gulf draw western condemnation tehran also held an exercise simulating the shutting down of a key oil route but said it had no immediate intention of actually doing so critics say the u.s. is provoking to iran by slapping down ever more crippling sanctions. up next financial guru max kaiser the subject of economic headlines to his own unique brand of scrutiny. keyser welcome to the kaiser report one of the great things about doing a show on our today is that new year lasts oh seems like almost two weeks days are

over now maggs is only eight days there are light weight we're still partying here . well that's because i found what's considered to be a shot in russia a shot of vodka but at the down involved no this is just a typical russian vodka with a few of these and you'll be taken off a few days or so yeah i think hey max i learned how to say happy new year in russian here it goes. well that's fantastic. that's really growing by learning will be well yes max this is our eastern european special here we're going to start with the headline here on russia russia economic growth bodes well for putin the election this is from forbes and they're reporting on the new statistics which say that g.d.p. is that nearly five percent year over year ending september the key indicator they say to watch going forward will be corporate investment the latest figure of seven

point seven percent year over year shows companies have started investing again after investments collapsed in late two thousand and ten and support for the consumer sector max comes from rising wages apparently there somewhere around the world that wages are actually rising wages have improved and unemployment has dropped to six point three percent from six point five percent with incomes rising more in the last month than they have all year. november wages rose seven point one percent higher after inflation well you can spell brick well there are brazil russia india china it's an emerging growth story it's all hot as globe country in the world well it's also of course has a huge vast reserves of oil and natural gas and i know you're going to be talking to constantine gird give about that in the second half he is from moscow and he's an economist but the article does note that russia's g.d.p. is growing faster than brazil's one of the big four emerging markets so as voters

look around at their neighbors to the west and see one economic crisis after another putin's chances of becoming president of russia again are greatly improved so i guess there are lots of protests going on in moscow and st petersburg and around russia but according to forbes they're saying because the economy is so strong compared to their neighbors all over europe it might boost his chances protests this is an emerging social media ploy. think about it make a transition away from natural resources to social media all those brilliant russian programmers and developers creating all the new generation of the son of the russian billionaire is investing in u.s. based companies i should invest in homegrown russian social media companies we know from the people out there in the social media phenomenon that they've got the tone for so let's move over to the rest of eastern europe here in max the first headline max frank mortgages cause pain in europe this is just remarkable max this is

regarding the carry trade that happened on mass across europe now by the time the economic crisis hit in two thousand and seven some two thirds of all mortgage loans in hungary were denominated in swiss francs two thirds max in poland more than half of mortgages were in francs well other eastern european baltic countries also had high rates now explained to the up by. he is here what this means welding interest rates in switzerland really close to zero so people would borrow money and then low rate then they'd buy real estate in their home countries but they didn't factor in the currency risk you see the thing is that people who are taking on mortgages and these low rate interest environment and foreign countries don't have the same tools to sterilize their currency risk that major corporations or countries do every single day they sterilize their currency risk but if you're out there borrowing in a foreign country to invest in

a home without hedging your currency risk then wham oh you're open to these currency moves and this is what happened again and again and again all over the world people are getting slaughtered by these currency rate changes and currency value changes yeah i mean it didn't happen obviously in america so american audience won't recognize this and but a lot of apologists for the banks through his will say well those people shouldn't have taken on mortgages that they can't pay but this story more than anything else demonstrates without a shadow of a doubt max the banks first were engaged in criminal activity because how could two thirds of the mortgages in hungary be written in swiss francs the bankers themselves understand the four x. market they understand how dangerous it is they understand the danger of the carry trade but how did you expect two thirds of the population of hungary to understand what they were engaged in the risks involved well people in the us you say that they haven't engaged in this carry trade mortgage but the banks in the us have

a lapse and then america's on the hook for austerity measures and bailouts so they are paying well just to put into context how much these mortgage holders have been hit the franc bought one hundred sixty hungary and forints in the summer of two thousand and eight but his strength is so much that it can command two hundred forty eight forints at the moment so it's almost doubled the exchange rate you know it's like offering a consumer tainted meat. that is against the law you can't sell somebody tainted mace and now and people say oh you know this whole wave of anti-capitalism is destructive no it's not about anti-capitalism it's about being anti the sellers of tainted meat i eat meat but i don't want to be sold tainted meat that doesn't make me a vegetarian still a capitalist i just don't want to be tainted meat now these banks offer the equivalent of tainted corrupted maggot infested products that are sold to them to

these people and with miss sold to these people that doesn't mean it's a their anticapitalist no they're anti criminals that's right now max in an effort to stem the rising foreclosures the hungarian government earlier this year in the first quarter of two thousand and eleven rather they basically banned all foreclosures just for a quarter but then they in order to help stave off the social meltdown the hunger enough already set an artificial exchange rate of one hundred eighty to allow homeowners to convert loans into four it's without going bust they interview good or gay barks chief economist at hungary skate bank and he says this is a better option than batting banks from for closing loans this created a moral hazard a banker should really talk about moral hazard as peat people simply stop their repayments believing that the government would bail them out and then he goes on to say allowing people to exchange their francs at an artificial level is less damaging to banks but it simply delays the debt problems for

a few years now max isn't this what all european banks are doing they're exchanging their toxic debts at an artificial level to the e.c.b. oh absolutely but they're doing so now three or four years after the crisis started so this is why you have the currency war going on in the relative valuation of your overseas dollar the dollar is already exchange with the fed trillions of dollars of toxic loans in the e.c.b. there. process is just starting so on a relative basis the euro is a lot better off than dollar so they still have trillions of euros to go to even achieve parity with the us corruption on the fed's balance sheet the e.c.b. looks like mother theresa looks like the virgin mary compared to the fed's balance sheet they have a long way to go basically you have to suspend yourself into your economic sovereignty and who steps in here but the e.u. and the i.m.f. to bankrupt organizations on their own i mean the i.m.f. is receiving loans from italy and spain and portugal and greece right now that

they're lending back it's just so absurd but these people are now lecturing hungry hungry warned against new laws the european union and international monetary fund are pressing hungary to postpone action on proposed central bank of fiscal policy laws now before parliament if it hopes to win their approval for a financial safety net to protect the indebted country during the continent's financial crisis. they're totally indebted they have no money how are they bailing out people that are in debt forgiven yet again it emphasizes the theme of medieval ism remember during the medieval period the pappas you would get together and decide and figure out how many angels can dance on the head of a pin you see this was a preoccupation for hundreds of years here and they used to be in the user figure out how many derivatives can they slice and dice and dance on the head of another derivative while being balanced on the fulcrum of a derivative laced bells situation balanced on the nose of a central banker who's standing on a beach ball in the middle of

a topsy turvy city with this new law that they're proposing going hungry they even i.m.f. say the financial stability law which would set tax and debt policies could limit the government's flexibility to negotiate budgetary requirements in any loan package so the prime minister viktor orban said that he was trying to regain economic sovereignty but of course once here in the hands of the i.m.f. even if you give up economic. sovereignty turned requirements yeah. we took all the money you got to austerity that's a requirement just to go over some of the policies that viktor orban has introduced in hungary which are called an orthodox from levying large windfall taxes on banks and other industries to diverting pension funds from private management backed into state coffers that these have apparently made investors nervous. so let's look at another former eastern european put former soviet bloc nation

which threw off cities of command and control communism only to brace the commanding control interest rate setting banks thursday. grand illusion why europe should question wisdom of austerity by alan scherr ter first let's start with this chart which is shows the biggest declines in modern economic history as we see the biggest on the bottom there was one nine hundred twenty nine that's from the us when real g.d.p. declined by twenty eight point nine percent over four years two thousand and seven that's a lot it declined by twenty four point one percent in just two years and then two thousand and one argentina declined by twenty one point nine percent one thousand nine hundred seven max indonesia declined by fourteen point seven percent in thailand by thirteen point five percent you were there at the time that was of course due to the carry trade carry trade collapse as well so well it's a common thing throughout the history of these collapses that generally it has to

do with bankers and day and incredibly stupid banking tricks for their benefit and everyone else's detriment of course i'm looking at the lafayette economy collapse and something reminds me of jeffrey sachs out of that remind me of jeffrey rosen oh never mind well it took a temp point two billion dollars bailout from the e.u. and i.m.f. and the author of this article is arguing that lafayette represents a key test case for the economic policies european officials are counting on to revive the region which is of course effectively a pilot study on whether economic austerity i.e. tax hikes government spending cuts wage reductions and other measures to shrink a nation's debt work better than the alternative a fiscal and monetary expansion and of course they use the example of argentina which said you know forget you i.m.f. and they tripled their government spending and in fact their economy ended up booming after that well you know absolutely and in brazil also there were other

i.m.f. loans and became part of the brics. growth and then finally talked about social media that here's a headline a lot fia a lot of your probes rumors behind cash withdrawals well you know like two or three weeks ago there were some run on the banks a lot here crashed bank and lot fia which crashed branka crashed bank wasn't much money at the crash or bank there was a run on that bank and it collapsed after snorer us bank and lithuania taken over by the lithuanian state anyway then there were rumors that the government saying was via twitter so lothian authorities said that a run on swedish banks the lafayette was started by false rumors aimed at destabilizing the country and that is police forces were investigating the matter but of course this nation has embraced the neo liberal banks are financialization model and these are the same guys that do spread false rumors in order to you know bet if it from the credit default swaps they've bought on any of these banks or

nations falling apart crushed and rumored to be bankrupt about grumpy and sneezy. well you know rumors of course are as good as anything else the entire global economy runs on rumors goes rumors traded on the chicago mercantile exchange a c m a c f t c doesn't regulate rumors and create rumors and cash in on the rumors and everyone plays austerity measures it's all about the rumors are i think sam or thanks so much for being on the kaiser report thank you max you know your own good well be right back don't go away. well with. technology innovation all the developments around russia we've got the future covered.

stature welcome back to the kaiser report time now to go to double and speak with economist professor constantine good yeah constantine is from moscow and now teaches at trinity college dublin welcome back to kaiser report constantine thank you max all right wasn't it and if it were to happen what impact would a euro zone breakup have on russia there i read it two ways in which the euro can break up and we can call it or the disorderly in the orderly case of a default or breakup of the euro what will happen is that the monetary must all that money in circulation currently in euros will be gradually over a number of years displaced out of the existence whether in one country such as

greece or in a number of countries so i just hold it very pro countries there are different permutations and the case in this case the disruption will be the most minor and the impact on the russian trade and the russian personal savings and investments will be very minor the worst case scenario calms when there's disorderly default disorderly structure and of the currency markets and there's a lot of the what happens as overnight you will see the exist in a number of countries and there's a lot of the other countries euros will become body priced as well so in their kids there will be significant disruption to the savings a lot of russian savings are currently held in euro's all of these will be in effect lost over time either to devaluation or directly or through both processes themselves as the countries will be when they can eurozone countries which as the eurozone it so well did and they get on some of their obligations especially to foreign investors and for foreign savers there will be also just their actions and investment markets which will impact the russian companies especially corporates

which are least adult side of our island where they trade and even shares. in point both and also there will be disruptions to the investment markets so the new investment will be disrupted and flows of investment into russia in either case there will be price in the european assets and in that case russian companies. sovereign wealth fund for example will be able to enter the markets and invest in european assets but much better valuations than before and so there is really makes bug but the destruction will be very significant right now or while all eyes have been on the european debt crisis how have the russian banks been holding up are they exposed the same mix of toxic debt that are taking down banks elsewhere but i think from the russian banks perspective the we have to recognize about two tiers or even three tiers of russian banks first at the very top all the banks the likes of v t v for example they probably are less exposed to the crisis in europe and they are less exposed to the prices that mystically as well they also have very

strong capital ratios and most of their capital cons courtesy of the government as a result of this high quality capital that will call so we would expect far less disruption there and there is also implicit sovereign guarantee in the case of those banks there is a need the range here which in itself is relatively healthy some of the industrial base into the industrial assets and as a result of that they also are much more conservative in terms of their business lending and in terms of their development loans and things like that so they probably will be as well ok where the real problem will occur is that the lower tier of the banks the smaller banks which are very light on the external funding which also relied on foreign funding in many cases as well and as a result of that there certainly exposed to the crisis in europe at least through the front and side of the markets they're not so much exposed on the asset side because very few russian banks have significant exposure to financial assets outside of russia but they have their own problems inside russia and through their plights the smaller banks tears now the government has been the central bank of russia being out of in terms of trying to reform the banking sector in russia over

a number of years of them before. prices because they corrected for so that there will be problems at the small bank kind of levels if you want and this process is ongoing will be disruptive will be very problematic for russia i don't think so assuming there are no major blow outs and global economic environment and global markets in general assuming everything continues as it is right now i don't really see a banking crisis of the proportions emerging in russia and i got it in russia recently been amended to the world trade organization the w t o y changes should we expect to see and two thousand and twelve as a result russian admission of the w t o it's probably one of the individuals one of the longest processes over session to w t o and so it's function of the ability or conditions of any countries so far in the records it actually is stretched over twelve to sixteen years depending on different types of measures the different components of those measures so that is out of that you wouldn't see a significant impact in terms of the w t o session in twenty twelve when it is

likely that we will see inflated twelve was the beginning of the process whereby foreign investors start to be pricing the least in russia as the trading partners for the west and the trading partner for the for the rest of the world and there will be a net positive it will starting point as well that will continue throughout the period of a session so the next eight years that we will see and our police in terms of the positive valuations on the east side over actually is again trading partners investment destination on the russian side i certainly hope that in twenty three it will see an increase drive towards improved imposition was that the industrial and the prices level and also that the certain sectors especially sectors where russia can be very competitive in international markets such as the food for example also the new technologies and if that process starts into it well this will be a very good market for us to go in for it in terms of achievement both on their mission not just the mission but rather sessions we don't need to know but also the greatest benefits that will gain the greatest benefits from that membership as well

in the long run our last part about oil is certainly oil is the key. and talking about the russian economy it's oil prices around just a near one hundred dollars throughout the entire crisis and of course big dependency on oil and gas in russia if the price falls back to the sixty or seventy dollars per range how does that impact the economy and constantine well i think it will impact the economy it will impact the physical dimension of the economy and also the impact investment going to be let's so less so in the short term the demand side of the economy i don't anticipate that their market moves in terms of the oil prices because the world price currently like the rest of the if you want storable commodities specially if you look at gold if you look at versus metals and look at the oil. less so on natural gas for example site what we're seeing is that the price of those commodities just flicked anticipation of continue to ease and you were in the united kingdom in the united states and also so globally there was an expectation of increase a month through mosques as

a result of the you know that is expected to inflation future inflation those expectations also being a factor the and the real loss that's what. kind of physical tangible assets own we're not in bali you would expect to continue not in terms of rising oil prices but against the floor level of oil prices in there is your say eighty five two hundred five somewhere in the neighborhood of course thing it's a bit of a curse as that because the high oil prices dissuade our disincentive as the economy to move into let's say more technology based initiatives and where that drops down to a lower price there is an urgency certainly to diversify but putting that aside for a second is there now some diversification in terms of a move toward let's call it technology or social media certainly we saw social media on display recently and there's a lot of talent there is that in the cards going forward certainly isn't the guards

both from the government perspective pulls the perspective. and the incentives that are being put in place and also in terms of the dynamic and the economy the younger generation of their actions nowadays are much more focused on the higher technology higher value out of what you would call sectors especially service sectors they also become increasingly traded sectors russian experts for example of i.c.t. services which is soft pretty late in services and you know so social networks as you mentioned them down things like that all based related services has been growing at about forty percent a year and that is going to continue the big problem for us that there is there to continue that momentum you have to stamp or forty deals that outflow or brains what we call in other words that human capital people garlands which is behind that and there are tremendous capacity of that talent but unfortunately in the last few years it has been losing that there grassley so the countries outside of international and in particular the multinational corporations so it's crucial that the russian government policies and the context for example of projects like

skolkovo are very interested in those projects are still potentially anker multinational corporations research and development centers in russia proper itself that's a given there are younger russian people who work in that sector and in those areas more than opportunities in terms of the growth and career wise and growth experience wise and skills wise and that is very very much informed because russia currently has compared to personal income tax rates which is a very significant incentive for people with high quality care with human capital to be there and to stay in the russia but unfortunately doesn't offer the same quality or far promotional opportunities for growth opportunities and also business mission of the two it is so we pair in those two areas redo the corporate side the multinational corporations and domestic business creation in these areas will be very much crucial to anchor in the talent and thereby benefiting from this growth as well as a janitor at about a minute left i want to talk about an economics kind of you know difference in an.

which different countries are approaching the crisis in different ways some are advocating austerity some are advocating. money spending by the government printing now you're in ireland they've chosen austerity how's that working well ireland has not chosen this terribly arlen how does thirty imposed on sort of by the circumstances of most cases this theory different been never been really chosen by the governments governments always pursue their objectives or raising their expenditure no matter what it's really is a matter of consideration how high is the national debt in the case of for example countries like russia some stimulus is warranted simply because it actually is not overboard with the going to be the government that is very low in the country there are significant reserves of funds and those can be deployed in the careful way not to overspend but at least to invest in the future capabilities such as infrastructure investment with skills the best we can use of countries like ireland

that isn't really good process when you reach the level of debt to g.d.p. ratios of one hundred percent plus like are likely to like greece and if you also have a very high especially if you have private you don't have a choice you have to bring all of the. fiscal situation back to the level of sustainability over the long term and that is something that our leaders trying to do unfortunately it's best done at the times of plenty rather than the middle of the crisis and of course that is the part of the economy which is not working right now for domestic is going to be in effect is not go it's continued to shrink as a result of those that are so. accustomed to guard yes thanks so much for being on the kaiser report thanks and that's going to do it for this edition of the kaiser report with me max kaiser and stacey herbert our thank my guest constantine girl yeah you can follow constantine on twitter g t c o s t or g t cost you can follow me on twitter as well that's just max kaiser and of course

you can follow stacy herbert you can send me an e-mail at kaiser report at r t t v dot r.e.o.'s stacey read it and so next time this is max guys are playing by our. own home.

arab league observers say syrian leaders have pulled have the weapons out of key cities and release prisoners but the group is still looking for ways to handle going violence. egyptians are casting their votes in the country's third round of parliamentary elections but with the recent raids on foreign n.g.o.s it's fear the military is grip on power could remain a strong as ever. at iran's missile test in the gulf drop western condemnation but critics say the u.s. will go to the prom by slapping down ever more sanctions.