bookstores syria vows to defend its people and sovereignty from foreign pressure by ushering in a new constitution that says the e.u. enforces fresh sanctions over the ongoing violence. the world bank walls china the world's second largest economy that without reform it faces a financial slowdown that could take the global system with the warning comes despite china's steady growth over the past few years. the way britain's criticised for cutting spending at home and sending britons abroad in foreign aid to countries who say they don't even want to catch. more of those stories in half an hour from now in the meantime artie's capital account with. shedding light on the tangled world of finance.

good afternoon and welcome to capital account i'm lauren mr 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 your 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 the compound in effect of how europe's debt crisis pushes down the members struggling to get their head above water and ask give zombie banks are becoming zombie 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. o. 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 looks

like some don't think the bank should be getting not so easy. let's return to sac one to shop for chip from that stassi that he said. that was the message these things should be taken to the banks 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 were michael douglas as gordon gekko in one thousand nine hundred eighty s. movie wall street are transforming now boarding 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 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 that 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 and 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 greece before the rest of the eurozone and it hit the hardest so far even through the twenty eleven and also we expect now to play to twelve construction overall total construction during this cycle has been the deepest in ireland out of all the referral 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 and months the younger people people with skills are leaving the country docks or go in are and if you look at the latest though they're not exactly government is very quick to point out that they should want to be stabilized and that's not exactly true belief as they that would have us for the third quarter last year in the third quarter last year are 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 go let me just get in your really really quickly because you've got you're pointing out a lot of really interesting things and some of the declines any irish economic data

is that as a result of the bailout and the prescriptions that were given to ireland indeed in the later stage especially. in the second half of the last year most of the action 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 should going to be as the body of enough meat which itself from 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 how to the facts and short term effects and also long term effects in terms of long term effects are just the markets are very favorable and this is a good thing so it terms of our growth but then we have as a court of the significant growth potential precisely because we have a younger workforce which is also a very highly educated workforce and those who work force with it are not the two human capital is going to be and this economy can grow the problem is that despite

the fact that with the demographics we will actually experience a very severe overhang. of. government calls and nonfinancial corporations in our use by a factor of fifty percent greater than that of greece the younger people as you mention normally would be saving on the best and instead actually being used effectively as wage slaves of the banks of the collapse they consistent which the state has assumed so in many ways yes demographics are favorable we're all solution is them or graphics right now because of the grosses we're facing because in the last couple of years in the piece and 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 yeah i am 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 debts of the insolvent and system should be shut down structured properly and liquidate that when it comes to that even through its own institutions instead of that we're using precious resources of this economy and the taxpayers' income to shore up the school it's like all 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 truck 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 have no potential for grooves at the levels that they need to grow in order to convert from the 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 follow 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. this is just an hour of

together with all of my academic colleagues about her book coming out on the crisis the particular focus and on are the international comparatives across the eurozone . and the countries which have defaulted including some actually in the support default such as new york city for example county defaults like orange county default when you make all of the comparisons there are different there are three genius types of defaults and different countries have different conditions and bill what is striking to me you know in all of my research and write the leads research is that again aren't 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 there 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 the action doesn't interpret nursery and on the same human capital as well so as a result of that we can use the banking sector to structure and bacon certain balance sheets and start simultaneously to 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 got to have to go to break that we will be back with more with economist content. and still ahead here greed is good that's 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 broker as we'll give you our three cents on what it is but first your closing market numbers.

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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 it that 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 you have to talk about this so i just showed a chart to our viewers showing what you see be lending has looked 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 ended up back at the e c b s 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 no i completely agree with the first it was really dealing with the issue of the immediately community crunch. right before of coming to the euro decision. there was a crunch both in terms of the u.s. dollars first that each of the for the european banks there was also the swap lines

and then the second there was a significant crunch in terms of the overall interbank lending and the community in general on the side of the eurozone banks and that was true across all of the banking system if you go a little bit earlier and you know i presume your heart of the charge which spawns a little bit more time and if you look at for example early part of the last year when the german banks accounted for about thirty percent of the overall need to move into demand from the e.c.b. itself that was the plan but money was old flowing out of the deposits out of the eurozone and flowing into the safe havens of norway denmark also switzerland and father broad as well as all the stuart and so for. 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're not very free and then moving towards germany so this is why we see both the 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 italian and 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 try 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 some of these sovereign countries i think that makes all the very similar to the previous one because simply as i said there is now in newly created to crunch happened in the peripheral countries and it will be placing this demand but what i'm expecting is that the next year will be slightly smaller in overalls and the carry trade will be accounted for about one third of the total issues under the or and the reason why carry through it is becoming less attractive as first on because deposit concerns of common are but also our losses needs to be players but margins themselves will carry through the shrinking because the banks are actually fulfilling their own prophecy down the yields and not the prices on the assets that they would buy a 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 liquidity 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 when the e.c.b. will have to decide how they don't want the l.t.r. was and the amount of liquidity that has been around 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 out 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 rain 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 and 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 increasing instability in violence caused by outside intervention and i don't care and 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 our soldiers that have defect now because they will not 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 there 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 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 fed 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 it's what they call the trade an unintended consequence of the ultra easy policy of the federal reserve unintended consequences blowback 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 is something that you should watch out for and that's a reality check today. all right i want to bring in dimitri cafe in us 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 greedy. for like the good 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 stops included is never the 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 submits harmful to their health there that you have to put out a public service announcement that will stop 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. or a public service announcement i'm not sure what is a p.s.a. going to do i mean the doors of these guys and the rest 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 some people are not happy about these banks getting any cheap money or anything of the sort to look at. why

were you choke you know well if i was joking that. guy said but i didn't say i said not bad enough said john up a. bank turned up but now it's going to. go. right. so. why do some fun stuff. that's. ok 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 further ok well that's how which is why we talked about the clip the cross-currents tree and 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 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 laurin mr have a great night.