spread the word. my sister in law and. good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for wednesday july eleventh two thousand and twelve f one c minutes from june's meeting came out today showing a new fed policymakers said the central bank will probably need to take further action now whether you think the fed has failed by doing too much or failed by doing too little there is plenty of evidence it has has has succeeded in propping up the stock market but are there signs even this is coming to an end we'll talk about it plus regulators have approved the definition of swaps starting the gargantuan overhaul of a six hundred fifty trillion dollars opaque derivatives market which was made possible years ago by their deregulation but would pandora's box even have been

opened if lawmakers had read the bill that open the hatches and we'll talk about that and more with the man on a mission to make lawmakers read the bills they passed in this as house republicans are reportedly voting today on repealing president obama's signature health care reform law again they've done it about thirty three times i think spain's prime minister meanwhile unveils another sixty five billion euros of austerity ok more of the same all stare kind of news we've come to expect out of europe what we've found more interesting coming out of spain recently was this banish economist herring and appalled crewman's neoclassical arguments right in front of king crewman himself take a look. nobel prize winners attempted to point to for cato much as one of the signs. in which they have excelled. out we'll

hear what misha thinks about that too let's get to today's capital account. the federal reserve open market committee minutes for june came out this afternoon so naturally everyone was obsessive looking at what they said and a few f o m c members said more stimulus would probably be needed and what do you know it wasn't enough of a promise of more easy money to come to excite the market that is if you think that news would explain the stock market's fall this afternoon we before on this show have discussed the fed's ability to prop up the stock market that the fed has been

successful in doing that no judgment here just stating what some of the evidence points to well now the new york fed itself is actually out with a report showing us stocks have experienced large excess returns in the twenty four hours proceeding f o m c announcements and they went back to one thousand nine hundred four on this but if everyone now expects the fed to prop up the stock market and the new york fed is even saying it now everyone expects it and the herd believes it does that mean that the fed's ability to do so is coming to an end as every move you could hope to make from this point forward has already been baked into the monetary cake it's a good question we'll ask our guest also nearly all f o m c participants noted higher than usual uncertainty about unemployment and growth and participants saw moderate growth likely and coming years but don't listen to the fed are we already

in a recession in the us that is a question and might shed lot thinks he has the answer he thinks we're in one he's an investment advisor for sick of pacific capital author of the very popular blog he writes and let's find out why he thinks we are in recession first mike shut. welcome back to capital count so nice to see you thanks for being on. the show love doing means more as does our cars do all. i and our audience certainly loves that so spell it out it's great to have the contrast on a day where the fad says ok moderate growth maybe it will act if it gets worse as far as the growth is you think that the u.s. is in a recession already lay out your thesis for why i think the whole global economy is in a recession but before we can go there you have to kind of define what you mean by that the global recession typically is well the i.m.f. defines is that under three percent i think we're going to see one percent maybe

even flat earth in the in the global economy actually negative wouldn't surprise me at all given the ports from from china from japan from from europe from germany actually germany was kind of enter resting because. the german new orders plunged more than any other country in europe except for greece so you know how's that for a stay out of the u.s. i assume numbers were a huge shock to everyone last month plunging twelve percentage points and into negative territory we've now had four consecutive weak jobs reports and i've got anecdotal emails from from people from auto parts buyers the world's largest auto parts manufacturer someone in the seventies to be a german company bosh this person emailed me and said that orders have plunged and this company makes brakes they make ignition systems all kinds of things so i'm

sitting there going ok jobs markets are already i assume as we go to manufacturing new orders everywhere is plunging auto parts parts are plunging so you know it looks like to me when the when they get back the n b r focuses on the s. and declares the start of the recession i think they're going to look at this thing and they're not going to wait for two quarters of g.d.p. it's most big. ok and nash this may seem like a silly question but from my perspective the u.s. and then a tough spot for years now i've heard you know month after month of bad news they you could chalk that to the fact that the u.s. is not doing well what difference does it really make it that it's a recession officially or if we're calling it a recession that's it's a good question certainly we've had an extremely anything anemic recovery. given the millions of people that are on unemployed for record duration times

unfortunately there's not a breakdown beyond twenty seven weeks but it's just critical and i think people are actually retiring once they get their ninety nine weeks of benefits that they or their benefits expire there are close to retirement age to have any money coming in or all i think we're seeing what i call forced retirement these people retire just to get some money coming in from from social security but i think a lot of this debate of timing this recession has to do with the belief i think it's a misguided belief actually that there is a length of time before the u.s. goes into earth before of recession starts on the stock market reacts well just because that's what happened in two thousand and seven or a couple of recent recessions i don't think you can go back. and make that claim and i also think that we're in

a different kind of recession here were. and i would call that an earnings recession a p you recession actually is a better term for. expansion ratios the the price of people who are willing to pay for stocks at forty four in two thousand and twelve to twenty three and at the bottom of two thousand and nine low it actually got to reasonable valuations around twelve are actually. and then fifteen or so but here we are back to twenty three we never saw those bear market bottoms and the only reason why the u.s. economy is that the u.s. stock market has held up better is just that it has more tools. affect everything it wants rather than what we're seeing in germany with all the bickering over bailouts for spain for greece first for ireland. once again it's this dirty shirt concept we've talked about that before yeah the u.s.

has benefited from with this decoupling is not going to last forever. once the u.s. job market you know continues to tank and once earnings growth hits the wall which i think is happening right now and before we get to the fed's ability to prop up the stock market and defy this trend i want to ask about auto sales because you predict that they're going to collapse globally which is not something i really heard a lot of people talk about or really anybody talk about so what are you forecasting first and why is this important. well to him two important pieces back share housing and auto sales and certainly housing is dredging along here right at the bottom we've not seen a recovery in housing i don't think we're going to see a recovery in housing for a decade yet one of the main drivers of the last recession was a plunge in new home by so if people are buying homes they're buying carpeting

they're buying appliances they're buying brassy of everything you know painting walls all of that that activity came to an end. but the fed has attempted to restart that out and it just hasn't worked so the home market remains depressed so we might not see the big falloff in g.d.p. we saw last time because home prices are already depressed however the rest of manufacturing is is now falling you know into the gutter led by autos you know these are jobs these are auto parts these are trucking supplies all of this and corporations are running pretty lean here lauren so what's going to happen here they're either going to lay off workers which are going to put more people out of work and governments are still struggling soror going to see some more government layoffs either that or these corporations are going to keep these people on and

their profits are going to sink which one is it i think it's a combination of both so that does not bode well for the stock market and also looking ahead in the beginning of next year we've got all kinds of tens of billions of dollars worth of tax hikes across the board alternative minimum tax all kinds of tax hikes the first year of a presidential term is seldom a good one all of the cards are lining up here for a pretty significant recession loss of jobs and an earnings recession as well i know that sounds. could your two scenarios of either compressed profits and earnings or workers being laid off both of them sound bad but if you're paul krugman you have the answer might shed like the government just needs to spend more but many disagree and you heard from that spanish economist at the beginning of the show saying hey just because you have a nobel prize in one area does not make you an expert on everything economic under the sun that everybody should listen to and now wasn't it paul krugman also got

some i don't know feel like they ganged up on him on squawk box today i want to play a little bit of that. what some actual own amount that the government should spend as a percentage of g.d.p. do you have a number for ram this incredibly or i want to try to figure out you know how to get a look at me when he gets about this the when it gets above fifty and i start to wonder a percent. so paul krugman would start to wonder if government spending became fifty percent of g.d.p. reactions you want to pile on here oh sure i'll be happy to pile on and add france is a fifty percent right now so you know where is it going to go on your own line and france has an unemployment rate in spite of all their social burden spider are they nor do i as an unemployment rate of ten point one percent as a ten point zero anyway it's over ten percent here and now all of europe is over is struggling out on employment and they have more government spending than we do

someone somewhere is going and i have to laugh at that one comment that came from spain because i had someone e-mail me last week you know who am i supposed to believe you or a nobel prize winning economist way one is nobel prize for trade and a lot of the things that bergman has actually said on trade i'm in the past historically agreed with her and wasn't one time a big proponent of free trade now the interesting thing right now is these drop that stance he wants the united states of a mistaken there he's looking for the us to tariffs on china by god you know this guy's not studied the great depression and on you know shades of smoot hawley so you know all of these things yeah he won his nobel prize for trade but if you look at what he's prescribing it's exactly what japan that for two decades would get japan has defenses row of japan's not blown up yet what great what do they get

for it they've got a debt to g.d.p. of two hundred twenty five percent who is even starting to worry about that a little bit yet. still proposing all of that stuff so you know his thesis is keynesian thesis simply does not add up it never ends when we saw endless keynesian and monetarist stimulus and your dad got them nothing you learn nothing from japan you learn nothing from the great depression you know because you got a nobel prize you can write a book and tell everyone what they should be doing and this guy needs to get out of his ivory tower learn and never know the real world that's all right well i don't know what i can say after that we're going to leave it there didn't have time to get too much more into the fed but you said so much that is so valuable already mike said like thanks for being on the show he is investment advisor for thyca pacific capital author of the popular economic blog two still ahead from financial bills to political ones it seems us lawmakers are voting without reading the fine

print will take a look at one man's quest to make a reading bill law but first your closing market number. what drives the world the fear mongering used by politicians who makes decisions to be precluded through to be made who can you trust no one who is you who view you with a global missionary see where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our tea question more. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you sure see some other part of it and realize that everything you thought

you knew you don't know i'm tarred as a big picture. very good. luck in the alona so we'll get to the real headlines with none of them are the problem with the mainstream media today is that they're completely disconnected from the viewers and for what actually matters to those viewers and so that's why young people just don't watch t.v. anymore if they want news they go online and read it but we're trying to take those stories that people actually care about and transfer them back to t.v. .

welcome back let's switch gears u.s. regulators have approved a definition of swaps this was required by dog frank and it will reportedly or should in theory at least bring scrutiny and transparency to this six hundred forty eight trillion dollar derivatives market now this is a huge opaque over the counter market that has basically been allowed to go unchecked for decades we talk about it a lot but how did it go unchecked for so long well that was thanks in part to financial deregulation of that market that came from another bill so let's back up let's get to the basics of lawmaking how does something become a bill in the first place well here is one way it's been talked to schoolchildren take a look. some folks back home they want to know what they call their local congressman and he said you're right. but he said really really i don't introduce me to congress and i became a boom. soon but is that really how it works did some average folks just call

up their lawmakers and ask to deregulate derivatives like the commodities future modernization act did in two thousand and did average people in small towns across america call their congressmen to tell them to make sure they get in that part about portfolio hedging as an exception to the volcker rule i don't know doesn't really stack up for me at least how do lawmakers really put together bills that they don't write bills they don't read the bills they don't know what's in the bills that they voted the bills want to. legislate partially. final hours. i guess generally baron didn't believe that student film or cartoon either because he has made it his mission to make lawmakers read the bills they're signing he's executive producer of fools on the hill a film documenting his spear experience trying to accomplish this so first welcome

to the show thank you thanks for having me thank you for being on i'm excited to hear about your journey so tell us because you describe yourself as an average joe a small business owner how did you go from average joe small business owner to political activist trying to make it your mission to have lawmakers read the bills well in two thousand i discovered that the patriot act had been passed without having been read and then when i when i got there i went with a minute how can that be this is a really important bill how can congress be sure the bills they haven't read are going to solve the problems you haven't looked at which point you started on my mission because i just found it was a case over and over and over again and let's talk about what you think are some of the most egregious consequences of what you are saying has come from from lawmakers not reading specific bills some that you lay out in your movie let's talk about the california pension sure system. the california pension fees are they going to have

to pay we're somewhere around three hundred million a year. and then. snuck in a little thing at the very last minute of the last day of the legislative session and now our payments are three point five billion dollars a year as well oh yeah that's exploded i mean that's been a trend across the country in places but are you saying that you attribute this to lawmakers not reading the bill because i hate to be a naysayer but we know that special interests oftentimes get their way and maybe would whether congress write about it or not one of our lawmakers in california you know i thought about what you know what what's going to work can we actually expect our legislators to read it if they do. it would be with there being a difference and that was my first focus because it made no sense to pass a bill you have read right. and then just really looking it over i decided the best way to do it is to make sure the legislators provide us enough time you know so

that we see the absolute final version of the bill will in advance of the vote so we can see those fingers or not so we can see what loopholes are are so that we can see a poorly thought out bill that we could then advise on to make it better and if we have that kind of transparency then special interests have so much control because you're right you know you get all the special interest there and you get twenty days and everybody says oh oh what's so so doing with this little clause in there get that out that's the way you handle special interest you have complete transparency before the fact so did you change your focus from having lawmakers read the bill to making sure the public in fear because once you got involved in this you saw the impact of special interests and what way they may read the bill but it doesn't mean anything is going to change my focus was to part during the documentary it was read the bill under penalty of perjury got to sign it that you've read it and then the other is given this enough time to see it ourselves.

but the focus then changed work we just want to time to what we see in ourselves who cares who have not you actually read it we want to see it ok what has changed but yet it was never it was never that i didn't think of it that part of it to be right right i want to get more into that but first you aren't alone in wanting members of congress to read the bill i want to play and some examples of lawmakers begging for this let's listen. eleven hundred pages not not one member of this body has read not worn the damn bill the car oh damn time come out here unless. i gotta try to figure out for my people who could stay up all night in reading and read a thousand pages so obviously it was done you know like business as usual things. some of those are really classic so with all of this outrage why haven't we seen efforts from lawmakers to get a bill to make people read the bill make lawmakers read the bill stuck and i wrote

they've got a status quo this is just the way you do it that's how you do it and they're not thinking outside the box and i just want to point out that it's not just the libertarians or the or the republicans who feel that they should be able to read the bills i mean. six years ago was talking about the same thing. but they're stuck in a rut that's all it is and they can't they can't see outside that box once you're in there i can't argue with you there and even if they do think outside the box go look at getting everybody to vote outside the box or outside the party with you on that the focus that you have in having the public read bills have them online i hear you proposing twenty days yeah i want to know i know from what i understand most bills are written in legally so it's complicated it's it's how lawyers would write a bill it's not how i would write what a bill means so so do you to get help the public to really have these gobbledygook

bills online or does it need to be broken down you know i've gotten e-mails from. a lot of people across the country and some really brilliant ideas and there are plenty of organizations and individuals who would gladly read the bills and do their best to understand it is it just an interesting little side note. if you look at the history of writing there was a point where people who were the scribes who actually paid by the word so they made a more worthy include the where in the so forth and then all those all those legal fees doesn't have to be that complicated you know being paid by the word in the longer they can simplify it they can will do you think it's your point of making lawmakers read the bill if that was. a law then wouldn't that result in shorter bills because if they had to sign off that they read this thousand page thing nothing would get done so then maybe the unintended consequence of making them read

it is we'd have shorter bills oh absolutely there's no question about that yeah simpler easier to understand and easier to follow. yeah yeah i know that's important and i couldn't agree more i do want to ask you you are trying to push this forward you do have a rally coming up i want to get that in there i want to know what you're doing you know july seventeenth over the southeastern part of the capitol grounds we're holding the rally tuesday night and anyone who wants to come we're happy to have you there it's just time i mean i was in this country we don't have the right to see the final versions of the bills because well that's a good point because because congress does put they want to build online they do put the bills online but it is the problem that the amendments don't all go online before they get acted upon voted on that is actually the problem you stuff at the last minute this is what our legislators and special interest do is for at the very last possible minute no one knows what's in there even the members of congress and then they vote on it and then it just can't be allowed to continue that's how

corruption is able to. win there that's exactly right yeah because i understand even though the house has a three day rule that they have to see a bill before they vote on it that three days gets a little murky it could be eleven pm wednesday that they get it and vote on it early friday morning so we can see that they get it they get around these do you want to add something there if you have it or the couple that go to ignore it or they can vote for your exactly and they do that exactly all right well i appreciate you being on the show a great detail in your story and your efforts to do this good for you if you had a rally anybody can join if they are looking to get some accountability and some time to read the bills too thanks so much carol thank you all right he's jeralyn baron executive producer of fools on the hill you can catch it it's a documentary and that is it for our show today but there is some news that came out j.p. . the morgan is planning to claw back millions of dollars in stock from individuals connected with the cia trading loss that came out in the wall street journal and

they also report that five billion dollars in losses from the whale trade are what's expected to come from j.p. morgan when they report earnings later this week we will talk about all of that on the show later this week from new york we are taking the show on the road thursday and friday i'm not going to tell you exactly what's in store but i'm just going to tell you you are not going to want to miss it we have some amazing gas lined up you may see me hitting the floor of the new york stock exchange to tell you what really goes on there and a re serjeant's of word of the day you may see me trying to tame the bull i don't know i'm just saying but you're not going to miss it that is thursday and friday this week capital account from new york thank you so much for watching our shows in washington and make sure to come back tomorrow to see what we do in new york and in the meantime you can follow me on twitter at lauren lyster and you can give us feedback on the show or catch any you missed at youtube dot com slash

capital account go subscribe if you haven't and you can always see us in h.d. on hulu at hulu dot com slash capital dash account forever and here have a great day. for sure is that so much about me when you see these even a lot of people have your ears on during the future that money treaty organization is an alliance in search of a mission does it project peace and stability as it claims. 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 tom parker pacific ocean. we.

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