in terms of statistical. cyclical growth but at the end of the day the question is what happens when you have the next session given the still high levels of private sector debt 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 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 cycle is going to wane whether it does it of its own accord or as a result of the fiscal cliff you know it's to be determined but when that happens then the question is about sustainability over the secular you know the longer term period but over the cyclical period that is over the short to medium term say out

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 markets are 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 change 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. so ultimately the fed 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 guard lesson from this 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. and you have written about the fiscal cliff you see this as 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 force. stock markets also be very negative for

g.d.p. growth ideology aside do you think that any president is going to go away and really do anything to cut the deficit or to address the u.s. debt because i have a hard time seeing that happen what history shows is that republican or democrat they pretty much stay on the same spending path they may just favor different interests 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 as a wealthy he wants tax and that is where the wealthy so i think 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 wealthy 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 or 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 that 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 there was a look you know we want to cut over the next you know twenty or twenty five years 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 unscathed 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 relate too 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 you know there was in romney slightly more stimulative than obama because when you know if you're lowering taxes look at his rhetoric what he's saying is that you know i'm going to close all these

loopholes in there for 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 larger deficits or are you going to start cutting spending more and i think that what's going to happen 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 would all depend 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 like when you increase taxes and therefore you. no money of the private sector

if you do hard enough it will cause a recession to to her 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. unsustainability in the private sector of the you know the things that are causing a recovery right now so what you see is debt service ratios dropping precipitously after two thousand and eight because of the stimulation from the

federal reserve when your interest rate exactly but you see the debt to income ratio is dropping much less precipitously so they're still incredibly high on a secular basis and you're up here in the year two thousand and twelve but you're way down here say in one thousand 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 stimulative policies you can't lower rates you know five percent because you're already at zero right wanted to be using doesn't actually net financial assets to the private sector it's just an asset swap of one for the other so how are you going to how we're 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. more can they do which i would say would be about thank 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's in a minute. one student a decade the ruling party gathers to select the next generation. thursday november.

the news today violence is once again flared up. these are the images the world has been seeing from the streets of canada. trying to corporations rule the day. i mean so to know your city in europe i'm the host of the twenty fourteen winter the picket. signs she. think you. saw she. thanked the. way a. dog days of. the pride days a. week so common. and such she it's so true i.

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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 downs 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 that with our eyes glazing over at times. we have to be thinking about political sustainability versus 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 to 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 in a harsh way but that's politically unsustainable in the countries words where debt deflation takes over and we've seen the muddle through exact so doing business 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 increasing 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 rubble 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 third for five years do you think we'll see fireworks somewhere in between there we see what i'm going to fall for weeks with regard to 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 we let 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 is 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 nuff 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 u.s. forestall this kind of result i mean you cannot print your way into prosperity or borrow your way to prosperity who you know the u.s. is in greece. look at japan they have you know go to any one 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 wealth you know it doesn't when you know what happens when the printing of money reaches the end of its rope will 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 it's no default but you know pain for sure for the i would throw a mild version of greece not the dramatic contraction they have but many of the same symptoms of inflation lower growth of those same factors. i mean basically you're talking about in a room of the world 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 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 is 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 into the demand if you have infinite amount of money at your beck and call but the reality is is that people are still 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 you have to see much lower in the household sector and then you have pent up demand but right now. i see that is completely ridiculous simply and even if people borrow more to spend more tell me how that's sustainable and how that's 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 three covina a long list for nice to say 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's former c.e.o. louis gallois his suggestion. there are twenty two million proposals designed to stop the slippery slope we're on and 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 see 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 none of 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 i don't you don't expect any change in voltage is that's what has the force 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 for sure but then at the same time those politicians are again doing what's in their best interest except this i'm not even answering to the electorate anymore they're answering to their overlords they use 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 argument about lincoln there you i don't know how good they were really i mean in history we always want heroes but right i don't god never never saw a politician that i ever like in retrospect i liked obama on that i knew that 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 at and buy 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 the writing now it's a big bloomberg was a big fan of it because he's like this is going to give moral support but that was a surge it was a marathon only someone like bloomberg is a billionaire would actually think that these things are morals like you should be focusing on actually the people in the rockaways who are like it's like a scene a lot of the flaws right ok or no escape with 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're one of the colts i'm going to call look i'd 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 samsung i know it's better better bang for your buck up but what

about the i phone but i'm going to be all going to apple commercial i'm assuming over a reliable recall then with the i pad maybe i'm just like to 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 internet rightward platform right ok well 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 tell like us that our facebook page watch is on you tube or on hulu and from everyone here thanks for watching and have a great night. excuse me can i speak to you sure. let me let me explain my son died in iraq i don't agree

you don't agree with her my son isn't isn't in the marine i don't know what is crappy when he's trying to argue a fair. share of the country. with a country here's. the moon or in hope to help you. you find in so many own says war. sometimes.

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