deficit well reportedly perhaps ten percent of g.d.p. an unprecedented level government officials had decided to stop paying tax returns and suppliers in order to deal with it at what point should this debt be considered odious debt immoral and would greek people be within their rights to have it forgiven also we've seen a laundry list of g.o.p. presidential debates here snippets from the most recent. well i've already told for him over flood i'm very concerned about not appearing to be using the we had a big back and forth about whether newt was involved in untoward activity. no you may have thought you were watching for laughs or to size up the race depending of course on your political persuasion little did you know you were doing due diligence because get ready folks a chicago derivatives exchange aims to be the first regulated us market to let you bet and cash in on the next president and would you be able to make money on the

payroll tax and gridlock in washington right now we will fill you with let's get to today's capital account. today we saw the federal reserve they released rules relating to a number of dogs frank requirements as well as dalzell three which includes higher capital requirements for institutions deemed systemically important now yesterday there were rumblings that the fed was on board with these requirements and that is reportedly what sent financial stocks tumbling down but we're going to look at what role the massive growth and the natural sector debt over the decades plays in all

of this and speaking of debt if you read the headlines worries over europe have eased for the minute there are expectations banks will borrow large amounts of money from the european central bank the e.c.b. will reportedly offer funds wednesday that's tomorrow but again what about the debt it is all still hanging there we're going to look at greece's economic troubles to gauge the damage to do this we are so lucky we have steve king here associate professor of economics and finance at the university of western sydney he's also author of this book d bunking economics the naked emperor dethroned and professor keene as always it's so nice to have you in australia with us thanks for waking up and joining us this morning for you i want to start with this example of greece as we look at the eurozone crisis because as we see excitement over the eurozone we also see reports that greece's debt or deficit excuse me will reach ten percent of

g.d.p. ok this is unprecedented for them we see officials reacting there saying ok we're going to stop paying out tax returns will stop paying suppliers and still the greek press is reporting that they may not be able to get their deficit below ten percent of g.d.p. my question to you being a proponent of debt jubilees is greece's debt odious debt should it be forgiven. it's crazy to because just to put that some of the pot at the comparison in perspective on america's debt. is america's government deficit is running to be zero order ten percent of you as well the get go to you know you deficit running and one of the trillion dollars in the fourth ensuring dollar economy so why be a law about greed still or is the obama's of the master treaty limited the amount of money to pay their equivalent of the federal reserve so cold the european central bank only had to fund three percent as it's anything above seven percent year on year on well that's just inside because

a central bank should be funding the activities of its government so reeling that sense europe doesn't have a central bank and i squeeze is real problem so it's not just that the level of debt is used because a huge part of that actually financed the growth of german manufacturing by cutting out the possibility of devaluation it really got germans an incredible advantage in exporting that to the listened laws parts of europe but on top of that it was not just ideas dead it's also ideas financial rules that mean you have a central bank that have like a genuine central bank so i can see the greats and concious working austerity like the situation was and in some states the brics will give the proverbial finger so the people who are telling you to go to step regardless of the consequences right and certainly we don't see anybody moving to forgive this debt quite the contrary and add one of of course the entities that would be hurt if the debt with forgiven was would be bank which would have to write down their great bond holdings at which

brings me to financial sector debt which i want to take a look at if we can bring up a chart of the u.s. example since you brought up the u.s. and this is actually from your blog dr cain at the debt by factor and finance that more than one hundred twenty percent of g.d.p. outpaces all those other sectors you show there are so simply put dr king why is financial sector debt important. well financials like that it is like any other form of profit when you're actually creative you create money now the trouble is that's when you win when you're big when you have a industrial corporation borrowing money from a bank that also creates spending power that doesn't come out of the silo was in services that actually as to that demand that's where we really finance investment from the fundamental source of new investment is not it's actually the increase in day that ends up in the hands of industrial corporations when that happens they invest they build new widgets we get new production coming out of it. it's from

replacing all products and so on it's the what i call the i pad effect and that's part of what gives capitalism is that it's useful dynamic the trouble is when the financial sector does that some of the money can go in that direction but they can also get themselves caught up in gambling over the process of assets and not producing new factories but again driving up asset process by leverage speculation that's been fundamentally the basis of the american economy for the last twenty years ever since the collapse of the stock market back in i.e. seven all there's really been doing with a bit of building you know five a back in the telecommunications does is being fundings ponzi schemes. crime so that level of financial safety data points out a system which is turning more and more into a ponzi scheme rather than a real productive economy and you're talking about speculation i'm also curious does the fact that bank lending creates reserves has something to deal with that has something to do with their role of it. yeah i mean the whole process of debt creation of the new york hospital equipment put in their heads is the exact reverse

of what happens so you bank banks about to find reserves had a hole and the government's role is to is to provide the reserves through city of money creation and then with reserves than about excess reserves and that they can therefore lend and what they didn't do is having the deposit depositing money they hand out a fraction it gets left out you get the chain reaction of a time when they get to the stage back where they have no excess reserves and conlin anymore that's the almost the exact reverse of what happens in practice what happens instead is the banks create. creating money in the process and that money then circulates through the system which later creates the reserves that they then need to balance the whole system and the central banks have pretty much required to create those reserves later on so the the bank but that doesn't happen when you have non bank lending when another bank lends even something as speculative as goldman sachs and so on to actually land and then finance you. know all the

various forms of asset cross gambling their bank account at the bank the genuine bank goes down to create a loan somewhere else so they get without creating money and of course somebody has to service that day so you actually because they're a bit they and they now want to find out more about that we've got to go to break up like. a day quickly but dr king arthur much more i want to get teeth if you could just hang tight there we'll be right back with you that is professor and steve keen also ought there will be back with him in a moment. all right it's time now for word of the day where we breakdown a term or concept for our very smart but just perhaps not the financial expert viewer in our audience and today it is prediction market and we are doing this given the news that

a small chicago futures exchange is trying to become the first regulated u.s. market to offer legal betting on the u.s. presidential election as political right introducing these so-called prediction markets to the broader public could end up giving a better read of the horse race than traditional polls so let's look at the what exactly are prediction markets well they are speculative markets created for the purpose of making predictions now the current market prices can then be interpreted as predictions of the probability of the event so let's take a look at some examples that do exist one is the hollywood stock exchange here's what it looks like ok this was established in one thousand nine hundred six actually by max kaiser who was the show on our t.v. now here players buy and sell prediction shares of movies of actors of directors and hey what do you know the exchange predicted seven out of eight of the top category oscar winners in two thousand and six so that worked out now another

example is the policy analysis market or pam which was supposed to read was proposed excuse me for the defense department shortly after nine eleven now this allowed participants to bet on things like the likelihood that yasser arafat would be assassinated or that jordan's monarchy would be overthrown now the program was canceled after it became widely referred to as the futures of terrorism market and that's because participants could actually bet on the likelihood of a terrorist attack now profiting from other. peoples destruction was obviously frowned upon and last year's dog frank act took this as a step further out long futures contracts tied to assassinations war and terrorism now conveniently not included in that and that is presidential elections now while we don't know if the chicago's future markets plans will work out let's have a look at in trade where bets on current g.o.p. races the current presidential race are being taken and here you can see mitt

romney's share price and according to this it translates to a sixty eight percent chance of him winning but is this really true can it really predict that because after all in the two thousand and four election let's take a speculator who is betting on trade sports that's another one of these online prediction markets that we're doing you know offering betting services so this speculator shorted so many bush futures contracts that he drove the likelihood that bush would be elected down to zero now of course bush ended up winning the election now some good argue that if more people participate in these markets then this type of manipulation is less likely because of the increase liquidity but again is this really true after all markets have been manipulated since the beginning of time and if other futures markets can be manipulated today why would these be immune what would stop let's say a well funded campaign for manipulating the stock price of its candidate and order

to drive the expectations of voters this could have a positive effect on the eventual outcome as donors and electric alike start piling on to that candidate's bandwagon you know it sounds to us like wall street could be looking for one more way to bring money into politics pumping and dumping candidates at the expense of democracy but that's prediction markets. now still ahead don't go away now that you know what a prediction market is we'll take a closer look at chicago's future market for the two thousand and twelve race but first your closing market numbers. we just put a picture of me when i was like nine years old and just you know look true.

i have a confession i am a total get of friends that i love driving hip hop music and pretty. much it was kind of the jester day. i'm very proud of the will without you she has played. oh oh oh oh oh. oh oh. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else you hear sees 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 have been made who can you trust no one who is human view with the global machinery see where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our t. question more. welcome back sticking to debt we see it used in more ways than one and one way we see it done is to get cozier in diplomatic relations now we've seen a report that the japanese are reportedly mulling buying chinese debt an order to get closer ties with the country now we also see other purchases made for diplomacy

we see the japanese government to stay with this example they are going to buy f. thirty five they have announced from the united states from the contractor lockheed martin so which is the better weapon is it debt which has been compared to death or is it actual weapon soft power or hard power we want to look at debt in that context to bring it back in to the conversation we want to bring in associate professor at the university of western sydney also author steve keen now professor came before we move on to debt and this what's been sense i want to go back to the financial sector debt that we were talking about before the break because i want to bring up the u.k. and when you look at their financial sector debt you put it in with their other debt it reaches a thousand close to one thousand percent of g.d.p. i mean it's higher compared to all the other g ten countries so more curious that this is an example where the financial sector could be completely destabilizing for the economy in the way that it was for iceland or yeah i'm simply staggered by

those numbers because i was look this is working again american debt level with the financial sector that we got a two percent of g.d.p. back in on in forty five new hundred twenty percent by the peak of the father takes a level of debt and is now rapidly fall and that alone was you know stunning to say that level of debt than household debt much much higher again than an industrial corporation did it but to say that the apparently i'm still going to ship this because myself i'm still shaking my head and just the lays but the financial sector in england is humility is something of the order of four hundred fifty or six hundred percent of g.d.p. at schools they feel that if it did it's all hard. money as max is very well in his own show. you are expected to come a couple of through and when that turns around it will plunge than it did in america and that will cause a credit crunch they call michael bloomberg this look like a picnic. and then that could make lehman brothers look like

a picnic we know it's going to be horrible speaking of the us financial sector since you bring up u.s. banks we have seen on this news that the federal reserve was going to be on board with the basil three capital requirements yesterday financial stocks tanked we saw bank of america go below five dollars a share we saw morgan stanley and citigroup and j.p. morgan fall substantially is this because do you think that basically people know that banks are so highly leveraged they can't afford to raise capital and that they either need to go bankrupt or be nationalized. yeah and the banks so fundamentally the banks are insolvent right now that we've been trying to pretend that they're not for the last four or five years and of course this is exactly what you pan did back in the not in nobbys and i remember a certain very was man called ben bernanke you advise in the japanese that they should shut down those on the banks right off the debt and stop the system all over again of course use all of these and it vos not this time around sort of trying to keep the zombies flooding without the cash flow that the japanese get by being one of the world's five try to exploit this so it's since signing to be doing i'm going

to deter to try to keep them afloat when they're fundamentally unsolvable should be written off and reorganise the best it's not going to happen so then and the bessel accords to a trial i can responsibly off the accumulated massive financial position sure irresponsible lending so to me is still a bit of a circus and speaking of the zombie banks that have continued to be propped up by by the u.s. government by the central bank which has continued to bail them out basically choosing winners and losers choosing the banks to be winners choosing the rest of society to drown how is this different then feudalism where you as centrally have feudal lords that own the debt of everybody else. well i think if you have always had a better idea how to run the masses than the than the politicians and the bankers and of how to run the capitalist system it's much more complex creature and you can be sure the outcomes funnily enough has been modeling around playing with the possibility of bringing what the bezel accords might mean for is that actually got

influenced and actually had an impact and it ended up accelerating the right of a process rather than they saw the writing one so you know the complexity of the system is so great that the what sound like right idea using a bit more responsible banking up to today severe sponsible banking and actually probably extend the length of the process rather than a chain you write it while three in your predictions will actually make prices more likely not good news but i want to look at debt really quickly before we run out of time here i want to look at it on the governmental level of governments using debt because i thought was pretty interesting that japan is now looking at buying chinese debt in order to get closer to china japan's and most of their their foreign reserves are in the u.s. dollar also some euro's. in what is debt used to kind of seduce people into countries geopolitically was being used massively in the whole the world bank

lending. to the third world countries ever since that is the so-called recycling of petro dollars because the the great temptation of davies is say he's a huge wad of spending power right now. and you've got it has a little amount of money on its own and by the way when you buy these big board back some fund on the track it's very seductive because it's very very dangerous because it only makes sense if you can actually get sensible investments out of the actually and generate new productive capacity that wouldn't be in there that was in substantially increase the capacity to service that date in the future it's a very dangerous tool to play with and in this particular case the japanese are doing it sue you know strengthen its cost with china but they probably also doing it to move a wife. might be ultimately the foreign currency of the american dollar but it may be more important in the long run that's interesting so perhaps the declining dollar will be the thing that plays a greater role here but sticking to this idea that this debt can be dangerous could be possibly as a weapon i want to bring in now actual weapons because we also saw that the

japanese government announced that they're going to buy u.s. f. thirty five we saw that the department of defense read tweeting a tweet from the press secretary of the pentagon i want to show it to our viewers if you haven't seen this professor king they said we're pleased your panel purchase f. thirty five next generation aircraft and grateful for our strong allies confidence and the u.s. industrial base so obviously the united states is pleased obviously buying weapons is another way to court your friends or enemies i guess depending on the situation so which do you think is a more powerful weapon these days debt which you pointed out is dangerous which some of the equated with death or actual fighter jets and weapons. well these are the thought of jack she would say that but then i think this is what i thought of the look you got enough of a good enough about one of the one of the most recent just in america being more of go on the financial sector side of this might be propping up another you know think of industrial ponzi scheme rather than a root of the rather than

a really effective one the strange thing about weapons is yes it definitely increases political cost between countries but there are also things you have never get used to the same time it's it's it's one of these dramatically wasteful elements of modern society because it goes back to feudal dieses well the weapons other than they used them or the fuel that is the now frankly. to me certainly. on this side of what's actually going wrong with us so you saw that it's important because you and i was on board now it's a good question you bring up sounds like both debt and over budget defense programs can both be used as weapons can both be bad investments i appreciate you being on the show it is always such a pleasure that was professor steve keen he is professor as well as author of debunking economics.

all right we have been taking a look at debt in so many different ways also speculation one thing i do want to point out we were talking about the greek deficit to g.d.p. ratio that ten percent number turns out not unprecedented i misspoke i apologize it has been closer to fifteen percent our point that we're trying to make is it is again right easing and getting into these dangerous levels now that we've cleared that up we can move on i can bring in dimitri kovtun as he is our producer as well as shannon donahoe who is in the control room holding the fort down there to talk about this story that we have been dying to talk about all day we touched on it earlier but ok we know that last year is dog frank x. specifically outlaws future contracts that are tied to assassinations war and

terrorism but as i've been talking about a little bit what about the take a look tell you what. ten thousand bucks. ten thousand dollars. i'm not in the betting business. he may not be in the betting business but maybe people that are all going to be a lot about betting on that the presidential race a small chicago futures exchange or exchange excuse me is aiming to be the first regulated u.s. market to offer legal betting on the outcome of the u.s. presidential election and they are asking if the f.t.c. if they can do this dimitri what do you think this is really cool i haven't heard you know we're going to have next cars are on friday to talk about this because he's been covering this stuff for a long period time he knows a lot better than me i just think it's interesting i think i mean you basically have you have a derivative an electoral derivative a derivative of a candidate trading on the exchange potentially more important to you than the

actual candidate himself or herself and the outcome of the election because you've got real money here and what stops in my opinion what stops you know like a kerry campaign if they've got enough initial funding for going to the futures market if it becomes more important let's say for donors and and and voters what happens in the futures market what stops them from going in there pumping up that market for somebody else then dumping it you know trying to shake our candidates pumping up the value of some guy stock their own candidate you know to influence like voters and i'm literally i am i'm on the same page also this is in chicago this is a chicago's exchange a chicago a small chicago changed and you want to weigh in on the chicago factor. i mean it's almost like the chicago outfit or chicago democratic machine controlling the kennedy nixon election whoa way to bring them here from rome they're russian you're from you're from the military all the midwest and god created equal all right why don't you just not bring the midwest out tonight and that way but one

thing i want to point out is what about ok we see this constant gridlock in washington we've seen that go on over this payroll tax vote that's been a disaster i'm curious if you guys think that there's going to be any way if this does go through to cash in on the dysfunction because how do you short the whole system you can't do that right so you could short your right you control washington there are some want us around washington right there george washington in the long or short any of you who should just listen to this is a gateway drug ok this is get your foot in the door i want to get this is the first one you're talking about a whole three can probably have driven lives out there all sorts of colors and things for whatever you want yeah i want to show washington you want to shorten the fence will you want to short this bill about the war short health care or you can do it on this new exchange where this is incredible you know you thought speculation was a bad before sorry but the money in politics thing is just a disaster we've already seen play out i can't imagine this would not be way worse that's all we have time for though we'd love to know what you think you should go to our website and tell us go to youtube dot com slash capital account and give us

your feedback on this proposal for this exchange because we will be talking about it more on friday also follow me on twitter as lauren lyster it's all we have time for today but from everyone here at capital account thanks for watching and have a great night. this was the plant that was responsible for causing the world's worst industrial disaster and now it had been abandoned in a condition where it had become a source of pollution or the most recent study that was done shows that this water pollution and spread of. food continued to be more than

a hundred thousand people in. groups welcome the fact that children see the children to be more likely to be born with birth defects and children in the rest of the country. being received as little as five hundred dollars for lifelong duties and. unpunished. the official. from the.

video. and. the palm of your. a u.s. drone captured an iran a helicopter shot down in afghanistan army private bradley manning accused of leaking classified information three separate incidents with the one common thing cybersecurity by the u.s. military. and it was this classified u.s. military video that shocked the nation to its core the man behind the leak now facing a military hearing coming up next we'll discuss how this case could potentially change the way future whistleblowers are treated by the u.s. government.