a resolution of my own i would like the it's one thousand twitter followers by the end of this year two thousand and thirteen so follow me on twitter at mag and underscore lopez have a great night. wealthy british study done. from time to. market why not. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines tune in to conjure reports . good afternoon welcome to capital account i'm lauren lyster here in washington d.c.

these are your headlines for wednesday january second two thousand and thirteen happy new year it's two thousand and thirteen we're back let's reflect on some of the economic predictions that never came to be last year so our thinking can progress pragmatic capitalist colin roche is here to explain why some folks were wrong about inflation as an example and what the fed's overly optimistic past predictions mean for its future guidance and we have heard about it. the senate strikes a deal on the fiscal cliff but not before we the fish we fall off the cliff just two hundred so just. your target meaning it is now the house that. you are dear smart viewers i'm sure already know about the deal congress reached then that it leaves lawmakers wrangling again in a couple months over the debt ceiling and the spending cuts that they delayed but when it comes to the reported six hundred billion dollars over ten years in new

revenue this deal is said to raise never mind the new deficit that creates what does that kind of money by any way we have a reality check plus why is the government involved in keeping the price of milk was no part of the fiscal cliff deal involved of burning what some have dubbed a dairy cliff we'll discuss and wall wrong cliffs we have five phrases we'd like to retire this year that's the loose change let's get to today's capital account. so the fiscal cliff has been averted kind of by a deal that pushes more wrangling into this you buy a few months so i'll save you the play by play of the twenty four hour cable network news that we are hearing and will continue to hear for at least the next

few months let's move on to something actually interesting though for the most part it is a new year time to reflect on how we can be better in two thousand and thirteen when it comes to the way we think about the economy money capitalism whew we just take an assessment of where we are heading into this new year what we maybe got wrong last year so colin rusch is here to help us with that he's founder of or camp a natural group and author of a blog you may know pragmatic capitalist or capitalism excuse me so first thank you so much for being on the shelf we're happy to have you here. the new year so let's just a little bit touch on the fiscal cliff and then we will move right past it we didn't go off it exactly still more deal making to come in a few months on the debt ceiling and on those spending cuts that they pushed off in terms of the sequence duration that was supposed to go through we do have some tax

hikes we do have some permanent bush tax cuts i don't know what's your take away on this deal. our. soldiers so basically. are basically what really been the problem here is the whole . people standing on. the downside was almost. we're going to get something in the range maybe a little more. is that. i think. the problem among. your lot. all.

right. a lot of. what the lawmakers what the deal did manage to do is help lawmakers avert headlines today of markets plunge honor those points on lack of fiscal cliff deal but as you said the actual meeting is really nothing to write home about so let's talk about something more interesting any time these kind of discussions come about about the fiscal cliff or or whatever it may be even we're talking about prescriptions for the economy we hear plenty of ideas about what it takes to stimulate the economy or help the economy and improve whether it's that the government needs to spend to make up for what the consumer isn't spending or whether it's the government know we need to cut spending to shore up the budget and get rid of some of these deficits or the magnitude of them or that you need tax cuts to stimulate the economy now all of these are driven by economics theory by economists and their models but you argue

that they're kind of a core problem which is that you can't really separate policy prescriptions from ideology of whoever that economist is or that school of thought is that giving a policy prescription so how so like x.-plane that's and also you know where is reality fit in. you know the one and i think the sort of the. economic that we're the big we have in the you know that you have to do it in a made up of really depends who you are who they call it in the skull was cool and it's basically the guys that are in chicago the first one guy when he bought the saltwater guys were there long guys all the. numbers at least two schools really dominate the entire field of economics not even their paragon their degree. outside of the higher economic. and i think that the problem with the fire is that the way that they saw much of their discussion is basically around.

around the political ideology for the most part the chicago guys tend to be a little bit smaller energy more than they were both on monetary policy and we saw so our guys tend to be more you know the name you know for the similarity between the two schools is that they all start with sort of the policy i mean that you know the marchers always. focus on. the treasury spend more money you are implementing some sort of. help me find work to do we're trying to think it was that both would make its policy agenda if you will the real world guard was the real work so

when i started do with a lot of my work is. a lot of the funk what we're trying to do with this market really what we call and now. we're starting from. we're starting from a reform to. design of the monetary system and really getting into the muck and ball out of. our system works. our eugenist say look this is not a world work with a monetary system was designed this is sort of the core institutional role of the party we're not really. ok we think that monetary policy by policy without were dispersed and ok you know the thing is the music or the business model or our good work is done so if more of those programs are care what your focus on the descriptive rather than what we hear were so many schools of thought which are both descriptive but also

prescriptive which you're saying you can't really then separate the ideology from that so then tell us your reality what are people missing about the monetary system and their origin every idea that doesn't necessarily gel with what's going on yes i think that the biggest thing that actually for most of the current economic model is a bank. that you know both the small or. big they really don't. think of this in their economic model for the most part it's part of you know. broader work with focusing mostly on the banking system because the banking the sort i mean credited by like love. is the primary form of money you must just. by its beauty supply. super bowl by. five day one call that may create money by creating long and they do this who are

are without a government. having more fun. at the law with a lot of modern economics that you just have no with that all this core. from the bottom. side on this in the human body. in the grass. grows more or. understand how to surf. and. we need to search because it's a road our also exact in the sense we. show our shore and when the circulatory system isn't performing well the fat comes then and is i don't know what you would compare the fed to the doctor that then supports the circulatory system gets the blood pumping or so we're led to believe so you know what. i got here is that but i am but i'm sure it's very very very funny i'll let you fully

respond because what then is the role of something like federal federal reserve stimulus or q and what does that actually do because the idea is that that gets the money to the banking system which in theory should then lend the money out and get it to contain straight for businesses or individuals or or what not but what do you think then really is going on with killing for the weird sort of end of the farmer for actually really for a while. actually go back to the way that it was. brought in one. day. and they really are all. about. the way that we all. live by.

the day. all work. with the hope. that. the cardinal law. who. will be involved in the last five years is the. who has the marketing they were exactly. who was on the. did. the moment with them not injected into actually have any impact on policy. i think you were wired you. knew. what you were. were farmers who you meet i think.

our. system this is. not. our old mine in boston so yes incident was wrong who were who are you making. and then you how the road warrior games. are. working because former asset bubble or what's more. or. marginal. and the who you need is promoting you know the sort of. credit which are in the long term more negative impact on the. area there and when we get back we're going to go to break but i want to talk more about the ways in which the monetary system is misunderstood as perhaps lend itself to wrong predictions that we've seen in the past year or so some more color and

then it also still ahead how many days worth of us spending can have projected new tax revenue from the fiscal cliff deal paid for take a guess do not google it will tell you after the break and put the fiscal cliff deal in context plus more with our gas calling chill first or closing market numbers. free studio time free. download free broadcast quality video for your media projects free media oh god r t v dot com you

. look. divine power in action activate this chakra it's. i am just so me it is we are under the control of those governing us if i were at the service of a space mafia i found on that date the magnetic fields of the sun will be folks tend to create the support that the stuff. after the second coming it will be a futile place it will receive its glory it will be a renewed world and it will be a beautiful place. full of the best. little stuff the

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welcome back so we're talking about monetary mechanics and this issue of monetary mechanics brings me to economic predictions that never came to be with the fed's unprecedented actions starting back in two thousand and eight and since we've had many a prediction for massive inflation one that our guest was writing about was a gentleman named robert murphy who made a bet in two thousand and nine is the story goes that headline inflation would hit ten percent by january of two thousand and thirteen that is now it hasn't done so here's just a look at the consumer price index for all urban consumers just for a little context so you can see that it's not anywhere near that mark and we don't need to single this guy out ok plenty of people thought this would happen i'm sure there were many of bets like this so what are these folks miss and what we're talking about missing predictions the fed has missed the mark on plenty of its

predictions ok here are the fed's forecast of growth versus actual grow ok which would be more funny and less concerning to us if it weren't for the recent guidance that the fed issued which included for example that the committee currently anticipates that it's exceptionally low range for the federal funds rate will be appropriate for at least as long as inflation is between one or between one and two years ahead is projected to be no more than a half a percentage point above the committee's two percent longer run goals so i don't know what could be the impact of the fact that the fed is in actor with its predictions it is basing its guidance on the let's ask our guest colin ross because we're talking all about the monetary system and how it really works in the role of bank so cool and with that first issue of inflation predictions predictions that we would have massive inflation by now what if people kind a miss. well the party goes back over probably about. understanding really the core of the modern. understanding modern banking and well are you going

back is. it was going to be very mindful of the. will we think. if you look back and look at. that something like. that out of the banking system in our private sector it is the core misunderstanding of the way that the intervention not actually more. important quantitative even what they're really doing is they're swapping treasury bonds. with the people obviously i mean all of them understand that one by one make you own they don't do so they don't do surveys on their condition they do it based on our mission and if you look at what we hear in the response to the bond or reserve actually doesn't change the congregation of the bank at all so they're

afraid more sir rather make more in both of them a loan and thirty back than that going i'm sorry i got thirty seconds before we go i just really quickly want to ask if we should be concerned about ben bernanke and his colleagues at the fed wrong predictions. yeah well i think you know the problem is that you know a lot of these guys. have very little actual thinking background so now you've got a guy running right now the more bank in the world. bank or more. someone who's got very little real world. who really hearing them work in order to progress in the world. has great power with ability to acclimate. that is huge and i think that the record sort of. in this what are the very work. in the future of the for both you and i think the broader. issue brown

why that policy. would be bad for iraq. doesn't bode well for the future but we're happy that you are to explain what people should know looking for i appreciate it congress founder of our campaign anshul group and he is a pragmatic capitalist. all right it's time for a reality check i think it's fair to say more political theater lies ahead when it comes to the fiscal cliff deal but let's just quickly touch on it ok when it comes to the tax hikes that were passed by congress as part of this deal those are set to

raise six hundred billion dollars in new revenue over the next ten years that's according to the wall street journal but just put into perspective what does six hundred billion dollars over ten years actually bob because it's important to know that right so let's put it in a little perspective one year's additional revenue from this six hundred billion dollars that's sixty billion could cover the u.s. as current expenses for how long oh a temporary five billion dollars that is less than six days that is five point seven days according to tim phillips of townhall dot com you've crunched the numbers or the additional revenue if you started saving it for about five years so half way through that ten year projection you could pay for the f. thirty five fighter plane program which will clock in it three hundred thirty one billion dollars according to forbes citing defense department in two thousand and twelve dollars so house way through you can get to that number of one plane program morning we have not adjusted these numbers for inflation and based on expectations

of inflation but hey these are estimates to begin with so let's just keep having some fun so at the end of ten years if you saved all of that money this six hundred billion dollars in additional revenue you're really good you saved it you didn't spend it you could pay for one year of defense spending after all that saving one year. at least as far as we can tell from projections that in two thousand and twenty two defense spending will be six hundred eighteen billion dollars that's under obama's budget estimated by the c b o and the office of budget management and after ten years saving all that dough it will oh it's pay for the federal spending on the net interest on america's debt which is estimated to be seven hundred forty three billion dollars and twenty twenty two again this is according to cvo and o.m.b. based on obama's budget finally this six hundred billion dollars if you a save that all could pay less than one sixth of the four trillion dollar deficits this c.b.s. says this deal is also likely to create because it makes most bush tax cuts

permanent so much for curbing our national debt just a quick reality check for you. all right let's wrap up at least change dimitry. let's we get from cliff let's talk about one more because there was another clip that lawmakers worried about this week the dairy cliff. one provision of the measure passed by the senate avoids the so-called dairy cliff it extends portions of an expired farm bill through september so that will prevent milk price increases without the legislation mentioned this to

you yesterday milk prices were expected to double up to eight dollars. why is the government involved in subsidizing the price of milk milk is not even good for you we're the only mammals that drink our own milk this is not a good thing to be involved in not that the government should be involved in the prices of anything you mean we're the only mammals that drink other mammals milk yes that's what i meant yeah. it's ridiculous. we rail against subsidies for all the subsidies in the farm and to go back at least as far as before part of the great depression when the farm industry and agriculture was hit hard before the crash of twenty nine and this is a disaster and i'll tell you what they were very clear about it the methane hot air balloon bubble because the reality is that these subsidies for milk i've seen reports of sixty percent ok of humans cannot digest milk or lactose intolerance we are not built to so they're so we're subsidizing human farts plus plus cows

apparently fart like crazy i have seen reports that that there's a huge concern that could actually be methane could actually be contributed global warming so they're creating the sport capturing devices that they put on the backs of cows and plug them in and then that methane gas goes into the sump somehow it's basically it's regrettable what should we have said that i mean lobal warming when you are one thing and sandy is these cows you know the the proverbial butterfly and it's like the cow in iowa or wherever these cows are being like california happy cows your from right fourteen cows though not well i'll tell you when you're talking about the methane bubble that is one bubble you would really not want to be on the wrong side of when it pops specially there's a lot of the lighter standing and. below it all up ok let's move along from the fart jokes ok so milk may be saved but according to the web site deal news here are products that will not be saved from price increases in two thousand and thirteen now this is a list of twelve i just gave you

a couple. ok food cost expected to rise remember we had a drought this really you know impact of food prices another one copper prices rise which could impact the price of beer can drink wine or drink milk instead of college according to the college board advocacy and policy center tuitions will increase because i guess uncle sam can't subsidize in-state institutions as much and shipping u.p.s. fedex announced that consumers can expect to five percent hikes and shipping costs this year so milk is saved but these are not the copper calculation was based on the fact that now it can be speculative with like the j.p. morgan e.t.f. i don't we were particularly worried about any of these particularly we're going to if you're worried about the one that you're about to tell us about more and i want to go i want to go to when i was saved we are sure that it was saved milk right now i'm sure it was the mix of. how do you remember why i know i'm not going to memorize it and i was still a different gear you're so good

a long time to get from second or first it's the fifth year ok it's ok you nailed it the first time around. two thousand and twelve we had so many phrases that we were over and over again. first the effects of the fiscal cliff so-called dairy cliff i don't want to use this phrase but kick the can down the road tax credits from from the stimulus in two thousand. there being too much austerity in the patriotic thing for them to do is to pay their fair share. so we have six phrases that we would really like to retire in two thousand and thirteen clips of any kind dairy cliff fiscal cliff earnings class no more kicking the can down the road over here that one more time i'm going to. jump off a cliff yes jump off a cliff with a can of my hand so it can't be kicked stimulus and we need it we don't need it blah blah blah austerity oh gosh austerity is austerity protests blah blah blah and

paying their fair share what is that even mean and this one of the wild card for me a green arguing i don't think it's a literary policy domestic policy is just a normal we're in the dictionary it's become a great thing where the make food vom want to vomit all over myself because you very very guys are going to be able to like we have a justice policy group tweak this policy so maybe. it would be better like bedwetting doesn't have any policy tool in our world is the scotch thing that. policy makers i only want this method i don't want. policy no more policy i don't want policy i just want markets get some markets in here we don't have prices out our prices i'm going to go so i thank you so much for watching be sure to come back tomorrow until then have a great night.