headlines from r.t. russian businessman viktor bhutto awaits sentencing in the united states after being convicted of arming terrorists and conspiring to kill americans he could get life behind bars but he insists he's innocent and that is case is fabricated. the u.n. security council calls on the syrian regime to meet the april tenth deadline to pull back troops but a full cease fire on both sides in the forty eight hours which followed. greece's morning with the straw to elderly victim of the government cuts the focus on life outside parliament the retired pharmacist suicide sparking violent clashes i'm carol lin thanks for being with us next a look at some of the world's top stories from our studios in washington d.c.

and tonight capital account. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are 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 keene when a little like this. that's how we see it at least steve king take in on the mainstream machine of economics for people who don't see the world through mido classical lenses because hey we sure can in fact i can't see much of anything out of these now he makes some 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 bay agreed to pay twenty million bucks to settle allegations from regulators that it mishandled 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 old the whole world herald newspaper serenaded a proud dressed as the paper board thinking i'm just of paper boy well it's 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 program comment on one of steve king's blog posts and you can see his post there on his new york times column and he questions and rejects some of what he is arguing in minsk methodology and he warns us that it's warm and i'll warn you this is all a bit long 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 the economic debate forward with those same theories

and this applies to policy makers 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 weigh in with their two cents more back and forth 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 and k. which i believe stands for new keynesian models are all about if you price is so what is king saying but what krugman 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 program and 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 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 your 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 debugging economics the naked emperor these throw and to get the scoop on all of this and also what it means bigger picture for the fight against the economic establishment professor king let me first just say thank you so much for van 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 as it really has just i mean it is all over the blogosphere now i see. an exodus

money minsky new keynesian new classical models a lot of this stuff that maybe only a ph d. can economists really understand so help us just first break down really what is the crux of the argument that you two have gotten into. well the crux of the argument is that 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 years has got away with arguing you can model the capitalist economy as if it has no banks in it 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 the level of capitalism if you don't include those components along comes the financial crisis characters like me predicted it using models and putting money banks and there and now proven comes along and says i well i can see why i should actually bother having levels of banks that money in

macroeconomics there are irrelevant they don't 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 they're ok and so just to really hammer it home what is that real major sticking point that you guys are arguing about that that that real sticking point. well the real sticking point is where the the with you can have a macro economic model of the economy the leaves out banking and crude views that banking and that is irrelevant to america really can all mix which is frankly bizarre in the middle of the biggest financial crisis in history where the behavior of banks is what is the process so it's really that total battle that he comes from the convention the the nine stream of economic which has dominated the sixty or seventy years yet which argues that you can model the economy without talking about

those issues without that money and i'm part of the minority which is being progressive only marginalized it says you conduit someone with only getting the attention of this crowd that been ignoring us for decades funny that's taken seriously but then of course they dismiss our arguments well you certainly are getting a lot of attention and i'll tell you what they did this is the escalated to is this i go 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 blog if you're right about his commenters write about it appears that he took part of your post out of context and you wave it seems really disingenuous what happened. well the type of model the crewman works on the models where they believe like and model billion tire macro economy as if it's one blown up individual and if you really like and i get to blown up individuals and they that's what they call 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 actually proven by very good conventional neoclassical economists that simply doesn't work. people are going to built the model to ignoring these strong well founded theoretical criticisms of the whole approach and in general i just think it's a bit like a bunch of ptolemaic astronomers to model the universe as if the earth is in the center and the planets and the sun revolved around us in the way they explained if i could planets occasionally reverse direction of the working at the socket on top of it and one bunch of got ones that he's arkell's another has another bunch there's still all human the earth is the center of the universe so to me i just use a label calling them dynamics they have a one particular label they call themselves the 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 it like a tall means and then two paragraphs down i said because this conflicts only match reality just like the ptolemaic astronomers added on planets going on at the cycle

so they could explain reversal of direction people are crude and actually mention in buying a home made in frictions slow greg reaction of process sticky creepy 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 junsu doesn't know the economic literature or the frankly as i know the one of the churches better than crewman does well and and there was the insult was that was yeah i got insulted by benefit of the million readers of the new york times by. somebody misread my write well you know a lot of good commenters though pointed that out and pointed out they 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 that chile time to move on were done this is it and we have it right there he went on it to sound like he bet that we called you

a heretic it least you 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. smaller than their festivals think they're right no matter war i mean they have they have a vision of the economy that has it in equilibrium or nearby disturbed a bit for make librium by shocks and all the ups and downs and just basic soldier in the shorts and we've been saying for a long long time you can't model the economy as if it's in equilibrium because. it's out of the equilibrium and especially it's on drugs right now so this is because other approaches do economy modeling that i do because the models would include banks that actually give you the result that gives you can have cross you'd like the one we're in now and i first wrote a model of that nature that i cannot in ninety five crewman always ignore this and

this is what they simply says oh you don't understand a models therefore we can ignore you which is a bit like astronomers saying that galileo you don't understand how if you kill a bunch of circle models there for i can ignore you saying how your tables are inaccurate people come another go at the mediterranean any more because your tables of 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 will have more with an app and a 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 of those routes making headlines for it as well we'll give you are three cents but first because the market numbers.

below with. stories technology innovation it's all the latest developments from around russia we've got the future covered. you know 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 you thought you knew you don't know i'm charging market is a big issue. welcome

back so we are trying to break through the conventional mainstream economic wisdom that's what we're talking about right now this recent data we've seen crewman and keane 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 crew going south at right around that time he asked how did it condiments get it so wrong he points out you economists our 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 and predict the financial crisis coming well ahead of 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 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 a long long running downturn for sauce a lot of armor in now and he also says and says the part that our fun part most outrageous that the level of debt and the the right of china profit it doesn't

matter if you do a graph and you've seen me do this before of the ratio of profit to income in america g.d.p. you get one enormous speak on the great depression then a decline through the great depression another ra's from loaves of did up to high levels of debt right now and then another fall the oem the so the two depressions we've had in the last century have both being coincident with rising levels of debt to g.d.p. that's relevant doesn't matter because on my blog you call deductive reasoning from the level of it doesn't matter this will become possibly cause of depression two of the last two depression so had the bottles they just annoying the it's as if you got a model of circular motion of the planets and if it had a collision with a huge mazie or that they claim con happened and didn't know that it matters who they really. are and it's time we pushed them off the stage well and this may be bringing me to my next question but many of our viewers may know this because they

pay attention to the glottis baird 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 it's back and forth between you and crowed men in 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 can actually set it up are applying to me but what i've been exposed was it's finally the beginnings of the divide because you know imagine if you're outside economics that if there's competing views into how the economy operates 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 even exist suddenly they're saying it causes an explosion discussions right across the blogs for you

and normally they come because you don't understand our models therefore we can ignore you but with your models didn't predict the financial process we can ignore your models and that is a big shift though that's a big hit so i know you have that in the past a neo classical economics there's going to. change literally one funeral at a time are you saying though that there's actually a starting 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 a good seats people his'n the outside and now they're realizing the economy because economics that the economists and when they look inside it and see how unrealistic the mainstream and sick a lot myself and the them street crowd is wealth of those kinds of inputs the position and even austrians there saying hey maybe the people who are being marginalized like make more sense than the one strain does and it's time we supported them so maybe we can break down the nearby school so that all the citadel 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 in the good fight we have your superhero doppelganger we did behind us before i bet it's nice to see in life and thank you. and if you didn't get that double going i wanted to make sure you saw this is the great cartoon someone came up with for our guest this superhero version again i was economist and professor steve king. all right let's wind down with the wrap 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 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 they should be touching to pay back the j.p. morgan credit on your question from day one of the all this had very strong suspicions and nothing's happened since then but our money is it should be more than one. 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's be asco but i am of 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 firms they see the funny thing is it 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 is 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 which so alarming to me is how much this headline looks like it could read as a development and the m.f. global case well i mean they were 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 a constant in this situation because if they see in two thousand and nine on them three hundred thousand dollars for a commingling cost of phones 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 lines and i'm a global have to hand them coaster money so i mean this is this is looking really bad for j.p. morgan i just don't know if they're going to get in trouble for i know i just think

it's interesting too because our guests were saying in the m.f. global case j.p. morgan would have known that m.f. global was facing a liquidity issue because they don't at nasa have amounts of due diligence on them and so i just think that kind of we're seeing maybe but i don't want to speculate too much but it sounds like you know 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 and you are admitting i kind of feel like j.p. morgan and the situation because i took to. trees schools out of the jar yes regaling car. so you can relate you can relate only you don't have to pay twenty million bucks we're going to be you know that shannon actually really hypothecated their goal to alone i one of them to get it to allison and on down the line art as most of these people got it up at saks his office over there ok but it didn't get repotted hypothecated past 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 delivering 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 on and on to the tune of some nine hundred thirty three song it's only a paper moon. ok so he's saying this he did this whole diddy he owns the paper and that he's there probably holding omaha world herald he is a continuation of what we've been talking about warren buffett is very clever our shox p.r. which is really could be further from what he actually pursuing are trying to win it actually is and yeah this is another snow job assigned her called a snow job on the public and that's what this is too bad or it is good here because a copyright cartel won't let us play the song because of those. who would look at

these and say that all of the people look my dad was a congressman from nebraska for a time congressman he doesn't mention that ok he's much like he's a billionaire who took the poor guy oh man this guy's a pretty good capitalist turned socialist not the super rich because he wants to keep all his money so this is a big p.r. stunt by warren buffett whose p.r. guy would make rockefeller's whatever the guy's guy the guy was in the street yeah yeah exactly lonely that's a modern day version how a feller always had this kind of p.r. that he was you know giving it up. yeah that was a parable but that is this whole p.r. stunt we've been talking about where he says tax me more tax the super rich but it really not suggesting that he's taxed more things that actually impact and as our guest on friday said air cry it's really to advance his crony capitalist ties and here he is our shox i'm just warren buffett and it's that little paper boy standing tall 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 newspaper who are definitely not billionaire investor those little patronizing like i'm just. one of those people really are just paper boys and they don't make that kind of money and i didn't see this part we don't have that but you have to do one of those papers and literally launched it and so one of the because that's how much spidey has. people. oh please ok i'd like to go and you could hear that song too. we're going to this 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 bride everywhere in the u.s. at least will be buying into the total racket that is planning your dream wedding and buying a dress. kalish would you like to spend. me . because i need to i need to point because we're looking in dresses that are like

twenty four thousand and i can get just as twenty five pounds not a problem ok rarely does the bride go four times over the budget. but they do have a sense that they're being ripped off ok this whole issue has an intrepid bride journalist that we saw a producer at n.p.r. caitlin kenney of planet money doing this whole story to figure out how badly she was ripped off buying her dress which she paid twenty five hundred bucks for but 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 suckered in 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 two bucks 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 simply 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 for a bus with him personally i was told that the morning meeting yeah we have a lengthy discussion in our morning meeting about it what i think this speaks more to is how successful this whole wedding dream wedding bracket in the u.s. is bankers it's something right women hold on to 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 things come back tomorrow we will have john perkins he's best selling author of confessions of an economic hit man and put link 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 answering that question richard as well we're going to try to get you any. because friday we're going to speak to mike maloney 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 lauren lyster give us feedback at youtube dot com slash capital account and have a great night.