have fingered as the cause of the great recession senator warren was recently interviewed about this legislation and feel strongly that these regulations need to be put back in place. going to have insurance you're going to have savings accounts and checking accounts they really do have to be rolled off remember we have three years following the passage of quiet in which we had. a number of thank you know that whole. cycle from seven hundred ninety seven to nine hundred thirty three went away and. so let's break down the boom bust cycle that senator warner referenced the boom bust cycle as a time period characterized by sustained increases and several economic indicators followed by a sharp rapid contraction some schools also call this business cycle theory and there is debate among what spurs these peaks and troughs in the economy the austrian school of economics says the boom a stimulated by the federal reserve

a setting go interest rates and is perpetuated by federal reserve fractional reserve banking which allows banks to expand credit be on their own assets and customer funds this additional creation of cheap money encourages investments that would not look profitable otherwise these mal investments grow stimulating the bubble as prices and inflation rise eventually this expansion of credit over reaches the capacity of capital and labor and the economy and the bubble pops leading us into a recession economists dr mark four and wrote that during the housing bubble interest rates on thirty year conventional mortgages were at their lowest levels ever during the post gold standard when interest rates fall asset prices and real estate prices tend to rise and vice versa in other words the fed's low interest rate policy stimulated borrowing that was steered towards the housing market coupled with other government policies such as tax breaks and. government sponsored

credit corporations a bubble was created eventually the high prices couldn't be sustained and the bubble popped in two thousand and eight another side of the story is told by economists who believe that the boom bust cycle is mostly attributed to psychological factor is a subset of neoclassical economist claim that the boom is driven by overconfidence in the market as investor confidence increase is they take on riskier investments this leads to a collective consciousness among investors the fuelling speculative behaviors and the bubble grows in a critical event turns investors confidence sparking an economic downturn exaggerated by negative economic reports and media coverage the economy enters recession or depression the argument is that the housing bubble was driven by increased confidence in housing and the media brought speculative attention which encourages real estate to rise in the bubble started to inflate as investor confidence grew spurring asset price inflation and the housing markets with this

rise cannot go on forever investor confidence eventually dropped contagion caught on and brought the economy into a recession to get historical perspective let's take a look at a graph of u.s. g.d.p. the shaded areas represent economic recession and as you can see each recession is preceded by an area. of period of growth these are the business cycles the boom and bust periods and the economy all this graph only goes back to the one nine hundred seventy and fed responses to economic downturn since then have been to spur the expansion of money and credit in the economy but it has had marginally diminishing returns a fact we can see that each recovery never reaches the of what was before. the fed is currently injecting eighty five billion dollars a month into the economy but economic indicators portray an economy that is simply limping along. so getting back to the glass steagall bill some believe there should

be a divide between investment banks and commercial banks when this law was repealed in one thousand nine hundred nine and then they will holding companies to on both securities firms and herschel banks senator warren herself has stated that the repeal of glass steagall was not the proximate cause of the financial collapse leading to the bailouts however we might agree that it was the icing on the cake and that's how we break down the boom bust cycle now let's get to today's daily tool. thank you joining me for the duel is steve keen author of economics thank you for joining me here welcome our first topic you were in a little bit of a duel yourself with paul krugman would you care to enlighten us with you know what

is this all about all of began last year when i was speaking at the institute for new economic thinking conference and berlin christmas supposed to be there as well so we had to exchange papers and my pipe said that christmas publish a paper originally called the i mean ski couth theory of debt and i said we don't mean well then minsky was the guy gave us the first sure thing fischer talk about it called that is what caused the great depression he said it was too much debt and fall in process at the same time so people reducing their debt levels process fell even faster and it got out of control because income fell faster than debt and the huge process and that was his explanation minsky developed further to say that capitalism has an inherent instability with its financial system and i've built a mathematical model of that but we also saw in the twenty's the federal reserve kept interest rates pretty low and we saw some would argue especially the austrian that it was the federal reserve that blew the bubble does minsky have

a place outside in a non fed i mean they're not in center i'm working on the sets right now with the with the governors what foundation and what's called the dead economics program and we find the same cycles occurred in the idea of hundreds every ten to twenty years so this is a description of capitalism with or without a government sector in fact from point if you what the government does is provide did provide spending when there's a downturn that would enable corporations to pay their debts so it actually minimise the damage. it's worse than the idea in century without the government spending because then when you will fall into debt all there's nobody to pump you out of that again what we saw in the especially during the civil war we had the national banking acts and we saw a cause i federal reserve system or at least the prototypical central bank started and it was based on the buying of treasury debt and that was exchanged between banks is apostle and we also had moral hazard the government also build out a number of banks during these financial panic i would say what the federal reserve does it's simply institutionalize moral hazard in fractional reserve which already

existed certainly that i think the fed reserve has done a lot of that on the greenspan right now it's gone astronomical on on the institutional moral hazard the moral hazard always just in banking because banks profit by creating debt and that can persuade us to borrow borrow money by. buying into the mississippi scheme or anything like that long before you can talk about clearing houses for banks right i'll do it and that's what the naive view is of people you know the austrians at one extreme you yeah that the other side it's all the fault of the government sector without the government everybody gets that naso in the section of supply and demand and nothing goes wrong with that that works with that vision it's got some sort of sense not a lot but some sense in a production world banks that have surprised constraints of supply and demand banks create money by double entry bookkeeping so when they double book and keeping. double the books. ok let's move on to another topic and i have ok you're talking

about the jubilee can you explain what this is for your viewers historically in michael hutchence the expert on this of course as you interviewed earlier if you go back. that they had a. they realize that debt tended to grow as exponentially a compound whereas agricultural productivity rose and then flattened out and what they have basically is there's a market as i could call this the right to take all the graphs showing exponential did. there's more draws of productivity and then bang they cut it back to zero again so every fifty is notable schol day it was institutionalized in those societies we can't do that now because rather than money lenders lending money to peasants which was the problem back then we now have banks which is not only lent money to borrow was they've also sold that did to people who thought i was cyprus scramble the whole thing together so i want to unscramble that egg and reduce the level of profit dead but you can't do it just bob all of the dead how do you do

securitize the entire market what you have to do is buy the debt back off the public using the federal reserve capacity to create money and they certainly have the capacity to look at the capacity so what they could do is transfer out that giving money to the banks which is what's going on quantitative easing they could do what and hold is now calling quantitative easing for the public. aaa and was a good that was what tarp was supposed to be for in the yeah place yeah it was howard more good news because if you if you bought if you can get the money to the public i would give it on the condition that if you have debt you must pay your debt down no choice so if you're in debt you've got to pay your debt down but if you're not in did you get a cash injection compensated site as for the fact the need to have bought off the banks gets reduced in value so site is done to lose what you actually have basically doing is re setting the system to have more money and listed it created money because we a lot of thought too much debt created money to be made by the banks but doesn't this just in the in general more moral hazard in other words people understand that there's going to be this true believe in they'll just be and they'll just be more

likely to take on more debt in the future will hold that it will be a call also to control how much banks going to lend. that's again of ideas of the property income limited leverage for real estate. is that the share market or controlling margin debt to make dividends rather than based on share prices you have to force the banks to limit their lending to the income earning capacity of whatever spend went for who gets to be in charge of forcing these banks and. that's all right is there anyone who is part enough to do this the judges of this because the simple little rule says you can't. the rental income of property any more than that you ball spend six months in the klang on something like that a little bit arbitrary in other words these are thresholds that you're saying are important but why not go to eleven or twelve times or eight times ultimately being not a bad idea and you have to have to make it sustainable the some level and i'm afraid you're at some point bankers have to be sold no deal. they've been thought you go

to saying deal or no deal that's pushing further and push it further some point saying look we know what you guys are all about you might think it's arbitrary. ok i'm going to quote you on that arbitrary is not bad thank you steve keen for joining me if you want to wait on today's show be sure to like this on facebook at facebook dot com slash prime interest you can follow steve keen the profile steve keen and you can follow me that english p.r.i. thank you for joining me for today's daily duel you're welcome. and it was a revision as the day here of prime interest but we began with the great band and its great ally that congress the going to have itself couldn't wrap his beard

around the gold brick stuff that holds our and don't tell fannie and freddie sometimes back what it is and this time the leverage will be televised speaking of the leverage the special thanks to that stephen king for helping us the vulcan decades of suspect economic taxonomy well thanks for joining us today make sure you come back tomorrow from everyone out of interest i'm terry i'm boring i have a great run. limitation of free cretaceous free in-store charge of free. range and free. three stooges free. download free broadcast quality video for your media projects free media dog r t v

dot com. i've seen the per session of the cross many times it doesn't matter if there's snow a heat wave or hail stones for people keep on going i don't expect anything i just want i told myself i keep on going as long as my heart told me to that's all i want to at the moment my hand send so my cheese cd i'm carrying these sayings on my shoulder. do you want me to put a bandage shared no that's fine a lot of people were so exhausted they could barely walk their feet hurt and some of them fainted we will bring you back to it three two wanted to keep going i don't know what tomorrow will bring.

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russian anti-corruption blogger alexina vali could get a last minute reprieve a day after being sentenced to five years in jail for embarrassment the court is considering granting a temporary release pending and he's appealed you're looking at live pictures right now. and a life sentence looms for u.s. army private bradley manning after a judge uphold a charge that he ate of the enemy in leaking classified documents but washington faces an uphill struggle and its war on whistleblowers. and the e.u. puts a damper on israel's settlement expansion plans new cooperation guidelines make the occupied territories ineligible for future funding.