the father of a. says he was mistaken when he accused him of being responsible for his son's story first. the u.n. reported. criticism from russia it's also likely to have references. removed from the text. and the german leader. to.

go against it. with more on those stories another update for in half an hour from the capital account where we look at the hot stories behind the republican party primaries that's next week. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. mitt romney won the republican florida primaries last night not only did he win he developed magical powers with raising taxes will finally get america to a balanced budget. while he's away third week han have it all that's amazing does anyone actually believe what these guys say anymore with the economy is such a disaster we have a better idea than just accepting this i'll tell you what it is and as for us

president barack obama he has been drawing up plans for an economic house built not of cards but of steel. tonight i want to speak about how we move forward. one of you for an economy that's built to learn. and grow to be built on american manufacturing. feels a little bit like a pipe dream economists dean baker says the missing piece is a competitive dollar but if that means devaluing the greenback just who benefits from that wealth transfer and who loses it and with not just manufacture and snow globes but there are indian logistics made in china too how can we be sure a single job would come back to the u.s. any time soon dr baker will be here to answer that and save areas of the world unite and joe why isn't all of business insider has a message for you another whining over lousy interest rates it sucks for everyone in the us right now so deal with it really joe wall street speculated with the

nation savings during the boom and now during the bust savers and retired shouldn't even have the dignity of earning a real return on their hard earned labor will go head to head let's get to today's capital account. all right we have dean baker in studio today but first i have to get this off my chest because u.s. republican presidential candidate mitt romney won the primary last night in florida reportedly restoring his status as the front runner but here is my favorite line from his victory speech. president obama wants to grow government and continue to amass trillion dollar deficits i will not just slow the growth of government i will

cut the spending of government i will not just freeze government share of the total economy i will reduce it and without raising taxes i will finally get america to a balanced budget wow that is amazing that is so fantastic that he's going to be able to do that especially considering the c b o says deficits were made in the one trillion dollar range for the next several years if bush era tax cuts slated to insist expire in december are extended which is what's commonly assumed this is not to mention the government's projections are typically pretty rosy and you know this really reminds me of someone else we know norm over mine probably mahler's over. there but we were going to have to pay burke three thousand dollars per we man woman and child ok responsible. only under that guy we've seen the debt rise by more than four trillion dollars

that's after bush added on five trillion dollars now we've been talking about some way to hold politicians accountable like performance based pay if you fail to do what you say you don't get to run for reelection it shouldn't pay to lie is kind of our point it should pay to do what you say you're going to do or be punished otherwise now my guess yesterday said oh it sounds great but come on lauren that's not very realistic so here's another idea we've been talking about how out of touch leaders seem this is been my latest rant since davos out of touch from a lot of the problems that they're legislating problems that affect people very severely during these tough economic times so this is what i want if you're an elected official you need to at least prove you have tried to understand the possible consequences of what you are voting or not voting for you want to send kids to war in a wrong or wherever fine but you better have served or have

a kid who's served or if not you spend the weekend with a grieving family who was just lost their daughter or son and i'm talking real time not some you know award ceremony you want to keep spending and spending and ignore the feds printing fine but you're better endure some kind of i don't know virtual reality that takes you to y m r germany to understand hyper inflation ok germany still resists easy money and when you look at their history you can see why the last time they let the printing presses roll and roll and roll they ended up with three billion bread and ultimately hitler if you want to impose austerity in greece or italy you go spend time with those protesting it you want to use occupy wall street to either criticize class warfare or talk about the problems of inequality fine but you better go spend some time there and actually understand the activists i want to see you want to tent and. goes for bankers too because we know unfortunately how influential they are and us politics economists and historian

niall ferguson talks about when he speaks to groups and financial services how shocked he is by their lack of knowledge of monetary history and the great depression saying the only history they know seems to be the history of their careers so monetary history of the us rehat niall ferguson says so too and take that knowledge to hearings on capitol hill or the boardroom or to davos so that is my rant let's stick to money though let's talk about the dollar u.s. president barack obama is talking about a plan to bring back manufacturing to the u.s. you know it's been going overseas for forty years a columnist and co-director of the center of economic and policy research team baker says his plans got a missing piece here to talk about what it is he is here and i bet he's read monetary history of the u.s. how do you see here our guy then all right so first i'm sure you're going to want to challenge me on the deficit so i'll just give you the opportunity to do my wrong well you're wrong because if we didn't run the deficits that obama around we'd have

much higher unemployment i really can't imagine what the right man would want that so hard very good you're on the deficits you should run bigger ones and the whole point was he walked into the middle of an economic collapse and the deficit in a certain sport the economy because the private sector was going to do it so hard time criticizing him for that one ok but if the private sector isn't spending why aren't they spending isn't that because they want to stay nable growth you know there and spend because they don't see demand it's very simple if you have a factory you increase spending you start hiring people and she demanded the demands are not there you don't do it it's very simple but the government can stimulate the economy but how do you know that that's a good growth there's a difference between good growth and bad growth all you have to do is look at the mortgage boom and the crisis a boom that was propped up by the government to see the cost of bad growth first of the boom it wasn't propped up by the government the people making money hand over fist where the wall street investment banks but secondly in this case there's literally nothing so it's not a question good growth or bad growth it's a question you want no growth you want a lot of people unemployed or you. and something governments doing you know the government could do better or worse things ideally you would do things like spend

on infrastructure spending on education make us wealthy in the future but the alternative is simply having more people unemployed why on earth would anyone want that well let's talk about how to bring some of those jobs back because obama has a plan for manufacturing and you say the problem with that is he lacks touching on the key point in your view i believe which is the competitiveness of the u.s. dollar you think the dollar is overvalued so why is that exactly well basically what determines relative price of imports and domestically produced goods is the value of the dollar and the dollar should be falling we have a large trade deficit and this is exactly what's supposed to happen supply and demand large trade deficit supposed to mean a decline in the value the dollar that makes imports more expensive for us in the united states will buy less it makes our goods cheaper for people around the world so they'll buy more of them that hasn't been happening because in many countries china being the most important but many countries have been deliberately buying up dollars in order to keep the dollar that has to stop so president obama asked what that front and center has other measures you know they're generally good ideas you

know let's have more training let's have good infrastructures lots of things there make sense hard to argue with but that won't amount to a hill of beans compared to a dollar that might feel valued by twenty twenty five percent how do you decide what is the right value of the dollar and who gets to decide that it doesn't matter what the right value is it's too high not whether we get the exact right value who cares we're never going to be exact right value the point is it's clearly too high and we can see that because we have a very large trade deficit sort of like you know it's just the supply and demand service is really think you can one on one all the breads to run on the store well maybe should raise the price one why don't the economy one hundred one cause i'm not an economist so that's a battle that while i'm mad i am a financial journalist that when the question becomes for me who benefits from that wealth transfer if you devalue the dollar you'd have a lot of workers in the u.s. would benefit because suddenly they would have jobs wouldn't have been previously have jobs pretty good to me oh ok well let's back up a second ok so to devalue the dollar when you get into again print a lot of my. you could i mean you could you could perhaps persuade china to stop

buying dollars if they were to be insistent saying no we're going to keep doing good you could play a little game with them go away you want to buy dollars will buy one and see who loses that one they would lose because they're paying too much for the dollars ok but but right now during these times wouldn't we expand the money supply wouldn't the fed stimulate the economy and print money and order to devalue the dollar well it could if you didn't get cooperation from trying to get some that would be an option so that who benefits from that because we're pretty sure would be more compatible with one person as wall street benefits from wall street be very unhappy wall street wants the high dollar because their money goes further in china and they fear inflation like anything so wall street be very unhappy with it which is probably why we're not doing it right now but not high dollar main high interest rates which why would wall street want that they're broke they're using these low interest rates to roll over the debt in the credit markets to finance their speculation road typically typically one hundred dollars more if i'm so sure with higher interest rates so they generally don't want lower interest rates we have lower interest rates now to spur the economy and again i can't see why anyone higher interest rates but who is benefiting from those low interest rates right now

well we're seeing a lot of people refinancing their homes they're benefiting we're having more demand in the economy more jobs so workers are benefiting so yeah so in general it's a good policy but i mean unemployment is still so high maybe high on wall street higher yet but we've seen wall street take on her cash and zero percent all this easy money market at the fed we've seen reserves go up we've seen that and take this money and speculate and chase yield where we haven't seen the kind of returns and then into the housing market or unemployment that you would want their name where they can make money in a high interest rate environment to that's not the issue is so it's really not that you can find lots of ways for them to make money again they're when they're thinking about the dollar overseas they want to high dollar because that means their money goes much further and most of all they fear inflation so printing a lot of money i mean we don't see much inflation but you know if you're concerned first and foremost about inflation you'd rather have a print less money and in fact if you look at the federal reserve board representative the banks who sit on the fed been very opposed to the expansionary monetary policy. let me ask you this then mr baker dr baker respectfully

how can you be sure that to be. well fine then you really open up the floodgates now i'm just kidding but ok we've seen great reporting on on for example how why i phones are manufactured in china and it's not just because of cheap labor it's because over forty years manufacturing has gone overseas and with it has gone logistics are indeed all of the support over a lot of it for manufacturing so how can you be sure that just affecting the value of the dollar would bring jobs back anytime soon it would bring about who would stop them from flowing over there we continue to see a flow of jobs to china and other countries we're not going to bring them all back just by lowering the dollar the point is it's a really big foot in the door we eventually want to rebuild a lot of those the just systems we still have them with autos i mean this is one of the great victories you know. if it's wrong to want to do it right bailed out the auto industry is result of that we don't just have g.m. and chrysler sitting there that would otherwise be bankrupt we have

a whole network of suppliers we need more of that but you have to start somewhere it's sort of like if you're trying to plant a garden well you need water you need soil if you don't have that you don't have a garden but you also need so you do it take time for the plants to grow but you've got to have the ingredients in a lower dollar is really key part of that story ok let me ask about the other maybe ingredients in the mix we heard the c.e.o. of cisco which cisco is a company that has forty three billion dollars parked overseas he says no way is he going to bring that back with the rate that foreign earnings are profits are taxed at he says it's easier right now to do business in canada and the u.k. russia china india that it is in the united states so how would you get companies to bring any business back here without dealing with issues like that but he's lobbying for tax cuts so of course he's going to say that the labor costs are far and away more important than the tax treatment obviously he maybe doesn't know it but he still is a business in the united states so someone should tell him that you should ask themselves for their tax treatment. such that it makes them profitable to be here

having a huge effect on the growth of prices and they're always going to obviously they always complain they want you'd rather pay less taxes so of course if you could post story there you know lower taxes or you know never open another factor in the u.s. but want to say that i hear you there that's a fair point really quickly before we go what happens if you're wrong dr baker if you do all this you devalue the dollar and the jobs don't come back what's the consequence or to see anything really bad from that you know you know so just to push it down further i mean at some point you know we're going to stop buying imports or we're going to buy domestically produced goods at some point we'll have to say about that i really appreciate you being on the show it's always such a pleasure to talk to you and i can't wait to see you friday night debate jeffrey tucker i will be there good to be debating him in washington we'll have him on the show friday to be defending the there will be honest here they really made it very railing against it thanks for being on the show that was dean baker he is an economist he is also a co-director at the center for economic policy research. and still ahead joe weisenthal thinks

a virgin retirees should quit whining about lousy interest rates he and capital accounts dimitri kofi anan will battle it out but first your closing market number it's. funny it's technology innovation all the latest developments from around russia we've got the huge earth covered.

welcome back capital account viewers our friend joe weisenthal a business insider has a message for you let's look at it he says dear savers and retirees stop whining about those lousy rates you're getting from the bank he goes on he says sorry but it's time we took on one of the most sacred cow demographics in the world savers specifically we're going to address the people who whine about how they're getting such paltry rates on their savings accounts including c.d.'s you hear all the time bernanke is zero interest rate policy is screwing over savers and retirees bernanke is even screwing over your grandma while you sure do hear all the time especially if you're watching the show because we talk about that all the time here on capital of count so to battle it out we've got joe here deputy editor of business insider

joe weisenthal is in new york and here in studio is producer of capital account dimitri cofee and i am going to moderate a very evenly and diplomatically so that this is really just between dimitri and joe so joe let's just start with you and get right into it why should savers and retirees stop whining that after their hard labor they can't save or earn any money while wall street which brought down the economy gets to speculate with cheap cash . yeah the fundamental problem with complaining about low interest rates is that i mean first of all everyone is annoyed when they can't make money we all want to make money on our investments we all want to get ahead but the fundamental problem is that the economy is lousy there isn't much inflation and at a time like this nobody can get any return to it's not just savers it's regular investors it's people vest and treasuries as people who invest in the real economy this is still a pretty depressed market and there's should be nothing special about people who

put their money in risk free institutions there's no special reason why they should get a good rate on their money in fact of the matter is the number one thing that investors want right now is security and liquidity and so you see them rushing for bonds in the u.s. and canada and germany basically anywhere that looks risk free and so that's basically what's happening with people who have their money in c.d.'s or other retirement accounts everyone wants what they have which is risk free returns and when everyone wants that you're not going to get very you're not going to get paid very well to hold that hold that account what we typically hear is that average turn money rather than return on what everybody is concerned about so demitri just basically saying hey you know nobody can get returns in this investment why are savers special. well joe i didn't actually get to hear the sort of what you're saying i caught it in a way but. i guess what don't you need interest rates to be substantially high in

order to create the capital formation that is required in order to spur the kind of investment that can lead to growth and there's a reason why investors would be demanding higher interest rates because they they're they want to sit on the sidelines and are ready to invest their capital. capital formation comes about when people see good business opportunities when people see growth for example people or investing or forming capital in china and other emerging markets not because of anything that the central bank is doing or interest rates but because they see real world economic growth they put their money to work they hire employees they build factories because they expect that the economy will give them good returns and then because the real world is offering them potential good returns then financial markets have to compensate so for example so interest rates rise but it doesn't work in reverse you can't create that environment of good businesses or a good climate for capital formation merely by raising rates that gets the cause and effect backwards to me while i'm going to say joe the thing is though that

we've had every time we've had a recession and maybe in the early eighties better recession we dropped rates as low as eight and a half percent we had a recession again or greenspan the drop in the three then a drop in again to one and now we're at zero each time we've been dropping them we've been keeping them lower and keeping them lower longer and now we're at zero how much lower can rates go they can't go any lower you can go negative but there's a point i mean if the fed is creating credit it's not creating capital right and credit is is just flushing through the pipes of the system and on jarring as much whatever capital is left to use. what what do you say to that i mean how do you how do you get an economy going because you've got to differentiate between growth growth and bag room. i for one am skeptical that the fed the fed has the tools to create growth i think it's doing what it can i personally in my view what i would like to see more fiscal stimulus actual investment into things i think that would probably help i think to some extent the fed is pushing on a string and you look at a lot of the you know see if you look at the effects of q.e.

sure they're buying up these assets held by banks but then that money isn't getting lent out anywhere and it's just sitting in excess reserves held by the banks so it is kind of pointless and there is no. there's only yes there's pretty marginal effects of all this stuff but it is not the reason why rates are so low it is not the reason investors all around the world are stuck in these risk free investments because throughout europe and the us right now due to the mediocre economy and basically the crisis stage in europe there's just an incredible demand for liquid risk for investments and until that demand eases there's just going to be no way that anyone can make money on a risk free and i question why people think that saving which is i understand that there are good reasons to save as an individual but as the whole benefits society of the least why anyone thinks in this environment people would pay them much for their save capital of the interesting question but i'm going to bring up the end place an argument that when they talk about gel you don't think we have inflation

right. the government measures very low and i know that there is going to be people who say that there are alternative measures out there but the fact of the matter is that it appears especially in the big ones like housing wages the things that really matter to people closing food is you know been volatile but the disinflation and deflation is still very real well this is what a commentary said and i want to read it and let you respond to what they said joe is right there is no inflation my plumber charged me fifteen hundred dollars for a three hour job the second time in as many months i'm willing to pay him with monopoly money in contrast at my local dollar store i can buy a fake al and other made in china junk for five dollars a piece very exciting with the current trend in a few years my plumber will sue me for my house but i will be able to live in my garage and hoard cheap chinese junk what a sick drain i respond is not like that. it's just let it come and you know

everyone has these anecdotal cases so whenever you point out that disinflation is the dominant theme oh i paid fifteen hundred dollars for my plumber or oh you know spend all this at the grocery store and everyone can identify certain things i don't see any reason to disbelieve the general numbers if you think that there's a big conspiracy and that the government is lying about inflation statistics i suppose that's an issue although it still actually doesn't really change the fact that still people are prioritizing savings in return of capital look i'm sure you could guess all the time who say that the dominant theme right now is safety and return of capital i hear a lot so even if there is inflation even if it is higher than what the government state it doesn't change the fact that with so many people just wanting safety and security you're not going to get paid very much to save right but you know that's the thing though that's that's the whole point that interest rates you have to look at interest rates in terms of what they really are and if the cost of living is higher than what the government reporting that interest rates have to reflect that

and give savers a real return seven shouldn't be getting a negative return in that case you're never going to own you're going. his booms misallocation of capital are never going to have the recession of the depression that's required and each time the fed has met the recession with lowering interest rates that's why i made the point each time to fight to lower them lower and longer the fed's actually creating the recessionary environment. well i don't this certainly buy the idea that we have to have recessions or i mean i understand the austrian argument about misallocation of capital but the third to the better is when we're in a crisis and i think because of the basically there's almost no safety safety to be found anywhere in europe between the banks and the sovereigns you're just going to get there's now truth huge glut of people who are not concerned about rates at all all they want is to be sure that they invest they put x. amount of capital into an institution and that at some point they can access it as long as such a huge part of the world economy is operating like that and as long as the really aren't that many great real world opportunities to invest in the u.s.

or europe there's nothing i don't believe there's anything the fed can do to guarantee people money there are just too much demand for safety and savings well joe it seems like they can guarantee wall street money wall street is getting cheap cash courtesy of the fed at zero percent they're able to access that and speculate with that or they're able to park it at the fed and get interest paid on their excess reserves so why should they benefit with getting interest in even though it's low if you have billions of dollars that interest payment is going to get just some more money than if you're you know grandma who is being penalized for not making anything. i was posting this to repairing. itself like look contrary to what people say wall street banks are making money hand over fist these days they can squeeze some water from a stone you're in there but the fact of the matter is wall street earnings have been dismal for a quarter of the quarter now and you just look at the reports of bank of america citigroup j.p. morgan. bank of america not much of

a penny stock really are just so third of the matter is all people talk about oh wall street is having this great free ride at the expense of the fed that doesn't appear to be. actually larry and the results the numbers don't bear that out look at goldman sachs that had a horrendous year in two thousand and eleven despite you know q.e. two for much of the year didn't actually help the company because there's no no let me let the banks fail let me get some money because i'm going to be worse off in the long run dimitry go i don't know joe that's just not true the entire region of the banks or even exist because the government stepped in and that's what you want to do is about the entire banking system would collapse because they've been living on the cheap money it's not a coincidence that the money printing that we've seen over the past forty years has coincided with the financial sector growing by leaps and bounds not joe you got ten seconds and i've got to wrap it up. i agree that the government has done a lot to prop up the banks there's no question about that but the idea that there are being a big bonanza or they're making a fortune on speculation i don't buy ok well thank you so much both of you guys for being here and duking it out it's

a conversation we will continue to and joe as long as you write posts like that we want to continue to talk about it yes that was deputy editor of business insider joe weisenthal and producer dimitri coffee and us here at capital account and that's all we have time for that's it for our show please follow me on twitter at loren legarda get you through until tomorrow from everyone here at capital account have a great night.