good afternoon happy monday and welcome to capital account i'm lauren lyster here in washington d.c. happy to be back and euro zone leaders are meeting again after talking about the eurozone crisis in davos they've moved to brussels to talk about it some more at any use summit a lot loblaw a lot of talk will tell you when something really happens that we need to break down until then let's talk about this meanwhile government and banks are still in bed together tangled up in their illicit love affair three years after the financial crisis yeah yeah we know the drill we're sick of socialized losses but how do we break this consensual rape of the public purse by wall street. i view a new lust. you don't do you. hold . and if that's all we're really contending with out of touch and leaders what chance do we have of escaping rule by financial all of our heat we'll talk to dr

michael hudson about it and i'm back obviously from the world economic forum my return to davos one and hardly one thing is for sure i never have to rely on this trespass ever again to get anywhere or to get rejected from anywhere i still have badge p.t.s.d. i'm still suffering but i will debrief you on my experience let's get to today's capital account. all right it's good to be back i just want to say dimitri did a great job filling in and i'm so happy to come back and do this show because coming back from davos i realize how much there is to talk about that is left out

of the mainstream conversation for example getting to today's guest michael hudson he recently quotes joseph stiglitz nobel prize winning economist in his latest article in hudson's latest article talking about the u.s. government's vast transfer of money and public debt to the banks as a privatizing of gains and the socializing of losses it is a partnership in which one partner robs the other now this is the kind of thing we hear and talk about all the time but why does it seem to be falling on deaf ears i was just at davos i watched bank c.e.o.'s defend their practices and the form of capitalism that continues to pad their pockets with cheap cash courtesy of zero percent interest rates set by the fed with interest paid on excess reserves mind you which they keep at the fed we heard this. policy too. yeah i bet you will jamie dimon i'm sure you're happy to leave that up

to the fed brian moynihan too he's c.e.o. of bank of america said boom bust cycles are just part of the capitalist system this is just what we have to deal with meanwhile there continue to be protests on the streets over the issues we've seen a number of developments with the occupy movement just over the weekend in oakland here in d.c. so where is the political awareness or the will to do something about this well let's go back a little into history today to figure out where the disconnect is coming from. but there's a big group fired by people. for it oh no. i love them now we used to be kings executed bankers when they didn't want to pay their debts the banks suffered losses when march when monarchs died or defaulted

now we have that in reverse and our western democracies we have governments taking on bad bank loans and banks cashing out on profits while the governments are sentenced to death with some at risk of default well let's talk to michael hudson he's professor of economics at the university of missouri kansas city he's also author of this book super imperialism the origin and fundamentals of u.s. world dominance and we're so happy to have you on the show dr hudson nice to see you as always so let's start with your recent piece you wrote banking wasn't meant to be like this you kind of give a short history of banking over the centuries concluding with how it looks today what were you getting out there what is thinking supposed to be like. there have always been two ideas of acting so it wasn't supposed to be like to get a player it's extract the whole idea in the late nineteenth century especially in germany was that banking was supposed to work with government to finance actual

capital investment in industry but if you look at banking today you have some very flat set of loans to consumers all of the growth in banking in the last five years has been loans to other credit other financial institutions so banks don't make loans for tangible capital investment to increase them toil labor that's time retained earnings of company it's banks make loans for derivatives for speculating currency for arbitrage interest rates and for stocks and bonds and of course eighty percent of bank loans are made on real estate mortgages so contrary to what was expected a hundred years ago banking has not become industrialized it's sort of west back into what people used to call user id and that's a word you don't hear anymore that banking has not become industrialized which was

the dream of at least not all europe after world war one. banking took the cooperation of american sort of merchant banking lending against the collateral against assets that could be grabbed not lending a blow against the productive means that could be put into place not lending against the means to produce future until they got their heads i want to get into some of the different things you're talking about i want to get into derivatives and all those mortgage loans that were written knowing that they could never be paid back but i want to talk about greece because that's very big in the news right now and debt literally seems to be used right now for a weapon of control the latest news that came out with the jurors. money actually wants to control the fiscal matters and the budget of greece so you know greece going to have to give up its sovereignty if that goes through and this is because of debt written by the banks and taken on by the kleptocrats do they have to lose their country as a result. that's the theory obviously the plan is to do

the greece what america and europe used to do to let america in third world countries in the nineteenth century when a country couldn't pay the creditors would send in a gunboat and they would literally occupy the customs office or they could collect tariffs revenues and repay the bondholders so what you have to go away is a decision that. finance capital and extracting money to pay the bankers is incompatible with democracy a few months ago when the elected prime minister of greece by grails was about to sign an agreement with europe to say ok we're going to sell off fifty billion euros worth of reply and this one sewer systems of athens another city on the market by ras maybe even the parthenon if you will island. the prime

minister said well we've got to put this to a referendum and let the people voted on it and angela merkel said no you can't ever referendum if you have a referendum no doubt no end of media leave the greek poppy population went out into the streets to demonstrate and say look there is no way that a national debt can beat elected if the people haven't approved it we have to legitimize them and so whatever debts we take on whatever promises we make to sell are not legitimate and as soon as we have an election then we're going to vote them out so you're upset you can't have an election we're going to put in our or our technocrat a technical or is it a euphemism for a factotum a lobbyist with a financial interest and they said we're going to put an essentially our dictator to tell you what to do and essentially what they're telling greece to do is you have to. we don't lower your wage rates even more you have to show off your public

property you have to essentially don't go into a chronic it's russian in order to. just i will right it's you can lose wealth in the time of mark more than greece obviously people are saying well wait a minute if that's the price of joining europe you don't want to be part of the war and using this is a model because clearly the greek government has needed to reform for a long time that this that can be argued but the debt burden is forcing reform on to greece it's not the type of reform that the people want it's the type of reform that technocrats want so what president is this setting about national autonomy. this is exactly the point warrants it was the germans said look we're going to come in and we're going to tax the wealthy people we're going to put him up for aggressive taxation we're going to do just what you're doing a lamb tax ancient athens use that well we're going to tax the land and x.

wealth and everybody will pay their fair share with a progressive tax like europe that will be fine but what they're saying is we're going to come in and we're going to take your money and we're going to buy german submarines and we're going to buy german arms and second hand american tax and we're going to spend it on the military you don't have any say in that and we're going to essentially shift the payouts off well on to the population at large with a flat like europe is in one of the post soviet economies in the e.u. and of those that are there not some some countries have had some success with that success with flat tax but i do want to move on to wealth transfer transfer more broadly ok because dad and other type of derivatives financial derivatives which you named were issued with literally no hope and no ability of the borrower to pay those back defaults were avoided because they transferred those payments to the public purse and now they demand austerity in conjunction with money printing to

pay the interest how is that different from stealing. it's legalized theft you know in america when president nixon said when the president does that it's not a crime when the financial sector does that it's not a crime and in america and europe crime spend decriminalized you're allowed to do that and you don't call it crime in america you've had not a single banker or kleptocrat be sent to jail by the f.b.i. they have been arresting the occupy wall street people who've been protesting against this now so you go to jail for protesting you don't go to jail for. stealing you go to channel four complaining it ups the ante on the financial side of things how is that price inflation a ponzi scheme. well people saying that the reason they want fiscal responsibility is to keep in place inflation and in place but the only way to keep the bank claims going is to fuel the largest inflation in history which is what we have seen in the

last ten years it's inflation of real estate prices and of corporate bond and stock prices since nineteen eighty the world the same but the largest bond boom. in history and as interest rates have gone down twenty percent to get the one percent you have the recent violence go up the price of stocks go up and banks that went slow heavily against the us if they were now to begin to raise interest rates you'd have the price of bonds go down real estate would go down and banks would be even further in the negative equity so the banks are negative equity you know and essentially they have to make a choice are they going to play in the positive routes where they want to pay the big gambles and certainly in this country obama says forget the deposit or pay the big gamble it's there are campaign to give us and that's pretty much the same in europe europe is not coming in and saying ok we want the greek banks to be able to

be money transfers credit cards and. but you know what banking you know writing checks we want them essentially to pay off all the gambles that of cake and especially now that the whole shift once of them into greece and bought greek debt on the thirty cents on the dollar and they're saying we want a thirty percent now we want the european central bank that borrow from the following several components one hundred cents on the dollar will make a telling by pushing greece into a generational depression that basically is what it is nice if they can't vote on it because obviously nobody's going to vote for depression. big assumption we finance achieved today we're pleased to be achieved only by military warfare and dr rice and i want to continue this conversation we're going to get a break but we'll come right back because i want to talk a little bit more about what this all says for the future of capitalism what it means for at it what some solutions are so we'll be right back with dr michael

hudson. now still ahead here i now have one world economic forum under my belt all debris q and what i took away from it after the break that first your closing market numbers. welcome back to capital account so some of the issues that we were talking about earlier and are in the show bring up

a lot of questions about what capitalism in its current form actually is what is this what about casino capitalism take a look. when the president of the m r were the least in the suit you really didn't seem. to be no one's going to interfere with you running the casino how relevant this seems right now let's bring back professor of economics though michael hudson also author of this book super imperialism the origins and fundamentals of u.s. world dominance to talk about just how relevant it is because dr hudson you've mentioned because you know capitalism gangsters used to run the casinos we just saw a little movie clip of it is it any coincidence that gangsters run them again in the sense of the banks. well that's why franklin roosevelt playing the term banks. the fact is that their idea of free market is

a market free from consumer protection free from anti-fraud laws and this is the exact reverse of its kind of free market with the classical a net of smith and a nine so a sort of ironic that they're using their claiming adam smith in the classical of the most as their place in st obviously what we have when people have been baiting the future of capitalism and you're having it everywhere in the financial ponds to get money and it wasn't there what they should be discussing is what type of capitalism are we talking about when you're right it's not the old fashioned industrial capitalism but. even when you say finance capitalism which it's evolved into finance careful what ism is is a whole family. pension fund capitalism a super sort of military and carry alyssum in the air and say you. see you know capitalism and the end product of all those it's like a radioactive

a process it resolves and go find what if lation and get in age ending up in the you know feudalism exactly what industrial capitalism was supposed to replace and and let's talk a little bit further about this because it isn't what we're doing capitalism and doesn't capitalism allows to do this we meaning us here doing the show we love to compete we love to put out views that aren't there on the mainstream media capitalism allows us to do that so isn't there a kind of capitalism that doesn't lead to the inequality that we see today because in the fifty's and sixty's there was capitalism that we had a much more equal society. well sugar camp group date of destruction that is the idea was that capitalism would have a kind of competition among the needs to increase productivity so lowering costs undersell where can and pass the productivity gains on them to their customers in the form of lower price it's what you have now is

a competition among financial getting sort of to see who can and the most financial charges will given them is that so they don't rate industry. by making loans in the form of those jump. in loans to work work great moves it will them even sell stock options you work with earnings not to invest in new plant and especially not long term which which is the phone will tell you hear things to buy their own style or simply depending up to give it him still raise the price and thereby raise the price of the stock options so you have financed capitalism and still the cost of doing business dance to the cost of living whereas industrial capitalism will suppose the lower the cost but what it is so you are what it will go was and let's look at the lesson turned upside down and how do we change this we don't have a lot of time obviously that's a big question but just to give one example of what i think is

a problem you know you have ariane i have been ten who i watched in an interview over the weekend talking about how we need moral capitalism men and how she it keeps her up at night and she's thinking about this during the day and you know more fair system and yet her writers boycotted first seven months a couple of guilds and unions because she capitalizes on labor that she doesn't pay for he doesn't pay some of her writers so this kind of hypocrisy how do we ever really talk about the real problems well i would have mistrust up all the patients who talk about morality children like to talk about morality and rick santorum more all of it it's usually the people who. are the sleazeballs of the legal system that talked about hoping that we're going to look at their words not of. and are really doing for their own can get it so it's the problem is to put in place a system where people believe the right thing by serving their own interests and now that system and regulatory system a legal system

a people for going to the getting more oil and more i mean it's become self just not the way to promote society as people expected it to be back when economics was followed political autonomy or bar philosophy that's a really interesting point a great one to wrap up on we really appreciate your analysis as always a nice breath of fresh air after listening to mainstream economists all last week and davos i really appreciate it as always dr michael hudson. all right so now that i'm back from davos i just want to say first thank you so

much to our viewers and to the twitter community and to guests like jim rickards and ed harris and max kaiser and stacy herbert who were so super supportive of the coverage and my trials and tribulations at the world economic forum now if you watched our show or read my tweets you know about the experience but this was my first davos so i did want to kind of debrief you on my biggest takeaways on a personal level now before this i had only really read about davos and learned about it from a chapter about davos and superclass which is a really great book by david rothkopf which jim records actually recommended to me which gave this really good kind of insider e. account so i don't know what i was expecting but i think davos is probably completely different based on who you are and what badge you have and so i can really only speak for myself i'm not trying to characterize the whole thing i'm not trying to paint with a broad brush i just want to give you my personal account of my impressions but some people view this as a leader meeting the haves all getting together while the have nots are locked out

a conversation that's really had a lot this year because of the whole occupy movement and the demands for democratization but what about the have nots that are allowed inside there is this whole hierarchy with in davos it feels like and we've heard the stories of the badges i know it's kind of been believer but you definitely feel that with in davos with the attendees and the press there is this whole hierarchy ok this i want to burn everywhere you go you have to scan this. this is what security guards see and tell you you can't go there this is what participants see and go i don't want to talk to you you scan it and you get rejected if it's not open if you're not allowed to access that area and your access is pretty limited somebody i think wrote that this is like high school but in high school i didn't need a bad should be considered a cool kid i had you know. nothing that whatever that took care of itself anyway if you're a billionaire i'm sure you're rich enough that you're at davos doing your own thing

you don't care because you're a billionaire and if you're a businessman judging by the ones i talk to you're mostly concerned with doing business networking but i just got the feeling with with some of these people with the feeling of the group that some are just so dazzled by the access and the rubbing elbows with some of these people and it really makes you realize where the herd mentality and the obsession with the establishment comes from and the desire for acceptance that part is like high school it made me think of some of the things that guess like reggie middleton and others talk about with their herd mentality and why people missed the crash as a result of it back in two thousand and eight and with some of the financial issues facing the country in the world today you know i had a friend that used to work for the obama administration and said that he seen grown men cry over riding on air force one and i got the feeling that the same kind of thing might upset some of the people at davos now some of the most interesting conversations i had were actually about where they were substantial and about

economic problems that went on a deeper level what was when i was speaking with the occupiers who actually wanted to talk about economics and were seriously questioning the way things are or someone for example who works for world economic forum but is in banking and we had a very content candid conversation about the problems with the banking system and the press team were the coolest most down to earth people at davos they were the best now there's so much going on there you really can't catch everything and there were sessions i couldn't even access or couldn't attend but most of what i heard was the same kind of establishment stuff nothing particularly the contrary and or alternative yes inequality was on the agenda but in golden from oxford university summed it up pretty well when i talked to him he's been going to davos for fifteen years and said even though it's grown at the end of the day davos over. resents the business elite and people are concerned about inequality yes because yes there is

some common humanity but you can only go too far with that that at the end of the day it's about self-interest people are worried about higher taxes and populist movements bringing governments to power that aren't big fans of the rich and most of the people i spoke to weren't panicking over the economic issues we face and after a few days i was like get me out of here i don't want to get stockholm syndrome so personal feeling as long as these people are the people in charge i don't have a lot of faith that much is going to change i think people see things relative to their situation and when you're flying into davos in a private jet and partying with prime ministers and c.e.o.'s you're a little out of touch with most of everybody else and if you're trying to hang out and run with the cool kids who are riding in their private jets then that's probably problematic too as far as really understanding the situation for most people and on a personal level i really don't think i ever need to go back until i get a white badge and p.s. a lot of people that tweeted me were very interested in the height of people and

there was a picture tweeted with geithner and christine legarde saying you know how short really is gardner i didn't see him but i do have to say that i did see christine legarde walk right past me and have air kisses with the chairman of society general and she is very tall so there is a possibility that she may be dwarfing tim geithner simply because she's so tall a live you on that thank you so much for watching feel free to follow me on twitter out more and lyster give us feedback a you tube dot com slash capital account and come back tomorrow for another show.

fierce fighting surround damascus as rebels engage with government forces in the suburbs of the compas holding while the assad government welcomes a russian proposal to host the base peace talks with the opposition which has given a mixed reaction. iran wants it could stop supplying low to some of the e.u. states in response to sanctions against its nuclear program which is currently undergoing a drought is that. you need is how to read on

a pattern in five hundred billion viewer rescue fund through the eurozone and i bet some it will be game brussels also bought two of these twenty seven countries have agreed to close a fiscal union intended to meet time to brussels control over the budgets of member states to help deal with the euro crisis. to have eight hundred police response to the call for projects in california and articles that plan to quit branch offices and also freeze them excessively so. as the headlines up next he's on your show plays out the occupy protests in oakland means yet more showdowns with. the loan to show we'll get the real headlines with the mercy or can live in washington d.c. it's not going to take a look back at what happened in oakland this weekend.