this is our team moscow our top stories plus this is part of new sanctions on north korea is not the way forward is the united nations looks into the controversial rocket launch that launch ended in failure though as the rocket plummeted into the sea just moments after it took off. the u.n. said to send more observers into syria as a draft resolution is laid out before the security council envoy kofi annan says forces in the country have not yet fully complied with the terms of the peace deal as reports emerge of clashes move the turkish border. and as we are reporting

tonight the world's most famous whistleblower brings his new a highly anticipated show to us r.t. starts next tuesday. will be talking to newsmakers and opinion formers some of whom have never appeared on english language television. lexx some economic perspective about the latest world financial news from our washington studios laura list is there for tonight's capital account enjoy. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. to hear 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. you can't recreate a time coming off proposal which could cause

a chain reaction to come out of the very fabric of the space time continuum just the entire universe are we had a great disaster of cosmic proportion the last that question an 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 a moment little bit of breathing space not much but a little bit of breathing space. to really pursue what still needs to be. 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 they or confidence in

a currency or economy so let's talk about where this is headed and virgin moguls 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 supports keeping interest rates near zero until late two thousand and

fourteen now all of this as us thinkin back to the future about time travel and has us wondering if the fed's artificial manipulation of interest rates distorts this 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 to severe 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 being on the show again it's nice to see you. 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'm going like a log i've been reading your blogs my things i said i don't read your blog i don't 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 have to say but my question is this back to the future question does the fed

manipulation of interest rates ok didn't keep intimate 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 but i 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 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 doesn't 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 low 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 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 has a distortive effect at all but mike how can you argue back and i hear everything you're saying but when there is keeping interest rates at rear end that sign usual even if they're telling us that they're going to be at zero for a while i'm negative real interest rate is distorting a lot more people than maybe it should be when you're incentive i think grand national 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 business 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 the man for credit in the hopes that that would foster some kind of a spending boom to prof said the desire to save but what we're seeing is it does it

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 enough to said oh that's a loaded question but then we say how how do we save how can i as a saver accumulate a net positive amount of dollars net dollars how can that happen the government somebody has to spend more dollars than 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 when way off and that's because private savings equal the deficit of the government to the penny it's an accounting identity oh what now you're talking about deficits that i am that 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 get so is that the unintended consequence of these deficits we are literally mike running out of safe 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 the spite the lowest rates in history right so the deficit is supplying those say facets the problem is

it's not supplying him in enough quantity equal to the desire of people that want to hold them it needs to it in fact what the markets are saying what the markets are screaming lauren is that the deficits have to be much much bigger because it is an enormous desire to save in these safe assets ok you can control data sets if you're a government but you cannot control 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 contract and so sharply ok if the economy were to grow at 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 the deficit the second part of your question i didn't really follow ok well then let's let's maybe you can follow this more closely because it'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 killing three you have people reading the tea leaves with that very fact governor's comments that have come out why and badly said something about it today . surely you don't think that more q. we would be a good thing might well yeah no i do not and i guess it's something that we agree on more in and here's why q. we 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.e. does exactly the same thing last year the federal reserve handed over eight hundred 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 this q.e. and the economy is still only growing at 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 to a cons make explosive destruction in the economy like. well 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 save or 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 that's big a big and we're going to want to talk about what's going on there we'll have more with mike norman chief economist at john thomas financial after the break and still ahead forget the space time continuum and even flights 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 your closing market.

is that so much and there's a huge musician on the market the series you read at least for now at this moment the u.n. sponsored peace plan for syria has gotten mixed reviews one. welcome back so europe has tried to paper over its problems we've seen that despite the fact that a debt crisis persists the e.c.v. has pumped liquidity into banks we've seen more than a trillion dollars pumped in through l t r 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 and i'm going to answer that but i am going to head 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 to build a quiddity that was pumped in war 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 are currency issuers anymore they're like functionally like states of 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 quasi 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 my are you saying hurry are you saying you're saying give them money give you countries not give them give banks money give you money give them the e.c.b. gives a ten percent this tribute to all the eurozone members you 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 issues there is that that money it may be averted 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 do it because it's just a loan on top of the lower the money forestalls or stops the collapse in economic

growth there's only one way to pay back the banks lauren 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 sterrett is not allowing this to happen if you stabilize the economy's so you don't have to lay off millions and millions of people and you don't have to close firms and business 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 after 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 and it'll get to them too why because germany is literally killing its customers that is the periphery on 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 than the one question i have now is how do you know that you're going to maintain faith in a currency if you just get all these governments a bunch of caps. well everything i meant handing fav 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 here 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. stays stable i'm not

saying it's going to go up through the roof but it least it stays stable all right i would be my guess ok well good guess and i appreciate you being on the show not to leave it there for today that was mike norman chief economist at john thomas financial. all right let's wrap up at least change we've got to meet her and sharon here and talk about how it's richard branson's big new idea so virgin c.e.o. and billionaire richard branson has him sights that on a new crusade take a look but 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 carrying 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 in 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 we talked it out some solutions to the student debt crisis and here is richard branson what do you think cut down class time i think. purging is because we used in the medieval period to frugal is when we have we had an educated service basically people that were indebted but didn't know anything right and now those are insurance will know the college that's what it will but i'm saying it's people agree that i actually think that they know something we're actually stupid

and have always those who actually do more than they were before you have a college degree but i don't think i'm a genius like these has come on the injury. and i didn't see. my point is that at least in the people period they were educated now they are educated so they're worse because they're under you can possibly think they are educated because they're just called degree isn't worth anything at all and they've got to do a lot of it through the feudal system of what people think are really smart but they're actually stoop and they're as dead as i do think he's honest and shannon i feel like honestly the money has gone to his head because if he is he's been kicked off of the middle of the ocean like six times his beard and if i had a surgeon operating on me after the six times i was plucked from the ocean i hope that they didn't have an expedient it college course. was ok there's only one last chance you need to know and that's unique ok if you're a surgeon or something specialized that's different i think in general i think for a lot of jobs you don't necessarily need to have an expertise you know the loss if

you want to one or some of these other subjects that you know maybe you don't let's move on doh. because speaking of 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 one hundred and sixteen spots below this any rule homers have been mindful of. you know actually push their their plumber is 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 a group of software engineer and a previous life i basically work with all software engineers and if you social they're able to extract huge amounts of money that are so good for them or

desirable in this economy. and there's there's not there's not enough supply so they're able to command a certain preview and they're able to really bust your you know you know what basically they feel like so force a great job being a software engineer the worst being a journalist it's almost the worst job she had and what was your reaction to these jobs just a rather subjective because i didn't see a politician on there i didn't i didn't see investment banker either well but somebody comes along to risk tail risk here investment banker to my door you work depends on if you're on to get it too big to fail banks or and yeah you're right but hey let's move on we've got to get this on the lazy airlines begins playing a double decker air bus on july first and it seems the company has a bit of a seating chart in mind take a look. a luxury airlines has to clear the child for his own it's the first one in the world to do that and honestly i think a lot of piston troubles are hoping all the real longs. so what do you think it is

my issue that child free zone will restrict families traveling with children to the all economy lower deck so basically 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 who make sense because the children and their population grow and it is bizarre to contract population growth and euthanize the population so i think it goes with the culture to eliminate children who don't want to behave shoulder at all so what if 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 or the understanding that this is really going to leave all of our policy there's an elite all of our policy because it excludes the middle class who want to having a child free zone to ride in peace but 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 feedback on the show at youtube dot 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. technology innovation all the developments around russia we've got the future. on.

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