resistance is not the politics but the culture. is couldn't get. its own.

cultures of resistance on the march.

memphis foreign minister says there is a risk of replacing a libyan style scenario there's foreign intervention in syria. no letup in the euro crisis as the eurozone chief says are going to sure and says are still awaiting from greek mr leaders and all the head to implementing the stereotype are glad to return from vital one hundred fed to be named europe a allowed to save the country from the fall. and north make nation over who ran as russia's new attributing the west to mind decide on a strike against the country and still some dishonest intervenes and is a sure bet he's got the state was behind monday's bomb attacks targeting us and this is a need in georgia and not from bangkok on trees day. as the headlines aussies capital account was lower this days next.

good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. here are your headlines for tuesday february fourteenth the two biggest economies sat down to the table and missed an ongoing trade rift i'm talking about china's v.p. who is also next in line to president is in washington meeting with u.s. president barack obama at the white house as they do the diplomatic dance we've recently heard tough talk towards china from both obama and republican presidential hopefuls we will separate campaign rhetoric from reality meanwhile the eurozone meeting to talk about greece's bailout tomorrow has been cancelled meanwhile in moody's rash of european sovereign credit downgrades most were similar to moves we've already seen from other ratings agencies this surprise though was the u.k. moody's is the first big firm to warn the u.k. could lose its aaa status it put it on negative outlook the heavily indebted u.k. is often left out of the euro zone crisis debt domino zone more look at how the

chips are stacking up now and how they may topple finally our breasts the new mini skirts last week we talked about the headline indicator for the economy's direction but is that how fake our breast implants really a better modern measure of economic mood will give you the evidence let's get to today's capital account. well folks we have a game changer today or it could be so the eurozone finance ministers were supposed to meet tomorrow over greece's bailout after greece of course approved austerity measures reportedly they'll now hold

a conference call the meeting with council last minute reportedly showing the eurozone wants tougher guarantees from athens and here we were thinking and how you were weak this was a done deal once greece got this passed it was just a mood sailin from here it's really showing to us that economic solutions are a lot more complicated than they appear on the surface or than how they are portrayed in the press there's a lot of dominoes to get in order a lot that could topple to this wall of course we've seen more sovereign downgrades so here to help us figure out all of this is founder of credit write downs edward harrison in studio with us i'm happy to see you as always good to be here thank you ok so this new you know canceling of the meeting when we thought this was a done deal with greece to me shows it to us shows the complexity of the situation you know this was played as to the press and kind of i just think more broadly to the public as once greeks parlin monks once greece's parliament gets this through

then this deals done and now you see there's all these other aspects that are set up there's the e.u. officials there's the i.m.f. there's the private sector creditors so what's the likelihood that this deal breaks down because of say private sector creditors wasn't that the deal will happen eventually i'm optimistic that it will happen because basically the alternative is an uncontrolled situation and so they'll do whatever it takes to at the last minute make it happen the rule in a day is as you know both in the greeks where we've already seen that they have made it happen and then also on the german the fin is that. you know there are a lot of different constituents to get together there but again you know the alternative to getting the deal done is the. for defaults credit default swaps contagion to portugal contagion to spain italy excedrin so forth could private sector investors derail this deal they could potentially do real part of the deal i

don't think i think eventually what we're going to see is a larger default i think probably will have to take a haircut i think that you know we're going to have to see greater public sector participation in the deal because we're not going to be able to get as much from the private sector as we initially had hoped oh gee what a shocker there and we're in the banks are going to make out better than everybody else even if there is a deal for refinancing though aig could not be over then i mean how many people how many private sector investors are going to take this to the courts and push for either c.d.'s or push for repayment or bonds who of course i mean you know why would you do that why wouldn't you push for what you want i mean you want to get the best deal for your for you as an individual the only investors that are going to actually go with this data are going to be the ones against whom the countries have leverage like the big banks because those are the cons those are the the and it is that will be bailed out potentially if down the line and this contagion with

portugal etc and so forth so there's a quid pro quo there look you help us. and we'll make sure that you know everything works out for you in terms of the long term refinancing operation by the e.c.b. in terms of bailouts going forward and so forth sounds a loss to me you said you think this is going to go through because there's just too much at stake no one wants a default they will push this through why can't greece defaults and stay in the eurozone why is that considered to be you know two separate scenarios where you know the interesting thing in my default scenario. no pun intended originally was though is now you're going to hear from here difficult scenario you default scenario for the eurozone was is that the weakest that is the. it would be greece and probably portugal would default but stay within the euro zone but we've gotten to the point where basically the the mood the political mood will become so ugly as

a result of the austerity measures that are being taken that the only solution i see as probable is a complete. removal from the euro zone because let's look at greece as an example you stay in the euro zone one thirty six to the dollar is that going to be the sort of thing though is going to get your current account imbalance is that the sort of thing that's going to stop you from having more government deficits in the future no of course not what you really want is you want to devaluation and the only way you can get that is by leaving the euro zone and so ultimately when the time comes after huge austerity that these politicians are going to it's not going to be the politicians that we see today is going to be much more extreme politicians much more nationalistic politicians they will have amended to do what's necessary for their people to stop twenty percent unemployment and they're going to say we want a devaluation and they're going to get go for the you know this is interesting because now we're talking about the political and the social and you know in the

past when we've talked about this at work it's always been the banking crisis the financial crisis but now we're seeing more the political crisis and this social crisis and we've seen the political crisis so far papered over by technocrats ok well put technocrats into these governments to handle the financial business and the social unrest we've seen papered over with police of course on the streets of athens there's you know tens of police that are trying to you know do everything they can i guess to restore some kind of order but now that these are getting so big and we've you know papered over everything just to try and push through this financial agenda is it time to give these issues the bigger stage the political and the social issues certainly in greece that that's the case and i think that what's going to happen is that going for. who are the people who are saying let's do what's best for greece forget about everyone else let's get rid of unemployment let's stop the riots in the streets those are the those are the voices that people will start listening to more and more and whether those voices come from within the

party or out ultimately what's going to happen is it's going to affect the political position of those in power you know you could see a splintering of parties you could see a reform you know more nationalistic extreme parties together to form a government but coming forward in the next few months there's a huge likelihood that we're going to see a new government and it's not necessarily in their interest to start the whole process with the exact same baseline as the old government they want to have some sort of difference this is why you should vote for us this is why you installed us we have a mandate to do x. and x. is to reduce unemployment and to stop this from happening do you think we're going to see that more broadly when there is elections in say italy and when there are other elections in other european countries where there is more of this nationalistic wave of politicians gaining steam oh yeah definitely but the question is how how does the economy have to go down before that happens you know greece is sort of the leading edge on this you know they have twenty percent unemployment

spain is twenty percent unemployment also there their g.d.p. is in the cloud as much but i would look at spain as potentially a place where you could see nationalism coming to the fore as well and what about portugal this is something a country that we hear compared to greece in terms of the situation it's in often but but what is really the deal in portugal i don't know that much about it basically portugal has private sector indebtedness just like other countries that have her like ireland and spain and so they've had a very uneven recovery and i think in two thousand and ten they actually had plus g.d.p. and now they're going through a second round of austerity cuts and therefore the. g.d.p. is going on employment rate is increasing so as far as the four countries in the periphery that includes italy. or actually let's make it

five including italy and spain they have the fourth largest amount of debt actually italy has more debt greece has more debt on the public sector. and ireland has more debt but are we going to see portugal look like greece and at that time i think the forward for whatever reason portugal is seen as the weakest link and they will probably be next in terms of a debt deflationary spiral the reason of this is because austerity is not a good solution what really happens is that cuts in the private in the public sector are met with cuts in the private sector because people in the private sector are in dead you know there's a high private sector indebtedness so when you cut over here suddenly the people who are here who want to say who want to pay down their debt they have even less money so what do they do they cut as well so get out and then the whole thing takes this cycle is what is a really great point that you're making ever the one thing i want to ask you

everyone talks about these common solutions that europe needs but as greece shows us you know very visually and very aggressively right now that's the situation in every country in the sense that greece's domestic politics are as different as italy's as germany is these are all different countries how in the world is there going to be one european solution that is going to actually deal with the situations in each of these countries will the way to do that is to automate the the fiscal integration you know i think that they're starting to try to move towards that that was you know if you think about the politics of california versus illinois versus florida or nevada those are states that have been hit hard by the financial. they have their own politics but you know at the national level they're insolent were insulated from becoming a talking point because you know you have the fiscal transfers you have complete fiscal and political integration and so one of the keys for europe going forward is

to increase that integration yeah we'll see if that happens a really quickly before we go i forgot to ask you about the u.k. that's really the standout from this moody's downgrade has all the other ones that happened from other ratings agencies negative outlook for the u.k. will it even matter though short term because even the u.k. has high debt i call this the u.s. in fact you know everybody else is doing so poorly and people want somewhere that safe to keep their money short term where they can print their own money so is the u.k. going to be ok really from the standard short term the political reaction from osborne he's the chancellor is going to be look that means we have to double down on our own what we're doing in terms of austerity so short term it's going to actually be they're going to do that exactly what i told you before spain in the u.k. have the highest indebtedness total debt is private and public sector together so in an economy like the u.k. where you're cutting you're going to get cuts here and that's going to produce cuts over there so that's going to create

a negative momentum but internationally me because i've got to go further just mean in terms of the money going in there people still moving cars because they can print the romani that actually means yields will go lower so the reality is they're not in the same position as the euro zone countries exactly they can print money when the economy goes to the yields go lower and that's what's going to happen in the similar to the us thank you so much for breaking this all down for us in a way that is very you know good and different at work it's nice to see you absolutely one hundred harrison he's founder of credit write downs. to lead obama opened the doors of the white house the oval office really to china v.p. to day but with the tough talk coming from obama and g.o.p. hopefuls to. china will separate fantasy from reality when it comes to the world's largest economy but first your closing market numbered.

issues that some of you are going to let you go down already well most of us want to take your pick the ones with the movie in britain and argentina again sparring over the legal status and future of these islands is this disputed. well. science technology innovation all the latest developments around russia we've got the future covered. welcome back u.s. president barack obama met with china's next leader today at the white house he's

china's vice president xi jinping he's set to become head of the communist party later this year then take over the presidency in two thousand and thirteen now obama is reportedly having oval office talks with this is usually reserved for the closest allies and the countries of course have an ongoing economic tip over issues like trade and currency here is how obama played that one publicly today we want to work with china to make sure that everybody is working by the same rules of the road when it comes to the world economic system and that includes ensuring that there is a balance trade flow. very diplomatic said strong relationship with china is vital some other nice things it's a little more diplomatic than when he played to the state of the union crowd in an election year just recently it's not fair one for manufacturers have

a leg up on ours only because they're heavily subsidized tonight i'm announcing the creation of a trade enforcement unit that will be charged with investigating unfair trading practices in countries like china he singled out china there mentioned china four times during that speech we've heard republican presidential hopefuls like mitt romney do much the same as far as singling out china and saying similar to what president obama did there so here to separate campaign rhetoric from economic reality is an economics professor and author of this book what the u.s. can learn from china an open minded guide to treating our greatest competitor as our greatest teacher and thank you for being on the show are always happy to get your perspective on these issues so let's get straight into this from the top ok the currency manipulator thing the under valuing of the currency i have heard this forever from u.s. politicians yet the administration has failed to ever name china a currency manipulator which is because a whole other set of issues presumably let's talk about now the chinese currency

the renminbi as an eighteen year high also foreign capital inflows to china have slowed down so that would weaken expectations for a you want appreciation so as we stand now does the u.s. have a case on this issue. i never really even had a case it's been a baseless accusation from the very get go because the classic definition of a currency manipulator is a nation or group of actors that depreciate its currency china has been up reshaping its currency since two thousand and five it's appreciated over twenty five per cent many estimates over forty percent if you include inflationary effects secondly the only way you could say that it's undervalued based on trade is if it was only trade that the term and currency values to date capital flows from currency speculators actually overwhelm trade flows by hundreds of times the

turnover in foreign exchange markets from currency speculation. out numbers the total goods and services produced in the entire world for a whole year and this is turnover that only happens in two weeks' time so as you can imagine capital flows coming from big hedge funds big banks those flows determine currency prices more so than trade and so if you want to label someone a currency manipulator those should be the ones who should be named currency manipulators method and then thirdly. it's about. even if one argue that the currency was undervalued at one point which is debatable because china is still very poor country and when they had pegged it to the dollar it was based on the overriding exchange rate of eight point two eight you onto the dollar but they have appreciated significantly since then the most important thing to trade is to

have a stable pricing and so even if it were undervalued the inflationary effect over time to make business is make sure that things are on. comparable terms that would have already over compensated for any undervaluation and by the way labor wages in china have been increasing about thirteen percent a year every year and so that would have the same exact effect as a currency appreciation on thirteen percent every year that's interesting and always it's an issue to me is how it is the u.s. is behavior perceived because the federal reserve has been very active and getting involved in u.s. currency i want to play you would jim rickards author of currency war thought about this and get your reaction. the u.s. is the biggest currency manipulator in the world major countries manipulate their currencies in this because of the chinese do it the japanese do of europeans to the

us it's just better than anybody else because we would be your printing press. so that's his view i'm curious what is your view and you being someone who is taught in china you're much more familiar with what's actually being talked about in chinese circles what is the view of u.s. policy in china. they're frankly very worried because they know that all the death they hold can be completely devalued china china holds over a trillion dollars of this but it could be completely worthless if the us decides to run the printing press as this author mentioned the only way that china could have had any effect on how much debt we run is if us was borrowing in chinese renminbi not in china and us dollars but because the debt is all denominated in us dollars the chinese have no ability to enforce. you know

better behavior from the u.s. and in terms of trade and other things and so they're very worried because they feel that they have shipped out over truth you know trillions of dollars of goods and services to us and they might be getting absolutely nothing in exchange for nothing as an interesting point and then let's talk about that issue of trade because though the obama administration has shied away from officially labeling china a currency manipulator g.o.p. hopefuls like mitt romney are claiming that they will do that and we heard obama say in his state of the union he's put it in his budget that he wants to fund this new trade enforcement unit to investigate unfair trading practices in countries anything without china ok a couple questions here are any of these likely to happen are any of them warranted and would they be helpful or harmful to what the u.s. wants to achieve with china. certainly it would be helpful.

shooting very hostile rhetoric when you're largest trading partners is just going to ruffle feathers and make negotiations more difficult going into the future. regarding whether it's really going to happen or not it's hard to say obviously some of this rhetoric is motivated by the fact that it's a presidential election year and so these people are playing to their bases people who may not understand what is going on in foreign exchange markets or global trade and so instead of owning up to the economic problems and coming up with real solutions to fix them in the u.s. they'd rather scapegoat china and so part of it is is that too right would they be actually i guess you answered that but as far as the current rhetoric from the side of the united states as well as the posturing with that with the u.s. military focus moving more from the middle east to asia along with china's

ambitions it seems like despite what any politician says this is could be moving more in the direction of some kind of military conflict even though that sounds you know like a good scenario do you agree with that or do you think that that threat is overblown . i personally am concerned with it even though a military conflict. may be very small it's still not a zero possibility there is still obviously a potential for that especially when the rhetoric gets moved up especially when we're backing our rhetoric with very hostile actions by pivoting all our military into the asia pacific and so this is really coming from the u.s. not from china because if we look at the military spending in china it's less than a tenth of what the u.s. spends on military china spends more on their don't mistake police force and all

their military operations put together and u.s. has hundreds of military bases around the world china doesn't even have one yet so there is no reason why china want to start a military conflict with the u.s. and more so why would they block their own ships from stripping their goods to the u.s. because they want to obviously in the grow economically so it would just make no sense the u.s. on the other hand because they're so powerful because there's so much military power and they don't want to take military cuts obviously in the pentagon they are trying to find excuses in order to maintain the current spending and i think that this is very unhelpful really interesting insight there i appreciate you being on the show you always give us a unique perspective on these issues thanks that was author and professor and lee.

ok it's valentine's day here in the u.s. so in the spirit we had to do something last week we talked about socio nomics with robert proctor he's founder of the elliott wave institute and the hemline indicator was part of our discussion ok this is where skirt length is a gauge of social mood and the health of markets and the economy you can say that see they went up in the sixty's here's what he said short skirts in the late sixty's he certainly returned in the late ninety's he watched many of the achieved . by women you know they were barely dressed for most of those and when times or more difficult and i don't just mean the economy when mood is depressed but you

find maxi skirts for example in the seventy's coming along maxi skirts for our male viewers are long skirts that go down to your ankles joshua brown of reform broker writes this whole idea may be passe for a past generation he's a myth a better indicator of financial wellbeing and national mood for our generation is what he does the boom indicator and he cites the rebound of plastic surgery along with some of the gains we've seen in the economy as usa today informs us americans got about one point six million cosmetic surgeries in two thousand and eleven the second year of a big increase after a big drop in two thousand and nine according to an annual report from the american society of plastic surgeons and if you're wondering how this breaks down breast implants of course dominate breast augmentations far and away the highest perform surgery so this could be a reality check for the hemline indicator you tell us what you think of the boob indicator and the recovery that's all we have.