happy new year and russian here goes from good the best friend to esther this. one will be well yes max this is our eastern european special here we're going to start with a 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 that 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 in 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 close 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 gary together 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. this is an emerging social media employed. 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 some of the russian billionaires investing in u.s. based social media 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 talent for so let's move over to the rest of eastern europe here max the first headline max prank mortgages cause pain in europe this is just remarkable max this is regarding the carry three 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 while other eastern european baltic countries also had high rates now explain to the audience

here what this means well the interest rates in switzerland are really cheap 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 on 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-o. 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 recognise this and but a lot of apologists for the banks through as 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 that 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 that 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 the us you say that they haven't engaged in the scary trade mortgage but the banks in the us have their lapse and the america's on the hook for austerity measures and bailouts and 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 as straight as so much that it can command two hundred forty eight foreign so at the moment so it's almost doubled the exchange rate you know it's like offering a consumer tainted meat basically that is against the law you can't sell somebody

tainted mate and now and people say oh you know this whole wave of anti-capitalism most 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 to their anticapitalist know their and 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. change rate of one hundred eighty to allow

homeowners to convert loans into four it's without going bust they interview gore gay barks chief economist at hungary skate bank and he says this is a better option than bad and banks from for closing loans this created a moral hazard a banker should really talk about moral hazard as 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.

that process is just starting so on a relative basis the euro is a lot better off than a dollar so they still have trillions of euros to go to even achieve parity with the u.s. 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 your sovereignty 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. there. totally indebted they have no money how are they bailing

out people that are in debt 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 e.u. there 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. 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 the e.u. and 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 to turn requirements yeah. we take all the

money you can just already that's our 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 and these have apparently made investors nervous. argentina. so let's look at another former eastern european put former soviet bloc nation which threw off the chains of command and control communism only to brace the commanding control interest rates heading 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 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 nevermind well it took a template two billion dollar 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 via 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 of banks there was

a run on that bank and it collapsed after snorer us bank in lithuania who has taken over by the lithuanian state anyway then there were rumors that the government saying was via twitter so a lot the in authority 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 crash. rumored to be bankrupt about grumpy and sneezing. well yeah rumors of course are as good as anything else the entire global economy runs on rumors because rumors traded on the chicago mercantile exchange of c.m.a. to see f.t.c. doesn't regulate rumors and create rumors and cash in on the rumors and everyone plays all starry 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.

casual 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 monks all right wasn't a and if it were to happen what impact would a euro zone breakup have russia there i read it two ways in which the euro can break up and we can call it or there disorderly in the orderly case of a default or breakup of the euro what will happen is that the monetary mass for that money in circulation currency and 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 such as all the peripheral countries there are different permutations and that case in this case the disruption will be the most minor and the impact on the russian trait of the russian personal savings and investments will be very minor the worst case scenario calms when there's disorderly default or

this sort of the destruction of the currency markets and this is a result of the what happens as overnight you will see the exist in the number of countries and that's a result of the of the other countries euros will become body priced as well so in this case 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 all directly or through both processes themselves as the concert will be when they can eurozone countries which as it's a euro zone itself well didn't they get on some of their obligations especially for the gutters and for foreign savers there will be also just their actions and investment markets which. park there are some companies especially corporates which are least adult side of violent where they trade and even shares or in both and also there will be disruptions to the investment market so the new investment will be disrupted the inflows of investment into russia in either case there were beauty 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 that much better valuations than before and so there is really makes but the destruction will be very significant right now or while all eyes have been on the arab and that 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 the 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 comes to see over 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 linked to the industrial assets and there's a lot 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 two years now the government has been. and the central bank of russia being ousted in terms of trying to reform the bacon sector in russia over a number of years of and before the crisis because they correctly foresaw that there will be problems at the small bank kind of levels that she wants and this process is ongoing will be disruptive will be very problematic for sure 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 wasn't in russia recently been a minute in a world trade organization and w t y changes should we expect to see and twenty twelve as a result russian admission and the w.t. oyster only one of the invasions one of the longest processes over session to w t o and so it's a function of the ability or conditions of any countries so far in the records it actually 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 double your 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 rest of the trading partner for the for the rest of the world and then it will be in a positive it will start in plaintiff's well that will continue throughout the period of

a session so the next eight years that we will see an obsolete in terms of the positive valuations on the east side over our shares again trading partner the best destination on the russian side i certainly hope that in twenty three it will see an increase drive towards improved impetus that they industrial in the prices level and also that the certain sectors especially sectors where russia can be very competitive international markets such as the food for example also the new technologies and if their process starts in towards it well this will be a very good market for us to go in for it in terms of achievement both on their mission to not just the nation but rather the session to w t o but also the. great the benefits that will gain the greater the benefits from the membership as well in the long run our last part about oil will certainly oil is king and talk about the russian economy it's oil prices manage to stay 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 constantine's well i think it will impact the economy it will impact the physical dimension of the economy and it will also impact the investment going to be let's less so in the short term the mon 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 there especially if you look at gold if you look at precious metals that we look at the oil. less so on natural gas for example site what we're seeing is the price of those the more it is just. continue to ease and you were in the united kingdom in the united states and also so globally there was an expectation of increase among through mosques as a result of the you know that is expected to inflation future inflation those expectations also been factored in and the real loss that's what. kind of physical tangible assets own we're not in bali you would expect that to continue not in terms of rising oil prices but the level of oil prices in the region eighty five to

one hundred five somewhere in the neighborhood yeah 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 a less a more technology based initiatives and where as it 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 government policy perspective and the incentives that they're being put in place and also in terms of the dynamic and they want to be the younger generation of their actions nowadays are much more focused on the high technology high 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 self-regulated services and you know so social networks as you mentioned them down things like that all have 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 for the deal with the outflow or brains what we call in other words that human capital people collins which is behind in russia tremendous capacity of the talent but unfortunately in the last few years it has been losing of their grass of late to the countries outside of russia and in particular to the multinational corporations so it is crucial that the russian government policies and now contacts for example 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 given their option younger russian people who work in that sector and in those areas and be more of an opportunities in terms of their growth and career wise and growth experience wise

and skills wise and that is very very much important because russia currently has they compared to personal income tax rates which is a very significant incentive for people with high quality cured human capital to be there and to stay in their russia but unfortunately it doesn't offer the same quality of promotional opportunities for growth opportunities and also business mission of the two inches so we pair in those two areas really the corporate side the multinational corporations and domestic business creation in these areas will be very much crucial to enter in that talent and thereby benefiting from this growth as well because it's a. i've got about a minute left i want to talk about an economics kind of you know difference in an approach different countries are approaching the crisis in different ways some are advocating are staring at you 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 a stereo arlen how does thirty imposed on their it by the circumstances of most cases. never been really chosen by the governments governments always receive their objective or raising their expenditure no matter what it's really is a matter of consideration of 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 mean the government does is very low in that country there are significant reserves of funds and those can be deployed in a careful way not to overspend but at least to invest in the future capabilities such as infrastructure investment with skills and best we can use of countries like car that isn't truly capacity when you reach the level of debt to g.d.p. ratios of one hundred percent plus like are likely to like greece if you also have a very high especially if you have a driver you don't have a choice you have to bring your all in the. fiscal situation back to the level of

sustainability over the long term and that is something that part of this 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 our domestic economy in effect is not it's continued to shrink as a result of those that are so. cosseting cardiff thanks so much for being on the kaiser report thanks and that's going to do it for this edition of the kaiser a par 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. and 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 are you stacey read it until next time this is max guys are saying.

well. technology innovation all the developments around russia we've got the future covered.

provoking tantrums the pentagon says u.s. warships will continue to sell in the arabian gulf despite an arabian warning to stay away for a while to iran successfully test fire as missiles during naval exercises claiming it's been put to good by the qatar. time between israel and palestine in fifteen months and without a breakthrough with true stuff and building on occupied lands continuing to blow but the restart of the substantive peace negotiations that is genius a construction milestone but israel wants no preconditions before towards. the winds of trains the russian army marches on who is to organize a fashion with the targeted him to return to soviet era markets or suppliers visit spending over six hundred billion dollars and upgrading the country's military

industry has fallen behind to from which. those are the headlines up next he's a no show looks at. the republican presidential wannabes seeking to oust obama from the white house. welcome to the a lot of shall we get the real headlines with none of them or see or can live out of washington d.c. tonight we're going to take a look at iowa and how it shows us where this campaign season will be had a lot to say at the big money is already rolling in for this very first primary vote david sirota and james fallows both join us for a panel discussion then while the overwhelming majority turns its back on sopa and protect ip there is still are a few out there they're touting this piece of legislation or those pieces of legislation.