all right good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. the big question is it a levy coming the next casualty of the eurozone debt crisis gone yields when the seven percent threshold that markets consider unsustainable stock markets all on our investors cutting their losses and just looking to pillage now whatever's left of these national economies meanwhile the global economy be headed for a lost decade and if you're a u.s. taxpayer we'll explain why fannie mae wants close to eight billion dollars more of your money fannie along with freddie mac. or of course the mortgage giant that the u.s.

government took over during the financial crisis in two thousand and eight now penny has lost billions of dollars recently from bad derivatives bets new while the u.s. is of course saddled with close to fifteen trillion dollars of national debt already and today u.s. president barack obama signed an executive order to shame a little off the top by cutting federal so wide but would shared swags sacrifice mean say parting with one of his private jets you can decide let's get a capital account. all right maybe you notice i don't know how you couldn't help but notice if you've been watching any news today that the dow was down one point four hundred points

today it closed down three hundred eighty nine points this is a big drop helping to explain it today the ten year yield on italian government bonds growth well above seven percent going as high as seven point five percent at one point during the day now this is the level why they considered unsustainable and it makes it increasingly likely that the italian government will become priced out of the bond market it's simply too expensive for the government to borrow in italy would either need a bailout like those negotiated for other pigs nations or face the d. word default now this is the level in the case of greece and ireland i want to remind you that these nations asked for a bailout that came after fifteen to twenty days in the first countries in portugal held out for two months until getting there after their going out to seven percent here's the problem italy's debt is more than those three countries plus spain combined this puts it well beyond the range of current i.m.f.

fire power to rescue and here is the other thing look what's happened to bond yields after bailout and some of those other countries that i mentioned greece. pretty sure they still went up very high let's look at ireland ok in that case they did go down but let's take a look at portugal. you can see that they still went even after these bailouts it didn't exactly calm the bond markets bond yields still went up the bond market is making the decisions here and to really highlight that adviser james carville at the beginning of the clinton administration was stunned at the power of the bond market when he realized how much power it had over the government and he once said if he came back if he was reincarnated he wanted to come back as the gone market because you could intimidate everybody so i want you to keep that in mind because with italy as opposed to smaller countries too stakes are higher ok italy needs to

roll over some one hundred fifty billion euro of debt and the first four months of next year alone according to the financial times that's a lot italy's the world's third largest bond market it has over two trillion dollars worth of outstanding public debt and let's take a look at exposure to it from the perspective of banks france its two largest banks four hundred sixteen billion dollars you can see other countries are on the hook for hundreds of billions of dollars and billions of dollars two hundred sixty one billion for germany to give you an example forty six billion in the case of the united states this is their exposure to italy the question to as we're seeing this unfold we're used to seeing major bondholders exercise control of large corporations even taking direct control by replacing members of the board of directors but are we now seeing this model of corporate thundering being applied to

solving countries because what we've seen in response to the bond market all the things i just showed you the bottom are being dissatisfied with the decisions that are made with the situations these countries are and what we've seen is changes in governments to try to satisfy these investors first and derail the prime minister in greece now girl loose kone the prime minister in italy. the concern was that they couldn't put in place the kind of reforms to satisfy investors to satisfy creditor demands and so the governments were changed so that's a big question also what does this mean for everyone else as we could head towards what christine legarde just is warning today could be a lost decade for the global economy here to talk about all of this is former white house economic adviser doug campbell doug thanks for being on the show it's nice to see you so this is a yeah first question because just as recently as this summer you're helping to

prepare the president of the united states is daily economic briefing. i know you have opinions over what should be in things that were taken out about if you were preparing and today what would you think was the most important thing for the credit of this country to be aware of as he's dealing with all of us. i i see this the problem in europe is first and foremost it's a crisis of growth so i would focus on two key numbers one is how much the european economy has grown over the past four years and over this time the economy has contract by two percent the second number i would focus on is the european central bank's key short term interest rate is now at one point two five percent so in short monetary policy in europe is too tight there's a very simple resolution to this crisis and because there is a potential it is italy fails there is a potential for a layman like event. to trigger international financial calamity. so the white

house really does have a special role and responsibility to put pressure on the europeans and extensionally the european central bank to provide more monetary stimulus to the european economy they should be doing three things right now they should first of all cut their short term interest rate from one point two five percent all the way to zero this might have been enough had they taken this action in the summer but because they have waited they need to back this up as well with a large programs quantitative easing like the fed has done in the us perhaps two trillion euros with the idea being that you need to the doctrine of overwhelming force the larger the package is the less likely it is that will it will need to be used the third thing that europe needs to do is to the e.c.b. needs a larger inflation target that the higher inflation is in europe the more those past debts debt in italy is one hundred twenty percent of g.d.p.

. zero or one. which the core inflation rate in europe now is and these drugs are more difficult to pay back let's let me jump in here and ask you this though doug ok let's let's kind of break this down if you're saying that interest rates should be cut and they're already law let's be honest here why should savers pay for these countries that are overly indebted and for banks that over lent. so i don't see that i don't quite see things that way i think any time that you have nominal g.d.p. which is essentially real growth plus the inflationary anytime that comes in below where it is expected to be there is going to be problems with solvency both in the private sector and at the government level and that is essentially the problem that europe faces right now right. and honestly i think it would be good for everyone is

europe was growing faster even germany which is thought to be the powerhouse of the new europe. looks like it's on the brink of recession but recessions are to be honest and normal occurrence right if if countries are sick that's normal for them to get sick once in a while and obviously there's many reasons for them to be right now. right a recession every now and that is not the worst thing to happen but the the key feature of this recession is that it's gone on for so long the italian economy is no larger than it was in two thousand and seven right so i think the if you look at the unemployment rates in spain above twenty one percent and what's going on in greece the human tragedy is associated with high unemployment is actually in the pool of prolong the internet it is it is enormous and there's no reason for it. exceptionally given that it's within the e.c.b. as cowards have fixed things i think. you would want to look to the international

community to put pressure on the e.c.b. that changes way and that touches on a couple of things you talked about the slow growth we're just hearing christine lagarde head of the i.m.f. say the global economy may be headed towards a lost decade now we've heard the last decade comparison between the united states comparing the us to japan's last decade i know that's one that you subscribe to as far as christina started saying that about west. about the global ican. what some people read to mean the western economy do you see it possibly headed for a lost decade oh i think i think we are certainly we're already halfway there growth over the last five years in europe the us and japan has been very close to zero on the whole i think a lot of there's a developing countries are continuing to develop which is a positive development for india and china when you're going to continue to see is that as china and india develop and they need to develop it will put upward pressure on gasoline prices and commodity prices and then you'll have developed

countries central banks like the e.c.b. like they did earlier in the year responding to these commodity price inflation with tight monetary policy and as they do this that's how the last decades happened what the what the what we need in america what we need in europe and what japan needs as well as much looser monetary policy until we see that i think we can say that the last decade isn't one follow up for you quickly on that because you talked about the federal reserve and united states monetary policy how much looser it's been pretty loose and we have not seen the kind of gains that you would expect from this monetary policy even today federal reserve chairman ben bernanke he was saying banks are tight on lending to small businesses this is one of the areas that is supposed to benefit from monetary policy you can't force banks to lend any matter how cheap money is that doesn't necessarily mean that people are going to continue

to lend are continue to borrow it. right well if we go back and look at what solved the great depression what it actually was was monetary policy the sooner that countries you know nineteen thirty one thirty two nineteen thirty three the sooner they left the gold standard and you tell you their currencies the sooner they got over the great depression by doing more quantitative easing and simulate of monetary policies they can essentially do the same thing today as the works of print another trillion dollars worth of debt and use that money to buy long term interest rates it would tend to devalue the dollar and this would help us not exports it would put up or pressure on wages in the u.s. and it would make it easier for consumers to repay their debts so they can spend again the same thing is true for your higher inflation that europe has the easier it's going to be for countries like italy to repay their debts. so this is clearly the way to go that's what you think is the way to go i didn't get to get you what

leverage the white house has because they are then over and told finance ministers what he thinks and they said i get your own house in order before you come here and talk to us about this but i certainly appreciate you being here you also get inside expertise they realize that much i say those dead campbell because white house economic advisor. now we had to touch upon this story i wanted to bring you a quick report on it because of course we've seen this report that came out from a u.n. watchdog they reportedly has credible data on iran's nuclear arms ambitions it says they're gone has sought to design and research a nuclear weapon as late as two thousand and ten now we have heard in response and you can see right there talk about the west stepping up their rhetoric iran stepping up their rhetoric on that video you can see that now we have also seen

that we. israeli media and western media has speculated that it might be enough to prompt the jewish state to do what it is often said it might to launch strikes to stop iran getting the bomb also the obama administration has come out and said that it may push for more sanctions so in light of all this news i wanted to reach out to this fantastic energy analyst that we know because he is a phenomenal analyst and he harvard educated geologist he also was a former aide to the u.s. chief of naval operations he was also one of the lots of billions off of one of the deepwater horizon oil rigs so i wanted to know what would have an oil if there was a situation where the united states did or another country did something retaliatory to iran now i should first say that he doesn't think that the u.s. would bomb iran and also doesn't think there is a supreme national us interest it's imperiled by any of the developments in iran in

near or medium term but here's what he said and the event of combat against iran and initiated by anyone the straits of hormuz would instantly become a no go zone oil shipments would surely be delayed tanker insurance rates would soar oil prices would move in fifty dollar leaps from one hundred to one fifty to two hundred and likely two hundred fifty dollars per barrel now in the event of war it's obviously far worse he said people in economies across the entire world would be impoverished by high oil prices visible energy scarcity to commerce with governments would crack down basically it sounds like a total nightmare scenario so we just wanted to fill you in on that briefly today and still ahead right here on capitol hill go away because obama has executively order the government to cut spending starting with swag but what about some of his purpose i have a reality check ahead but first the closing stock numbers. into

a little more military mechanisms that do not work to bring justice or accountability. i have every right to know what my government truly you want to know why i pay taxes. but i would characterize obama as a charismatic version of american exceptionalism. all

right it's time now for word of the day where i breakdown up anshul term or concept for our very smart viewer but perhaps not the financial expert so where is our eyes because he had it i saw a little already i'm good how are you if you were going to do it which is my favorite part of the day as well oh warren new words every day i'm so glad thanks deborah thank you very much later all right. word of the day to day is derivatives and one reason why you need to know about them if you're u.s. taxpayer they help explain why more of your money is likely going to one of the

mortgage giants the u.s. government took over during the financial crisis in two thousand acres of this the u.s. controlled mortgage finance year will request an additional seven point eight billion dollars from taxpayers after salwar derivatives bets cause the company to record a five point one billion dollars orderly loss now fannie according to the fanjul times made some bad bets on interest rates which declined in storage lows during the three months ending in september so what exactly is a derivative this horrible thing evidently that is causing you money it's a contract between two or more parties whose value is derived from the price the underlying assets cited in the contract is now the most common underlying assets in food stocks bonds commodities currencies interest. rates market indices if that sounds confusing let me just kind of simplify it for it is our and originally they were done with something like corn futures ok so if you were a corn farmer you do something like this it's a corn futures a bet on

a future price of corn and this is a simple example of a derivative so this would be done to legitimately had risk by the people who bought or sold the actual poor life for example that corn farmer or for example coca-cola who perhaps needs corn for their corn syrup the problem is that derivatives have evolved over the years so that people with no vested interest and the underlying asset started to buy and sell these people like this guy trader. making them is a sign of bad and they weren't using them to hedge risk and stead they've been used as a way to take risk people can take huge bets they can then go sour which is speculation and it's become a huge market i will give you an example bank of america how many trillions of dollars does it have on its books and derivatives seventy five trillion dollars let's see that's more than the u.s. g.d.p.

by several times several times china and that you use it's more than global g.d.p. so derivatives are very complicated obviously but this brief overview should do enough to help you understand why they are important and can cause so much damage to. alright so we've gone through some of the serious stuff today now let's go through our take on some of the less serious stuff but still important. so dimitri kovtun as our producer joins us here in the studio as has shannon donahoe who joins us remotely from the control room all right guys so a lot of people have heard about american companies outsourcing jobs to india to

other countries like that. obviously hiring in the u.s. as and you know it's a difficult thing jobs are scarce so one solution is immigrants coming here to create jobs and that's what one indian man is doing who he's hiring one hundred people and one hundred days the c.e.o. of this company an indian immigrant believes that he needs to do something about this economy he's decided to do his part so is this a little like how the u.s. government was kind of trying to lure chinese tourists to come to the u.s. to spur spending now we're seeing immigrants come over to help with our jobs crisis is this what it's you know our last hope oh there's a funny story i mean i didn't know what you think about this you or your partner this one here you pick this one up. i mean i think it's awesome that he is coming over creating jobs and you know she said that it here already felt like thirty five

so as much as we can. so it's going to get it's like the people who are outsource are going back to in source. cycling of was i don't know i mean what i mean american jobs or jobs right or. you know trying to figure out what the angle was on that one i mean if it's a foreign company the money is going back to them it's just why can't we get american c.e.o.'s or c.e.o.'s of multinational companies to care about hiring workers care about serving their merican public as opposed to just shareholders well we graphics back to their you know i really hate this story is nothing that they will move on because they're not happy maybe like this one better because a swedish branch of a scandinavian lingerie chain come under a lot through any kind of fire from some employees they're not too happy because they have to wear tags just displaying a bra size on their clothes i guess that this is their tactic for

helping men pick out larger a for their wives mistresses and girlfriends i don't know do you think this is ok this is absurd this is great i don't know about this is amazing so these girls actually have to wear the sizes on their role i don't know if they do now because they're obviously pissed off about it but that would make it so the kind of work against the guy because then he doesn't get the idea of like trying to figure it out so it isn't like you know there's no you know don't really get to stare as long sack maybe you would if you didn't just say it on the names so maybe really this is a deterrent from men coming in and staring at women's chests and i think that would be right if i was one of the friends and i would say look this is actually a measure designed to prevent them from staring at a prolonged period i woman's breasts because it is original rape or can be treated just still going to stare at that name tag as possible so well if it's not on their chest i don't know how much it will actually matter so maybe. the biggest takeaway here is put on your forehead moving on. this is terrible picture.

times are tough jobs are scarce lots more homeless panhandlers but what were to say the punishment should be if you gave money to a panhandler and then took it back well we have an answer for you because for this lady megan flemmi it's robbery so she gave a panhandler five bucks and then not only she took it back a very little bit of more of a violent way but she pleaded guilty to third degree robbery for that she faces two years of probation when she's sentenced in january so the lawyer says that the twenty six year old gave five bucks to an aggressive beggar then returned with a pellet gun to demand her money back the funniest part is that she was sentenced you've got to be sentenced i mean is this class warfare at a new level panhandlers versus people that give them money i don't even know that

they had guns or remember there was a movie with his brother there some guy. maybe the solution was his you have a public on and was you know how could this woman the how did you how could you prove that you're the mother begin with she could respond to some psycho with a pellet gun looking for five dollars how much did it cost them to go over this woman and to put her through the legal process arrest her charge her have a go through court for five bucks i'm sorry but that's not i mean talk about government waste i grew that's crazy shannon i mean the guy that panhandlers don't want to press charges like. they spent all this money like go into this. business on or even i don't want to press charges that's how much they wanted to go after this girl for five bucks despite the costs even though the panhandler didn't even care about the child i was sorry for and being held up by a pellet gun. that's all we have time for because we've got to get this reality check for you.

all right in an effort to cut government spending because we know that obviously that's a big topic and the debt of this country is close to fifteen trillion dollars so president obama signed an executive order to cut federal swag he's directing agencies to cut back on things like flags promotional items coffee mugs printouts also travel arrangements and smartphones executive flee take a listen. at a time where your ways as you. said made some tough decisions about it were very big only in order to make investments to do. that it was entirely for our government's authority to try to go were extraordinary and small. all right now according to the white house some of the cuts if they've come up with the commerce

department will reduce the number of drivers for all senior officials to just one i don't know why they would have needed more the white house said the federal government spends nine million dollars on just getting around d.c. every year and department of treasury plans to reduce spending by increasing people as transactions not printing so much but here is a little reality check no word yet on what this will mean for the president's perks what about both of you can decide if they should be on the chopping block if shared sacrifice of being giving out some of them but her of the examples that we have for you remember they are tax free so here's perks and through the use of two private jets better known as air force one has security details and drivers of course and one example of this being ramped up was the reaches the recently purchased armored buses there will be used during the two thousand and twelve presidential campaign and after as part of the president's security detail those cost two point two million dollars and then of course white house grand those sort of things and our

favorite a private chef which we don't have a picture of but we have this great stand and so you can decide what shared sacrifice looks like but that's it for our show we'll see you tomorrow. in los angeles to chicago to twenty trauma centers of closed since two thousand separate homes not enough information not on the third person seen apartment and another in the nurses. this is a man goes to take care of all the people who know her the only real health care system that we have in the city of los angeles is the los angeles fire department in fact when i started my venture is a firefighter i didn't want to say i started out i want to just do fire fighting it's about eighty two percent of what we do the fire departments medical data rescue couple weeks away for hours for i waited sometimes three hours but i

wouldn't say it's a francis in lynnwood for four hours and fifteen minutes standing as a wall with patients and we have a federal law that mandates that if you can't turn no one away who seeks care in an emergency room. we have the most expensive health care system in the world and it's probably valued the least. least. mission free critique a free. for three. months three. three stooges free. download free volunteer live video for your media project a free media don carty talk.