good afternoon and welcome to capital account i'm laurin leicester here in washington d.c. and the sick man of europe yesterday greece today italy tomorrow who knows a number of possibilities but was this inevitable and is western medicine failing meanwhile is there any cure to be found perhaps in eastern medicine as leaders meet in hawaii for the asia pacific economic summit meanwhile in the u.s. protests against wall street and money and politics continue as riot police clamp down most recently on the occupied how a camp at u.c. berkeley and arrest protesters and meanwhile the public continues to scrutinize

presidential candidates and yet another g.o.p. debate protests and scrutiny over the economic conditions in this country be directed at the economics departments of the university and we also asked in the p.r. battle between wall street bankers and some of those americans that are outraged at them we'll take a look at who's winning look at today's capital account. ok it's trivia time i am going to start the show by reading a couple of quotes from two thousand and one and i want you to think about what they have in common first as on the u.s. economy america could well join japan on the list of the global economies walking

wounded mired in a debt induced recession with static or falling prices and a seemingly intractable burden of private debt ok this is what many people refer to as the last decade you can see a reference right there just from earlier this month and about europe when an economic crisis eventually strikes people's europe's governments may be compelled to impose austerity upon economies which will be in desperate need of a stimulus big. and you just saw protests of course from austerity measures in greece people on the streets protesting them so did you notice anything about those statements they were both from two thousand and one and there are compelling facts to show that both are playing out right now years later they came to fruition and both came from our next guest lucky for you both are examples of what many modern economists missed and examples of what they may continue to miss because my guest says not a whole lot of thinking has changed he steve keen economics professor at the

university of western sydney he's also author of this book debunking economics the naked emperor dethroned which just came out in its revised edition and he joins us here in the studio far from australia where he joined us from last time and we're so happy to have you here on the show and a lot of to be here really enjoy they did last time rather thank you we enjoyed it as well so did our viewers so let's start because i just gave a few examples of things that you got right well ahead of time things that are playing out right now economic problems also of course the financial crisis in two thousand and eight which you saw coming here is ahead of time sitting on that you know in two thousand and nine after everything kind of got really bad people like paul krugman were writing columns saying how did economists miss that you know how did they get it so wrong but you didn't get it wrong you got it right so why did so many economists and is it really this really interesting important question isn't while a shortcoming because it's me it's incredibly obvious of you take a look at what was happening the financial sector and take it seriously the

original cone of the students coming in as they convinced themselves and crudeness still believes that you wrote this in a research paper at the end of last year that the level of debt doesn't matter. but only what about political government to convince themselves of the level of profit that doesn't matter because it is simply one person said another person's liability overall there's no in that effect on the macro economy that is so fundamentally flawed and wrong but that's why they've launched sort of to it so i didn't even look at the major indicator that i took seriously right. all of a sudden you back and not in ninety seven frankly but certainly two thousand and five which is the russia of profit to two hundred and when i saw that rising exponentially i thought holy hell there's a gigantic crisis coming train content to new when it breaks we'll have the biggest crisis possibly since the great depression somebody has to go on and on and trouble to somebody and get to g.d.p. and just debt in general is the issue that really all of the economic problems that we're talking about every day in europe and in the u.s.

is really surrounded upon so i guess the question becomes as leading up to the financial crisis in two thousand and eight yeah we heard policymakers like ben bernanke be applauding economists and saying that the great moderation was in large part due to there was something you wrote about due to their good economic policy that sort of thing if they all missed this is the problem that we're seeing now the economic problems we see a result of the fact that these are the people that are still policymakers and advising policymakers you have a lot of nervousness for it and you were making this is for the irish news type of the saying that normally when you're probably the boss of the experts what have you trying to work with expect to go to the doctor you follow the advice for your health improves we follow the advice of the economists in the economy tanks completely so it's a song they're not really exposed to on the economy they're exposed on the model of the economy on the great tragedy is that model is almost completely irrelevant to the system we actually live in but it's plausible enough for them to fall for it

and believe that it's correct so they did all these things that said let's improve the right of inflation let's keep going right for inflation under control and that will make the economy richer not stable equilibrium if favre is the buzzword is equal to like to see you pulled up one apart and one of your next would would sit. on my list. but the thing is capitalism the good thing about cup was it was not equilibrium the good stuff about capitalism is instability and the instability and for innovation and which is the positive side. but on the other side of that would also an intense is financial innovation and speculation and unfortunately that is destructive and by focusing on equilibrium and ignoring both the good and the bad instability of capitalism it unleashed the bad instability because they were basically untrained frankenstein's monster which is the thought and so from the finance that there is a break in science frankenstein's monster arguably not a whole lot about the financial sector has changed if you listen to critics of dodd

frank he says that having gone far enough yeah after all the lessons that have come out of two thousand and eight like things like you point out in your book why has never been gone back to the drawing board and rethought the very models you're talking about fundamentally momentum is such an agreement on the phone in sick the now that it's if you go back in and forty five the finance sector was a trivial part of the american economy which is what it should be the real heart of america's always been into austria with innovative side of it and that was far more important back in the audi forty five to sixty five than it is now but the finance sector in it and they simply grew because we still made it possible to gamble on rising us it processes and that's what sucks is into taking on too much did you know the g.i. uses if you go to the dentist and have a tooth that's sore you'll get the tooth pulled but you won't get any more truthful than that because it's not lost if your teeth pulled and list the dentist manages to convince you that you look sick so you with a list teeth i don't think anyone can convince me of that i'm sure but that's what

that's what the economists that's what i thought the financial stake in this is about did this a bad thing to be and labor which is not a good thing to have because you go to services that out of income but they persuade you it's good because the leverage will increase your gains on rising asset markets but in fact this rising that this causes the rising asset markets speak of course in a positive feedback loop the truth is that this unbelievable level of probably three hundred percent of g.d.p. was the peak america picked that it's now thawing dressed sickly probably good is that less than a month a little even now. so it's the profit that bubble that caused all the trouble in the rhyming slang there and and now what we're seeing is this on wanting to win when the fun is to do generates that much dish they get enormous political power as well and breaking them in tight so if we have to get to the stage where a publication has the guts and courage and independence that roosevelt had back in the not in thirty's to say we're putting the banks in the dog or putting him in the driver's seat take the danger out of the driver's yeah that's about all sorry go ahead in this summit bill was bill black needs to be there somebody had to go in

the sideline process you need somebody like that and you need a politician to back them up currently we have no you don't and that's the political side of it but you also argue that economists and the people that are there advising policy that they need to change to write well you know i mean the i'm i'm waiting for it max planck talked about of the by scientific progress because in a discipline he said progress because one funeral that it's time for a new classical economist and never going to die off then fortunately you cannot persuade people who believe a mythical vision of reality and believe that their whole lives is dedicated to believing that why you talk have been a have proven have a lot of time for christmas publish the conclusions that he's a novice or sidewalks them into a way of thinking about what will but he thinks is the only way i can analyze the economy they always fall back to it so my favorite there is all of a blanchard alluded to it was head of the i miss economic wing and was the founding editor of the american economic reviews macroeconomics journal and beck and of all things in two thousand and eight he came out and said the state of macro it was

good talking about macroeconomic theory one year after the process began so these are the kind of thought that we're going to even write up today crisis there's so much more we want to get to you on this and we're going to talk to it right after the break bang and we have to get word of the day that i know you wouldn't want to look into it that way we'll have more with you came in just a myth. player . all right it's time now for word of the day where i breakdown a financial term or concept for our very smart of you or about perhaps not the financial expert in the audience so worst operas because we wouldn't want to miss his opportunity to give us the word of the day and every word of it or you're going to look good report of the thank you it's mine to to ever. feel later all right word of the day is. ok it's kind of

a thing it's and the minsky moment and this is very fitting because it's something that i want to talk about with my guest in just a minute and it's what you see in this clip for the new movie margin call it depicts a minsky moment for the financial system take a look at this. how long would it take to clear that up for locals you. were doing . so little for them you're showing something that you know. we made sure. so you can get the vibe that this was a good deed there for the definition which is something very dramatic so what is a minsky moment it's when a market fails or falls into crisis after an extended period of market speculation and unsustainable growth minsky moment is based on the idea that periods of speculation if they last long enough will eventually lead to a crisis the longer speculation occurs the worse the crisis will be now it's named after an economist and professor you're curious where the term came from and as far

as i'm in the moment in order to have this type of that you have to have excessive speculation which is fueled by overborrowing and overspending prices are bid up like that because people are able to borrow money so let's take just a look at credit market debt so you can see how this is spent so what we see here is how credit market debt has expanded over the course of decades you can see how it expanded leading up until the great depression we saw this huge growth and credit and leading up to the financial crisis in september two thousand and eight we saw that as well so in both cases investors and speculators alike realizes that prices could not continue to rise indefinitely and so the began to sell and that was what economists like i believe dr steve keen say was a minsky moment and because everyone was so overloaded bridge when they began to sell prices began to decline and people started to go bankrupt charts are not always the easiest way to describe it so let's take a look at this so essentially this is what was going on everyone was using credit

which is this boulder and speculating and in doing that they were pushing prices they were pushing this boulder up the hill and prices were going up and the further and further they want up the higher prices went but this builder of debt was getting heavier and heavier until enough people. well realize that both the debt and how high these prices were was not sustainable so they're like oh that boulder i want to let that go you can only imagine this looks like a very big boulder it's very difficult to stop very say impossible like i said it's a pretty big boulder and that is the world after him and. now don't go away till i had right here on catholic out will devolve more economic which came best time here at the first your closing stock numbers. zero zero. zero zero. zero

zero. zero. if we just put a picture of me when i was like nine years old on the job the truth. i'm a confession i am a total get of friends that i love rap and hip hop is a planned trip. but it was kind of yesterday. i'm very proud of the all the belgian she has played. the odd. you know sometimes you see a story and the scene so. you think you understand it and then you glimpse something else and hear see some other part of it and realize that everything is ok

if you don't. charge was a big issue. what drives the world the fear mongering used by politicians who makes decisions. made who can you trust no one who is imbue it with a global missionary see where are we heading state controlled capitalism is called sessions when nobody dares to ask why we do our t.v. question more. as the euro zone debt crisis continues and we see prime ministers go we see new governments installed in order to please lenders please creditors moer austerity

imposed really it's unclear where this is all headed and why this is all going on and there's the question of was this inevitable because as you heard our guest steve kean predicted a lot of this because of what he saw coming so he joins us again in the studio steve keen professor and author of to go again economics which i've been reading studiously it's a great book everyone should read it so i obviously so much is going on with the girls and lysis italy today some are saying is france what's going to be kind of issue next with the french on market we see the former e.c. b i believe vice president who has been named to lead the greek unity government i mean prime ministers have come and gone more austerity measures have been enacted how do you see this whole situation with those song there with the suicide notes when i saw the minister treaty with even a small cross it would have destroyed the ministry of treaty the whole it was and it was because it was on the new classical economists live in

a sad to see world which obviously it was never has a need any downturns but of course one and the bookcase they said as a pair of rules about it which was simply in signing the rules the aggregate of a government could not exclusive sixty percent of g.d.p. if you're in on what america's father was running harder than that government that private it had three hundred percent of it right right which they ignored. and also that the deficit knew you when you couldn't exceed three percent of g.d.p. what it meant was if they wanted to fund the deficit larger than that they had to raise money by going to the bond market they couldn't get the money off the central bank which is that if i didn't assume in america three quarters of the american dollar would need to be funded by the american government selling bonds not bank by the federal reserve so it's an insanely bad system that would guarantee to follow that even with a small crisis there was no a no brainer for me to make a comeback in two thousand so again italy boils down to near as they call it on and i just for everybody that doesn't understand economics profession is this what everyone is trained in that is. so you can only say has is

a lot of science people think it's a science that's why the nobel prize which is a job it's not a real nobel prize so that made up of the swedish bank rather than by the nobel committee but. in a genuine science fun has experimentation and a critical engagement with the dod to see whether your theory fits or not in economics unfortunately because it's what it would have belief about a social system i have a goal that she has dominated moxon in the previous school of ideology to put analysis the question of school to a critical capitalism in the new possible clue who will come along saying capitalism is wonderful and they try to prove that it's not just a good social system a bit of than feudalism which is quite easy to argue and stalin the socialism as well and they try to argue it's a perfect social system but that's just nonsense but if it were design principles about it which presume it's perfect and of course it's not therefore it has to have crosses on the fundamental thing they nor i are amazingly to think about trying to economics they ignore money now how can you when last capitalism when you ignore

money i suppose are a quest and i'm not a neo classical economist but i don't think i had to be one in order to understand that something there doesn't add up i guess the question becomes you say neo classical economists have to die off but we do see this movement occupy wall street obviously protesting wall street you've spoken out and i think i am willing to speak again to anyone of any of the rally around the world heard them to me the thought. really challenging the hedge of money not just of the finance sector but also conventional thinking about the economy well that's the question i have for you did they need to be occupying the economics departments of the universe that yes and in fact harvard university did this in a sense just recently going to students a ten percent of men queued fuz class walk the walk out of these lectures and men queue i'm sure is a lovely guy but he's a new classical economist he teaches nonsense he's theory is garbage in his book is trivializes a complex area and makes numerous economic mistakes he doesn't apparently know because he hasn't rid the literature of economics and as i've realized i wrote in

this particular edition of the book new york possible economists don't understand classical economics they don't even know their own area properly so that walkout occupations things like that students around the world should be doing that and saying we want to learn other approaches to economics if you want to learn this particular approach wat's and all of them believe me this is not lots of warts ok and the other thing too of course we've been talking about politics in the united states we saw another g.o.p. debate republican presidential hopefuls we've seen a lot of them they're out there talking about their jobs plan their tax plans their why the u.s. is going to go the direction of italy or greece unless something changes do any of their plans matter and less they're prepared to fire their staff economists watch them to erase their ph d.'s they're having their head in say i don't know read your book pretty much unfortunately because most of them do they treat the economy like a household with a very simple flow through money in money out the other saw a simple accounting system. called me is a very complex feedback system and if they do things like you know i've heard one

of them talk about abolishing the education department i'm going to give you a break you need education in this country don't raise a lot of education you know there's a debate of but probably most of the trouble is the feedback so what actually determine the outcomes not the direct impacts so they're putting forward not simple grab a sound bite stuff that sounds good wins. when solutions but you know it goes to the heartland of america but it's not describing a complex system which is the one that actually live in and will make things worse small to them better and it sounds like the economists that are advising them as well right mark let me bring it out either that's all we have time for we are so happy that we have you here on the show thank you so much for being there that was professor steve king is also author of debunking economics.

all right we've gone over some of the very important things that are going on today and that important national issues now we're going to go over some of the they're not necessarily not important they're just more i don't know crazy so joining me in the studio is our producer dimitri cuffing us as well as shannon donahue in the control room who is multitasking our producer in there now this is a little bit of something that's gone viral and this kind of this you tube channel is r.g.b. an r.v. you really got to hand it to him because he's kind of doesn't really creative videos that's what i think steve king is going to love as well let's let's take a look at it. really. no joke it's a rope do you wish to.

no words as they're kind of violent images i guess of the hanging but that's of course jamie diamond the head of j.p. morgan and max guy there of the max keiser report going head to head in an old western is this kind of the next move in a p.r. battle between wall street and critics that it was incredible this guy's made a lot of he made a video before that we showed with my eyes are taking over parliament eventually become the central bank head now it's him as clint eastwood grabbing jimmy going to go to get the silver recover the shorts so i think this is you know this is the next step in the battle. to save reverse of the speculators and max keiser is making a cameo as a clint eastwood i know it's very creative we got to get into this whoever this guy is i want to come forward and get these videos are going viral yeah and they put this put something like this on part of my film dot com which is. maybe you will

see like a feature film with. you know like a wild west gunslinger. ok you make sure we get your channel and any is is this the way to settle the the between wall street and the critics of it. but it stars watching. hollywood career let's go. continuing on the trend of wall street versus critics celebrity chef mario batali he has phenomenal restaurants and he made a statement that a lot of bankers that ate in them didn't like he compared the banking industry to stalin and hitler he said at a time panel that the ways the bankers have kind of toppled the way money is distributed and taken most of it into their hands is as good as stalin or hitler and the evil guys so it actually doesn't end there he didn't just get to make his

criticism what happened was there was a huge backlash from wall street and bankers at bay started tweeting they started telling all of the all the other bankers to boycott but all these restaurants you can see an example right there ok so batali went on to twitter and he apologized so basically does this mean that no one can criticize the banks that have a vested interest in their capitalist expenditures well i mean apparently was going all over through there was going through traders the story where the when he said they were all going to boycott he's got a lot of restaurants in new york so he was scared but you know he begins to really good point and talk about how the bankers have basically changed the way the resources allocated the economy has become kind of like black holes where capital can't go rather taken hostage so he did. but doesn't it kind of make it look like mario batali then lost shannon and mario

batali versus the bankers to lose this one because he apologized and it seemed like it was because everybody was in his restaurant. exactly it like i don't agree with . it but i don't like just reading the story i feel like i should have stood up for yourself even though the bakers are good if you like stand by your comments but the point that he was he was being unfair he was unfairly comparing bush haters to. what you see him one can argue was one of the greatest leaders of all time because he got to go off his. it's like the bankers did for a long time too they got they got politicians to go along with their horrible plans and they've continued but i get it i mean i don't think that we can belabor this that comparison too much but i just think that at the end of the day people are protecting their bottom line our group ok moving on speaking of bottom lines

affluent people have done better with theirs and as a result c.m. d.c. issued a gift guide talking about how affluent. people are spending and spending and some of the things in this gift guide are nineteen thousand dollars a four hundred thousand dollar ferrari a five thousand dollar liquor tastes dana it's absurd that c.m. d.c. is pushing this kind of super exorbitant super luxury super high and kind of agenda that this is their gift guide because they're the customers who are there appealing to greed and so the people who. grow the website they want to aspire to live you know in the level of luxury they can. it's their banker version of keeping up with the joneses i suppose i don't know why everybody else feels about that but you can decide because that's it for our show thanks so much for watching things still free to follow me on twitter at lauren

lyster and give us feedback on the show you tube dot com slash capital account i'm lauren lyster and from everyone here until next time. great night. in canada and the us that it is legal for you to use a bubble bath on your baby they contains a known carcinogen something that causes cancer most of this trying to break them up but in the present day i suppose i might be induced to do it and most of the brave don't claim it's a conflict of interest today an average cancer drug prescription costs nearly one thousand six hundred dollars a month. on nobody with cancer in my five therefore i predict so because the navy to ninety five percent of cancers occur among people with funny

history of cancer the pharmaceutical industry spends about fourteen percent of their budget on research and development and about thirty one percent for marketing and ministration. in fact there are more pharmaceutical industry lobbyists in washington d.c. and members of congress. to. get off sometimes you see a story and it seems so for life you think you understand it and then you glimpse something else you hear or see some other part of it and realize everything you thought you knew you don't know i'm sorry welcome to the big picture.