currency war with china and speaking of currency what will prevail in two thousand and twelve the dollar the yen the euro and as we see the euro at a sixteen month low against the dollar will we see a shake up in the global currency basket we'll discuss with forex strategist mark chandler and as merkel meets with monty to talk euro zone debt crisis and guess who is reportedly not suffering from italy's economic crisis the mob an anti-crime group s.o.s. in praise that reports with sixty five billion euros in liquidity the mafia is italy's number one bank this as monti for his own part is saying hey markets need to recognize italy's reforms will talk about who will come out on top let's get to today's capital account.

another day what can i say another slew of news and calls from leaders for economic solutions to economic problems the eurozone crisis continues today merkel and monti met merkel was praising italy's reforms monti saying hey yeah but it's important that markets recognize the progress of course we see the power of the bond market still with italy facing deals of around seven percent for their ten year bonds that's of course the seven percent marker broadly seen as unsustainable now the u.s. for its part continues to see economic struggles you know the list debt larger than g.d.p. slow growth joblessness today in a speech in fact president obama was urging businesses to bring jobs back from abroad with his message on jobs today now we hear analysis of these problems from a broader policy economic perspective very often now this is an important of course

but there's often a gap between analysis views of what should happen and reality we all know that we see that all the time as far as what some of this really means what it's really going to result in let's talk about it in real terms let's talk dollars and cents and here to give us a view of that from the trenches is mark chandler he's global head of currency strategy at brown brothers harriman and co and author of the book you see there making sense of the dollar exposing dangerous myths about foreign about trade excuse me and foreign exchange mr chandler it's really nice to have you on the show because as i said we often have policy analysts that sort of thing we haven't had someone who specializes in four x. as much as you do in your book which we put out making sense of the dollar made the case for why the dollar isn't going anywhere so what's your outlook in two thousand and twelve for the dollar. but we think the dollar is going to be relatively strong currency in this current year we think that the driving force will be two things one that you mentioned which is the european debt crisis which is

a negative for the your europe and secondarily good news for the u.s. even though i think in your in your lead up you're giving a litany of things about the u.s. but i think the big story is really how strong the u.s. economy was in q four unemployment rate eight point five percent even though it's still high from historical standards it's much lower than most people thought it would be and i think that the general mood is that we think it is surprises and the economic data has been surprising to the upside in the u.s. well surprise of the downside in europe and you're talking kind of about expectations this is something that when people are looking from a broad policy view they don't often realize how much that plays into what we really see happen with markets continuing with the u.s. dollar because i think. i do want to address some of these issues that we see with the dollar the constant deficits that we see that are that are staggering for the united states debt to g.d.p. which is now oh sorry go ahead we're going to talk about the the the budget deficit

you're talking about not the trade deficit you know not that great stuff they say we talk we got a lot of deficits we do we do have a lot of deficits i was talking about fiscal deficit so we have the fiscal deficit more than a trillion dollars we have fifteen trillion dollar debt to g.d.p. is now one hundred percent with these problems not to mention the fed's balance sheet is three times what it was before the financial crisis how can the u.s. dollar remain strong and the world's reserve currency. i think that's an important question that i think a lot of people a lot of americans themselves are going to doubt the role of the dollar the role of the u.s. economy going forward and i think that this partly. misunderstand what the foreign exchange market really tells us that there's no there's the four exchange market is really about relative values we don't treat the dollar against do we treat the dollar not in the abstract thing but a dollar against the euro or the dollar against the japanese yen or the dollar against the british pound and so they have sense and so these things that you point out a large budget deficit. large debt levels when you look at these numbers they look

bad in absolute terms but when you look at other countries the u.s. data is still much better even though some measure of the deficit is bigger than in germany for example but when you look at what's behind it i think that i think that you'd find that. macro economic data basis the long run in the us is much better than another country i'll give you one statistic that the u.s. has a surplus in and that is the u.s. is the only major industrialized country that has a positive fertility rate that is our population box is slowing it's not slowing as much as say japan which has a shrinking population japan has a two hundred percent debt to g.d.p. you see the u.s. is one hundred percent debt to g.d.p. i think japan is two hundred percent and the japanese yen was actually the strongest currency not only in two thousand and eleven but of two thousand and ten so that tells me is that valuation in the currency market is not simply a big deficit bad currency japan is the exact opposite japan's case

demonstrates that large deficits large debt levels do not necessarily mean a weaker currency there's other things we've got to put into the mix really good point interesting insight intense you brought up japan i want to talk about that you g three currency the yen the euro the dollar in august i know it's been a little while since i was struck by mohamed el area and the c.e.o. of pimco in an interview he of course being the largest bond fund in the world he was saying g three currencies all have issues we no longer look at terms of in terms of the cleanest shirt we look at which is the cleanest dirty shirt. do you agree and we're going to save the dirtiest of these shirts yes sure i mean of course it's easy it's sort of an easy thing to say but i would say the same thing about politics people say well we vote for the candidate you vote against the not for a candidate and i think it's really rather how you how you can come up with a pretty phrase for headlines but i think in substance it's true currency markets are relative value i would say that the u.s.

macro economic fundamentals look better than japan and the euro zone here's another example the japanese are having version of quantitative easing they're expanding the bank of japan is expanding its balance sheet it's not just by the risk free asset like japanese government bonds but the bank of japan is also buying things like equities and the corporate bonds and look at the e.c.b. as doing the e.c.b. balance sheet has exploded that even though the federal reserve goes quickly in the early part of the crisis the federal reserve balance sheet is stabilized the european central bank's balance sheet has exploded and what do they buy they're buying with things that nobody else wants to buy for example greek bonds or italian bonds and so i think that the kind of assets the federal reserve bought on its balance sheet as you point out it's a if it's grown it's by risk free or relatively rich it will be regarded as discrete assets u.s. governed by the europeans are buying sovereign bonds that nobody else wants to buy and the japanese are buying even riskier assets ok so it sounds like to keep the

clean shirt analogy which you didn't love but it sounds like you think that the u.s. is the cleanest dirty shirt and would you say then that the euro is that you're a guest of the us. well right now i'd say so and i think that the european debt crisis is still a go if private single biggest factor that's driving the foreign exchange market is the european debt crisis and i think that we've seen happening of course is since the japanese intervene massive size october thirty first the yen is really been out of place been in relatively narrow trading ranges and the euro is very volatile currency is really driving the other so earlier today we saw the euro sell off almost i'd say inexplicably and it brought down the other major currencies with it currencies are more correlated the euro than they are to the yet ok as a great great interesting point now the euro is also interesting because it maybe has less to do with the perceived value of the european economies more to do with perception that maybe a country will default that is unable to print its own currency do you see the euro

existing continue to exist in this form long term. that's a good question if you know it in mind to me you know there was a chinese premier who is asked in the early one nine hundred sixty s. what he thought about the political consequences of the french revolution and he said in the early one nine hundred sixty s. it's too early to tell and yet many people are trying to judge as european experiment after eleven years of existence i suggested that the euro zone monetary union in europe is like a child it spends nine months in utero in developing and then spends the next several years outside the womb developing and i think the euro zone was was sort of born half completed and this crisis is further developing europe so like the old socratic greek philosopher said you can't step in the same river twice i think the euro that emerges out after this crisis is a different type of euro that came into the crisis institutional reforms building is that usual capacity you know interesting thing happened this week for the first

time the european commission rejected belgium's budget and said no if you want to if you're going to use this budget you have to change you have to have more tightening otherwise you're going to each the objectives today it looks like they rejected the hungary and budget not part of the euro zone but part of the e.u. this is the first like i want to say where the building of the scaffolding you know when they build a big sky a skyscraper here in new york they build they have some scaffolding on the outside of it that's how to construct it and i think the same thing is true that the scaffolding for fiscal union is being carved out through this crisis and want to see if it results in this big skyscraper like we see in new york or to the ground you mentioned china i want to talk about china after the break we're going to go to break when we come back we'll have more with mark chandler support for x. specialists.

all right it's time now for word of the day when we break down a financial term or concept for our very smart viewer but perhaps not the financial expert and today very fittingly it is four x. and why is it important well for one you've heard our guest is a four x. specialist and we're talking about it today and here is another example of it being used here is a headline from the wall street journal war world forex euro falls on concerns over debt worries economy we were just talking about this so all our viewers are very familiar with the euro's problems we talk about him a lot and europe's debt worries but what exactly is it is this here's the definition the market in which currencies are traded very simply the forex market is the largest most liquid market in the world it is open twenty four hours a day except weekends which means our gas must work very hard with an average daily turnover of more than four trillion dollars traders include large banks central banks institutional investors currencies speculators corporations you get it now

the modern foreign exchange market began forming after the breakdown of the bretton woods fixed exchange rate system this is something that we've covered before on this show just as a refresher remember under the britain would system each country tied its currency to the u.s. dollar which was then backed by gold and the u.s. promised to fix the price of gold at thirty five dollars per ounce ok but then with this automatic stabilization mechanism gone which was provided through bretton woods it was no longer around starting in the early seventies national currencies were free to flow resulting in this huge buildup that you see of foreign exchange exchange reserves over time so look at that huge buildup that you see of reserves of foreign exchange reserves is a direct. all of different nations central banks printing massive amounts of their currencies after one thousand nine hundred seventy one you can see that rise now the three most liquid currency markets in the world remain the euro they get and

the u.s. dollar which we've been talking about but with the central banks responsible for maintaining the value of these currencies facing their own unique set of problems we may very well see a change in this mix in the not too distant future you could argue that something that we are talking about today and we'll continue to talk about so now when we do everyone watching will know what four axes and stick around stay right here geithner is in china talking of iran sanctions and of course as usual currency controls is a yawn floats though couldn't buy for global reserve currency we'll try to get an answer to that but first your closing market numbers. you 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 for. that it was kind of the guest today. and. i'm very proud of the role with just your history played. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else hears you some other part of it and realized everything you thought you knew you don't know i'm trying hard to think. what drives the world the fear mongering used by politicians who makes decisions to

break through it's already been made who can you trust no one. with the global machinery to see where are we heading state controlled capitalism is called sasha's when nobody dares to ask we do our t.v. question more. before the break mark chandler pointed out in his view you can't step in the same river twice something that he thought applied to europe so now let's talk about where europe is going to go what it's going to look like coming out of this crisis i want to bring mark chandler back and he is author and global head of currency strategy at brown brothers harriman to remind you so sticking with your metaphor i want to bring up greece because this could be a kind of

a difference into what the eurozone will look like coming out of this crisis regardless of kind of this daily debate we have over whether is going to get this bailout or that bailout or what it needs to do i want to bring up this chart to show our viewers we got it from sites numbers from the greek central bank showing the bank deposit flight from greek banks and it seems greeks are certainly worried about the future of their country staying in the euro by the way those bank deposits have been taken out of their countries banking system do you think greece will remain in the euro mark chandler. i do think that three stays in the unit here is really why i mean i think that we try to analyze a problem we have to make certain assumptions about the adversary the subject they were trying to analyze and we have to assume i think a rational actor that is their grease politicians grease officials with a side like a cost benefit analysis basis rather than some kind of ideological formation about whether they stay or not and i think that what every advantage is i know there's

a lot of famous economists saying greece ought to drop out soon we look at the data itself we try to build some scenarios what would it look like if greece were to drop out we think that any kind of currency advantage by a depreciate by reintroducing a new greek drachmas depreciating it whatever traded very age could achieve which we don't think great we would lose it through higher inflation we're worried about a roughly a seven percent decline in the greek g.d.p. this year what stays in the euro zone if you're if you were to drop out of the euro zone we think would be a much deeper economic downturn we think that the banking crisis now you talk about the deposits leaving the greek banking system but it's greece would have dropped out we think all that money would be wiped out and so because there is some chance that greece drops out it makes sense that investors in greece try to protect their savings ok tech their pension money ok i hear you're saying it's interesting so then what longer term do you see for the euro zone i'm not talking about you know one year to year are we going to see a resurrection i'm talking five ten years are we going to the edge of pan style

last decade. but they say the last decade because i think the big difference between say japan and saving a core country like germany in one thousand nine hundred ninety s. we regard as a lost decade for japan the difference between germany and japan the ninety's was not that germany was going faster japan wasn't they were both growing barely at all but the big difference was that your path had deflation so what's the euro zone to look like of course i don't know it's going to show you some analogies in the us it's been over one hundred fifty years since we have the civil war to this day the poorest states in the us in the united states tend to be the from the old south the old confederate self like mississippi an arc of saw louisiana among the poorest states in the united states are those that left the country during the civil war period east germany and west germany it's been twenty years roughly and still east germany has a big gap from west germany and so i think that we can see this in a number of different countries that so i would imagine what's going to happen is

that over time i think it's not what i wish to happen i'm really looking at who's got the power and for me that's one of the golden rules he would have gold makes the rules germany in this case has the gold it has the financial power and i think its vision of a fiscal union in europe is going to take place and i think it means sort of like condense europe to another decade a very slow growth and a deep track to the session they were about to enter if we haven't already entered it then found great for the people live in and europe interesting analysis let's go to japan is that something you were talking about because we heard an interesting case made by had fund manager kyle bass who is talking about japan is kind of a unique opportunity for bear as a country that as you point out very large debt two hundred percent debt to g.d.p. paying very low interest payments on that debt so that even it a little bit of a rise in interest rates could be totally chaotic do you see that point do you agree. well i say this in my experience for over ten years now i think that

the j g b that the japanese market has been the graveyard of many good smart traders many people are trying to pick a top. the japanese go by the ten year yield is less than one hundred basis points but there's a reason why it is because the japanese it's hard to say this in the united states but i would suggest that the problem that you have has is too much money and that's why they have such low interest rates interest rates are the return on capital and we have such low interest rates it's either too much capital relative to demand and japan saves a lot of money and they get a lot of money from foreigners buying japanese yen and buying japanese equities because the second biggest global equity market the largest bond market in the world so a lot of these that the hedge funds that you mentioned but the mutual funds and those money the money that sort of benchmark to some world capture of market capitalization has to have money in japan and the japanese are getting this money

plus they're keeping their own savings more at home and so i think this is why japanese bond yields are so low so i'd be cautious about hearing from somebody else saying ok valuev got to sell japanese government bonds or sell japanese stocks the japanese stock market peaked twenty one years ago so it's hardly it's hardly news that it's week ok march and that my producers are going to tell me i just want to keep this going for one more second because i have to ask you about china geithner is in china same old story talking to china about currency their currency valuation if you won did float what dat buy for global reserve currency with the united states. i think that china is so far away from having a global reserve currency for example the us is roughly sixty percent of global reserves actually about sixty two percent the euro or as composite currencies before the advent of the euro makes about twenty five percent the japanese yen and the british pound make up the bulk of the mean there's a lot of reasons why the chinese currency is not going to be a major reserve currency any time soon but i would say suggest this if the currency would have float rather than rise it could very well sink as multinationals try to

take their money out of the country which is difficult today a lot of speculators give up the game of betting on chinese currency appreciation and chinese middle class and other thing that the chinese are producing a middle class they do but middle classes do in all countries take some of their money out of the country diversify their hides from the tax man right thanks so much i got to go mark stand a really interesting analysis we appreciate you weighing in on all of these currencies that was mark chandler for x. specialist joining us from new york. all right sticking with the eurozone debt crisis i want to talk about this but i want to bring in our producer to me and shannon donna hold down the fort in the

control room to talk about it because italy is really in trouble monti is trying to tell markets to accept italy's reforms and guess who isn't suffering though from italy's economic crisis we'll give you a hint we merchants of phone you really should have some around the clock security now with the police if they do it best but they've got their hands full. you weekly dues to us we'll give you all the supplemental safety net you'll ever need i can also rise in the thing like that and have to go to court and say yeah it's over for the little guy. all right a very good hand brian may there is a sopranos fan according to a new report by the anti-crime group s.o.s. in praise the mafia is now the number one bank in italy despite the economic crisis perhaps because of the economic crisis the report says that small businesses that maybe haven't been able to get credit may have increasingly been turning to the mafia just to give you this in terms of dollars with sixty five billion euros in liquidity the mafia is now italy's number one bank dimitri i think these guys are

going the right way they should i mean the you always hear about have passionate people on wall street or the mafia really should be out of blue collar crime to move to wall street that's visually as well they should be selling for that you saw that video those guys were they were british we were they were running a protection racket the market should be selling forward contracts futures contracts on protection of the vatican if anything they could bail out europe they could build these to be so once he's got way more money than anyone else clearly that's a really good point back up there a lot of the world they have the ability to make sure that interest payments get paid enough to worry about because of the faltering they're going to give the fall they're going to take it to merkel you have a new solution for the eurozone debt crisis take it to monte shannon what do you think think they've got some pretty good debt collection tactics that maybe sovereigns could learn from so to be sure if greece does default does that mean that the mafia is going to send its women with the fishes all right. because the whole point you. can't afford to get this in the mafia but groups can

do whatever ones they can they go as they can of course they can grease is above the mafia in your in your scenario that you're facing all right let's move on because we've got to get to this from mobs to wars. we have a twitter war in one corner labor journalist michaele and the other slate moneybox blogger matt yglesias will give you a few snippets of what happened so michaele didn't like the way that matt yglesias what about a piece a can someone nickname a you fill in the blank you know kicking piece matt yglesias has ever written this kind of a grudgingly sarcastically said iglesias sucks answered i think the issues i've been writing about this week do impact workers that was kind of the essence of my point was that iglesias was pointing out that c.e.o.'s don't get record pay because of cutting workers or balancing on their backs that it's because of their competition relative to other c.e.o.'s continuing with this michael said good then

but i don't see the point of articles about a company profiting not because of inequality against workers but against other courts who do you think came out swinging to me truly don't have a lot of time i mean we had mike on the show before i don't write about liberal sort of mike's apart from the guy he seems real i don't know this other guy and mike did seemingly came out swinging but what i am tired of those are part of progress of them we'll talk about my career because i don't know who the other guys but i've heard of progressive warburton like they care about the people and they care about you know doing good stuff for the masses and then they come here and they rub elbows with people in power so that's what mike was referring to when you talk about that. qualifies but that's just drives me crazy well we don't know what my colleague or i don't know matt yglesias but one of the issues i'm on a labor journalist blog that this brought about was was access to power and if by getting that access that means that you kind of give that point of view it's an interesting debate will continue to have it because we're out of time for now unfortunately i don't think we have time for the national desk clean your desk

a picture but i'll post it online thanks for watching thanks for tuning in and follow me on twitter out lauren lyster give us feedback at youtube dot com slash capital account from everyone here have a great night we'll see them on. culture is that so much as i know i am an american which of course is why monotone times of year when a republican party presidential contenders are falling over themselves to their support of israel is this a reflection of gross ignorance of history in the israel. for. a past.

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he was the journalist who changed the course of the u.s. war in afghanistan with nothing more than his words why was he the only one to tell it like it is going to speak to rolling stone contributor michael hastings about how the mainstream media is more like a megaphone for the establishment and a medium for truth. but the n.b.a. clearly you know is a major roadblock in this passage really was the death knell for attempts to close guantanamo and now i think we're stuck with a sentenced to life what was once a powerful tool in the war on terror continues to dry up drill holes in america's credibility we're going to tell you why the new defense bill may have just sealed.