then australia this launch comes on the heels of international pressure on the country not to launch the rocket and also violates united nations security council restrictions and possibly a deal with the u.s. in exchange for aid and if you remember earlier this year there were signs that relations between the u.s. and north korea were warming after the death of longtime leader kim jong il and his son kim jong owned and up replacing him but this launch might mean the end of in an already shaky relationship between the countries we will of course continue to bring you updates in the next hour we are now receiving words of that launch may have failed we'll bring you the very latest back here at aids. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something

else hears you some other part of it and realize that everything you thought you knew you don't. charge is a big huge. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and in your headlines for april twelfth two thousand and twelve the vice chair of the u.s. federal reserve suggest keeping interest rates close to zero until possibly as late as two thousand and fifteen we asked if this is the unintended consequence of negative real interest rates. how to create a time paradox the results published propose a chain reaction going on none of the very top of the space hundred you don't understand the entire universe are we headed for

a disaster of cosmic proportion we'll ask that question and international monetary fund managing director christine lagarde seems to be doing p.r. in washington ahead of her attempt to collect more money from i.m.f. members which is expected to come next week to guard against the risk of europe's crisis. we probably have of the moment little bit of breathing space not much but a little bit of breathing space where we can actively pursue what still needs to be done. meanwhile george soros writes in an op ed things have gotten less volatile in europe but more lethal always seen an e.c.v. official hint that the bank could attempt to put out the fire with more debt purchases or try policymakers may control the printing press but they can't control faith or confidence in a currency or economy so we'll talk about where this is headed and virgin mogul richard branson has a new global idea he's got

a plan to tackle the racket of student loan debt and you've got outer space is ambitious we'll talk about it let's get to today's capital account. more reading of the u.s. federal reserve's tea leaves today as the fed's vice chair janet yellen said interest rates maybe should be kept at zero until as late as two thousand and fifteen reportedly she said that in a speech in new york meanwhile the new york fed president going dudley also has reiterated he's the fords keeping interest rates near zero until late two thousand and fourteen now all of this has us thinking about back to the future about time

travel and has us wondering if the fed's artificial manipulation of interest rates distorts the space time continuum and therefore threatens economic destruction of cosmic proportions now we have mike norman here to talk about it he's probably going disagree with what i have to say but that's why we like him so much he's chief economist at john thomas financial and he joins us now to talk about all things monetary issue related first of all mike thanks so much for get on the show again cites a c.e.o. . i love being on the show lauren and you know i love talking to you and you are so smart how did you get some more i mean i mean i really love my writings i say i don't wring your blog and read your blog ok on that note i have a feeling that though i do read your blog that you're going to disagree with what i had to say but my question is this back to the future question does the fed's manipulation of interest rates ok that mean keeping him and zero they're going to continue keeping them at zero does that distort the space time continuum meaning

that it's manipulating and screwing up perception of risk my and therefore the value of the present relative to the future do you think. well i don't think so i mean it's kind of a weird. entree into this the space time continuum but look first of all let's understand that the one of the functions of the central bank is the setting of interest rates it's part of its monetary policy and it goes along with its mandate of trying to keep low inflation and employment at a certain level does it distort risk i mean you have to remember there's two sides to a balance sheet right we've been for the last five hundred years on double entry accounting so of for flow interest rates you know create an incentive to take more risk on the part of some people. on the other it's flip

side of that which is something you guys have been talking about and everybody's been talking about for a long time and it reduces incomes to people who you know are on fixed income so i ask you the question you obviously don't like low interest rates you think it's a distortion but high interest rates the very same thing only it's the reverse ok it increases income to people who are in fixed income or savers or creditors and it reduces the ability to borrow it makes it more expensive so basically it is what it is you know the fact that the fed or a central bank sets interest rates in its own currency i don't think that's a distortion i don't think you know what it is basically i think it removes risk in the sense that the central bank is telling you where the interest rate is going to be you don't have to guess in this particular situation they're saying out to twenty fourteen another two years or maybe possibly even three years out from now

we're going to keep it at zero or around zero that's wonderful because you talk about being able to plan you know exactly where the interest rate is going to be if left to the vagaries of the marketplace as we see with other. instruments or commodities where there is no monopolistic power that sets a price it could be all over the place that makes it very very hard to plan so i don't think it's it has a distortive effect at all but mike how can you argue back and i hear everything you're saying but when it's keeping interest rates at zero and that's an usual even if they're telling i think they're going to be there for a while i'm negative real interest rate if i can't just storing a lot more people then maybe it should be when you're incentive i think grants now as opposed to planning for the future saving for the future you can do that ok well well they can obviously they do but here's the reason why they think you know the

fed believes it will accomplish a certain goal right i mean that's why they're doing it what we have seen after the financial crisis and the very severe contraction in the economy the loss of jobs is now households have this very strong desire to save they're worried about the future they may not have a job their consumption ability their spending ability has been impaired this savings is a leakage to the economy right i mean somebody has to spend or there is no economy so the fed in its thinking and i'm not saying it's correct i'm not saying it even accomplishes the goal but in its thinking it lowers rates trying to spur demand for credit in the hopes that that would foster son kind of a spending boom to offset the desire to save but what we're saying is it doesn't work ok the savings desire is still very very high. and

household spending spending is still very modest very weak that's why we only have a two percent growth rate so it really isn't working is it bad to say it mike. it's obviously not said oh that's a loaded question what can we say how how do we save how can i as a saver accumulate net positive amount of dollars and that dollars how can that happen the government somebody has to spend more dollars then it takes in order in order for me to have a surplus of dollars right so in order for the non government that's me and you and businesses and everybody else who's not the government in order for us to save have a net surplus of dollars the government has to run a deficit of dollars because that's where dollars come from so if you notice when the deficit went way through the roof up to one point five trillion if you noticed the savings private savings exploded it went where not where they are and that's

because private savings equal the deficit of the government to the penny it's an accounting identity of what now you're talking about deficits that i am i just came out and said that we're looking at a scarcity and safe assets that as we've seen these sovereign debt crises there are fewer countries that people are willing to accept are risk free when they issue debt so is that the unintended consequence add these deficits we are literally my one in out of faith risk free assets. well that's not ok that's not the consequence of the deficits the deficits are providing the safe assets they're providing the treasuries look at treasuries people want to own treasuries despite the lowest rates in history right so the deficit is supplying those safe assets the problem is it's not supplying him in enough quantity equal to the desire

of people that want a hold of it needs to the fact that the markets are saying what the markets are screaming lauren is that the deficits have to be much much bigger because of the enormous desire to save in these safe assets ok you can control data sets that if you're a government that you cannot control faith and your currency and your economy so what about when that runs out and if it runs out how can you rule that out. i don't follow first of all let me just say as a government you know you can't even control the deficits the deficits are an economic phenomenon not a policy phenomenon the deficit got to where it is because economic growth contracted so sharply ok if the economy were to grow and historically that's the only way to eliminate deficits if the economy were to grow the deficit were to shrink so it's not a policy decision that creates the deficit it's an economic phenomenon that creates

a deficit the second part of your question i didn't really follow ok well then that's let's maybe you can call and ask more closely because that's something that i know you will have a strong opinion on a lot of people are wondering about q.e. if there is going to be a q e three you have people reading the tealeaves with every fad governor's comments that have come out william dudley said something about it today. surely you don't think that mark you we would be a good thing mike oh yeah no i do not and i guess it's something that we agree on more and here's why q.e. really functions like a tax and the reason that it's true is because it removes interest income from the private sector think about it when the fed conducts q.e. what happens it strips the public of one asset which is a bond and replaces it with cash a reserve balance in the banking system which pays nothing so you have the removal of a very significant amount of income that's the same thing as a tax what is

a tax why do we hate taxes because they take income away from us q we does exactly the same thing last year the federal reserve handed over eighty billion dollars in interesting come to the treasury that's income that would have been earned by the private sector and over the past four years four hundred billion dollars has been taken out that's not an insignificant amount of income so and the proof is in the putting right i mean we've had. all of this q.e. and the economy is still only grown to two percent so i would i would say absolutely they should so in that regard is the fed messing with the asp a centime continue one and could this be leading the cons make explosive destruction in the economy mike. no i don't think so and i think it gets back to what i said at the beginning was remember it's double entry accounting so if it's taking income away from somebody a saver let's say it's providing income to somebody else in the form of let's say

lower debt service payments the problem is there's a leakage there it goes into the banking system in the form of higher margins and profits so net net i think it's a negative net net negative when we come back i want to talk about europe because as big a big and we're going to want to talk about what's going on there we'll have more with my garmin chief economist john thomas financial after the break and still ahead forget the space time continuum and even flight to outer space for that matter it seems to richard branson has other ambitions these days we'll give you our three cents on the billionaires plan to send student loan debt light years away but first they're closing our very.

wealthy british style. sometimes. market trying to. find out what's really happening to the global economy with mike's concert a no holds barred look at the global financial headlines tune in to congress report on our. it would.

welcome back so europe is trying to paper over its problems we've seen that despite the fact that a debt crisis persists the e.c.v. has conflict quiddity into banks we've seen more than a trillion dollars pumped in through l t r o yet again we see spanish yields have been rising some concerns there christine legarde managing director of the i.m.f. today said europe is the threat to the financial stability of the global economy still and is no way out of the woods george soros writes in an op ed about europe at the fundamental problems have not been resolved indeed the gap between creditor and debtor countries continues to widen the crisis has entered what may be

a less volatile but perhaps more lethal phase now we're garlits of the motivations for what they're saying ok we know the guard is trying to raise money i think george soros has plans and ideas of his own but the problem is that they talk about that is very clear it goes to show that you can try to paper over a problem but that doesn't make it go away so what are you to do that's my question as we continue with mike norman chief economist at john thomas financial so mike my question is we've seen so much liquidity pumped into europe ok they still have a debt crisis they still have all of these problems what is the solution to that. ok well that's a hard one to answer that but i am going to add to the surface article by the way he said he didn't have an answer i'm going to give an answer first of all you have to understand one thing the quiddity that was pumped in were loans and the problem

with europe right now is that all these countries and we have to remember very important to state that none of these countries our currency is sure is any more they're like functionally like states in the united states so they can go bankrupt so these loans on top of loans to countries whose economies are contracting as a result of austerity there's no way they could pay them back right i mean the math just doesn't work in this situation we know that what the problem is now the solution is to have a fiscal authority but they don't have a fiscal authority it's not like the united states of california was going bankrupt if push comes to shove the federal government could give money to california you don't have that in place what you have in europe is the e.c.b. which could be like a fiscal authority and it kind of has been acting like that in the purchase of bonds it's been sort of clause ife funding these countries like greece and spain what you need to have is for that to be institutionalized right now in the european

constitution that can't really happen so they're figuring out all kind of ways that the e.c.b. could kind of do that and germany's against that but to really solve the problem what you need to have is for the e.c.b. not to lend but to give a distribution maybe let's say ten percent of your g.d.p. to all countries not just greece so there's not everybody all you know upset that it's just going to graze ten percent of g.d.p. a one time distribution or maybe repeat that the next year if it's necessary to allow the deficits to remain at the current level so that they could stop all the good. of their economy so that the economies can stabilize start to produce revenue again hopefully get back to a growth path and then those deficits would start to shrink so mike are you saying her are you saying you're saying give them money if you countries many of them give

banks money give you money give them the e.c.b. gives a ten percent distribution to all the eurozone members have a money ok so then in this scenario what would the members do with them because the whole issue of the banking system and we've seen these to be at least try to prop up banks but one of the big issues there is that that money it may be avert a credit crisis but the banks don't lend it and they don't buy sovereign debt with it they just use it to shore up their balance sheets. right well here's what happened said i went over the problem with the other way they're doing it because it's just a loan on top of a loan the money for stalls or stops the collapse of economic growth there's only one way to pay back the banks floor and that the bad banks are businesses right they made loans that's their business the loans have paid back if you have economic activity where people have jobs and they're making money and they can pay back the loans this is the whole problem well as stary is not allowing this to happen if you

stabilize the economy so you don't have to layoff millions and millions of people and you don't have to close firms and businesses could start to grow a little bit guess what the loans get paid back the banking system starts to heal and you grow your way out of it that's the only way if you continue with these loans if you continue with the current approach the so-called remedy that they're going to have to it's an absolute one hundred percent guarantee that the whole thing is going down and i will say this the strong nations like germany who think they're now shielded from this are in some way protected because they're very strong financially the whole thing will migrate right up to the top it'll get to them too why because germany is literally killing its customers that is the periphery of the other nations in the eurozone that pie their exports if they don't see this it's amazing that they don't see this and i've said it before on this show

it's the definition of insanity continuing to do the same thing over and over again and expecting a different result you know one question i have now is how do you know that you're going to maintain faith in the currency if you just get all these governments a bunch of cash. well i was in the not hanging fave here are you all just answer your question with a question are you maintaining faith in the currency by destroying your economy come on well either way it doesn't seem like it or one wins it seems like you could lose either way. i disagree i think if the economy grows and people are working again and things stabilize i think the currency lease stays stable i'm not saying it's going to go up through the roof but at least it stays stable all right i would be my guess ok well good gas and i appreciate you being on the show we're going to leave it there for today that was mike norman chief economist at john thomas financial.

all right let's wrap up with loose change we've got to me terry and shannon here and talk about how it's richard branson's big new idea so virgin c.e.o. and billionaire richard branson has his sights on a new crusade take a look i think government should generally get out of any business and. put up their prices to try to encourage. private private individuals to do it. don't forget carry u.s. astronauts to space he's actually taking on the university system the high school dropout took to his blog to write this there needs to be an urgent rethink and all countries around the globe courses for most subjects need to be slashed in half so

that students can get out into the real world quicker with less debt and have the ability to start earning so yesterday we got a lot of feedback when we talked it out some solutions to the student debt crisis and here is richard branson what do you think cut down costs and i think odds are i told the great courage it's because we used in the medieval period of feudalism we have we have an educated serfs basically people that were embedded but didn't know anything right and now those are in terms well not in the college that's what what i'm saying is people know because agree that i actually think they know something we're actually stupid and have always those who are active dumber than they were before you have a college degree but i don't think i'm a genius like these kids come out of that imagery. they don't see. my point is that at least in the fuel period they were an educated now they are educated so they're worse because they're under. because there is cause agree isn't worth anything at all and they've got a better job of it through the tools of people who are really smart with their true

stoop and they're as good as i do think he's honest and they shannon i feel like honestly the money has gone to his head because if he is he's been picked up off of the middle of the ocean like six times his budget near to and if i search and operating on me after those six times i was plucked from the ocean i hope that they didn't have an expedient college course. was ok there's only one last chance you need that's unique ok if you're a surgeon or something specialize that's different i think in general i think for a lot of jobs you don't necessarily need to have an expertise and you know the last if you want to one or some of these other subjects that you know maybe you don't let's move on doh. because making an education maybe you should consider this before you get yours because career cast dot com ranked the best and worst jobs of two thousand and twelve the best job a software engineer according to them and the worst

a lumberjack if you're curious to where we fell as broadcasters well broadcaster fell a hundred and sixteen spots follow this any rule owners have been mindful of. you know actually push their their plumbers so broadcaster is ranked one hundred ninety one out of the two hundred worst jobs after maids shoe repair people just a little bit better than lumberjack who risk their lives every day i told the group the software engineer in a previous life i basically work with also for engineers as our friends are anti social and they're able to extract huge amounts of money for them because they are desirable in this economy but there's that world where there's a there's there's not there's not enough supply so they're able to command a certain premium and they're able to really boss your you know you know what basically they feel like so course a great job being a software engineer the worst are probably being a journalist it's almost a worse job than what was your reaction to the jobs just

a rather subjective list because i didn't see a politician on there yeah i didn't i didn't see investment banker either going but somebody comes along to risk the risk is your investment banker to my door you work depends on if you're on it to get it too big to fail banks or in. hey let's move on we've got to get to this one malaysia airlines begins flying their double decker air bus on july first and it seems the company has a bit of a seating chart in mind take a look for leisure airlines has declared a child free zone it's the first lawn in the world to do that and honestly i think a lot of business travelers are hoping other real ones. so what do you think of this my issue the child free zone will restrict families traveling with children to the all economy lower deck so basically you only get a child free zone if you're in business class or first class if you're an economy you're stuck with the kids all makes sense because the children and they hear population growth and there's desire to contrive population growth and euthanize the population so i think it goes with the culture to eliminate children they don't

want to behave the way older than all of us what i want to child free zone but i ride economy because i obviously have job number one ninety one on that list i'm a broadcaster and i write in economy then i don't get the benefit of a child free zone i really go into that understanding that this is really a leave all of our policy it is in the lead all of our policy because it excludes the middle class who want to get out of having a child free zone to ride in peace and i'm all for it otherwise on that note that's all we have time for thanks so much for tuning in do not forget to follow me on twitter at lauren lyster also give us speed back on the show at youtube dot com dot com slash capital account tomorrow we will respond to it we will also speak with the always informative and interesting chris martenson there for now from everyone here at capital account thank you so much for watching and have a great night.