good afternoon welcome to capital account i'm more in leicester here in washington d.c. these are your headlines birds thursday december sixth two thousand while it seems to be at the center of the u.s. as current fiscal lows in the debate over them. when it comes to raising taxes on the wealthy or those making more than through the fifty thousand dollars if republicans do not agree to that is the administration prepared to go over the fiscal cliff well absolutely. absolutely but when it comes to the u.s. is economic problems does this tax debate or even this fiscal cliff debate begin to scratch the surface of the crisis all former republican strategist author and historian kevin phillips is here with lessons we can learn from seventeen seventy

five the subject of his latest book that many a politician may benefit from actually reading. from a long time involved church i don't do it anymore of those boys much so you do not read because for people. to go and the as these the is reportedly investigating going to be providing twelve million dollars in derivatives trading losses in two thousand and eight yeah yeah there's a list of alleged bad bank behavior how is good capitalism though being driven out by bad capitalism all will break it down and word of the day plus alan greenspan says a painless solution to the u.s. debt is a fantasy finally something we can agree on more loose change let's get to today's capital account.

our guest kevin phillips made a name for himself in the late one nine hundred sixty s. as a g.o.p. operative who coined the phrase and wrote the book the emerging republican majority predicting the rise of the republican party by securing the south for a generation fast forward though and now he's writing about revolution in particular seven hundred seventy five which he says was a good year for it that was of course when the american revolution was going on and when it comes to this war he gets into economic factors that may not have gone down as saliently in mainstream history as taxation without representation but were major goals nonetheless among them was the inability of colonists to manage their own monetary affairs because of british policies also over indebtedness that was in part the result and the brits control of trade which required certain commodities to actually pass through middlemen always over london now sell them to what we can learn from this history as the u.s.

faces its modern economic problems earlier i spoke to kevin phillips he's a former white house strategist to president richard nixon he's also author of many books including his latest seven hundred seventy five a good year for revolution i first asked about the problem of overindebtedness it was an issue in seven hundred seventy five i asked how that would compare to what we see now. overindebtedness at this point. it's like ten different flavors i mean you've got the government has way too much there so you have private credit whether it's for mortgages credit cards or just simply private debt various forms and that. they have talked about trying to do to leverage the credit market debt in this country is extraordinary but there hasn't been much work done sure their total credit market maybe has been reduced by four five six percent now. when they were on. the over the

problem of. by simply letting a depression happen in the 1930's the credit market really trying and of course that made for a depression right flat out where there's no willingness to do this at this point and what they're trying to do they're not solving the problem of overindebtedness in any meaningful way so what everybody has to wonder are they going to solve it with inflation or are we about to see inflation and parents that are clearly they're getting rid of the penny of the nickel and john you're worried and they go to four it's going to be requiring prices to be priced out of the nearest ten cents that's going to create a sense on the part of the public of inflation coming and then that jeopardizes the whole approach to doug that's interesting and some do believe that the fed is trying to inflate its way out of debt that it's the only politically possible way to do so in this country which brings me to the modern debate we hear so much about

the fiscal cliff it is what the modern debate over the fiscal the country's fiscal problems and partially economic problems are centered around currently and that has really been centered around the issue of taxes for the top bracket some other things in there too but really this issue of let's play a clip of some of the talking points. we're going to have to see the rates on the top two percent go up and we're not going to be able to get a deal without it our members believe strongly that raising tax rates will hurt you come closer to the polls. especially those who are wealthy is a better way to raise this revenue they're raising right. ok so they don't agree on taxes for the top two percent of the country but bigger picture is this a thin representative of any kind of transform ational issue that will save the us economy or the ten flavors of debt that have accumulated to such

a great extent well. a little snippets of debate between the pros of the republicans in congress are things the whole thing has a major element of farce. the democrats really don't want to cut spending very much they know and that's a huge part of the problem the republicans don't want to raise taxes on the top rockets they know that's coming but i don't want to work with they know what's coming but the number of them know it's coming the democrats in the united states almost as much and sometimes even more money from the richest americans of the republicans to both sides refuse to acknowledge that they are basically in hock to interest groups and that they can't begin to confront this crisis head wrong meaning the economic crisis they're demanding that. the deficit crisis.

the lock of the ability to really get a serious recovery going as long as that much there are a lot of studies showing that the higher the general or was the last you could really have a growing economy kenneth rogoff and carmen reinhart came out with a salary a debt overhang to just that so then what do you think are the lessons from seventeen seventy five you know we're winding see what was going on and fast forward to today what can we learn from from the politics of the time and the bold moves of the dime if it can inform the u.s. that is. facing such economic problems. iraq obama. was acquainted with the. some of the larger dimensions of the problem of how other countries like the british and the dutch previously had gotten in this kind of trap and he was well aware that he decided to take a somewhat happy to feel in two thousand and nine because the democratic

politicians convinced them to get on the right track with democratic economics and will solve the problem so he has backed away from facing this seriously i don't think that the republicans facing it at all seriously here they are to much to march in the hawk of their upper bracket groups and i don't think unfortunately at seventeen seventy five or six has much of a lesson but politicians who can't appreciate what's happened to some of the other countries more recently aren't going to go jumping back and look at what was going on in seventeen seventy five or seven hundred seventy six i've spent a long time in politics and i don't do it anymore but believe me they do not read history books said they i mean you talked about in seven hundred seventy five you know that what you took away from it was how much was needed in terms of really difficult politics and and hard talk and raising tough issues and that that was

really needed to make progress we don't see that today do we know i don't think they're even confronting the framework involved now in fairness back in seventeen seventy five and seventy to seventy six the colonies world blige to confront the problem. and tried to run a wire but in general i come from of the problem what they're doing now is not confronting the problem and i don't believe that any history or any lessons from history are going to jar of them and in fairness one the british were facing similar problems they didn't confront this they knew. prosser this from holland and they didn't confront it the dutch couldn't turn from that before conferees can't tackle these things because they go to the heart of a build up of interest groups and failures over a century or at least two or three generations politicians can't cope with that

sort of thing so do you think it would take another not a war like we saw in the american revolution perhaps but i have no other economic crisis or financial crisis to force more action and would it be action do you think based on your knowledge of politics in the right direction or further down the wrong road or you're asking exactly the right questions here the crisis is probably necessary trying we assume a crisis will focus the right time for a movie in the right type of concern i'm skeptical i think it would what it would bring would be a member round of floundering in some partial responses but one of the lessons of history which leads me to think that nobody will solve the problem is that the previous nations facing comparable problems could never really cope with that and i do think that unfortunately the best guess as to was solution here is to work in flight and deal with the oil history suggests that doesn't usually work are there

for other reasons interesting when you're talking about those countries in similar situations what would you be comparing it to like the british empire as well there are people to deal with in all this is a matter of history and economic history generally suggests the immediate predecessor was britain the previous protests in the seventeenth and early eighteenth century with a dog like one new york was no amsterdam. kevin phillips after the break on deregulation and some more of the modern financial issues but if you really want to delve into the history of seven hundred seventy five and the currency and trade issues at play then check our you tube channel for a web exclusive because we did pro. more into that also still ahead alan greenspan talked to bloomberg today about the fiscal cliff what else but they are long term deficits maybe we agree with them find out what he said in loose change but first the closing market numbers.

for the. science technology innovation hall believes developments from around russia we've got the future covered. the gold fever. turns out as it's good to see late. my father but also a month brotherhood involved in the mines and since i started working in the mine i stayed here it. says multinationals. is a cash cow to be milked dry and is but i think that in this country gold medal logie has an environmental cost which is an acceptable local business was labeled illegal and controlled by criminals you know in order to protect our lives our families and to work in peace. news. we are forced to pay protection to illegal

groups prices colombia going to pay. for the for the modest effect on r.t. . boy.

welcome back we are speaking with kevin phillips are we i spoke to him earlier and now though he was a republican political strategist he now is very critical of both parties and one reason progressives have been a big fan is because he's been hugely critical of financial deregulation over the years i had to ask him about it take a listen. let's go through first some of the history of deregulation and money let's play a couple of clips. i have to read the secretary of the treasury to be necessary to defend the dollar again. i have directed secretary connally. convertible with a dollar. or. true problems of our nation

a much deeper. than gasoline lines or energy shortages these are even that inflation recession i need your home. so you have nixon taking us off bretton woods once and for all carter marking a period of horrible stagflation that paved the way for a massive deregulatory measure in the form of the monetary control act and then here you have bill clinton after he had signed the repeal of glass steagall with his cronies babying the way to too big to fail and then here is george w. bush after he had signed the bill named bankruptcy abuse prevention and consumer protection act of two thousand and five which i would say ils ill named because it actually made declaring bankruptcy more difficult so we've heard you talk about deregulation i want to get to that but first i don't think i've heard you talk about how you feel about the end of bretton woods and the move finally away from commodity based money and to a debt based currency system which is allowed for really this unprecedented

accumulation of credit and ten flavors of debt well somebody could do a very effective book on the united states and go over the various stages but i don't see the movement toward from britain wards quite the significance of that others do because it wasn't that it was a war. change. there's some surely what you have what nixon closed the gold one of the fraser in nineteen seventy one the united states was not really still on gold standard until the point that it was just modifying the end of the gold standard to be a complete end of the gold strike and we had started the printing process dollar. but other countries have had printing for us currency and other wires. i think i agree that the downhill slope started in a major way during the sixty's and seventy's but the war in vietnam was responsible

for a lot of the economic dislocation and the extent to which inflation was coming and the dollar weakening and that was an affront i am still saying that was a mistake in foreign policy and what you get when you look at the conferees when they get in this kind of pickle it's generally been a failure of more than financial policy it's been a failure across a broad range just for example look at pictures of the pros of instilling this now only war presidential aspirant i didn't support him but he did do this and charged and everything ross perot and member a whole world and we put up these people have never gone to the heart of any of the crises they've been describing they've never explained how they've started they've never shown what was involved they just say all we've got a major crisis here and i want to take a firm stand you know and then we get a policy and then ten years later somebody else wants to take

a firm stand without explaining what it is that's happening right that's what happened what would you say is the core problem that has been happening that's led to this well i would say of a core problem at this point is the united states is a declining world power that is not able to deal with the sources of its decline which are economic economic. poor foreign policy that expects to play policeman for the world without anybody wanting us to win without being able to afford it. we're trying to support the dollar as the world's leading currency and i doubt that that's possible anymore oddly enough the dollar is but better supported by crisis than by anything else ironic. because this is a haven so then in terms of just deregulation to end on it why do you think it is that republicans and democrats haven't. so wholeheartedly as the ethos of the best bang for the economy you know not withstanding the more recent times where we have

seen some out to try and bring back those regulations even though it's not been totally successful. well i think the notion of deregulation as a solution. the british to a certain extent when they were beginning their real rise into the sunshine during the victorian years in the middle of the nineteenth century did move away from one of the been a marcum to list patterns even as late as the early months of the century and they cut sciences and they did deregulate but that was in a period in time when a laissez faire was spreading around the world and was a movement to get rid of old structures from another era i don't think the deregulation has anything like a framework of historical justification at this point it sort of came out of reagan inside here and is now being prolonging it in a way that i think what you're seeing in asia for example is is the rise of state

capitalism and i don't think it's the regulators are still regulation compared with communism and some of the old mistakes right but this notion that deregulation that's an anglo-saxon policy and even the british don't push it so much anymore. i don't think the deregulation is the word that's being used broadly but in terms of rolling back tax is giving business a chance to solve the problems this is all republican rhetoric i mean i've seen this sort of stuff for fifty years now and this isn't the first time and it won't be the last time once a generation that's liberate the economy cut taxes and you think that's what we're saying you're saying it's misguided i think it's stale i don't thing. this is a solution and i don't think the democrats where there is a solution about spending more money. com impact all these programs they always

want all these programs and the republicans are always one or barry bush most of the war. as far as what does work i asked mr philips and he said i don't know if there is anything at this point so. sorry not a more positive note to end on but lots of nuggets there of good thought from kevin phillips former republican strategist author of seven hundred seventy five. you know what time it is time for word of the day when we break down a term or concept for our smart viewer but maybe not the financial expert i have a penny here from one nine hundred seventy one you'll find out why i'm keeping this baby i'm not going to spend it in a moment because given our conversation about money and coinage with kevin phillips

we touched on it the word of the day is gresham's law so what exactly is it according to a vested pedia it is the following a monetary principle stating that bad money drives out good money but it's a bit more complicated that bad versus good because what does that even mean so let's take a look at what it means if a new coin is issued and a legal authority such as a government artificially overvalues this new money says this is good for x. amount and undervalues another then as more and more of this new currency enters the system people actually take their old undervalued coins and pull them out of circulation. so my nine hundred seventy one penny on what i want to keep in here is why one recent example is when the composition of the penny changed in one thousand nine hundred two so the pay was five percent copper and five percent zinc so here is the composition back in one thousand nine hundred two then it was changed though they flipped it around two point five percent copper and ninety seven point five percent zinc and now the value of the older pennies my nine hundred seventy one

penny counts is well over two cents which is why we see things like this. works in pennies by the time the money clients storing huge sharks of inquiries from. now i do want to tell you i'm sorry to disappoint you but in two thousand and six the u.s. mint did pass a rule that banned melting coins due to rising metal prices and it's illegal to transport more than five hundred pennies out of the country as well try getting those thirty s a anyway but in two thousand and seven the mint issued a press release stating why there is concern they said that speculators could remove pennies and nickels from circulation and sell them as scrap for profit so there you have it in action but here is an older example of gresham's law in the seventy's an eighteenth century great britain was on a silver standard but when the master of the mint sir isaac newton there is a fine looking fellow he established

a new mint ratio of silver to gold which overvalued gold and undervalued silver and you can imagine what happened as i explained what happens in this law this is over began to disappear and gold flowed into the country now gresham's law can be applied not just to money but to more than that to perhaps politics and forms of capitalism as well where the cream never rises to the top in fact it goes towards the lowest common denominator but that's where some slots are where the day. ok let's wrap up with loose change dimitri coziness let's talk about central bankers it's your favorite topic at all they're my favorite people there so alan greenspan very famous former one spoke out on whether

a painless solution can be found to avoiding the fiscal cliff ever do sing us long term deficits take a lesson the presumption i'm going to have a problem with. so he said it's fantasy that there is going to need to be economic pain in reducing long term deficit i agree with him on that i'm glad he's going to be on the talking and i'm glad he's out saying things like this where they become mr realism where you become mr whalen you left office yeah he was no longer i don't know it official . you know alan greenspan has gotten off the hook like there's one person that's walked away you know when the financial crisis happened like he got a little bit of flack but that's it you know he hasn't gotten and still of there are a lot of people out there that say you know you could have you didn't know what industry should be or whether they were too hard too low i'm just i think there's one guy

that's gotten away with more like bush did a lot of bush will a lot too right i know i think that this i think i'm i think it's unfortunate that the fiscal cliff has become such a din of coverage because i think major points are lost and it's interesting one that i want to highlight that is worth noting so steve king our guest our frequent guest was actually on the hill yesterday for a congressional briefing with members of congress who brought him in to do that and he was talking about how based on historical precedent what you could see with the fiscal cliff in terms of cuts dimitry to the public sector are not so much. the impact of those public sector cuts but the impact on the private sector that may begin to leveraging once the government starts cutting what a shock yeah this is shocking news if you guys don't know this but i know you're not watching the show i mean. yes this is true this is actually one hundred percent accurate ok there is it back private liability yes yes but what i think is

interesting is because it's a republican talking point that businesses are holding off on spending because of uncertainty because of what's going to happen with spending but yet steve can i think many would would would characterize a lot of the ideas as more of a lefty economist so there you have they're saying the same thing in the middle not meeting in the middle saying the exact same thing but i don't mischaracterize anybody here so let's move on because we just have a minute and i'm not going to play a clip i just want to address that deutsche bank is being probed by the f.c.c. for hiding till billion dollars in derivatives lost in a way they say this is old news one of the interesting points the wall street journal made is that they were a bank that did not take state aid during the crisis when i said doesn't this show that the ability of banks to muddle through despite these losses you said that's not true and that's why it was bogus because i do remember i haven't had a chance to check those but they were top may be second or third on the list total for. also if owner counter parties are illiquid or insolvent or

a majority or and then they're getting bailed out also then that's also a bailout for you so if you're part of a interconnected system where which is generally over leveraged even if you yourself are a good player you're still in big trouble but but also the parquet. it was in that it was the it was the idea that the government was going to solve the problem but i have to stop because we're out of time but i hope i can offer you a penny for your thoughts i'm going to do me any good for some time and i suppose that not only having time for thank you for watching be sure to come back tomorrow in the meantime you can follow me on twitter at lauren lyster watches on you tube or hulu check in on our you because tube. as i said you can watch the full seven hundred seventy five view on their web exclusive and have a great night. download

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