good afternoon and welcome to capital account i'm lower in the store here in washington d.c. and here are your headlines for february twenty seventh two thousand and twelve the german parliament today voted to back the greek bailout package but you greek bailout burnout well if you do you're a lot remember ireland will according to the i.m.f. today they talk about whether to approve the latest tranche of ireland's bailout money for the emerald isle look at that compound in effect of how europe's debt crisis pushes down the members struggling to get their head above water and out gives on the banks are becoming downbeat governments will speak to an economist in dublin and u.k. banks lloyds and r.b.s.

may take advantage of the cheap money the e.c.b. is building out through its l.t.r. oh program this week that's according to reports that one percent interest rate is reportedly all to entice thing to pass up it's no secret that banks love that easy money but it looks like some don't think the banks to be get not so easy. let's return to some stock want to shop the bunch of rugs that's not seized. and that was the message you think should be taken to the bank so we'll hear more from him and remember this. the point is ladies and gentlemen that greed. for lack of a better word is good. not anymore those famous words from michael douglas as gordon gekko in the nineteenth eighty's movie wall street are transforming now gordon gekko has a different message for the street and the f.b.i. has put him up to it will fill you with it and tell you what we think let's get to today's capital account.

so let's recap what's going on over the weekend to paraphrase g twenty finance ministers met in mexico city they didn't come up with really any new a internationally to stem the eurozone crisis or to throw out it more pressure was put on germany to increase the fire wall and germany took that pressure went to parliament today and didn't do anything about that but they did vote to go ahead with greeks greece's bailout package but do you have greek bailout burnout because that's what we think you may be suffering from so why don't we take

a look at just how hard hit some other western economies have been take a look at this chart this shows what year it is in economic terms in all of these countries how far back they've basically reverted economically looking at factors such as g.d.p. consumption stock markets housing prices unemployment now you can see there greece tops the list so i guess there's no avoiding it but look at that the united states is number three and ireland which we're going to talk about with our guest today is six on the list and worse shape than spain and italy which gets a lot more crisis headlines now speaking of arlin the international monetary fund is reportedly talking today about whether to approve the latest tranche of bailout money but what's really going on in the emerald isle because you don't hear much about it here to tell us economist constantine. and we are so lucky to have you coming straight from ireland so first thank you so much for being on the show i think you are absolutely so let's start with ireland because although ireland was

second in line after greece to get a bailout from international members we don't hear much about ireland we hear a lot more about greece and some of these other countries but today the i.m.f. is discussing the next tranche of the bailout for ireland so you're sitting there in dublin what's really going on economically there now well in terms of their children. now for the loans which satisfy the terms of that that will satisfy the terms of the troika that's not true the problem so nobody expects that the i.m.f. and the troika will not disburse the next tranche the are the part if it is that we would expect them to be more lenient to us because we did satisfy the conditions of the thirty's so far what really has happened in the on the ground environment is that the irish economy hit this assertion earlier than the piece before the rest of the eurozone and it hit the hardest so far even through the twenty eleven and also we expect now if that were to quell the contraction over all the little construction here in this cycle has been the deepest in ireland out of all

peripheral economies of europe out of all eurozone economies and the only in the next year we expect at least or overtake us in terms of the depth of the construction unemployment has shot from about four point seven percent. of the workforce to all the fourteen percent of the workforce again substantial increase large swaths of unemployed in months the younger people people with skills are leaving the country docks as i go in are and if you look at the latest though the in our example government is very quick to point out that they should want to be stabilized and that's not exactly true believe as they were for the third quarter last year in the third quarter last year our them gently session throughly across all of the parameters our g.d.p. has gone down by two point eight percent if you use the constant factor basis it went down by two percent if you use just constant market prices so in other words in real terms and if you look at our g.n.p. which is a bit more important to us than our g.d.p. because it takes out the moves the effects of the multinational corporations doing

the transfer pricing let me let me just get in your really really quickly because you get you're pointing out a lot of really interesting things and some of the declines in the irish economic data is that as a result of the bailout and the prescriptions that were given to ireland indeed in the later stage as. in the second half of the last year most of the induction has happened due to the structure of government expenditure and in particular government investment private sector investment has collapsed during this crisis it has collapsed about seventy percent large part of that has been also driven by the fact that so far most of the us there it's you know if they can form of government to do this and capital expenditure of its own so as the result of the above year ago i have done some calculations and it looks like ireland is not even compensating for the. existence of capital in other words i think obama should

going to be as the body of enough meat which itself from the inside ok dr good you have let's let's stick to that then let's talk more about this i want to talk about the internal workings and ireland in the demographics first let's talk about if they're working for ireland compared to other eurozone nations because ireland has a younger median age and it has a lower dependency ratio and for our viewers the dependency ratio is essentially people that are out of the workforce because they're too old or too young over the people that are productive members so the higher the dependency ratio the more difficult it is for an economy because there's more pressure on pension systems there's more people you need to support and also that eats away at this savings rate because there are more older people that are using their savings instead of investing it so are these demographics working for ireland well demographics that you mentioned there have to the facts and the short term effects and also long term effects in terms of long term effects on the markets are very favorable and this is a good thing so it turns about growth but then we have as

a corner the significant growth potential precisely because we have younger workforce which is also a very highly educated workforce and also workforce where there aren't up to two human capital is going to be and this economy can grow the problem is that despite the fact that the demographics we will actually experience a very severe overhang. government calls and nonfinancial corporations aren't used by a factor of fifty percent greater than that of greece the younger people as you mentioned normally would be saving on the best and instead actually being used effectively as wage slaves of the brinks of the collapse they can system which the state has assumed so in many ways yes demographics are favorable we also lose them as demographics right now because of the grosses we're facing because in the last couple of years in the increase in the young people who are graduating from college isn't leaving and also even people who leave their jobs and look for better opportunities simply because the taxes have gone up and the conditions for their

career for a motion disappear and sticking on that i know during the boom period in ireland it invested a lot in human capital and you point out one of the big breasts in that which is that when the economy is bad all that human capital leaves it can leave and go somewhere else for better opportunities so and that's a situation that's in more countries than just ireland there's that situation exists in the u.s. as well i know colleagues of mine have done reports on that are people going places like india for better opportunities because of the economy so how do you when said to advise that human capital to stay somewhere like ireland that's the problem that we're facing right now in the fact and that's where the bail out comes in effect the structure of the bailout and also the fact that most of the bailout funds going to be paid you know effectively the dance of the insolvent should be shut down if you structured properly and liquidate that when it comes to that even through its own students instead of that we're using precious resources of this economy and the taxpayers' income to shore up the school this black hole of the banking system so

we really are prevented by the bailout terms by our european partners and the european central bank from putting in place the forms which can get our of them back on growth druck it's very different story in our when you compare it with the rest of the periphery setting aside spain for example just not. if you look at either the greece and portugal those economies that have no potential for grooves at the levels that they need to grow in order to convert from their government deficits and you know some are prostitutes would have to deal with the banking sector and so on and there's a huge issue of the banks which you keep talking about and i want to get a little bit more in-depth into that but first i want to ask this we've seen a lot of comparisons between greece and argentina when it defaulted and one of the bloggers that we followed emmanuel saez us who's a senior policy advisor at aca he points out that actually that comparison is really not a good one because of this issue of demographics greece has

a much older population and a higher dependency ratio so what there be some other economies in ireland maybe one where there are better parallels drawn to argentina. just together with all of my academic colleagues about her book coming out on the crisis the particular focus on are the international comparatives across the eurozone. and the countries which have defaulted including some actually in this support default such as new york city for example the county defaults like orange county default when you make all of the comparisons there are different they are three genius types of defaults and different countries have different conditions and dogs what is striking to me you know in all of my research and my colleagues research is that again our one stands out as the only economy in the eurozone which actually can get back on growth there are once the overhang that you see more and then you have to look at what do we call the default the destruction of there in the irish case we do not need to restructure government that it is but it can be resolved it can be managed

by the economic growth which can be robust in our what we need to do is we have to deal strongly with household debt which is really the biggest drag on the economy when there isn't a drop or inertia and on the very same human capital as well so as a result of that we can use the banking sector to structure and bank in search of balance sheets and simultaneously do leverage the banks and at the same time prepare some of the burden which has been imposed on to the households and then my view irish economy will be off to a good start it will be able to pick up and grow on its own we don't need a lot ok that's an interesting point i want to stop you right there i do want to talk more about the banks and this issue of the banking system and insolvency but i do have to go to break that we will be back with more with economist content. and still ahead here greed is good as the message from gordon gekko in the one nine hundred eighty seven movie wall street will get to go is back with a new message for traders and brokers we'll give you our three cents on what it is

but first your closing market numbers. above. it we just put a picture of me when i was like nine years old and don't you tell the truth. i'm a confession i am a total get over friends that i love driving hip hop music and for. that he was kind of the jester day. i'm very proud of the will without you she has played. my.

guitar sometimes you see a story and it seems so. you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything is ok you don't know i'm charged welcomes a big picture. of. what drives the world the fear mongering used by politicians who makes decisions to break through that sort of a being made who can you trust no one who is human view with the global machinery see where we had a state controlled capitalism is called sash. when nobody dares to ask we do r t question more.

welcome back before the break we were talking about ireland and some of the other economies in the eurozone that have been affected by the debt crisis and one issue that keeps coming up no matter who you're talking about one issue that comes up repeatedly is the banks and the issue of insolvency of the banks and one thing that we've seen are all these operations by the e.c. be in order to help with that presumably and here is a just a an example showing what e.c.b. lending has looked like over the last couple years if we could bring up that chart because what you see when you look at total e.c.b. lending is that it's really gone up for at least spain and france and if you look at over a couple years it's gone down overall for germany so this week we're going to see l.t.r. which is one of these programs it's one percent money for three years. we're going to see what what banks are going to take it how much of it is going to be disbursed

and if it's much more important than just one l.t.r. auction this week and so we want to talk about what exactly it means where i want to bring back an economist constantine to talk about this so i just showed a chart to our viewers showing what you see lending his look like to some of these countries and one interesting thing that we saw right after the last l.t.r. was that much of the newly printed money and it out back at the deposit facility and we took that to mean that banks were worried about their balance sheets wanted to shore them up were concerned about liquidity so they were stashing money at the e.c.b. as opposed to profiting off of the carry trade first do you agree with that. crunch . upcoming to the terrible decision they announce that well tomorrow there was a nuclear deterrence both in terms of the us dollars first that egypt for the european banks there was delta that was the swap lines and then the second there

was a significant crunch in terms of the overall interbank lending and liquidity in general on the side of the euro zone banks and that was true across all of the banking system if you go a little bit earlier and you know i presume you have the chart which spans a little bit more time and if you look at for example early part of the last year but the german banks accounted for about thirty percent at the peak of over all the tweeting to demand from the e.c.b. itself that was the time but money was out flowing out of the deposits out of the euro zone and flowing into the safe havens of norway denmark also switzerland and father brought as well as all that started and so forth what we're seeing now since zero one was. pushed out what we're seeing now is that actually deposits are now circulating within the euro zone but they have been out very free and they're moving towards germany so this is why we see both that we darshan of germany overall demand for the e.c.b. the community program thirty percent to six percent but we're also seeing the same

increases continue same pieces in terms of the talent in spanish for example the man ok and i want to get if you could a quick answer on whether you think with this next auction we're going to see banks trying to meet their liquidity needs or whether more banks are shored up and we're going to see them engage in the carry trade and that in seventy thousand countries i think that meets all the very similar to the previous one because simply as i said there is now in nearly pleaded to crunch happened in the peripheral countries and they will be placing this month but what i am expecting is that the next year will be slightly smaller in overall scale and the carry trade will be accounted for about one third of the total emissions are built here or and the reason why is becoming less attractive is first on because deposits in cern's of common are but also our losses needs to be a players. margins themselves will carry through the streets because the banks are actually fulfilling their own prophecy down that yields not the prices on assets that they would buy for character in the first place and quickly if you could sum

up in thirty seconds and i know that's quite a feat what you think this briefly says all these the quiddity operations about the potential for a prolonged zombie banking system in europe i think we're certain are for a disaster on the eurozone side and it will be a global level disaster it's a disaster which will unfold in about three years time but the e.c.b. will have to decide how that one of the l.t.r. was and the amount of liquidity that has been programmed into the system is going to flow out into the economy we're going to see inflation we're going to see double digit interest rates and we're going to see very high rates as well down at the e.c.b. and the combination of the banks pushing up the profit margin simultaneously as the e.c.b. is fighting inflation could go into a lead to the stock solution in this economy overall all right thanks so much we're going to leave it there that with economist content can go again saying we've got the real years here folks.

ok we noticed something over the weekend that we had to share with you something about a trend in the washington consensus or the mainstream thinking that we saw first listen to this this is a snippet from a debate over syria and whether or not the u.s. should get involved on one side you have a side you have anne-marie slaughter she's a princeton professor and former director of policy planning at the state department on the other side you have jeremy scahill which is very far from the state department ok he's an investigative journalist national security correspondent for the nation he's recently reported in yemen and somalia now in this debate slaughter is defending her position in a recent op ed she laid out where she recommended the u.s. and others create a no kill zones in syria set up by the free syrian army which is some of the

opposition protected by a coalition of outside powers giving the rebels weapons and military training take a look at this you also can be very concerned about the potential for blowback and instability and an increase in instability and violence caused by outside intervention well i mean to me i want to focus on where you were opposed to the idea that the trucks would enable the free syrian army on their border to establish a safe zone it was the free syrian army the free syrian army are soldiers that have defect now because they are real much ok so that i am proposing you don't know what we are and you are saying we should not i'm generalizing harm them. really important we don't know who they are but yet you think we should have our allies arm that did you notice anything about that discussion about the two positions one reflecting the mainstream one reflecting a contrarian point of view one lobbying for intervention to do something to get involved and someone on the outside who reports on the effects of that intervention

saying hold your horses look at the unintended consequences this could create does it remind you of anything else something we cover much more frequently on this show why don't i play you a little but how about fed reserve chairman alan greenspan former one talking about why the us is credit rating doesn't matter. i was because we can always print more money to do that so. i love his face but let's stick on this ok let's let's listen to new york times columnist and nobel prize winning economist paul krugman talking about why the u.s. government should spend spend spend its way out of the doldrums as he explains it and is asked by for reid's a korea they're going to borrow more spend more but that is what the economy needs right now not worries about the deficit and i think in a way we may. we may be approaching

a somewhat advantages position for that so the mainstream the establishment get involved in the economy spend spend spend print print print and kirkman wrote his last column not last one but in a column last month that the fed shouldn't start raising interest rates any time soon you know they're near zero have been and are expected to continue to be so washington consensus again do something intervene whether it's in a war or in the economy and in this case in the fed's case never mind the economic blow back of something like the fed holding interest rates near zero percent take a listen to this. the said hose through this action. has. completely confused. traditional relationships between risk and reward to the many workers confusing traditional relationships between risk and rewards that has added a lot of risk to a lot of what we're seeing going on right now with crises and that along with other

contrarians to keynesians like jim grant who you just heard for is what amounts to this is what they call the trade an unintended consequence of the ultra easy policy of the federal reserve unintended consequences low back so that as our reality check it looks like the same trend emerges from military intervention to monitor money money branding in the mainstream dialogue and something that you should watch out for and that's a reality check today. all right i want to bring in dimitri cafe nice and shannon donahoe to wrap this up with this because maybe you remember this quote from the movie wall street. the point

is ladies and gentlemen act greed. for lack of better word is good. right greed works. great ok that was gordon gekko that was the character played by michael douglas in the movie wall street will turns out michael douglas has a new message for wall street he's appearing in f.b.i. public service announcements to tell traders and brokers that insider trading is a serious crime or basically that greed is bad what do you think this will be if the crime fighting substance there's not any balls because if they did they would be setting up public service announcements that's what we do for tobacco smoking and drugs because you're supposed to get someone to convince them to stop doing sublists harmful to their health there that you have to put out a public service announcement about doing insider trading shows that you obviously don't have the balls to send the people to regulate where you're doing it was so and who cares about michael douglas what i would want to see is bill black and a p.s.a.

saying hey back in the savings and loan crisis i saw that you know hundreds of bankers were prosecuted and went to jail and that included c.e.o.'s and we're coming after you and we're not just coming after you on this later in this latest insider trading ring which has nothing to do with the financial crisis we're going back and we're getting you for your crimes during the financial crisis we're pressing criminal charges and work work were taken everything that's what i want to see janet get anything out to my i don't think i got a script i don't think anybody's going to be intimidated by michael douglas. for a public service announcement i'm going to florida what is a p.s.a. going to do and you can play dumb as the doors of these guys and arrest them yeah but that's if you're committing a crime a public service announcement is not going to not giving a throwback to an eighty's movie ok real quickly lloyds and royal bank of scotland may access the l.t.r. row which we've been talking about more cheap money so people are not happy about these banks getting any cheap money or anything of the sort take a look at. why are you sure you know by now well

a funny joke you that get down there get said but i did it said not bad enough should shut up the. bank turned out but no it's done it is on top of it. right so what's so sad sack white shoe shop. that's nazis. that's mark mcgowan a u k performance artist and he is awesome and that was me on friday if you remember correctly why is that because that's how it's all the friday ok well that's how which is why we talk about the kleptocrats courage train yeah yeah which he is upset about and i think expresses a lot of the anger that so many people feel over the austerity imposed in net on them while the big banks get fresh cash doled out to them we're going to leave you with that that's all we have time for thanks so much for tuning in feel free to

follow me on twitter at lauren lyster and give us feedback on the show you tube dot com slash capitol hill but for now from everyone here i'm more in leicester have a great night. download the official tea humbly cation your body so the ipod touch from the q. stops to. life on the. video on demand. smile you will come. r.s.s. feeds now in the palm of your. question on the dot com. mission free. education free. for charge free. range month. three stooges

free. john move free broadcast cloning video for your media project a free media dog guarnteed on top. of a local war lords will give him a note so we have a lot of. groups of the callers with the sluices all star views in the whole movie right enough to my mouth it was like when you had that knowledge it wasn't just the smadi when i was fourteen yes you can liberate their winnings and you certainly can't do it through the barrel of a gun only effective social changes can be the afghans themselves ask dan men and women we believe i'm going to spawn because i'm not sure that cross paths. but the patient it's chemical.