carrboro because they're a profit driven industry that sells and sensationalistic garbage he calls it breaking news i'm out of the market and we're going to break this but it's a. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for tuesday november sixth two thousand and twelve the u.s. presidential elections are today along with elections for hundreds of lawmakers for every the house of representatives and some in the senate will discuss what a proposed election economy may look like with credit write downs founder edward terrorists and and europe may be an example of what happens when you cut spending without writing down the debt so far the u.s. is postpone financial reckoning day by ramping up the presses but how much longer

can do is continue plus the u.s. fiscal cliff has people worried about a u.s. recession if washington does nothing meanwhile in france president francois hollande is under pressure to reform the economy loosening labor laws for example reuters says he's expected to brush aside the prescriptions from an i.m.f. and also a government commission report our elected politicians just universally aligned and not wanting to make the tough decisions we'll discuss let's get to today's capital again. so soon we will presumably know who will be president of the united states. but do

we know exactly what we would get out there that looking at the economy and their agenda well let's take a look at one talking point. i want to put people back to work here in the united states. we can do this from day one i'm going to go to work to help get americans back to work and people across the country are responding to our five part plant. so really what's the difference where a look at out when it comes to the economy and does a president get people back to work anyway joining me now is edward harrison founder of credit right down to talk about that and what a post election economy is going to look like so first edward thanks for being on this is an opportune time to talk about all this stuff given that it is the election. so you know let's start with some of the pretty decent economic news we've seen recently i have a list of a few of the highlights i guess you could call on household debt is the lowest since two thousand and three reportedly we've seen increased hiring we saw you know better non-farm payrolls in september and october consumer confidence climbed in

october to a four year high retail sales jumped one percent in september it's better than nothing i guess better than decline so is the economy finally getting out of its slump and is this sustainable growth going to continue regardless of who's president. the interesting part of your question was the sustainable part we're going to pick that because you know ultimately i think. it depends on how you look at it from a longer term perspective versus a short term perspective if you look at it from a cyclical perspective that is completely sustainable. upward in terms of statistics. cyclical growth bud at the end of the day the question is what happens when you have the next recession given the still high levels of private sector especially in the household sector and with less policy space meaning you know we have high deficits in the government sector and we also have you know zero rates from the federal reserve so those are big problems from

a secular perspective but i think it's it is sustainable on a cyclical perspective and which means what that the central bank is propping this up enough that were going on this enormous going on going forward you know the economic cycle will take its course and we're you know moving upward in the trajectory for this cyclical upward cycle and at some point you know the site was going to wane whether it does. that of its own accord or as a result of the fiscal cliff is to be determined but when that happens then the question is about sustainability over the secular you know the longer term but over the cyclical period that is over the short to medium term say to a year or two i think it is sustainable what we're seeing right now ok but what about depending on who is president one of the concerns from folks that are saying the market's worried that you know with mitt romney for example this could mean another fed chairman and ben i think has told friends ben bernanke he that he wouldn't even want another term and you could argue the markets have become

addicted to this liquidity and that if they get cut off from it then short term that could be a disaster but i mean you know just for them disaster for them but my question is this idea that there would be a more hawkish central bank chairman under romney is that misguided don't central bankers just want to keep this game going are you i think it is completely misguided it's not going to happen in more over to a degree you can sheens the psychology of the. instituting you know installing a fed chairman who positions it one way or the other but he's only one of the number of different people who are who are voting in the city so ultimately the all of the hawks in the you know. for example they've started to jump on board to the bandwagon of easy money and i don't think that you know they're going to stop and anytime soon ok so easy money will continue one thing that there was a fox analysis that bond investors are worried going into the election because we're going to listen to his president they'll still have to deal with the fiscal

cliff and if the u.s. goes over it according to many forecasts it would go into recession you have written about the fiscal cliff you see this of as a point of great importance you just referred to it a little earlier in our discussion why and what do you think should be done you know just looking at ideologically speaking. my own personal impression is that in terms of you know stimulus and deficits i'm not concerned about what i would call cyclical deficits i think that you know steering the economy in order to meet certain deficit goals is actually getting the you know the tail to wag the dog at the end of the day the reason that the deficit exists one way or the other is because of what's happened in the private sector so really what you should be focused on is the private sector getting job growth etc but you know with regard to the fiscal cliff specifically i think that. you know basically what's going to happen is that people are uncomfortable with the level of deficits that we have now

that's because there was a huge amount of debt in the private sector the private sector still somewhat in need mic and people are not you know going out there and spending in the same levels so that's meaning that the deficit in the public sector is still large and people are uncomfortable with that so they're going to artificially intercede and try to cut those deficit which is the equivalent of cutting the private sector surpluses so as soon as the deficits get cut the surplus will be cut in the private sector and they'll be very negative for stock markets but also be very negative for g.d.p. growth ideology aside do you think that any president is going to go away and or really do anything to cut the deficit or to address the u.s. debt because i have a hard time seeing that happen and what history shows is that republican or democrat they pretty much stay on the same spending path they may just favor different interests well here's what i think the key difference is between romney

and obama first of all i think that obama is serious about tax increases and so i think that one of the big differences are wealthy he wants tax and the wealthy so i think that one of the big differences between obama and romney is that obama will be slightly more aggressive in terms of raising taxes especially on the well. but when it comes to spending cuts i don't think that there's going to be that big a difference over the near term between obama and romney so over the near term i think that when you look at stimulus with stimulative activity actually obama's slightly less stimulative in that sense than romney would be because i don't believe that romney is going to cut and i don't think the republicans in congress want him to cut because they know that that would lead to recession and that would be bad for the republican party so what instead they would do in order to keep their bona fides cutter's is look to the longer term that is so security and

medicare so you're saying it's a calculated kind of political interest because then they can preserve things now and they can sabotage the future or cut from the future i don't know if i would use the term sabotage but i did our job because there is there is a there is a sound obvious argument to be made for cutting long term spending and some of the long term entitlements are reforming them but you're saying they would push the pain down the road so that'll be long after they're out of office exactly they will say look you know we want to cut over the next twenty or twenty five years x. trillion dollars out of the government this is how we're going to do it and it's going to be heavily weighted towards social security and medicare and things like that defense spending will will will go relatively on. will be some minor cuts in discretionary spending but you know at the end of the day you know the large majority of the outlook is in the government's budget is in defense medicare medicaid social security so that's where the cuts would have to be if you were

going to look at it from a long term perspective and so that's what i expect in terms of both candidates tax plans what we know of them at least obviously romney has not said what. tax expenditures he would close or what really happened in terms of both their tax plans and assuming that they don't really do much to spending what impact do you think that there are two policies have on the economy do you think. there really will be one where there are different tax policies what i think you know there are those in romney is slightly more similar than obama because when you go if you're lowering taxes you know look at his rhetoric what he's saying is that you know i'm going to close all these loopholes and therefore you know but i'm going to i'm going to lower the tax level but i'm going to close loopholes will be neutral in terms of taxes anyone who's looked at those numbers knows that's never going to happen it's never going to be like that so he's in a quandary the question is how is the how does that quandary get resolved. are you going to have a larger deficit or are you going to start cutting spending more and i think that

what's going to happen is is they're going to have unexpectedly high deficits and you know over the near term even when you're wrong the deficit. even bigger than they would under obama with all depends on growth that comes from having these tax cuts that he's going to have over the near term yes i think deficits will be slightly higher under romney unless obviously it leads to a recession because you have the sort of self fulfilling prophecy when you cut you know when you increase taxes and therefore you know suck money out of the private sector if you do hard enough it will cause a recession to occur and then potentially you could actually get larger deficits what about the role of private debt because we talk a lot about government debt but private sector debt is something that plays heavily into the economy and you had a chart that you posted on your website actually that i want to bring up that shows

what's in this is the. i can't see it that well there we go debt service ratio and then debt to income ratio the debt to income ratio and gray and the debt service ratio in blue you see this is important what is this show and why is it important you think would showing secular unsustainability in the private sector. you know the things that are causing a recovery right now so what you see is is debt service ratios dropping precipitously after two thousand and eight because of the stimulation from the federal reserve your interest rate. but you see the debt to income ratio is dropping much less precipitously so there's still incredibly high on a secular basis in europe here in the year two thousand and twelve but you're way down here say in the one nine hundred seventy five and that difference is going to be crucial when you come to the next recession because you can't have the same types of stimulus policies you can't lower rates you know five percent because

you're already at zero right wanted to be easing doesn't actually net financial assets to the private sector it's just an asset swap of one for the old so how are you going to how are we going to do that except by deficit spending basically deficit spending is politically unsustainable and you're already at zero rates you have a big problem yeah and on that note deficit spending being unsustainable politically ellerey and says hey whoever's president there at the end of their rope whether it's with fed policy or fiscal policy they've done so much already people have had enough what more can they do which i would say would be a bad thing edward thank you we're going to continue this conversation shift gears to europe find out what we've been missing while we're focused on the u.s. elections and also what we can learn looking at the u.s. we'll have more with founder of credit write downs in a minute still had to could france be in need of some shock therapy we'll tell you about some dramatic proposals to fix their struggling economy and of course the

resistance to them in tonight's loose change that the minute. 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 realized everything you thought you knew you don't know i'm tom hardy welcome to the big picture. i will fight all the natural gas i also promised to write every single day i'm ever going to get. to go along with my own.

group. welcome back we are so focused on talking about the u.s. elections they are today after all but what about europe what is going on in europe that we've been missing and what can we learn from europe about what may be coming for the united states edward harrison is with me as founder of credit write down

he's helping us assess all of this so now edward i have to admit with europe going on so long and feeling a little like groundhog day with the eurozone crisis i'm a little behind i know angela merkel said that this is not going to be over in one to two years we're looking at five years at least so are we doomed to five more years of groundhog day type news out of the eurozone and what are the key things that we should be not miss saying with our eyes glazing over at times. we have to be thinking about political sustainability verses you know what i would call debt deflation on the one hand you have the path which is that you know in countries like germany people are saying these people in greece or spain and so forth they really need to tighten their belts we've done therefore they need to do it as well but at the same time we don't want the whole thing to spiral out of control so we're kind of going you know we have to give them some help in some way shape or

form but at the same time we want them to meet the grid in a harsh word but that's politically unsustainable in the countries were. debt deflation takes over and we've seen the muddle through exam so doing we see this on the modeling group for four or five year we've seen greece. spain is actually muddling through they're in a very dire situation the question is will it get more dire will become more greek like will collapse but they're still in the euro zone they're still on the euro they're still passing these measures despite the fact that their populations are rioting or protesting on the streets and i was going on in this class sustainability comes into play you. you know increase seen levels of factionalism of extremism in you know the golden dawn party in greece you have separatism in catalonia separatism in the u.k. which is isn't part of the euro zone in scotland these are the kinds of things that

start to happen the whole political system starts on ravel so basically it's completely unsustainable the present course from a political perspective people are going to put up with for another five years something bad will happen and therefore they'll have to react if they don't react quickly enough then you could see the eurozone collapse entirely so you don't think we'll see just kind of this same modeling for five years do you think we'll see fireworks somewhere in between there we see what i'm going to default we were saying for weeks with regard to the e.c.b. wasn't a year or two ago when people said no way they're never going to monetize right look at them they're printing money basically monetizing right now propping up spain and italy without the e.c.b. spain and italy would default their interest rates would have gone through the roof that's the kind of thing that's going to happen eventually you know you hit the wall and then the have to make a political decision do we go to the next level or do without the whole thing collapse and i think that they've already gone so far in trying to keep this whole

thing together that they will go to the next level that is they will do whatever's necessary in order to keep the whole thing from from collapsing but it will be quickly enough that's great that's the question right and looking at europe you could say this is exhibit a for what happens when you cut spending dramatically without addressing the debt without writing down and nothing of the debt to where private investors feel comfortable going in and investing in a country anymore i mean the private sector has collapsed in greece to give an example how long can the us forestall this kind of result i mean you cannot print your way into prosperity or borrow your way to prosperity would you know the u.s. is in greece. look at japan they have you know go to anyone is that g.d.p. i mean just run through an experiment mentally if the federal reserve went out and they said you know things are terrible in the u.s. with regard to fiscal sustainability and the debt and so forth so we're going to go

we're going to buy up one of the existing treasuries and we're going to just take it into the federal reserve what would happen as a result of that and they said categorically this is a one time decision that we're going to make the first thing you notice is the u.s. government prints money that is their own currency it's a liability they've created it's not some external liability that they have to do they can just you know buy it up secondly if it's a one off then what you see is an immediate fall in the price level you see rising inflation but it's not necessarily sustained inflation so the point is when you talk about sustainability it's completely sustainable it's their own currency it's not the same as in greece or in you know in germany even where they have debt to g.d.p. of over eighty percent. currency user that could completely go bankrupt because unless the e.c.b. prints money right but the u.s. even when you control your currency printing money can create money but it doesn't

create wow you know it doesn't when you know what happens when the printing of money reaches the end of its row doesn't reach the end of its rope what happens is you get a situation like in the u.k. i look at the u.k. post world war two as a perfect example of you know the money printing inflationary route to getting out of problems they had over two hundred percent debt to g.d.p. after government debt to g.d.p. after world war two almost two hundred fifty percent so what happened massive depreciation the currency massive amounts of inflation bouts of inflation lower standards of living in you know the sick man of europe lou. oh low real g.d.p. growth and by the one nine hundred eighty s. the debt to g.d.p. was sixty seventy percent so that's what you know default but you know pain for sure for you i would throw a mild version of greece not the dramatic contraction they have but many of the

same sentence of inflation lower growth of those same factors. i mean basically you're talking about in a religion of wealth you're talking about people being relatively speaking poor especially as compared to their counterparts in germany switzerland and other places that didn't have the same sort of inflationary policy right and before we go i thought it was really funny peter hooper a chief economist at deutsche bank and a former fed official said that there's so much pent up demand in the us then that is where regardless of presidential policies that's going to drive the expansion for the next few years where is this demand coming from the coming from as well i mean there's infinite demand if you have infinite amount of money at your beck and call but the reality is is that people are still and in the private sector there's no pent up demand except to the degree that people are taking on more debt you have

to you have to see much more job growth and we have to see much lower debt in the household sector and then you have pent up demand but right now. i see that is completely ridiculous completely and even if people borrow more to spend more tell me how that's sustainable and how cuts a great way to really recover as an economy will have to leave it there for today but thank you so much edward for guiding us through presidential politics and europe as well as opposed. all right let's wrap up with loose change to reach very long list for nice to see

on this day you know it's not just the united states it's struggling obviously as france's economy is struggling some of us come forward with a what you could call severe approach someone say to fixing their economic woes here is former c.e.o. louis gallois his suggestion. there are twenty two rain proposals designed to stop the slippery slope we're on it to support investment this is what i call a competitive mission which is actually a confidence shot i can from the numbers a proposal of twenty billion euros of labor cost cutting for businesses and ten billion euros for employees. so there's a government sanctioned report that is urging these kind of reforms in france and according to reuters the president francois hollande is likely to shrug them off so the thing that strikes me is. is this just what we've seen widespread that politicians do not ever want to make the tough decisions on their watch their kids

yet there is the u.s. or the or france or wherever of course i mean think about it what's the incentive there is that your old going to get reelected you're not going out right forte i'm saying these sets of structure for a politician is just to do the here and now to worry about now and increasingly that's become the most a brand across the economy in general it's all about now so it actually incentivize politicians to do what's already in there and set them structure so yeah you don't you don't expect any change in voltage is that's what has the forced on them and that's why in those countries in europe that have actually been shut out of the bond market as they are the markets and force are right there is a need for service but then at the same time those politicians are again doing what's in their best interest except this time not even answering to the electorate anymore their answers to their overlords the use of theirs and then the i.m.f. so they're saying ok we'll cut spending because we never would do that otherwise but this is almost a fault on our day we won't play hardball a negotiating on our debt so they're really destroying their economy so they're both politicians in general from what i've seen i know you read about frank and that's the are you worried about linked in there you i don't know how good they

were really i mean in history we always want heroes but right i don't i've never lied never saw a politician that i ever like in retrospect i like obama i have anybody any modern day politicians going on to become heroes let's move on because speaking of heroes there have been some helping out with the devastation wreaked by superstorm sandy it's still being felt that one point nine million homes and businesses last night were without power there are ports that remain closed the marine terminals and they were closed over the weekend but despite sandy's massive destruction which you know new yorkers did find a story to line up added by the latest apple i pad. what i've seen uptown is downtown was arguably out of power i think at that point so on the one hand we see such devastation and a city rendered powerless by

a storm literally literally and on the other hand we see just these weird things that can still go on that letter the tick that's pathetic i didn't realize that was during the part of the during now i did realize that right now it's a big bloomberg was a big fan of it because he's like this is going to give moral support i was afraid it was like meron only someone like bloomberg is a billionaire would actually think that these things are morals that you should be focusing on actually that the people in the rockaways who are like it's like a scene a lot of the flaws right ok or no escape with right ray liotta look i mean i never thought i'd say this i'm over apple i'm over our philosophy i've said you can you believe you are in the cold i'm going to call i like apple i like the computer it's amazing i like the operating system i'm glad i have an i phone i don't want to send song i know it's better better bang for your buck up but what about the i phone but i'm kind of all going to an apple commercial i'm sort of kind of over that route over the coals and with the i pad maybe i'm just like you know what is there what's new here guys yeah but i still would never go to microsoft and i'm not in a linux platform or

a network platform right ok well i want to leave it there for today except all we have time for but thank you so much for watching be sure to come back tomorrow and in the meantime you know you can follow me on twitter at lauren lyster you ten like us at our facebook page watches on you tube or on hulu and from everyone here thanks for watching and have a great night. i will fight all that i also promised and i want your breasts removed for. my own. 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 everything you thought you knew. welcome to the big picture. what drives the world the fear mongering used by politicians who makes decisions to be breakthrough it's already been.