mexico to blow your neighbors it off well that's ok because it's a generic copy no no sane person would allow drug producers to have no liability for their product but that's just my opinion. good afternoon and welcome to prime interest i'm perry and boring big wish let's get to today's headline. i don't understand gold yes that's what our beloved fed chairman actually told congress today maybe that's why jury wants three hundred tons of it back that would be the goal of the fed is holding on its behalf we have just one word for you finance minister sure you won't tungsten but don't worry chairman bernanke he assured the s. and p. five hundred know it all time highs that the monetary q.e. stimulus will continue until the economy can stand on its own feet such

anthropomorphization is quite quaint for an economy tradition isn't it we devote the likes of bernanke you can talk about the mortgage jubilee with economist stephen king later in the show and jamie dimon can't seem to find its share of that isn't at the hot seat j.p. morgan is about to shell out a few one hundred million and a settlement with the federal energy regulatory commission that would be for allegedly manipulating energy markets in california and iran style barclays already settled for four hundred thirty five million dollars and a similar settlement for j.p. morgan in what amounts to well just one sixtieth of its twenty six billion dollars in revenues reported last friday no word yet on how much it actually profited from allegedly bilking americans finally subprime is back the consumer financial protection bureau just strengthen mortgage underwriting standards which we don't fund fall under the new rules don't worry that's because the guy who helped write the rules at the c.f.p. . he just went private and he started

a company that will service the very market his old regulatory body now excludes and yes even providing an interest only financing because that worked out so well in two thousand and eight you can't make this stuff up breaks down the boom bust cycle later in the show. and here's what's on your ryan interest. when it comes to economic textbooks and economic schools of thought we hear a lot about kinsey ism but there are actually many more flavors available in the economic marketplace earlier i spoke with professor steve king author of the

bunking economics and i started out by asking him what he describes as the different economic religions. i'll start with the dominant one which is called neo classical and that school of thought includes people who in the media would be cold kind and want to paul krugman and at the other extreme they'd be cold what is for turn fresh water economists. as opposed to salt water a lot crude and they are also on a across the globe i stop from the same basic idea of how the economy operates and how people behave in the economy and the simply have different nuances of want to strangle the other when they call themselves kinds ian these are people have been told kinds as he was interpreted by polls samuelson and there was such a reaction by the aca lots of kinds to samuelson's but as far as complete distortions of kinds that another group broke away completely in the call themselves post kinds again and i buy some souls much more on the original works the kinds did and the sea had upon uncertainty as neoclassical which is the thought

thought the largest group which is a protest group that goes back to kinds talking about uncertainty and being out of equilibrium and then is an austrian school of thought which comes out of people. mazas and so on. and right and wrong and they are actually close in since the theory of value to the new classical holes but they're closer in terms of how they talk about instability and capitalism and disequilibrium and the behavior of finance to the post kind so there's a quite a quite a mess there and a very very hard to get reconciliation across that the austrians they they talk a lot about the ordinal value of various things that ordinal value preferences and the marginal in the marginal person how does that fit into the kinsey and world or the post keynesian well well that's quite consistent because the new across the poles and the austrians both believe that people are out there as utility maximov so there's and the firms are out there as profit maximizes and we have to work from

the individual level up to understand the economy and that's how they think about it the post kinds against aren't really. i have a coherent theory of value like that but in fundamentally the science is objective fact as in the economy cost of production determine processes profit you take the whole idea that you can maximize the same as being naive you which are which doesn't take account of uncertainty about the future and you you can't maximise what you've done and therefore you have to behave in the face of uncertainty and therefore you'll take rules of. current conditions and so on and you'll go with the hood so that is much more an idea of being able to follow ensuring you'll how and how you slot into society in the neoclassical and the austrian view we're supposed kinds of much more lock it aside it's an uncertain world out there and people go in group behavior much more socially class all right in how they think they will behave and people behave in the face of fundamental uncertainty about the future so

they will extrapolate they want they won't be behaving behave sensibly given what they know but what matters most is what they've done let's talk about the role of banks it seems that they are excluded in a lot of these models and this is something that you talk a lot of yeah this is always will you do the point which would you would think the crazy people would be the ones who say you can analyze capitalism without including banks state money if you're right and the classical they dominate the profession so the standard theory of the bank has to the crude ones to crimes and so on and why back in samuel's and as well said you can model capitalism as if there are no banks no did and money and we all do bottom and we're saying that i. you know what if you're analyzing interesting little fictional world but it's not the real world so you must include banks state money in the way model of the economy and when you do that of course that what banks to has dramatic effect upon how the economy albright's and that's what i fundamentally analyze what we actually have a chart here of yours and it is a u.s. private debt to g.d.p.

ratio you know has five years in private debt reached record highs starting with this graph in one thousand twenties so are you. well expecting to see a private debt deal leveraging what would trigger this. i'm just working with richard in the in the governor woods foundation right now to reveal all of those figures because we found them actually including some bank that i shouldn't include in the profit at this we're going to be changing that child has some point but yes there is we have got to a level of debt in terms of the private sector which are probably three times the level which i think is sustainable in the long run so we're going to see a deal a bridging which is roughly equivalent to one year's shared a pay driven out of the economy but there can be periods where it will go back into borrowing money again and one reason we're actually seeing a bit of a boost to the economy right now is people really were trying to clean businesses are borrowing money again so does this have anything to do with policy i think the fed policy is encourage people back into debt again i mean for fundamentally don't realize this but a major reason why the economy's recovered to some it's very very monitor great

growth is that by all the stimulus that the gov the states pumped in it slowed down the road to private sector day labor during and then and carriage people back into bed to buy shares and bought property and so on and that's actually giving a debt finance boost to the economy that is making things better than i would be without the debt finance boost but of course we're getting back into the assignments tangible territory again yes and what do you think the trigger event will be if any that causes this actually to leverage is that a crisis of cons for confidence in the u.s. dollar is it in europe is a china it could be because the real goal of the whole of external thing but can also be the internal one that. because when you're borrowing money and you are spending additional borrowed money is stimulating the economy but at some point people start to worry about the difference between their income and the level of that they've got and so if you get over locked in so people to take on more debt then that can cause a downturn and that itself can happen simply out of things like that as it did during the property bubble people borrowing money to buy houses and lots of people

losing money on that tried they only managed to get out of their cars they could refinance as a camera gave a vehicle cherubs almost so. good ones once you get a full training that right of growth of how to process that can trigger people to stop losing money and then the the borrowing the acceleration of borrowing which is necessary to keep it going on slows down and so simple to slow down the right of growth of the change and it can be enough to trigger a downturn and that's what happened back in two thousand and again in two thousand and six with the housing market it took to two thousand and eight before the right of change of debt went from free rausing to fall down and then when that happened that's when the downturn could right and especially we saw with the fed in two thousand and four two thousand and five keeping interest rates really low record almost record low at the time one percent for over a year and now we're almost five years into zero interest rate policy what effect where can we go from here is the fed stuck in a perpetual cycle well because the fed want to which i think they should have done they should have actually got in there and rescued the debt is not the creditors

try to keep the banks alive that the lousy dead rather than getting the debt is out of a debt i should never have been a toss to in the first place and so they remain just thinking i can do it by increasing the reserves of the of the banks and by not directing money to main street rather than wall street we're going to continue falling back into this crossers and they don't only way that they would just by inflating asset process that was a deliberate policy yes and they have them and we see rising stock market prices we actually have a graph here it's the ratio of margin debt on the new york stock in to g.d.p. as well as the dow jones industrial average and you might recognize this. one. because you could even go back to the one hundred twenty s. and it was a similar story this only good as i think this goes back to the forty's or fifty's but it's the same story exact the margin debt drops the level of stock prices and it's a positive feedback loop if you if you see the stock market willing to tack on modern day it to gamble on it because you tack on the modern day to leverage up the asset

process but the positive feedback loops just like a sound. where somebody puts the mark too close to the speaker what happens is goes when and then a bright and that's what we see happening in the roses in the folds of the positive feedback between the level of leverage and the level of asset process it's all about the liquidity it's all about leverage and unfortunately we have let the banks get away with dramatically excessive levels of leverage which works for a while and then causes a collapse and that's why why the amount of capital of society what is the right way to run a couple is the audience trying to banks and how do we do that from a regulatory person i don't think regulators can do it i think regulate is too slow moving to lock to get seduced by the banks of a thomas and they happened with the regulators and since the great depression what i'd prefer to do is to set up rules that a quarter of them about the maximum amount of leverage that a bank for a particular type of purchase so i have out of one thing

a cold pill stands for property income limited leverage over. from and that is that rather than banks being lending supposedly on the income of the bodies for a property the maximum they can lend is also controlled. between the income of the property itself and the amount of money so i give you a preview right now you're not competing over some property insurer in washington somewhere and the property of. fifty thousand dollars a year and ranch that's irrelevant to us and you and i will fight over it by getting trying to get highly for with the same income and one of us would win with the one about the high level of leverage from a bank which makes us want hard leverage what i want to do is change of the side the banks can only end up to a maximum of sight ten times the rental income of the property so their property on fifty thousand dollars a year most either of us could borrow is five million dollars and then if you want to get them all the knowledge of what you go to do a sizeable money. but that's that's what i want to do all i want to stop the

positive back between the leverage and asset process and you can do a similar thing on share markets as well. steve cain this has been fascinating thank you so much for joining me you're welcome. coming up harry and breaks down the boom bust cycles so pour yourself a tall glass of animal spirits then i do all steve keen on an ancient tradition with a new twist called the mortgage jubilee. i doubt very seriously that obama is sincere when he says snowden should come home and stand trial. to speak to language. programs and documentaries in arabic it's all here on all t.v. reporting from the will talks about six of the c.o.r.p. interviews intriguing story for you. in troy

arabic to find out more visit arabic don't call. right to see. first street. and i think picture. on our reporter's twitter. instagram. to be in the know. on. the. senator's warning mccain mccain well in king recently entered the twenty first

century glass steagall act to rebuild at the wall between commercial and. smith in banking this bill would reinstate regulations that were repealed in one thousand nine hundred nine that some have finger 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 a fifty nine feet ensuring you're going to have savings accounts and checking account 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 the 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 stunning blow interest rates and is perpetuated by the 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 era 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 of fueling speculative behaviors and the bubble grows then 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 spearing 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. a period of growth these are the business cycles the boom and bust periods and the economy 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 refer facts 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 all in both securities firms and car show 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 vice cycle now let's get to today's daily to all.

three of you joining me for the dual is steve keen author of economics thank you for joining me here welcome our first topic you were in a little bit of a dual 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 christmas supposed to be there as well so we had to exchange papers and my pipe said the christmas publish a paper originally called 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 are reducing their debt levels process fell even faster and it got out of control because income fell faster than did and the huge process and that was his explanation minsky develop it further to say that capitalism has an inherent instability with its financial system and i build

a mathematical model of that ok but we also saw in the twenty's the federal reserve . interest rates pretty low and we saw some would argue especially the austrian camp that it was the federal reserve that blew the bubble does minsky have a place outside in a non fed yeah i mean you did 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. could in the idea hundreds every ten twenty years so this is its description of capitalism with or without a government sector and point if you what the government does is provide did provide spending when there's a downturn that wouldn't 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 it 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 not to greenspan when it's gone astronomical on on the institutional moral hazard but moral hazard it was just in banking because banks profit by creating debt and if they can persuade us to borrow borrow money. into the mississippi scheme or anything like that long before you can talk about clearing houses for banks right they'll do it and that's what the naive view is of people like you know the austrians at one extreme you yeah that the other side it's all the fold the government sector without the government everybody gets that nostalgia section of supply and demand and nothing goes wrong 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. double book entry keeping. double the books yeah ok let's move on to another topic yeah i have ok you're talking about the jubilee can you explain what this is for our viewers historically in michael hudson is the expert on this of course as you interviewed earlier if you go back. on that they had a. they realize that dead tended to grow as exponentially a compound where as agricultural productivity rose and then flattened out and with a bicycle you. could call this the right to take all the graphs showing exponential did. more draws of productivity and then bang they cut the date back to zero again so every fifty years that abolish old 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 to 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 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 of the capacity so what they could do is transfer out that giving money to the banks which is what's going on the quantitative easing they could do what i know a whole scheme is now calling quantitative easing for the public that i first called aaa and was a kind of that was what tarp was supposed to be for in the yeah place yeah it was a hell that's how it more good news because if you if you bought if you gave 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 debt you get a cash injection comp and sightsavers for the fact the need to have bought off the banks gets reduced in value so scientists don't lose what you actually basically doing is re setting the system to have more money and listed it created money

because we a lot of thought to much debt created money to be made by. banks but doesn't this just in general a 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 explicit out of control how much banks going to lend how do commercial that's again come back to mind is the property income limited leverage for real estate. is that the share market or controlling margin debt to make dividends rather than by some share prices you have to force the banks to limit their lending to the income earning capacity of whatever spangler who can still be in charge of forcing these banks and this is they're not just part enough to do this the judge is the best because a simple little rule says you can't lend all intent on the rental income of property any more than that you bought 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 being not

a bad idea you have to have to make it sustainable there's some level and i'm afraid. it's 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 on about you might think it's. 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 us on facebook at facebook dot com slash prime interest you can follow steve keen that profile steve kane and you can follow me at 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 at prime interest for the grant we began. at the great bend and of great light of congress the goldilocks chairman himself couldn't wrap his beard around the gold brick stuff that holds how ever and don't tell fannie and freddie sub prime is back what it is and this time the leverage will be televised speaking of the leverage of a special thanks to it stephen cain for helping us with the balkan decades of suspect economic taxonomy paul thanks for joining us today and make sure you come back tomorrow from everyone at prime interest i'm harry i'm boring i have a great. oh . music is our job the army our destiny these soldiers don't know

what real arms look like but it didn't take them a single shots to conquer the world. china and korea try to imitate them america and europe cry bravo absolutely amazing amazing. meanwhile back in russia military artists are losing their grip on the audiences. the young people especially soldiers they seem to me to differently from. the russian musical army has been fighting for eighty five years now will it stay in tune with the times and win over the younger audience is up to date or has the time come to give up the fight and defeat. on r t.

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told you my language as well but i will only react to situations i have read the reports to the pollution and no i will leave them to the state department to comment on your latter point i come on to say that if mr k.l.a. car is on the docket no god there. are no more weasel words. when you made a direct question me prepared for a change when you throw a punch be ready for a bad. freedom of speech and down to freedom to question. british. market why not. find out what's really happening to the global economy in.

a little while freedom of. the russian opposition is released with travel restrictions before his appeal is heard all of this just a day off. israel's. blockade effectively cutting off settlements built on palestinian land from any sort of european union funding. thousands of supporters of the deposed president mohamed morsy square up to the egyptian army which shows no signs of backing down. on the simmering tension around george zimmerman.