an hour later into this the chamber of. commerce trade after they were dead. community from the new center here in moscow top stories now at half past the hour on the russian capital the wrath of a muslim protest as a response to an american film mocking islam in more countries as demonstrations raged for a fifth day hundreds of clashed with police outside the u.s. consulate in sydney australia and other parts of the world. washington races to say facing contain the scandal which ignited a powder keg of anti-american sentiment that according to opinion polls has been brewing thing is some experts say u.s. intervention in muslim countries is to blame. and after

a summer break russia's opposition comes together once again in demonstration with public sector workers joining the march for the first time ever the number of activists in attendance fall short of previous opposition turnout probably that with more news with the news team in half an hour from now in the meantime let's get some extensive analysis of the international economic headlines from washington with lauren lyster and capital account. good afternoon welcome to capital account i'm more in leicester here in washington d.c. these are headlines for friday september fourteenth two thousand and twelve inflation what inflation await consumer prices in the us rose in august by the most reportedly in three years consumer price index increased point six percent gasoline prices accounted for eighty percent of that rise reportedly that's if you even believe government statistics how does q.e. fit into this equation and is central banks try to reflate asset prices on the flip

side we'll hear how moffatt mark barbara lays out his case longer term for a deed lation narry collapse plus yesterday while the fed was overshadowing all other financial news of five hundred billion dollars spending bill easily got through the house of representatives to keep the government's wheels greased until march now the government borrowed nearly thirty five cents for every dollar it spent this year according to the wall street journal mind you lawmakers purportedly hope to address spending after the election but hey what's wrong with deficit spending anyway google if you're from edward harrison founder of credit write downs on that question and the deep prize to housing prices that the fed is targeting with its policy economic symptom or is that the disease. symptom the fed is trying to treat this symptom with q we instead of the disease of the high debt keeping people from being able to buy homes or get out of them in the first

place this game show idea came thanks to you our loyal viewer more in viewer feedback let's get to today's capital account. all right everyone is digesting the fed's q.e. infinity and now it's meant still that came out yesterday and of course the other thing we've heard a lot about ben bernanke you talked about it quite to quite an extent yesterday in the press conference about the fiscal cliff and what fiscal policy makers are doing the heavy lifting the fed is doing but can't do alone so so what could fiscal authorities be doing the central planners sitting not at the federal reserve but sitting over in congress or the white house well or what should they not be doing

is really the question to joining me to talk about it is edward harrison founder of credit write downs and nice to have you back on the show and we're going to be a long time it has been so let's start with the fed because i do want to touch on q.e. because we haven't had a chance to talk about it now you put this into a broader perspective in your thoughts about q.e. in terms of what central banks all over the world are doing to make up for what you say or what fiscal agents are doing first who would you group in to this group of central banks that are that have the printing presses on on overtime to make up for what you say fiscal agents are all of the major industrial central banks here at the bank of england the swiss national bank the bank of japan and the e.c.b. and the fed all engaging in one form or another of money printing q.e. or financial to the system the swiss national bank has kept the currency to

the to the euro one twenty and there are limited amounts of reserves in order to keep that from going above that ok so you have central banks on overdrive is there any kind of broad trend or if not a broad trend what are the key trends what fiscal agents you believe are doing that they should be doing that central banks are making up for well before. into the whole fiscal side it's interesting to think about the fact that two years ago we had this whole thing with the finance minister from brazil talking about currency wars the currency wars and yes exactly on pain of what's happening happening again that he was talking about he was talking about the fact that all these industrialized countries were printing money they were adding reserves to their systems etc and this was having a negative effect on his economy so we could potentially have that again of course

all of these economies are slowing not just in the united states and in europe and so forth but brazil's only going to have two percent g.d.p. growth this year so it's a little bit of a different story it is a different story that's interesting because originally when that currency wars speech was famously made by that finance minister that's when brazil's economy was growing very rapidly all of the brics economies work and now we've seen more of a global slowdown where some of those economies that were driving global growth has slowed down a bit so what happens in kind of a currency war two point zero where are those countries try to fire back against the liquidity that's being put into the system by developed economies what is it round to look like maybe they get into the system as well you know india is slowing down they still have pretty high inflation the last that i saw was seven point seven percent brazil slowing as we were talking about china's slowing all these countries are slowing so maybe they'll do exactly the same thing and to a certain degree they can go with school more so than the developed economies

because they don't have the huge debt burdens that develop right on their head all down when they had austerity programs back in the i.m.f. europe is dealing with so they don't have the same debt overhang but with the consequences be greater this time because there's less low hanging fruit it seems there's definitely less ability for us to sort of engineer a reflation response because you know you have higher debt levels. in the public sector you have still high debt levels in the private sector and then you have things that are decelerating but you know they're going to try to do as much as they can they're going to try to you know boost asset prices as much as possible if you can get this housing recovery that sort of incipient stabilizing keep on going for a little bit a few. fewer people are going to be underwater in their mortgages in fact actually over q one and q two to one point three million people with above water on their

mortgages which is a huge amount that's what the fed is really trying to do that's why they're targeting mortgages and these are the kinds of things that they're going to try to do is just treading water we might have two percent growth as a result of that. but obviously if you have the fiscal cliff you could actually go into recession right so you said some doubt this is the most aggressive monetary blitz the world has ever seen so is this going to be the most aggressive display of unintended consequences we've ever seen without a doubt i mean if you look at you know just the price earnings ratios on the s. and p. they're still very high yield bonds are at their lowest nominal rate ever in the history of the high yield market you have gold now that is soaring you have oil prices which are incredibly high and that are contributing eighty percent of the inflation that we saw in the last month all these things are the unintended consequences of the quantitative easing that we're seeing and people shifting their

portfolios in order to take advantage of the fact that they're getting nothing they're getting you know financial repression from the central banks and they need to do something in order to actually see to retire right so do you think that we're going to see commodity prices go up as a result of this latest killing we could i would think that that would be the first thing that we would see is as long as demand is still relatively world. asked for the products that you know in particular and we also have soybean and corn which have seen very high numbers then we're going to see higher prices but the industrial commodities you know like iron ore and so forth that's ruling over because demand in places like china has slowed has slowed down yeah that's right so what then does printing money because we've talked about propping up asset prices in homes we've talked about unintended consequences we've talked about that money

going into commodities what then edward please tell me there's more q. we just printing money have to do with unemployment that's a good question and that's one of the people who think that the fed is omnipotent really doesn't have a whole lot to do with it because at the end of the day really what the fed's doing is they're swapping one government liability for another they're saying look you know there are all these government liabilities out there and we're going to take them up and then we're going to you know make some more in terms of reserves so we got rid of these government bonds and now we're putting reserves and this version that they're doing instead of saying well you know that's not good enough so what we'll do is we'll try to you know target this particular market you know in an artificial bill to the mortgage market by being creating government money and then swapping those assets for the mortgage assets so that we can make that this this particular market inflated because that's something that we really want to write

and as ben bernanke he said if people have more value in their homes they'll feel richer they'll go out and spend money maybe this will create growth maybe this will create jobs maybe but what if the problems with employment are structural and not cyclical will take a little step back even though isn't it true that we already have a record low mortgage. so why are you. even lower yields is actually going to make people suddenly have jobs it's not about the interest which is about something else it's about huge levels of it's about people trying to overcome that lack of aggregate demand because people you know they're trying to save in order to pay down their debt right so how in this situation do you deal with that debt burden you know there are a number of different ways you can do with that one you could print money and try to boost up asset prices that were but that's what he's doing that's what he's

doing that's only going to have a limited effect but then you can also have someone like the government that is the fiscal agent try to get in there and also boost up. demand by actually adding demand and deficit spending ok let let's get into this let's get into this because the other night we got into this discussion you me and our producer on the show dimitri about you said you guys tell me what's wrong with deficit spending and dimitri and i had plenty of reasons that we thought but edward what is not wrong with deficit spending at a time when the u.s. is sixteen trillion dollars in debt will ultimately if you look at your money you you know i'll take out a twenty dollar bill here that you know i need a net worth it's not a you look on and says here this no it's legal tender for all the debts public and private so you go down to the bureau of printing and engraving you say you know

give me my money i want something instead of this piece of paper that you gave me they'll just give you a bunch of ones or a bunch of favs or you know maybe even you get a bunch of you're going to give you the same thing back because of the currency ok so are you suggesting that it's worthless you can't get around these are granting that for more paper money based on it's worth you know the full faith and credit of the united states government and its ability to tax you know the. the reason that it's worth something is also because it does you know this is legal tender it's not like i could go up and print up a bunch of harrisons and put them out there so you're saying that the u.s. government's ability to code worth is what's backing that twenty dollar bill one hundred percent and so as a result of that they've coerced and you know everyone has to use this money this is the only legal tender and we can tax you and will be able to

back the money and give the money actual you know currency because you have to pay off your tax obligation you can only pay it off if you pay it off in the currency the government has created the government has no restrictions this is the problem that people don't understand is the government the reason that we try to put all these restrictions on them we we act as if they actually are real is because we understand people really understand the system that the government could just go out and just buy in for night and they could do anything they want to add where the one problem that i have with this is what about if people do stay in the currency then all bets are off when you say what are they going to do are they going to start you know buying with gold or they're going to start using a rose in the united states so they can start using chinese yuan no it's never going to maybe the for your. dollar we want to transact angle if the markets will overall they won't be able to do the legal tender you have to pay off your taxes with the united states currency it's not all the people who are always talking

about the fact that people will lose faith in the currency they fail to realize that you still have a tax obligation that has to be made in the currency it's a long time this year if you're your old is that it's you can't pay your taxes and it's not i think it is and it's a different the way it's even dealt with we're going to have to leave it there for today but this discussion we will continue edward harrison thank you so much i'll get that twenty from you during the break just kidding after it airs and founder credit right down. and still ahead while everyone else is using the word inflation to discuss q e three we will talk to mark bob or about why he predicts longer term deviation narry collapse that's right after the break but first your closing market numbers.

as we're talking today about money printing and inflation what would milton friedman or john maynard keynes have to say what would they buy maybe not what the popular notion would suggest keynesianism today is synonymous with money printing

or spending i would argue now mark father recently argued in a king world news interview which by the way is a great radio program he made an interesting point about how modern economists have misrepresented and abuse the work and intentions of people like keynes and friedman people like paul krugman for example or ben bernanke who have strongly associated in cells with these famous economists now earlier i spoke with gloom doom and gloom reports mark father himself all about it take a listen. to people like paul krugman for example or ben bernanke have strongly associated themselves with these famous economist but if keynes or friedman were alive today do you think this they would endorse these modern thinkers policies. actually i could tell you keynes was a very intelligent man and actually he also had the flexibility to

change some of you if the arguments presented to him were convincing conditions change or the change some of those and he actually there was a huge debate in the late twenty's between american economies to maintain that the inflation was not just an increase in the prices of consumer goods. but that they had at that time also inflation in real estate prices in the late twenties and in installment credit and then inflation in stock prices and after the crash in twenty nine days during the depression keynes himself wrote that if someone had just looked at consumer prices and at commodity prices wholesale prices in the twenty's he would have concluded that there is no inflation but if someone had looked at credit growth and that real estate prices and home prices

and the real estate industry in general and at stock prices he would have concluded that there was a lot of inflation in the system and so i think if we leave today he would have he would be very disappointed how his series have been abused because a series were essentially designed to smooth out the business cycle when they made it much worse in the last twenty years by intervening repeatedly into the free market with government institutions like any man freddie mac. government policies fiscal policies and monetary policies and prospering problems so each crisis was the worse and worse than the previous one and equally. your listeners should actually look at the speech milton friedman gave in

nineteen seventy seven he gave it at the university and i think it may have been viscounts in or so but i don't recall it exactly but basically he. spoke about five great economic myth and basically yes he said that during. the depression the federal reserve should have printed more money but later in his presentation he says that of course the money printing is very negative kind of economic policy you know i want to talk a little bit more about the deflationary collapse that you see bigger picture on the horizon at some point because you've talked about war you've talked about biological terrorism all sorts of conditions that could define this period in the near future what through the now how do you see that scenario playing out.

well i believe that central banks will continue to print. money doesn't flow on the street and it doesn't create employment quite on the contrary it may be counterproductive there's all kinds of studies that have been published for one thing is sure having these artificially low interest rates allows the government to have huge deficits and so the government explodes in this road and the government increases its size at the expense of the private sector in an economy of the larger the government is basically the slower economic growth will be because the government is not the productive part of the economy moreover if you pile up it depends also what you use the dates for do you use it for capital spending the construction of factories and machinery or do you use it for

consumption and consumption is obviously not sustainable. model in the long run it can last for a long time but not forever so the way i see it is that as the central banks will continue to print money the average household will be become more and more dissatisfied. right and probably over time as has happened for many households the household sector will become impoverished and then there will be a lot of dissatisfaction and then the politicians will have to find a way to get out of that and usually in that situation when money printing doesn't help anymore they'll go to war or they'll start the war or. and then me outside. of the states and so forth and that then can lead to war

and i would say war will break out the major way the whole derivatives market will simply. expire year will disappear how it will be settled i don't know but it will disappear and there will be huge losses among friends and shaleen situations and the players in their early thieves the man on the street you will hardly notice it. mark bobber on the next chapter of derivative warfare and just ask why i here is part of the one nine hundred seventy seven milton friedman speech that mark father mentioned we wanted to bring you that line because the friedman in that speech said the fed should have done more to prevent contraction during the great depression but he also issued a warning about monetary easing can you put in money at no cost. it's very cheap to turn those pieces of paper. but there's a good society something for nothing not alone it's simply

a different form of taxation there you go the government may have the ability to do it it doesn't make it right doesn't make it free he went on to say if you print money people have more money to spend if they spend more money on the same amount of goods prices go up and in effect everyone is paying a tax through inflation i will leave you with that final thought. our let's wrap up with a little loose change i want to chance to interact with our viewers earlier this week we had mark's father on you obviously some today yesterday he was on talking

about q.e. and about gold and one of our viewers just took it straight on said lauren better own some gold hey r t how about answering this question on air you can block my name does lauren own any gold this is from f one eight seven guess that's why we had block his name on full disclosure i do not own gold i can't afford to hold as expensive i don't make very much money. relative to how expensive it is which works out because then i avoid a conflict of interest considering that we do cover gold so much i'm constantly it to bring people about it full disclosure though we should tell you that dimitri our producer does own gold he has since two thousand and five he was smart he got her early and in regard to the mark barber interview another viewer said lauren is the only one who can interview this very intelligent man properly in comparison to all the mainstream dumbos his word not mine and he likes and respects her questions

more too so joseph amro you are officially my favorite person in the world today thank you earlier this week we played some of these sound from a great interview with david stockman reagan's former budget director where he just laid into the fed here's a little bit of a taste. he was the only one that was right about the sled and the fed is the heart of the problem we have destroyed the capital markets the money markets interest rates mean nothing everything is trading off the said. he was talking about ron paul being the only one that was right about the fed when they were talking about politicians in the elections and one of our viewers found this wiki attributed quote to david stockman saying i invest in anything that he can't destroy including gold canned beans bottled water and flashlight batteries that was bam-bam twelve who found out on wiki not exactly the most trustworthy source but we have david stockman on the show next week we are supposed to so i will just go ahead and ask him in person about how he bets on the burning keep put and someone really loved

dimitry talking about whether. or policymakers were treating the symptom and economic symptom or the disease viewers love that we got a lot of responses and one said dimitri you want to create a new game show with the social educational bent called symptom or disease magic two hands you're one of our loyal viewers because i know we read your comments before and now you're creating segments because i think we're going to have to try this out and do a little game show with some of our guests because it is such a perfect perfect thing to do and just real quickly earlier this week we had a segment on a doctor who's bringing the market to health care really taken on the whole insurance and cost paradigm and one of our viewers said i learned more about how the health care industry operates in the last half hour than i have in my entire life steve two three two three z. x. thank you i'm glad you learned something we did too is a really interesting segment

a really different way to look at the economic principles applied to medicine and that's it for our show today thank you so much for watching be sure to come back next week because as i hinted with david stockman got a lot of good guests and in the meantime you can follow me on twitter lauren lyster give us feedback on the show any you missed or subscribe at youtube dot com slash capital account you know you can watch us in h.d. on tulu capital dash account and from everyone here thank you so much for watching have a great weekend and a great night.