so the fiscal cliff has been averted kind of by a deal that pushes more wrangling into this future 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 q 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. happy 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. are. older so basically. really been a problem here the whole. we're

going to get in the rain maybe a little more. it's. i think that. probably. you're not. all. right. a lot of. what the lawmakers and what the deal did manage to do is help lawmakers avert headlines today of markets plunged under 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 able we're talking about prescription for the economy we hear plenty of ideas about what it takes to stimulate the economy our 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 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. 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 is. made up of

really good to be cool professional are cool they call it in the mall and it's basically the guys that are in chicago the first one guy when he bought the saltwater guys where there. was all the. numbers and the two schools really dominate the field of economics not even their paramount is that we basically outside of higher economic blushing. and i think that the problem with the 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 both on monetary policy and we saw so our guys tend to be more you know the name you pay. for the similarity between the two schools is that they all start with. i

mean that you know the marchers always focus on. the pond. focus on. the treasury spend more money you implement some sort of. help me find work do my thing was that they both would make its policy agenda if you will the real world guard with the real work so when i started to do with a lot of my work. a lot of the funds. were trying to do. what we call and now. we're starting from. we're starting from a risk here. not of the monetary system and really getting the ball out of. our system works. our agenda thought look this is modern world

work with a monetary system. this is sort of the core institutional role of the party but we're not really. ok we think that monetary policy will follow we're just present ok you know the thing. is our business works and. so if more of those programs are here right 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 but i think the biggest thing that actually for the current economic model. you have to be clung to that you know focus all or. the first part they really don't who says i'm

in their economic model for the most part so far you know my brother works with focuses mostly on the banking system because the banking the sort i mean credited by my mother. is the primary form of money new money just bring it primarily by its beauty supply drive five super bowl. five day call bank make create money by creating long and they do this in a large part without a government. to have any more phenomenal our mom. and the law with a lot of modern economics today that we just have no focus it all on this core boss who you find honest and human. proving the grass the circle that we're. growing more for.

i think we need a certain report because it's over with our also exactly. performing our show our shore and when that 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 and federal federal reserve stimulus or queuing 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 her or we're going to 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. are all. the way that we all are you know i buy. the argument that. the banks. all work. with. the cardinal law of. the wall. well. mark. actually.

the. moment that some. injected it seems to actually have any impact on policy. i think. that's why. you probably. were the firemen who should we be i think it. would be. the modern system really to be surprised. when the productive use of the credit are in fact. wrong along the crisis and they can buy them for research and development and then you how unproductive. they are. as we call

that bubble and well we're more. for the use them but going on margin of our boxes . and the proof you need is promoting you know the sort of use of credit which i think in the law more negative impact on the economy than anything i get there and when we get back we're going to get a break but i want to talk more about the ways in which the monetary system is misunderstood and perhaps lends itself to wrong predictions that we've seen in the past year or so as some are calling rush and then it all. any day's worth of u.s. spending can the projected new tax revenue from the physical cliff deal pay for take a gas do not google it will tell you after the break and put the fiscal cliff deal in contact plus more with our guests call in roach first your closing market numbers.

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 that everything you thought you knew you don't know i'm charged welcome to the big picture.

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a nation free accreditation three times for charges free. range month free. free. time free. download free broadcast quality video for your media projects and free video dot com. 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 projection 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

a story goes that headline inflation would hit time 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 missed 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 grow ok which would be more funny and less concerning to us if it weren't for the recent guidance that the fed is

the same 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 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 i'm actually more. important

quasi to be. swapping treasury bonds. with the people. understanding that one by one make won't 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 hear in the response to the bond or reserve actually doesn't seem to 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 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 you know the problem is that you know a lot of these guys. have actually very little actual thinking background so now you've got a buyer running right now the more bank in the world. bank or my more academic.

very little real world. who really hearing them work in order to progress in the world. has great power with ability to acclimate you. that is huge and i think that the record sort of. the in the what are the very work. in the future of the proposal by you and i think the broader. issue brown why that policy have. to be backdrop drop 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 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. 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 wessel 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 see below and o.m.b. based on obama's budget finally this six hundred billion dollars if you 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 quarter 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 are 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 it i'm. sorry it's ridiculous i rail against subsidies the subsidies in the farms to go back at least as far as before right part of the great

depression when the farm industry and agriculture was hit hard before the crash 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 are lactose intolerant that we are not built to so we're subsidizing human farts plus plus cows apparently fart like crazy as he reports that there's a huge concern that could actually be from cows methane could actually be contributing goble warming so they're creating these for capturing devices that they put on the backs of cows and plug them in and then that methane gas goes and somehow it's basically it's a threat to global warming so we just said that warming lobel warming when you're when they're sending these cows you know the proverbial butterfly to the cow or

wherever these cows are being callous california happy cows are from barton cows though not having 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 if there's a lot of the wider standing army behind a catalogue of the cows 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 to just give you a couple grocery costs expected to rise remember we had a drought this really you know in fact if. 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. fed ex announced that consumers can expect a five percent hike 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 particular i'm. worried about the one that you're about to tell us about more and i want to talk about that i want to go to one of those say we are sure that it was saved milk right now i'm sure it was the next. how do you remember why i know i'm not going to memorize it and i was still in a different gear you're still getting 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 all right let's go to the node. 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 club's 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 austerity protest blah blah blah and paying their fair share what is that even mean and this one of the wild card for me were arguing i don't think it's really hurry policy debate policy is just a normal word in the dictionary and i know it's become a great thing where the makes me vom want to vomit all over myself why because you very very 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 really doesn't have any policy tool use our word is the scotch thing i'm sick of your receipt 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 you know our prices are 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. something

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in the end of the street. if you. are hurried and i. wish. to bomb if so could. we. just finish the monument and beat our head. down on our economy a little. fifth.