so the fiscal cliff has been averted kind of by a deal that pushes more wrangling into this by 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. nothing new here 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 stillmore dealmaking to come in 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 your take away on this deal. are. older so basically. basically what really been the problem here is the whole. people standing on. the downside was almost one hundred billion dollars. we're going to get something in the range maybe

a little more. it's. probably my. dollar you know we're not talking about. all. right. a lot of. what that lawmaker is and what the deal did manage to do is help lawmakers avert headlines today of markets plunged honor their 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 we're talking about prescription for the economy we hear plenty of ideas about what it takes to stimulate the economy or help the economy 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 they 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 explain that and also you know where is reality fit in. and i think the sort of the. economics that we're the big we have in the you know that you have. been that made up of really good to be with the french you are who they call it in the fall was cool and it's basically the guys that are in chicago the first one guy when he bought a saltwater guy sure that. was all the. number of the schools

really dominate the entire field of economics not even their paragon their degree he basically outside of the higher economic. and i think that the problem with the school fire is that. so 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 about energy more than they were trying to focus on monetary policy and we saw so our guys tend to be more fiscal policy you know the name you know. 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 pond work to do with my thinking was that both would make its policy agenda if you will the real world guard was a real work. when i started to do with a lot of my work is. a lot of the funds what we're trying to do with the market really what we call and now. we're starting from. we're starting from understanding the. not of the monetary system and really getting into the muck and ball out of. our system works and we're staying away from 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 but we're not really. ok we think that monetary policy by cisco

policy without were dispersed and ok you know the thing is the news of course has a business model for our work because that work is done so if more of those programs are air not 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 the biggest thing that actually for most of the current economic model is the banking system you have to be that you know both a small or small. part it really don't. think it's in their economic model for the most part as far as. broader work with the focus is mostly young bank and the because the banking. being credited by my mother. is the

primary form of money the new mother just part of. its beauty supply. hebrew or god. five day call that may create money by creating law and they do this who are are without any government. to have any more of our mom. and the law with a lot of modern economics that they just have no food with that all this pork. from the boss who signed on this in the human body. in the grass. grows more or. understand how to search for. the new the search because it's a low dollar also exactly. for. the market short 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 get 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 and 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 . actually. for a while. actually go back to the way that it was. a big draw. one. day. and they

really are all. the way that we all. live by. the day. all work. with. the cardinal law. the one who. will be involved in the last five years is the fact that it. moves to the market and they rate the action actually. on the. day. the moment with them is not injected into action we have any impact on policy.

i think. that's why. you need. a monitor. parmalee good. i think. our. system this is. not. our old money invested so yes incident was wrong how long. were you making. then you how. were your dates. are what. calls for asset bubble or what's more. or. marginal. and the who you need. you know the sort of.

credit which are. more. important than 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 calling rush 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 guests calling for a chill first or closing market numbers.

i was. was. in the middle of russia's north far away from civilization and history our helicopter treat from the nearest village. these stolen family have been living here for a long time in tents made of reindeer skins. so obviously. lodging runs in a single nail and then it's there also grew up in the but left it at the age of six and never returned they now live in the city in apartment building but still room

and their regions was. i planted here is a dancing teacher. i. was. still his dances he tells us stories about his motherland. thanks laws in aruba to now has a one thousand strong reindeer herd when the enemy only saw the light in and mosques around bruges gathered turns and moved to another posture they travel hundreds of kilometers in winter women and children for them. but the two families have less of a chance to come across each other they belong to different worlds even though there's sometimes a similar. 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 as 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 forecasts of growth versus actual will 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 accurate 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 look the part of those bungalow responsible for your understanding really the core of the modern. understanding modern banking and well are you going back in the late model was that it was going to be very much of the problem are places where 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 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 deserve it. and they do it based on our mission and if you look at what we do you really through small t. 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 that that call and i'm sorry to have 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 prediction. 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 organic in the world. bank or my more academic. was very little real world. who really hearing them work in order to promote the

world. was pretty powerful with ability to acclimate. that is huge and i think that the record sort of. what are the various work predicting the future of the for those of you and i think the broader. issue brown why is that policy hard not. to be that broccoli dropped so it 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 con rush founder of our camp a natural 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 to 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 us 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 the cvo 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 dimitri. lest 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 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. 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 to so there are so we're subsidizing human farts plus plus cows apparently fart like crazy and 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 these for capturing devices that they put on the backs of cows and plug them in and then the methane gas goes into the sump somehow it's basically it's a global war so we're not certain that i want to lowball warming but you are one thing and sandy is these cows you know the the proverbial butterfly like the cow in iowa or wherever these cows would be california happy cows you're from foreign 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

especially 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 on products that will not be saved from price increases in two thousand and thirteen now this is a list of twelve to just give you a couple groceries a food cost expected to rise remember we had a drought this really you know. back to 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. that x. 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 warren i want to go i want to go to one of those saved we are sure that it was saved milk right now i'm sure it was the next. how do you remember it and why i know i'm not going to memorize it and i was still in a different gear here so did a long time to get from so i can refer to the fifth year ok ok you nailed it the first time around. two thousand and twelve we had so many phrases that we were over and over again. 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 gary cliff fiscal cliff patent 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 in 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 protest blah blah blah and paying their fair share what is that even mean and this one of the wild card from a green or arguing i don't think it's a literary policy domestic policy is just a normal word in the dictionary and i know it's become a great thing where the makes revolve want to vomit all over myself while because you're going to guys are going to be able to like we have a justice policy group tweak this policy so maybe it's a single word no it would be better like bedwetting he doesn't have any policy tool use our word is the scotch thing i'm sick of your receipts policy makers i only want this method i don't want loads on foreign policy no more policy i don't want policy i just want markets get some markets in here yeah your prices are right 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. download

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