lawyer. good afternoon and welcome to capital account happy monday as well i am lauren lyster here in washington d.c. and as the eurozone crisis brings laughter and tears we see first new austerity measures in italy causing the labor minister to literally break down. kiddy said. meanwhile u.s. vice president joe biden a rise in greece and cracks jokes about bringing bailout cash with him today as well merkel and sarkozy are pushing a plan for tighter fiscal union and some believe this is it this is the week that

will decide the fate of the eurozone culminating with a summit on friday so we ask where does this leave the citizens and also democracy in the process also could the federal reserve along with european central banks provide the international monetary fund with the money to bail out the eurozone that's what a german newspaper is reporting will get into it further and after m.f. global's bankruptcy and john corazon suspected misuse of client cash u.s. regulators have approved a rule to put tighter limits on how brokerage firms use customer money but can we expect this to rein in the war zone for signs of the world when this is who the vice president says he and the president call love for policy advice listen to this . because he had been in the period he had been in the burdens we trust of these children. that's why they trusted his judgment we'll get into more of that let's

get to today's capital account. all right it's monday and this week is leading up to what some think is d.-day for the eurozone crisis if you believe some officials and the headlines mid last week. commissioner said that said we are now entering the critical period of ten days to complete and conclude the crisis response of the european union now as you can imagine emotions are running high just look at this. it. italian labor minister broke down into tears she was announcing cuts to pensions

changes to retirement age italy's new government under the charge of the technocrat mario monti has unveiled a three year forty billion dollar austerity program that's what the tears were about so the crisis is bringing tears and reportedly some laughter u.s. vice president biden is on a visit to athens he reportedly joked to the greek president that is delegate from the u.s. treasury had brought hundreds of millions of dollars with them now you can decide if you think that's funny but regardless u.s. officials are in europe this week lobbying for washington's interests geithner has there tomorrow now merkel and sarkozy are pushing their plan for fiscal unity a new e.u. treaty with sanctions for rule breakers now this is all leading up to a big meeting on friday now headlined say with only days to avoid collapse this is the euro zone's last chance for survival rumor this headline we talked about a little bit last week saying the euro zone really only has days to avoid collapse if the european summit could reach

a deal on december ninth its next scheduled meeting though the eurozone will survive that was from a financial times column so is this really the last chance for the euro or does this urgency allow for the extraction of more wealth or for more painful austerity measures like that labor minister was crying about while unelected technocrats a banker backgrounds make decisions and central banks including the federal reserve may step in with bailouts through the i.m.f. will answer those questions for us is dean baker his economist and co-director of the center for economic and policy research dr baker it's so nice to have you on the show absolutely so i want to start with the technocrats who are in charge and the two oldest capitals in europe they are unelected they are former bankers and as i said they're running the two oldest capitals in europe so have really reached a point in the west. where we're not at risk of losing our democratic liberties and democracy but where it's already gone what once it's already gone i mean the it was

sort of brought out this was brought about through a democratic process i mean these were parliaments that pushed these people in but i can certainly understand the people in both greece and italy feel like a quasi coup took place i mean they did not vote for these people they had constraints put on them by the european central bank by the i.m.f. from the you know the european union and they were given very very little choice so i can certainly understand a lot of resentment there but it did happen through a democratic process but what about if u.s. congress said hey we're in tough financial times alan greenspan needs to replace the president or you know leave again for the people we elected so they were people that the people and we selected they were people that people in the italy elected so it was done through a democratic process not the way i'd like to see it but it was people were democratically elected who made this decision. but the people they're not allowed to mario monti to be the prime minister they elected the people who chose mario monti to be the prime minister that's the way it works in italy that's where it works in greece they were they were chosen by lot to their elected representatives but just the concept of it i mean if congress said hey we need to shuffle up the

executive branch i mean that would be outrageous that's because we don't have what we have we don't promote your system so it would be outrageous they do have a problem interests so you see this is being less of an issue less of a concern and terms that well i can certainly understand people being very unhappy about it they they did not bring on the crisis they had mismanagement brought on the crisis but i would say you know again it was done through a democratic process it was done a very very heavy handed manner and i certainly understand people resenting it but was done through a democratic process but what about ok so consider the following along that argument you know the justification is you need to give up a little bit of your liberty for the economy or you know it in nine eleven we heard similar things need to give up a little bit of your security for liberty for security you know you kind of we're not it's almost different here the there what they're doing is saying that they're not prepared to bar the european union the european commission they could do it no one in greece is prepared to. ok let's get off the euro i think they should consider that they should say that but you don't see a movement of a large movement in greece saying let's get off the euros that's the issue if

they're going to stay in the euro they need to bail out they have to get that from the european and commit your european central bank the i.m.f. that means they have to play by their tune so that it was done through a democratic process not a very pretty one but was done for a democratic process and also protests and strikes on the streets as well as as we see austerity measures passed again and again in some of these countries so i want to ask you along those lines do you think that there is a real deadline for the eurozone on friday as some believe to solve all of this or do you think that that helps to pass austerity measures that there's a sense of panic an urgency i think is a pressure they're trying to curb and create this sense of urgency that isn't fully there in the sense is kind of like thomas friedman kept talking about six months for the next six months in iraq or big crucially said that for three years this is you know probably here the next ten days will be crucial for the next however long there is this effort to say ok we have to do things now now you could get things spin out of control but the people are really holding things up in my view are the european central bank being very tight not taking steps forward which essentially

means gear untying the debt of of the heavily into countries italy spain and saying ok let's move on and move on with the path of growth rather than austerity because ultimately the end of the day these karmas have to grow and the path they're projecting now is simply one of those staring and shrinkage so how do you move forward because if you look at kind of the united states as well if you look at how debt has exploded you know total credit market debt in the united states has gone from over the last forty years three trillion to over fifty trillion dollars today we see in the financial sector increased by forty percent of the nation's profits during that period as well and every time that there's financial crises you see bailouts and those get socialized those costs for taxpayers so over time do you see any similarity between these bailouts for the banking sector while for everybody else you kind of have this. debt serfdom to their the costs of those bailouts well actually europe is a very very different dynamic i'd be interested to see how it plays out because

european union there's there's a very strong movement actually led by people like her close to merkel to have a financial transaction tax which will be a very big hit on the financial sector if you in fact get that and you're seeing the opposite the united states basically the financial sector still very much calling the shots here you are talking about john corazon earlier mr amazing story of beatrice and see if it is of interest and want to get into the whole financial transaction tax after the break with you with you more about continue your thought so what i'd say is that there is a more mixed picture we'll have to see how a lot of this plays out the austerity is very very bad in some ways you know we have better here that the fed has been more accommodating more expansionary the european central bank by a long shot but the financial sector is not as dominant in europe is the case here but but looking at here if you just look at the role of debt do you see a similarity of benefiting the banks at the expense of everybody else and adding more debt to all the taxpayers. the dead is only part of the story i mean the point here is that you kept you kept the banks in business in the united states and

allowed them to keep going as their current practice it would have been very bad for the economy had the banks collapsed but we could have kept them in business and told them you're not going to keep doing business the same way we could have put serious caps on compensation we could've said ok you're going to be broken up you're not going to have you know j.p. morgan is you don't want to have trillion dollar bank morgan stanley is you know a trillion dollar bank goldman sachs who said you're breaking up that's a condition of the bailout we didn't do that we just had in the cab yeah and i want to get it to all of this with you more and talk a little bit more about the financial transaction tax which i know that you are for i just want to quickly break down for our viewers who may not know just what exactly that is so we'll be right back with more with dean baker. all right it's time now for word the day where i break down a financial term or concept for our very smart viewer but just perhaps not the

financial expert not the dean baker in the audience and today it is financial transaction tax and i want to talk about this because we're going to get into it with our guests later in the show but i first want to break it down a little bit for you and it's being talked about in this instance here is roger cohen recently in the new york times saying this in his story some ideas like the tobin tax on global financial transactions have been around for years but they are almost impossible to apply now to which dean baker responded to the cohen story in a post saying this he wouldn't say this if he was familiar with the united kingdom the united kingdom has been taxing trades of stock for centuries so first let's look at exactly what is the definition of a financial transaction tax it is this it is a tax placed on a specific type of financial transaction first pacific purpose this term has been most commonly associated with the financial sector as opposed to consumption taxes paid by consumers now examples of places that have one because there are countries

that have them so as dean baker referred to the u.k. has tax u.k. stock trades for centuries it's called a stamp duty there are other countries singapore has a point two percent stamp duty on transactions of stocks and shares also switzerland has a transfer tax levied on securities where one of the parties is a swiss broker and even there was one in the united states from one thousand nine hundred fourteen thousand nine hundred sixty six on stock sales and transfers now this has been an ongoing debate in global policy a proposal for a financial transaction tax at the g. twenty in new. vem ber failed later that month though you heard the european commission president saying that one of these taxes remained a possibility between euro zone countries and before that france and germany have been championing a financial transaction tax tax now as dean baker referred to the united states has not backed this they wouldn't back at the g.

twenty reportedly worried about the burden on banks and some advocates of this say that timothy geitner has effectively vetoed it now some arguments against this are that volume will drop and trading will move to countries where there isn't a tax arguments for it include that it could raise revenues studies show for the u.s. it could mean one hundred billion dollars a year to fight the deficit create jobs or whatever other purposes that it was designed for so we will get more into this but now you know the basics of the financial transaction tax. and to get do not go away right here on capital i count as behold the world's most expensive car crash what i how much it costs and the laundry list of luxury vehicles involved the first your closing stock numbers.

you just put a picture of me when i was like nine years old on such a low truth. i confess and i am in total ghetto friends that i love driving hip hop music and for . that he was kind of the jester day. i'm very proud of the will without you she has played. the. guitar sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear see some other part of it and realize that everything you thought you knew you don't know i'm charged welcome is

a big issue. what drives the world the fear mongering used by politicians who makes decisions to break through that sort of being made who can you trust no one who is human view with a global missionary see where we had a state controlled capital. it's called sessions when nobody dares to ask we do our t.v. question more. and from europe let's get more into the united states now the future's regulator the c.-a t. c u nana mostly approved tighter limits on how brokerage firms can use customer

funds it's being quaint the and the global rule is of course in the wake of m.f. global's collapse where it's suspected junk or resign who was in charge was betting with client money one point two billion dollars of that money is believed to be missing now this c a t c wanted to vote on this sooner but they didn't because as i told you last week it was reportedly because of heavy lobbying from none other than john corazon when he was head of m.f. global and before all of this went down the vice president was talking about going to court for policy advice him and the president so how can we believe politicians are regulators when they say that they aim to regulate the very people that they are advising them on policy that are inviting them on policy economist dean baker is back with us to help us figure that out maybe some better solutions so first i want to ask you is this video that i'm going to play kind of sums up the problem with regulations in the u.s.

to control that. i literally picked up the phone and called john kors i can see john what do you think we should do. the reason why we told you. to speak your eyes we knew he knew about the economy about world markets about how we had to respond like almost anyone we knew. so while it's great and all that the regulators passed this rule how can we really expect regulators to regulate the very people that politicians reach out to for advice and it is a huge problem i mean it's a problem in every sector but particularly with finances because finances become so enormously powerful and they so control the debate so it's not just that they have a huge amount of money to give to politicians which of course they do but they also control the expertise you know the joke is that if you want to talk to someone from goldman sachs call the treasury department i mean it's just staffed with people who

are from wall street so it's an area where they really do control both ends of the debate you don't have much choice between the republicans and democrats you know you can get the democrats and you have as many people from wall street is what the republicans maybe more so it's certainly a very very big problem that you have regulatory capture way over the top in the financial sector so what do you do as far as the financial transaction tax which i know you are for and there is opposition from the united states government from timothy geitner who said it would burden the banks when you hear that opposition are some of the same reasons we're talking about feeling that both course i mean they're huge this is money directly out of the park of the financial sector and that's why they're saying this and you know what we could do is try and shoot down every legitimate concern so they say well burning the banks well yes i mean that's we need to raise money we're better than to get it from the waste in the financial sector which is what it would do they say would use trading buy you go that's fine we have lower trading volume in the seventy's in the eighty's was there a problem what's the problem you know. they talk about it going offshore some will

but you know you have the example of the united kingdom that has had this tax for centuries they raised between two and three tenths of a percent g.d.p. that be thirty to forty billion dollars a year just taxing stock trades on tax derivatives credit default swaps all of that they just tech stock trades raise a very large amount of money doesn't go offshore i mean some does of course but they still get that much so the point is we could tear down every legitimate argument they have at the end of the day you know people have a lot of money a lot of power maybe they'll win out but the point is we can say you don't have a legitimate argument you just don't take money from people take money from the people that's what it comes down to that's the that's the point and you know again it's not just being punitive we need tax revenues so do you want do you want to pay i mean to a middle income people pay or should we take it from the waist almost real one of the arguments is that banks don't pay at all just passed along to consumers and that we can do the arithmetic on which they were better of magick if you cut your trades in half what say you trade cost you twice as much you cut the number of trades you do in half which the research shows you will guess what you're paying no

more few trades than you did previously you're paying twice as much in each trade but you're only trading half as much as you used to very low this will be passed on to consumers so aside from consumers i want to talk about you mentioned how in europe they have been receptive to this they have pushed for this why is it so different from europe to the united states why is it u.s. so i think the financial sector is not quite as dominant in europe they obviously have large banks they have a large financial sector they also have large manufacturing sector they have other voices there so it's not that you know this is the you know paradigm of democracy and virtue and everything but the point is the rivals of the financial sector they saw what the financial sector did to the economy and the other sectors other business sectors we want to rein them in and force in the united states at the moment at least i don't think those other business sectors are very powerful finance is really calling the shots other sectors would run the labor well labor of course but i'm talking about the business sectors i mean labor's labor is willing to support this in the unions do support a financial transactions fact we need to go beyond labor i mean as much as i love

labor you know we're just. about a little over ten percent of the workforce you know i can do it with labor alone ok and just quickly because we are talking about europe and we're talking about kind of the impetus there to make a decision i just want to go back to one thing because in europe they really have this sense of urgency because they're borrowing costs have soared you know we've seen italian yields be over seven percent and that's the the unsustainable rate according to markets in the united states you don't have that you know our yields have been two percent for various the very reasons which i won't get into now but does that allow something like the super committee go we don't really need to do our job because there's really not that dire of a situation where there wasn't a dire situation i mean the super committee i think was an effort to cut social security and medicare and they're trying to go around circumvent the normal congressional process because they know how hugely unpopular is and thankfully to my mind at least there was enough political opposition that they had to back off the agenda and really quickly i know you think occupy wall street had something to do with that do you really believe that occupy wall street was stronger than the two hundred lobbying groups that were the new money investing it wasn't stronger

alone the point was that it resonated its message resonated that you know we have ninety nine percent basically being taken advantage of for the one percent and that was the backdrop congress debating do you want to cut social security medicare do you want to kick that ninety nine percent again and they backed away from it do you hear any rumblings from members of that committee saying that well i didn't know you personally contacted the members are going to but they certainly are aware of the political environment they know that you know cold is a big item on the agenda today all right well i want to thank you so much for being on the show on capital account so nice to talk to you that was dean baker he is co-director of the center for economic policy research.

so we have been talking a lot about the eurozone crisis but i want to bring in our producer dimitri kofi anan as as well as shannon donahoe in the control room to talk about this story so long going on with the eurozone crisis so i guess maybe it's no surprise that it now has one of these watch this. what's great about you. is that if you want to check snow conditions on the mountain there's an app for that. if you want to check how many calories are in your lunch. there's an app for that. yes there is an hour for that there is an hour in which you can steer the euro zone debt crisis and you can decide interest rates all sorts of things the european central bank launched it for the i pad and i phone is that true yeah i mean i played i downloaded this game ok so i got to download this game i got to play the game and this is basically how it works you set interest rates in order to keep the inflation below two percent

and then you have there's a road to get thrown in like you have an oil shock or you find like all these wild reserves where there's an our stock market crash or those stock market is booming and you have the side of the central bankers of technocrats where interest rates should be it's basically like teaching you how to control rates which is absurd but that's you know it's it's what you would want to do if your central banker but we shan't and seriously because you've found the story the central bank actually launched this yes they want i just think it's clear that they're not charging anything for it it's free so they can't make any money to bail out the countries ok but hold on what is the impetus for a central bank to launch an i phone or i pod applications for its public relations so that the people who are listening to central bankers can think that they're doing something really big and important so you're playing a game when you're learning how to manipulate interest rates when the reality is that no central bank on the planet not true not drive you know one of these bozos

know where the interest rate should be so they're saying hey we're going to sell game out there so you can play and you can see what how fun it is to nuclear rates it just shows how absurd and ridiculous the entire process of central banking is since you played it is it just inflation yet it's ok you have to keep inflation below two percent and you manipulate the interest rate according to exaggerate the shocks that occur as the the do. it's more just you know how to be a sort of banker so let me ask you this is it propaganda because simply isn't that easy to be you know suppose you just be about inflation will go in that sense that well yeah exactly that's interesting so it's kind of the old mandate of the supposed to be just about inflation yeah but it has like employment other things where you're supposed to focus on inflation and then you look at the particulars of where employment is in this and that but yeah i mean these to be doesn't care about inflation any more of this is just focused on printing money but it's just ridiculous i was on another idiot our last guest people should. people should just download the game and check it out. and you're an ad now before we devolve into a total advertisement this is not an advertisement not for these cars even the

world's most expensive because take a look at this video right here there was an enormous car crash ok ten people were slightly injured but there were no casualties so we can talk about this and poke a little fun because eight ferrari and a lamborghini all got into a car accident in japan is a pile up costing four million dollars there's also toyota prius but i just didn't think that was worth mentioning generally go together but. i mean behaving the one percent isn't immune to devastating losses well that's the thing like if only let's assume these guys are bankers what would be if they were bankers this never would have actually happened one of the words it would have happened but no never would have paid for the going on there we go with no one would know that the cars crash no one would know that they were worthless now they would be on the books as being worth something so we need as actually take what happened here in this car crash and and do it on the banks asset ledger so those are the banks of the write down

assets we need to have a car crash on the banks are so leisure that's what we need because we already have it but we need people to know that the question actually happen it needs to be flashy or it needs to be you know need to look more like a ferrari i mean and oh she and it does this make you not even want to own a ferrari every even if you ever had the money to. put that first because. that is the proletariat president but. whatever he is lagging is the way to the bank because he didn't lose as much money. really quickly. reportedly downed the u.s. drone that went missing last week in afghanistan we only have a moment for it but we know that drones are kind of this sought after technology growth for the military industrial complex is this really bad p.r. that this delphinus drone got knocked down i know and i heard also this is ben bernanke is private grown. navigating it from washington so this is really bad p.r. i mean this is a disaster you can't have your high quality lockheed martin drones dropping in the

iranian sky there you have it that's all we have time for we'll leave you with that bit of wisdom from dmitri kofi anna because it's all we have time for thanks so much for tuning in from everyone here at the capital account have a great night and we will see you again tomorrow. sure is that so much as i would like to you know really be with us. continuity and change united russia is long gone when it's over the countries of coral politics is said to undergo significant transformation once. you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything is. welcome to the big picture.

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