you so much for being on the show we're happy to have you here. or are you 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 in a few months on the debt ceiling and on those spending cuts that they pushed off in terms of the sequester ration 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. people .

were going to get something in the range maybe a little more. is that. i think that. the problem among. your lot. all. right. a lot of. what the law maker is 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 even we're talking about prescriptions 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 there's 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 the policy prescriptions so how so like explain that and also you know where does reality fit in. you know the one and i think the sort of the. economics that we have you know that you have this movie. made up of really good who are fresh who are who they call out in the mall and it's basically the guys that are in chicago the first one guy when he bought

a saltwater guys were that. was all the. number of the two schools really dominate the entire field of economics not even their paragon visibly physically outside of the higher economic fashion. and i think that the problem with the fire is that. so much of their discussion is based 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 the. salt water guys and the more you know the name you pay. for the similarity to the school that they all start with. i mean that you know the marchers always.

focus on. the treasury and spend more money you implement some sort of. help me pond work do i 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 to do a lot of my work is. a lot of the what we're trying to do with. 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. away from our agenda stuff look this is modern world work with a monetary system. this is sort of core to the role of the party but we're not really. ok we think that monetary policy will power

we're just we're saying ok you know the thing. is a business model or our business or dunkin. is more broke rather hair 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 version every idea that doesn't necessarily gel with what's going on. yes i think the biggest. actually for more of the current economic model is a bank. that your focus all or. they really don't. think is in their economic model for the most part it's far.

broader work brought this the most along banking system because the banking. being credited. is the primary form of money just. its beauty supply. hebrew or god. called make money by creating long and they do this who are are without a government. with all. our moms and the law with a lot of modern economics that you just have no with that all this core boss who signed on is in the human body. in the grass. grows more or. understand how to serve. and. we need to serve them because it's the old our also exactly sensibly

performing our show our shore and when that circulatory system isn't performing well the fed 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 could hear you 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 cueing 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. how to get it to contain straightforward businesses or individuals are or what not but what do you think then really is going on with killing. the weird sort of entity because the primary purpose but actually really for a while. actually go back to the way that it was.

actually being brought into one market what we call inner bank markets now and they think we really are all part of the blue without a profit from the way that we are that are paid you know i buy. if i go out and buy a new car and i think that you know the more. things that tend to america the bank. all work at the same bank. for the sort of the. profit. that in the hundreds with the column a lot of who's. going to be involved in the last five years is the. south bank market and they were exactly. on the.

moment with them not injected into action we had any impact on policy and. i think. that's why you. you probably knew that monica. we're far more who you meet if you. are in the mob or. we. are you know. are in. wrong who are who are you making. and then you are. right we're going. to call our current we're going to call for her. and what's more he or her. margin. in the world you need is promoting you know the sort of.

which are. more negative. and i get 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 lends 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 kind of projecting new tax revenue from the fiscal cliff deal paid for taken gas do not google it will tell you after the break and put the fiscal cliff deal in context plus more with our gas call and growth first or closing market numbers.

wealthy british style. that's not on the time. markets why not come to. find out what's really happening to the global economy with max cause or for a no holds barred look at the global financial headlines tune in to kaiser report

on. the russia would be soon which brightened if you knew more about someone from fast impressions. his friends start totty dot com. and. you. just. should. soon look cool.

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 will 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 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 fact that the fed is in accurate with its predictions it is basing its guidance on the let's ask our guest colin rose because we're talking all about the monetary system and how it really works in the role of

banks 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 i know the party goes back over probably about. understanding really the core of the modern. understanding modern banking and well are you going back. mom was it was good the very first of the. we think. if you look back and look at my work i think that something like. that our banking system and our private sector is the core misunderstanding of the way that we intervene and not more. important quantitative even what they're really doing is they're swapping fresh revile. if the people obviously are saying that one by one make you own they don't do so they don't deserve. this and they do it based

on our mission and if you look at what we hear in the responses. or reserve actually doesn't seem to the tower vision of the bank at all so it integrates more reserves rather make more in both of them a. and thirty seconds but i go 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 prediction. 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 guy running right now the more organic in the world. bank or my more academic. very little real world. who really hearing them work or programs in the world.

has great power 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 photos do and i think that by. brown why that policy. to be backdrop drop so 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 angelo 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 we'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 the 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 well oh it's pay what were 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 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 dimitri. 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 price 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 we are not built to go there 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 proud 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 when you said that warming lobel warming when you are one thing and sandy is these cows you know the the proverbial butterfly like the cow or whatever these cows are being like alice 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 lighter 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 cases cost expected to rise remember we had a drought this really you know impacted 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 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 mix of. how do you remember why i know i'm going to memorize it and i was still in a different gear here so take a long time to get from second or first of 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 and nine supposed ability of there being too much austerity at 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 cliffs earnings cliff 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 austerity protest blah blah blah and paying their fair share what's that even mean and this one of the wild card for me if you really mean or arguing i don't think it's a policy debate policy is just a normal word in the dictionary and i it's become a great thing where the makes me vom want to vomit all over myself because you've heard that guys are going to be all time like we have a justice policy group tweak this policy so maybe the word know would be better like bedwetting he doesn't have any policy tool you are worth is this thing that we are with the policy makers i only want this method i don't want no more policy no more policy i don't want policy i just want markets get some markets and here we are our prices are right our prices i'm going to go as i drive and i thank you so

much for watching be sure to come back tomorrow until then have a great night. we speak your language as i think about the war not a new. one use programs and documentaries and spanish what matters to you. a little tune in to bangalore stories. you. all teach spanish find out more visit to other tito it's cold.

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