scott. russian. syria enters the muslim holy month of ramadan engulfed in violence as government forces and rebel fighters battle on every corner of the country. spain is gearing up for more angry and just already protests just days after nationwide marches descended into clashes that left dozens injured. plus trigger happy tourism a new attraction for visitors to israel of promoting a negative perception of the country. is next with the latest capital account from washington. well good afternoon welcome to council account i'm lauren lyster here in washington d.c. the easier headlines for friday july twentieth two thousand and twelve rising food prices are being called the next crisis by some as drought pushes agriculture

commodity prices to record highs the writing an economy in a tough spot already but is this part of a bigger bust cycles that is all part of the natural historical trend of collapses tied to technology where we need to hit a real rock bottom in order to move forward to a golden age well we'll talk to author and professor carlotta per read who is certainly thinks so plus morgan stanley and citi group are reportedly among wall street firms preparing to eliminate jobs as revenues reported so far in two thousand and twelve drop for a third straight year that's according to bloomberg but is a step in the right direction for the broader economy do we need a much bigger shift away from finance and speculation for capital to move where it would be more productive in the u.s. we'll look into it and a viewer has inspired me to wrap it in viewer feedback yes that's what you heard

it's that time it's friday will get its days capital account. so when we are talking about booms and busts crises and what we've experienced of course over the last few years there are many things economists factor into their analysis technology isn't typically one you hear but what if you look at the economy through the lens of major technological revolutions over generations over centuries when you look at the investment it takes to roll them out and then the subsequent financial innovation of that industry is so speculators can invest to their heart's content do you find

a unique analysis of financial growth and financial crisis let's take an example that we can probably all remember the internet boom it created major new technologies but it was followed by a speculative frenzy that created a price bubble for tech companies and those prices did not accurately rafat reflect what these companies were actually worth and it all imploded now that's just one historical example but it's not unique least not according to carlotta perec she's a professor and author of this book here technological revolutions and financial capital the dynamics of bubbles and golden ages we spoke to her about it all earlier. so professor thank you so much for being on the show first of all. ok so now let's start let's kind of set up your theory for our guest because in your book you write about how this wing of the economic plan occurs every two or three decades bringing us from gilded ages to golden ages so i want to bring up

that chart which is what you just scribe of this process a sixteen year cycle of capital going from twenty to thirty years at what you call an installation period to a crisis and then a deployment period now we're going to break this down through the course of the interview but maybe you could start by just explaining what this installation period is that begins at all. is what we have been through the past year. the first thing. is that you go change by revolution and it's revolutions agree about six years so what happens is that we don't really ever none of us live full of them and therefore we don't realize that the for things that are happening have happened before we always think we're unique and this is the first i'm going to have. is precisely. this new technological revolution which takes about thirty years for us to learn all the new

things so we get a new infrastructure and we've got now the internet and we have all the information revolution all these new things have been how thirty or forty years changing reducing the industry because everyone these were able to transform all and that's what makes it possible to have a. good. now the way google is is by no means to get interest and can get financial returns to new its profits with these new technologies we just awful. so here it. goes for thirty years why not scoop holds everything inside where the investment explodes who gets the money . during the time or. social phenomena that help of course finance from. abduction on what happens on.

illusion. and the major problems ok about ok and before we get to a major crisis and the collapse and the next days let's go there are a few of the examples of these technological right revolutions over the past two centuries that have fuel the instillation periods you mention five in your book maybe you want to kind of go over them our audience is looking at them you can't you can name those those keep periods of technological revolutions. there have been five this is that the first one was make an isolation of call. outs that come out for the internet and. then we have not made any come out panic and about the surge of britain that's the great power then we have the second one. and railways that we have the

railways and then the panic in forty eight and after that golden age of the korean . the next one is heavy engineering it's fairly naval civil chemical electrical. engineering things with. feel that was the first globalization it's the first time that we can have. global prices and lowball trade because these ships were able to. the southern hemisphere in just two weeks so we had huge globalization in agriculture in meat. in refrigerators and just just with ice and ships and in two weeks they could go all in the whole world changed because we have a first globalization and we have big call ups in the southern hemisphere and

particularly bearing prices in argentina in the world the city of london for about two years and then we have that. golden age of the. fords model. the age of mass production cheap oil balls electrical appliances on all the rest. roaring. then twenty nine. the. recession of the 1930's. and the golden age post-war fifty's and sixty's who just too great to be in history . in. microprocessor inaugurate to the information revolution and we've had the installation on till now we have all we have have the big big. might now have a hand if you know how to do it the global sustainable golden age of the knowledge

society so maybe there is some good news head before we get to that though i want to talk more about what you discussed in the installation phase of the decoupling of finance so the burst of the bubble leads to financial collapse which then swings the pendulum towards the next phase in your view book before this we see what is documented in this graph where the growth of financial profits relative to g.d.p. far outpace is those of non-financial profits and this is in the ninety's and the two thousand so does this decoupling of financial and production profits occur in each of those cases that you mentioned of technological revolutions. just the poorer. you know one. person has done because there is a very interesting phenomenon which is what produces the bubble which is that even though finance has been has been funding the new technologies the installation

especially the infrastructure. internet in this case what happens it is that so much money because it's so successful that everybody wants a piece of the action so you get so much excess money i do you get such interesting new technologies that we both technologies for nucingen finance the financial innovation and it's all this financial innovation which in part because we've got so you know start. that creates the bubble so this separation of financial profits from real profits because finance actually couples from the real economy there is much more money moving. by these the roof. betting on that. and also the inflation of assets because there is a hybrid inflation of a sense of the bubble because if you have so much money going into housing then you

just have housing prices rice you have a huge amount of that breach and all that money moves into this market and the more it looks like things are getting more and more expensive when you have inflation the more they have on the more money the more goes and. the bubble but also in the choice but before it's that's that's a really interesting analysis of the role of technology in that i haven't ever thought of it quite that way so at the point where you hit the crisis stage which is right at this intersection of the installation and the deployment deployment phase can you explain why the influence of production capital does come to replace the influence of investment and finance capital which as you describe has already decouple so if so how does it refocus back to production capital well first of all it's certainly doesn't help american market if you ask to be brought about by the

state but on fortunately the. point is very much of by the most powerful part of the finance. system which is finance so it's not easy so what happens is and that's why. the recession a slow important fortunately after these bubbles is the political question and the b.s. when people get worried about what finance going on about not having all the problems that are created by the coupling. then the politicians tell you it's gone but of course they have enormous pressure from finance who are trying to stop it from happening so for instance the whole of the nine b. thirty s. which is a very long period on the war on the off the war was just recession on the question on we couldn't get the economy out of the hole because the measures that had to be taken which were the welfare was based on old things going to be our want to go on

with things that in the end were done on the greatest boom in history could not be done because business we will accept that's what's happened you know i mean things like transaction tax or or things that would really be bringing who are human creation expansion all the possibilities that there are now we've green technology and so on it is almost impossible to do it because the race was this done so the question of how production capital comes by and why it has come back has to do with first of all whether they will help how it's been on the secondary with their finance is willing to be really oriented towards patient capital and creation. so what is the proper role of policy and regulation because we certainly talk about a lot of failures on the show of it so we'll hear more from car lot of her as on what she says to that lot still ahead you responded now i'll answer i may even wrap

checkout up your comment caught my eye this week and your feedback but first your closing market numbers. will. so the food science technology innovation all the latest developments from around russia we've dumped a huge earth covered. welcome

back so before the break we were talking about the financial ization of the economy the massive expansion of the casino like atmosphere on wall street that is not productive for the economy and ok yeah i get that we talk about that a lot on the show but where are we now looking at the rise of tech companies for example like google and apple that are doing very well and are arguably much more productive in terms of what they're producing how did they factor in to our guest argument and what is the proper role of policy to reverse the financial railroading of wall street how do you incentivize banks to finance the real economy and not their own speculative portfolios how to get j.p. morgan to finance small businesses and not london whale terry as well there's more with car lot of to answer that question she is

a professor and author of technological revolutions and financial capital the dynamics of bubbles and the golden ages. none of these guys in the financial sector are themselves. financial power in our art of the of the. the production world it's a very are also playing on so profits on fortune what do harm. to the quantum we're. the only ones who are the board who have policies that are more profitable for finance who. really. consider the us a question i have for you what should what is the proper and affective role of government in incentivizing the type of investment you're describing because for example we've seen dodd frank regulation in the united

states which has not ended too big to fail it is not and did a lot of the casino like practices at the biggest banks so there is one example of regulation failing to do what you're describing and in addition you may see so. banks for example print a lot of money that they're hoping gets out to the real economy but they can't force banks to lend that money out to finance businesses and so what you see is banks decided to do what they want to do which recently has not been to finance the real economy seemingly so so what is the way to create the right incentives for the investment you're talking about. of course what it isn't it is not. your average number of that's not what's needed and much less. bureaucratic what you need to do is to radically change the conditions of the market so but it is much more profitable profitable for them to fund the real economy than the going to

do in the consumer so for instance just new york at something very simple. capital gains tax on capital gains is less than half the tax on what people earn by really working by really making real profits in the real economy now that's completely absurd of course that what generally happens in the installation everybody wants to have finance to go hungry like it was in the eighty's is completely the trying of this in real trouble so people want you know whip it out. get the economy moving get the financial world moving so you know reduce the interest rates and you do all sorts of things who move the economy then finance. and it works fine for a while on the board or i'm told that's so now the thing it's not to control finance but. rather. more profitable so you have to change the

fact system in a way that is profiling the appearance of the welfare state comparison with the situation of. in comes before that so that's one of the big things the other thing the one thing i want to jump in with professor pres what about interest rates when you have percent interest rates that doesn't incentivize banks to lend to people because they're not getting a lot of interest on loans it incentivizes them to speculate where they can't to chase yields so do interest rates need to come up. or what not what you might not be. bums you have. the possibility of are surely having better rates when they borrow that's not where people get sober house proposal is making proposals or whatever you get the

money going to all the people so that they will break the banks and better because what's the government going it's big money for. the banks it's not printing printing money for people who are or kind of over time or but there are a couple slight things that i want to touch on and i was hoping you could quickly answer you mentioned google you mentioned some of these tech companies are you saying that for the golden age if we do get to it it's not going to be goldman sachs and j.p. morgan leading us into this next phase. well first of all it. but normally what happens is. the financial world does not need the economy but serves the economy in the way it's for the economy and make money outside of the pockets of the many they are now making money by. by differential us that in. their own without really generate you can well they're not generating real world

because. it's about a better life for everybody and we thank god we have a head of some possibility is a golden a sustainable about global. universal i see. a green green growth across the economy and also full. well we'll have to see if that green economy is the next phase and we do see real change in that direction it could go either way i think that was author and professor at the car lot of.

all right it is friday and last week i was detained in new york so now i have an opportunity to respond to you with some of your feedback and it's a good time to do it because there are a few things i need to clear up about monday's show some confusion that i noticed from the comments on our youtube channel here is a sampling of them kuka new cooking one said weird ending someone else said strange cut off interview maybe our tea was being swatted as a branch and three some said gee lauren don't say goodbye or anything great show nevertheless i wish it could have been twice as long but there were several comments to this effect people were confused and our dedicated viewers definitely deserve an explanation so welcome to live t.v. we had some technical problems with our guests during the live t.v. show monday we improvised we pulled it off lucky for us our very nice guest paul craig roberts was able to stay and tape a nice long interview with us which we posted online which is what our online

viewers saw you all clearly enjoyed the content judging by the comments and the likes but we're also a little confused with the presentation so that explains it don't worry i'm going to say goodbye and all my shows continuing on and who who is seven four six said have the bank stars kidnapped lauren where's lauren today there were a few comments to this effect i thought it was a little interesting i watched the show back to see what that was all about i think i was just maybe a little more calm than usual i don't know thinking back maybe i had a little less calf a nation. that day so i guess the moral of the story is i need to switch back to double espresso overdrive so i don't throw everybody off in the audience so consider it done because frank our floor director quits coffee and my mom will i'm back in action and i will continue to be on the paul craig roberts interview which was on monday which had to do with his article he wrote with nomi prins on war and

what their analysis of the real scandal was t.f. marketed by tweeted me this is peter cheer and he disagreed with an aspect of the argument he tweeted that floating rate bonds wouldn't have been helped by library much as they are floating rate now that ties into an argument that nomi prins and paul craig roberts made in their paper in the article now peter chair was nice enough to send me a whole bunch of information which i'll go through this weekend and try to present you with this alternative analysis he laid out on live board next week so you can look forward to that i'll try to get him on the show too and after new york which was last week and some other days where we had multiple guests and we didn't really have the opportunity to do a loose change in the studio while we did this week we did yesterday and someone actually wrote us a poem which was very touching and it actually may have been inspired by a song a gene autry song which our line producer found and brought to my attention but since we can't play music on air for copyright reasons i actually like to think

that maybe it sounds more like a rap so let's bring it up i'll try to do my best interpretation of what this viewer wrote it looks a little something like dimitri and lauren back in this saddle again. as good friends loose change it be jingle in lauren cool classy keeps the tingle in their back in the saddle again. yes i know i know that was a really pathetic thank you for my control room for indulging me in a little fake applause with that but this viewer also said this week shows have been to perfect a plus. plus which is the part that i really care about so thanks and he also said i like how the real greek on the show was not enough for eternity cheers to dimitri for being real now magic two hands gets all the credit for that poem you're awesome thank you and he with that comment about dimitri was referring to a story we did about wall street clients pain consultants to help their daughters through sorority rush and group dimitri who is actually a greek was never in

a fraternity which he pointed out the irony are you're dead but that story inspired me to use a word that some had never heard and heavens trail tweeted and said is loser is stephen a word even though i don't think it matters it was meant. no viewers and heavens first lose the areas to lose their areas whatever is said is not a word absolutely isn't but that is right i do take creative freedom to make up words when it seems appropriate and loose change certainly seems to qualify we also reserve the right to make of images and now seems like a good time for that because we were inspired to do just that in response to this economist cover we're almost out of time to respond to it because this is the last day this issue is on newsstands but we were just so shocked by uncle sam's hastie's of bolding biceps we just don't know where this is going to go next but we were thinking you know maybe if the qana missed if angela merkel did everything the economist has wanted her to do are we going to see this next this is what we came

up with miss universe for angela merkel on oh seems like the likely next step though it probably won't be happening in the case of europe judging by the current state of affairs and a view with that because that's all we have time for but think you so much for watching and don't forget to come back next week we have a packed week as dimitri is heading off to vancouver to score lots of great guests from a bore a financial conference you can follow me on twitter at lauren lyster go to our you tube channel at youtube dot com slash capital account c s n h d on hulu and have a great night.

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