free. three stooges free. download free volunteer video store your media project c.d.o. guns are cheap dot com. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. does your headlines for april fourth two thousand and twelve the internet has been abuzz over the blogosphere boxing match between nobel laureate and new york times columnist paul krugman and the debugger of conventional wisdom and super hero economist stephen kant it went a little like this. that's how we see it at least steve keen taken on the mainstream machine of economics for

people who don't see the world through neoclassical lenses because hey we sure can in fact i can't see much of anything out of these now he makes them headway as paul krugman log some seemingly low blows we spoke to steve keen to talk about it and also the broader significance and too big to fail banks agreed to pay twenty million bucks to settle allegations from regulators that it missed handled customer funds before major brokers collapse it may sound familiar but the details may surprise you will tell you about them and last friday we exposed the apparent mess of billionaire investor warren buffett's proclaimed desire to be taxed more well now he's singing a different song literally the owner of the omaha world herald newspaper serenaded a proud dress to the paper boris singing i'm just of paper boy who had time to demystify the message look at today's capital account.

so have you seen the latest major debate to heat up the economic blogosphere because it involves one of our frequent guests and who we maybe would consider the poster boy of establishment economics paul krugman himself now if you are just you know catching up with this let me bring you up to speed so you had crewman comment on one of steve keen's blog posts and you can see his post there on his new york times column and he questions and rejects some of what king is arguing in minsk in methodology and he warns us that it's war and all born you this is all a bit wonky wish but it is worth it to bear with us because hey you know we had

a major financial crisis and the people who missed it did not see it coming are still the ones largely driving economic debate forward with the same theories and this applies to policymakers too from what i understand so back to this response defending his alternative approaches you can see his post there he notes that paul krugman has been commenting on his blog so this continues some others weighed in with their two cents more back and forth and sue it gets a lot of buzz it seems to an with a kind of an embarrassing really and at least slightly lazy seeming post where krugman takes part of keane's post out of context and then refutes it he does it right here where he says that one of points is all wrong that which i believe stands for new keynesian models are all about sticky prices so what is king saying but what proven fails to recognize is that keane has already just cleared up this

point only slightly later in the post i don't know if you read this far but he said so economists like croman who describe themselves as new keynesian had tweaked the base case to derive models with sticky prices so i know this is convoluted but basically the poor. point is that kean had already cleared up what krugman is criticizing except can of course doesn't have the benefit of having all of new york times readers see that so it's a little sticky there now we spoke to economist and professor steve kean he is also the author of debunking economics the naked emperor dethroned do you get the scoop on all of this and also what it means bigger picture for the fight against the economic establishment professor cain let me first just say thank you so much for being on the show we are so happy to have you not only because we think you're fantastic but you have been involved in this blog brawl with paul krugman new york

times writer nobel laureate darling of the establishment economic world that really has just i mean it is all over the blogosphere now i see banks and dodginess an exodus money the new keynesian neoclassical models a lot of this stuff they maybe only a ph d. e can economists really understand so help us just first break down really what is the crux of the argument that you two have got into. all across of the argument is the one of the group of non-conventional economists who argue you can't model the economy without including the role of banks and money and crudeness part of the economic establishment which for thirty or forty is has got away with arguing you can model the capitalist economy as if it has no banks in it and no money and no debt and we've been screaming for ages from the sidelines saying hey you can't do that you just don't have a model of capitalism if you don't include those components along comes the

financial crisis characters like me predicted it using models and putting money in banks and did it and now proven comes along and says i well i can see why i should actually bother having models of banks that money in macroeconomics there are irrelevant and matter to the macro economy which frankly is somebody like me and i hope most people in the real world gobsmacked because hey we're living in the middle of a banking crisis caused by too much. ok if they'll just head to really hammer and nail what is that real major one sticking point that you guys are arguing about that that that real thinking right. well the real sticking point is whether the with you can have a macro economic model of the economy that leaves out banking and there and crewman use the banking and that is irrelevant to macro economics which is frankly bizarre in the middle of the biggest financial crisis in history where the behavior of banks is what gave us the cross-overs so it's really that total battle that he

comes from the convention to the nines for me the economic which has dominated the sixty or seventy years yeah which argues that you can model the economy without talking about those issues without their money and i'm part of the minority which is being progressive really marginalized but says you conduit someone with finally getting the attention of this crowd they've been ignoring us for decades funny that i kind of seriously but then of course they dismiss our arguments well you certainly are getting a lot of attention and i'll tell you one thing that this is the escalated to you is this final back and forth you have krugman and you know this is something that i've seen you write about a lot of people on the blogosphere right about his commenters write about it appears that he took part of your post out of context and the way that seems really disingenuous what happened. well the type of model that criminal works on the models where they believe they can model the entire macro economy as if it's one blown up individual if you really like and i get to blown up individuals and they

that's what they called the micro foundations approach to macroeconomics now from my point of view that's nonsense you can't do it and actually the the reasons why you can't are actually proven by very good conventional neo classical economists that simply doesn't work. people are going to build the model to these strong well founded theoretical criticisms of that whole approach and in general i just think it's a bit like a bunch of ptolemaic astronomers who model the universe as if the earth is in the center and the planets and the sun revolves around us in the way they explain the type of planets equation reverse direction of the working at the socket on top of it and one bunch of got one set of if you saw holes another has another bunch there's still. at the center of the universe so to me i just use a level calling them dynamics they behave at one particular level they call themselves d s g a which stands for dynamics the classic general equilibrium models and i simply said these models start off by shaming all motion is circular

a bit like a tall means and then two paragraphs down i said because this composite we match reality just like atomic astronomers i had it on planets going on a cycle so they could explain reversal of direction people are crude meant actually mention him by name and in frictions slow reg reaction of process sticky pretty wages. downwardly inflexible wages etc etc now he obviously didn't read the posts simply saw the start right talked about the circular motion part of the model and then it is soon that i that i didn't know that the rest was on his own some done so doesn't know the economic literature other frankly as i know the going to church are better than crude and does well and and there was the insult was that was yeah i got insulted by of in front of a million readers of the new york times by. somebody could misread my write well you know a lot of it commenters though pointed that out and pointed out that he took you out of context to make his point and then he said if we can bring it up he gave update

to that post and said essentially time to move on we're done this is there and we have it right there he went on it to sound like he essentially called you a heretic is least is that i'm all for listening to heretics but blah blah blah so i guess my question is this that paul krugman personality thing do you think or is this more representative of how neo classical economists think that they need to be right even when they're wrong. small the near classical think they're right no matter what i mean they have a vision of the economy that has it in equilibrium or new boy disturbed from an equilibrium by sharks and all the option downs are just physics knowledge of the shorts and with been saying for a long long time you can't model the economy as if it's an equilibrium because. it's out of equilibrium and especially a time drug right now so there's because of other approaches to do it and i mean modeling that i do give you models that include banks that actually give you the

result that yes you can have crosses like the one we're in now and i first wrote a model of that nature but not in ninety five crewman they've always ignored us and this is what they simply says oh you don't understand our models therefore we can ignore you which is a bit like astronomer saying to go along you don't understand how my particular bunch of circle models therefore i can ignore you because i was saying how your tables are inaccurate people never go to the mediterranean anymore because your troubles have lost relevance there's something wrong with the core of your model in my case i'm saying political models are right we wouldn't be in a financial crisis. there you go that was economist professor and author steve king will have more with him after the break and still ahead warren buffett may have started out as a newspaper boy in the forty's but now it seems the billionaire investor is trying to play up those routes making headlines for it as well we'll give you our three cents but first because the market numbers.

you just put a picture of me when i was like nine years old on the show lived through. i confess and i am in total get a friend that i love rob and hip hop is a pretty. but it was kind of yesterday. i'm very proud of the wall that i'll just use its place.

oh. you know sometimes you see a story and it seems so you think you understand it and then he lives something else and hears you some other part of it and realize that everything is ok and you don't i'm trying hard is a big issue. what drives the world the fear mongering. used by politicians who makes decisions through. who can you trust no one who is you who with the local machinery see where are we heading state controlled capitals it's called sessions when nobody dares to ask we do our tea question more.

welcome back so we are trying to break through conventional mainstream economic wisdom that's what we're talking about right now this recent battle we've seen krugman and keene have been duking it out that's recently on the pages of their blogs but you may recall that it was mainstream economists who largely missed the financial crisis of two thousand and eight in the first place they didn't see it coming and remember this article from curb and sell out right around that time he asked how did economists get it so wrong he points out you economists are current crisis coming more important was the profession's blindness to the very possibility of catastrophic failures in

a market economy yet catastrophic they were none the less people did predict them ok just maybe not those that are right nergal's like that ok and according to keane and many others not much has changed with traditional economics with neo classical economics and with its failures that are still considered status quo so i followed up with economist and professor steve keen who i should point out and he said it earlier did see an predict the financial crisis coming while at a time. and you said you know classical economists don't want to listen so what does that say about the people whose opinions are still considered the holy grail even though they missed the financial crisis continue to miss things and yet this is you know considered conventional wisdom yeah on the we are really listening people should not be listening to anymore because the one thing the theory predicted was you couldn't have an enormous long run a long running downturn. and he also says and says the part that i can quote most

writers but the level of do it and that the right of chimes of product it doesn't matter if you do a graph and you're saying we did this before but the ratio of profit to income in america g.d.p. you get one enormous speak in the great depression the new decline through the great depression another ross from locals who did up to higher levels of debt right now and then another full the own so the two depressions we've had in the last century of both being coincident with the rising levels of the g.d.p. now he's saying all this relevant doesn't matter because on my. logical deductive reasoning from the level of the it doesn't matter this will become possibly cause oppression to the last true depression so how did couples they just annoying the it's as if you've got a model of you know six of the notion of the planets which has had a collision with a huge mazie or they claim con happened and annoying that it matters they really are human and it's time we pushed them off the stage well and that's maybe brings

me to my next question but many of our viewers may know this because they pay attention to the blogosphere and read a lot of the blogs that are popular economic blogs but those that don't this is become a really big deal i've seen people all over the blogosphere writing about this conversation and this back and forth between you and crowed men and a few others that are peppered in there why do you think this is gotten so much. well i think it's a pretty good start when you get somebody talking about your work in the new york times and then expressing incredulity and then making the mistake of engaging in a discussion afterwards because the crew didn't actually set it up are applying to me but what i've been exposed was it's far only the beginnings of a guide because you know imagine if you're outside economics that if this competing views into how do you want to be all price within economics then surely there are regular divides the reality is no the new across circles normal people like me who

are critical so once you suddenly get one of their cars it was an illusion that we can exist suddenly bang it causes an explosion discussions are right across the blogs fear and normally they come because you don't understand our models therefore we can ignore you but was saying how your models didn't predict the financial crisis we can ignore your models and that that is a big shift so that the big hit so i know you have that in the past that neoclassical economics is going to andorra change literally one funeral at a time are you saying though that there's actually air farting to advance the conversation in a way that is material and we just have a minute here. and i think it's the beginning of it it sees people his having outside and realizing the economy because economics that the economists and when they look inside it and see how unrealistic the mindstream and see people like myself and the them into a crowd as wealth of those kinds you know the position and even austrians they're saying maybe the people who are being marginalized make more sense than the one strain does it's time we supported them so maybe we can break down the new across

a whole set of rules that it all from the outside with the help of the public well maybe it looks like this this blog brawl his started to show some cracks which is really refreshing to see and we really appreciate you being on the show to tell us about it professor keene first hand in the trenches fighting the good fight we have your superhero doppelganger we did behind us before this then it's nice to see in life in thank you. and if you didn't get that bell going i wanted to make sure you saw this is the great cartoon someone came up with for our guest the steve king superhero version and again i was the economist and professor steve king.

all right let's wind down with or appen it up with loose change i have to meet shannon to talk about this story ok j.p. morgan too big to fail j.p. morgan we talk about them a lot of pay they've agreed to pay a twenty million dollars fine to settle regulatory allegations that the bank mishandled customer funds over twenty two months until a financial broker filed for bankruptcy court protection. the new if that money was not money that should be touchy to pay back the credit on your question from day one of the all of us have very strong suspicions nothing's happened since then your money is it your working. here's the thing that was stanley hard he was a guest on our show talking about j.p. morgan's suspected role in the m.f. global fiasco but i'm a global customers like him and the ones that he is fighting for to get their money back ok people who have lost their money in the firm's bankruptcy the funny thing

is that lines up pretty well with this new story about j.p. morgan however in reality these allegations that j.p. morgan is settling have to do with the lehman brothers bankruptcy ok this the f.t.c. that's the commodity futures trading commission allege that j.p. morgan at the request of lehman began using customer funds to calculate how much credit it would extend to lehman brothers in violation of customer segregation account rules back in november of two thousand and six but so alarming to me is how much this headline looks like it could read as a development in the m.f. global case well i mean that was specifically banking on money that they should have been banking on right and this is not the first time they've been caught with their fingers in the cookie jar j.p. morgan is the constant in this situation the sixty seat in two thousand and nine fine them three hundred thousand dollars for a commingling cost of funds in the u.k. is that the same thing in plenty of time for for not probably started funds so j.p. morgan. is really suspect here and we know that they put a clamp on m.f. global's credit and then of global had to hand them cost of money so i mean this is

this is looking really bad for j.p. morgan how does one know if they're going to get in trouble for right now i just think it's interesting too because our guests were saying and m.f. global case j.p. morgan would have known that m.f. global was facing a liquidity issue because they didn't massive amounts of due diligence on them and so i just think that kind of we're seeing maybe i don't want to speculate too much but it sounds like you know if it looks like a duck and quacks like a i don't know sometimes to me and they would think it should be investigated as a duck can anyone anything i kind of feel like j.p. morgan and the situation because i took to. school's out of the jar yes. please play. so you can relate you can relate only you don't have to pay twenty million bucks where you want to be known that shannon actually read hypothecated that coldplay alone i one of the. two allison and on the one artist as most of

these people but it ended up with such as office over there ok but it didn't get repopulate there because there progresses and they probably just kept let's move on warren which is a good thing in that case ok warren buffett may be the third richest man in the world but he started out some people may know as a paper boy and here he is ok the billionaire investor dressed as a news boy the livery papers to the crowd at the omaha press club show ok he then went on to say as you see there. just a paper boy. to the tune of some nine hundred thirty three song it's only a paper moon. ok so he's saying this on he did this little ditty he owns the paper he's they're probably holding know how world herald it is a continuation of what we've been talking about warren buffett is very clever our shox p.r. which is you know really could be further from what he actually pursuing or trying to it actually is and yeah this is another snow job assigned her called it

a snow job on the public and that's what this is to better or it is couldn't hear because the copyright cartel won't let us play the song. the people would look these and say that all of the people look other my dad was a congressman from nebraska for a time congressman he doesn't mention that ok it is much like he's a billionaire little clipper guy oh man this goes with pretty can capitalist turn socialist not the super rich because you want to keep those money so this is a big p.r. stunt or war buffett whose p.r. guy would make rockefeller's whatever the guy's guy the guy was free yeah yeah exactly only that's a modern day version how rockefeller always had this kind of p.r. that he was you know getting into or. yeah that was a parable but it is this whole p.r. stunt we've been talking about where he says tax me more tax the super rich but i'm really not suggesting that he's taxed more i think that it actually impact and as our guest on friday said eric riots really to advance his crony capitalist ties and here he is our stocks i'm just warren buffett and it's that little paper boy

standing well it's not that he's just an innocent little paper boy anymore obviously he owns this newspaper yet he's singing that song to the very people who work at that used paper who are definitely not billionaire investor so there's a little patronizing and it's like i'm just. one of those people really are just paper boys and they don't make that kind of money so true and i was the patron we didn't see after this part we don't have that but they have to took one of those papers and literally launched it at some of the crowd because that's how much spidey has brought us working class people that's one of the. bullies ok i don't like to go and you can hear the song to the. move on to the it's april which means that i guess bells will be ringing for many couples this is a popular time to tie the knot or start getting ready to tie the knot this summer which means that brides everywhere in the u.s. at least will be buying into the total racket that is planning your dream wedding and buying a dress. how much would you like to spend. i

mean because i need i need a cutoff point because we're looking interest is there like twenty four thousand and i can get it just as twenty four thousand that's not a problem ok rarely does the bride go four times over budget. but they do have a sense that they're being ripped off ok this whole issue has an intrepid bright journalist that we saw a producer at n.p.r. caitlin kenney planet money doing this whole story to figure out how badly she was ripped off buying her dress which she paid twenty seven hundred bucks for when really in reality the materials and labor cost seven hundred dollars so i guess the big theme here is that weddings are a total racket and they have not been suffering ok the average amount of a bridal gown that was paid was a slight increase over two thousand and ten in two thousand and eleven twenty three bucks so an increase i mean is this is all the labor costs or how much of this is actually people in vietnam who are working the sweat shops to give her this wedding

dress that she wants to walk out there all nice and pretty and this is a this is a this is a consistent problem with women in america since i'm with god was they want their blood diamonds right with it or look at it they don't want to worry about that but they want their you know three months salary sort of for a vessel apparently i was told about the morning meeting yeah we had to write a lengthy discussion or a morning meeting about it what i think this speaks more to is how successful this whole wedding dream bracket in the u.s. is bankers it's something right women hold onto despite tough times we're going to leave it there can unfortunately i love you we've got to end the show because that's all we have time for thanks so much for tuning in please come back tomorrow we will have john perkins he's best selling author of confessions of an economic hit man and he's also self professed economic hitman and viewers on you tube and twitter like richard have asked me about this if they think that the dollar is manipulated what makes you think they won't manipulate or regulate bull for answering that question richard outvote we're going to try to get you. sir because

friday we're going to speak to michael loney of gold silver dot com a renowned investor advisor off their industry expert about metal manipulation and don't forget to follow me on twitter at lord lester give us feedback at you tube dot com plus capital count and have a great night. culture is that so much a given to each musician on the market. to the muslim brotherhood decision to one presidential candidate coming elections down to maybe there's a policy. you know sometimes you see a story and it seems so for lengthly you think you understand it and then he lives something else here sees some other part of it and realize that everything is ok you don't know i'm sorry welcome to the big picture.

the for. the. wealthy british soil. the time to go to. market why not. come to find out what's really happening to the global economy was much stronger there are no holds barred look at the global financial headlines tune into cars report on our. emissions free credit change should be free.