you coming on there so if that's a pleasure to speak to you of course his new book is available in stores in the us today the new version of debunking economics and we appreciate you being on the show that was dr steve keen. all right we have hit you with some really heavy topics throughout the show now we have some heavy topics but we will bring them to you in

a lighter way so we can end on a happier note joining me in the studio is our producer to talk about this all with major mitri kofi anna us and we were speaking a little bit about banks and how banks and investors should take more of a hit of some of these crises and this debt maybe they are but you're going to die when i tell you this so at a charity dinner in new york last week this is according to the wall street journal private equity tight knit stephen schwarzman drew a parallel between brian moynihan who is the c.e.o. of bank of america grace of america and his brother who incidentally is a deacon and missionary so. i essentially this is how he made the comparison to bank of america and the noble work of brian moynihan brother he said i hope we have a joke that we have a full screen. ok well you know he was saying that the deacon and the missionary

was in the same field as brian moynihan and their parents must be so proud to have two people they were both involved in a nonprofit under funded organization of course talking about bank of america and wall story come on. this is i think we're finally recognizing i think what happened was schwartzman had a slip up and he he really said what people in the banking community believe which is they have divine right just like the priests you know communicate with god and they're the intermediaries for man on earth bankers are now in a position where you're very have the right of communication with the supreme being and we just need to listen to what they say and do what we're told so who is the supreme being in this situation the federal reserve or lawmakers that bailed them out and buffett who gave bank of america five billion bucks it's anyone who's involved in money shifting cation of other people's money and it would be in the movie it's like anybody who basically makes them money from financial wizardry and

and that's what i think so brian moynihan qualifies lloyd blankfein you know i think you know it's ben bernanke is more like the unit of the harem he's really he's really more just a servant really for the banks the bankers are the ones that are doing the real work they are the ones blasting the guess everybody else. i mean the best part of this is that everybody in the room including i think mayor bloomberg got such a great kick out of that joke ok meanwhile i don't know if you'll get such a big kick out of this joke it's not a joke actually it is the new game available on x.-box three sixty that came out day blackwater it is a blackwater video game let me give you a little bit of a sample.

wow there it is bring it to life for the players so that they can join mercenary armies like blackwater sorry it's you know down the road it has like a thousand thousand times yes i mean this is group p.r. work for blackwater erik prince is really i think he's doing users from a favor cooperated with x. box and then you connected so this is the first i think f.p.s. or the first first person shooter of a rock water at least on the connect so kind of provides an interactive aspect for the blackwater good exposure for them those are trying to remake their image from the bottom so no that's terrifying i find it very ironic that this is come out just after president obama has announced that troops are going to be out of iraq u.s. troops there's been all of these reports about the civilian the state department

buildup and the mercenaries are going to be required in that are going to be in there were so this is a group so exactly so you know what they. were even worried about using the military for a farm to raise our our soldiers will just go straight. into blackwater use first person shooters as their kids up until eighteen then just bring them right into the private military drucker consumer direct to consumer they has emerged in the military to in the recruiting buses to try and get kids to join the army for most neris real quickly we're almost out of time but these girls look so nice they're twin sisters however they are duking it out over occupy wall street they are on opposite sides of the protest both are ivy league graduates but one is super impassioned about occupy wall street the front of the economic or the other one i believe is actually working on wall street or is a consulting firm a major financial services firm what does. this is like come from you know we've seen in civil wars before his brother against brother you know the civil war of the

union north versus the confederates and i think this is a kind of potentially this in bodies and incarnates the struggle going on in wall street and in america large you've got alternately international. war internets and consequently members of the hopes of the of the family some for equitable you know middle class existence all those. people ism banks rule all kind of bride want to have class warfare socialists against capitalists one of those is going to end up in the one percent it is right there on the same trajectory i don't know if i hopefully it will never get as bloody. that's the light no we're going to leave you want because that's what we have time for thanks for tuning in to our show please by all of me on twitter at lauren lyster for all sorts of insight when we're not on air and give us feedback on the show at youtube dot com slash capital account and go subscribe now and until next time from everyone here on the capital account i'm more listener have a great night. her

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