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there i marinated this is boom bust and these are the stories that we're tracking for you today. now first up and headed for one of the few economists who could actually claim to have predicted the crisis joined me earlier today from our london studios to talk sovereign debt and international finance you will want to miss it's a great interview plus could the fed be pulling back again on its current seventy five billion dollar month of bond buying program i'll let you know coming right up and finally in which u.s. cities are you most likely to achieve the american dream harrison i will tell you today's big deal it's all coming up and it all starts right now.

leading our headlines today the federal reserve announced it's on track to trim its seventy five billion dollar a month bond buying program for a second time in six weeks a reduction to the sixty five billion dollars a month stimulus down ten billion dollars from its current level could be announced at the january fed meeting on the twenty eighth of january which will be the last meeting for outgoing chairman ben bernanke now mr bernanke who suggested december news conference that officials were inclined to continue cutting purchases in ten billion dollar increment so long as the economy keeps strengthening. elsewhere the international monetary fund has raised its global growth forecast the

i.m.f. raised its forecast for global growth this year as expansions in the u.s. and u.k. accelerate and advanced economies to maintain monetary accommodations in the. or to strengthen the recovery the report says the global economy will grow fruit point seven percent this year u.s. g.d.p. will expand it two point eight percent and the u.k. will increase two point four percent now while the i.m.f. raised its outlook for advanced nations they also said downside risks remain including financial market volatility in emerging markets. and finally goldman sachs has quietly been moving thousands of jobs from pricey places like new york and london to cheaper locales like salt lake city utah and apparently the cost cutting measures they're working now one former salt lake city employee recalled visits from senior executives touring the offices in salt lake there were filled with awkward banter about the mormon religion along with an emphasis on how important the office was because of how cheap it is for goldman now the migration

of jobs to lower cost cutting centers has created some tension between goldman employees in new york and salt lake city who get paid different amounts for very similar jobs now new hires in salt lake cost about thirty percent less on average than employees in the same role in new york and the bank senior executives are pleased with how their experiment in salt lake city is working out so far so they say they'd like to build it up even further. well there you have it as always we'll be tracking these stories and keeping you posted on all the latest. our next guest and pettifor is a world renowned economist whose book the first coming world debt crisis was published in two thousand and six now just one year before we had the worst financial crisis in three quarters of

a century plus she's one of the few economists who can claim to have genuinely genuinely predicted the crisis now she has a new book out called just money how society. break the despotic power of finance and she joined me earlier today from our london studio to talk about the global economy here's how it went it wasn't difficult really i had been working on third world debt i'd been working in africa latin america and parts of southeast asia and . of course i was in southeast asia during the one nine hundred eighty nine hundred ninety eight financial crisis there and i was worrying about the sovereign deaths of the countries in africa and enough in america but when i looked up from my desk so to speak at the debts private and public of both. the european but also the united states i realized that actually the debt crisis of the poor countries was tiny compared to the threat that was posed by the growth in

particular in private in the anglo american economies and i could see that this was not sustainable absolutely. now can you tell us what impact has economic liberalization and the restructuring of the world's financial architecture had on private and public indebtedness. well if you look at the period nine hundred forty five until one thousand nine hundred seventy one when president nixon you knew actually. dismantled the britain would system without consulting his partners by the way. there was no sir no single financial crisis. of any significance in the world the period of extraordinary financial stability and indeed a period of high rates of growth but with the. dismantling of the bretton woods system which would actually oblige countries to manage their balance

of payments their balances if you like their international balances both financial and trade balances and had also imposed some kind of regulation over the banking system the private banking in the financial system restraints on the movement of capital across borders but also restraints on the creation of credit. and particular credit aimed at speculative activity before the one nine hundred seventy s. most credit was aimed if you like in the new american economies a productive activity leaves restraints were lifted in the after one nine hundred seventy one and increasingly after that in both the united states but also in britain in particular and in other countries tied into the anger american coming economies it became a debt in credit creation if you like became more and more liberalized aware is in the one thirty nine hundred sixty s. you had struggled hard to get a loan you had to prove that you could generate income for the repayment of the

loan after the nine hundred seventy s. in the one nine hundred eighty s. and of course that exploded in the one nine hundred ninety s. you could listen to a voice at the end of a telephone and get a loan and then we saw the climax of that when lending was made to what is known as subprime borrowers. who were the most profitable because the rates of interest on those loans were the highest but also because they were poor they were the most exposed borrowers and it's when they were unable to repay at those very high rates of interest that the whole edifice of debt came down because of course it was all linked now australian professor steve keen argues that means stream economics doesn't take money banks or debt seriously enough when modeling the economy do you agree with them. i do completely agree with the dominant economic orthodoxy which is taught in all of our universities to the

exclusion of other economic theories and thinks of money as a commodity thinks of it as something that can be scarce and something that can be managed by i suppose the forces of supply and demand but because money in the. advanced western economy economies. originate as credit in the banking system. it is far from being a commodity it is actually a system built on a social construct. if you like and social relationships based on trust. and as such it can be created if you like out of thin air so these two very divergent views of what money is have informed economics but the dominant view is that money is like a commodity like gold or silver or copper and as such it's in limited supply you have to build up savings before you can you can spend under that basically under

those theories was under the keynesian theory came to an understanding of money which is actually goes back to jordan law. back to you know sixteen ninety four when the bank of england was founded as a banking system can create credit which can in turn initiate economic activity which can generate income to repay the debt and if that system is stable in equitably and searches speak then the creation of credit is entirely a good thing for economic activity if it's allowed to be wasted or gambled on speculative activities then that system big you know falls into disick librium if you like. now what about the social contract issues surrounding money and debt now that the debt collapse that has occurred how do we deal with those issues when there are debts to be repaired which appear to be unplayable.

yes i mean the point is we're not in a terrible mess we liberalise the financial system we allowed if you like the finance sector to run amok and we're now in a frightful mess and the very high levels of private debt and growing levels of public debt now this three ways to deal with debt you can either pay it down by getting employment getting a job making profits and generate income to pay it down or you can write it off. that's the other thing that can be done you could go through a bankruptcy process unfortunately that cannot apply to to governments but it applies to the private commercial sector and go through a bankruptcy process and write off the debt thirdly the debt can be inflated away central banks and private banks can generate inflation because they both of them both sectors print if you like money print money and they can create too much

credit tasting too few goods and services and that will create inflation and that will get rid of debt as well so those are the three ways of dealing with it unfortunately our policymakers a simply ignoring the debt pretending that it's going to go away while at the same time incomes affording there are no processes for right tool for restructuring the debt the private debt of the private sector in particular of the private household sector and inflation is falling across the euro zone certainly also here in britain and decreasing increase across the world so rather than writing off the debt three inflation we're actually increasing the value of the debt by these deflationary pressures. time now for a quick break but when we return more for my interview with dr ann pettifor plus in today's big deal over harrison in our talk economic upward mobility here in america and we're blessed to find it you won't want to miss the moment but as we head to

a quick break now here's a look at some of that is. the numbered stated. goals . science technology innovation all the latest developments around russia we've got the huge earth covered.

i'm the president and a society. big corporation trying to convince that it can do. the bad writing all that long all about my. family like for a politician writing the laws and regulations. coming. here just to pledge. today. that.

welcome back we're going to do now with more from my interview with dr for and i asked her about the thesis of her new book just money here's what she had was that . the point of the book is just like to draw out the political economy of money our understanding of money that is originates as credit that it is something that you don't have to accumulate over time before you can spend that it's something like your credit card if you think of your credit card there is no money in the bank when you go into a shop to spend on your credit card but when you spend on your credit card what there is is a relationship between you and the retailer and the retailer in the bank and between you and the bank and that and the relationship is based on a contract that you've signed in which you promise to repay the money that you've spent on your credit card over a specific period of time and it's

a certain rate of interest and with that you gain purchasing power and by gaining purchasing power by being able to spend on your credit card you stimulate economic activity that retailer sells a good and that stimulates him perhaps to create more goods you then take your credit card and you put it back in your pocket in other words money isn't the thing for which we engage in a transaction it's a money by which we we transact and this fundamental idea has enormous political economy implications which is what my book is about first started means they need. never be a shortage of money if that's the way we've created that need never be a shortage of money of course we have to manage that money creation so that it use it wisely but there need never be a shortage we never need to say we haven't got enough savings in the bank we can't invest in climate change a mediation that need never happen secondly if that's how money is created then

actually it's effectively effortless activity. it is based on a judgment about whether or not you can be trusted to repay your loans and therefore the rate of interest on that money can be and needs to be necessarily low and that again makes for both economic sustainability but also for environmentally to logical sustainability that's the ceases of my book that there is a there are very important political economy implications of the way in which money is created in our society and unfortunately there's enormous misunderstanding about it and confusion and most economists don't understand money and don't have a proper foundation in monetary theory so this is led to the complete muddle in the creation of too much debt and debt that's wasted and spent on speculation which in turn can make some people very very rich but is enormously destabilizing of an

economy ok now given what you're telling us how would you address the debt issue in the euro zone specifically. well there's no doubt in my mind that it's unsustainable. it can be managed in several ways the recognition i think that the private sector led crazy money to for example borrowers in greece including the government and not the private sector might have to take some losses on that crazy borrowing. if you think of macy's in new york i remember there was a time in two thousand. when macy's went bust. what happened then was there was a chapter eleven process creditors were told you lent to macy's you should have been assessed better whether or not it was able to repay macy's was told you're going to have to restructure you going to do something about the business because you can't

repay these debts. some of the debts going to have to be run all right written off but what the authorities tried to do more than anything else was get macy's back into business and back actively becoming economically active because ultimately that's have the interest of her creditors as well of society as a whole and sure enough that's what the chapter eleven process did for macy's in new york there is no such process for the sovereign governments of the euro zone instead they have the debt burden is just growing the people are being drained of their resources both their public sector resources but also their own incomes in a desperate effort to restructure the economies to repay the debt but it's constantly the policies of applied are shrinking those economies and making it harder for them to repay their debts and so we're getting divergence in the euro zone where the southern countries that have debts that are not competitive are

dealing with a currency that's overvalued in their terms and where their debts are rising in real terms and then we have a northern zone that's benefiting enormously from this. from from the way in which the euro zone is managed and so we have political and economic divergence which is the opposite of what the architects of the euro zone wished for so much more must be done to restructure the debt to these countries and to acknowledge that it is the framework of the euro zone that has created this crisis not the profit of good borrowers of the year of the southern seven countries and. interesting and concerning the very concept that you have there but how does the concept of peak oil play into your view of the debt crisis. well the point is my my view of the way in which financial and monetary system

operates is that we encourage excessive consumption if money is easy to get hold of if credit can just be poured like oil on the economy then of course we all go shopping and the more consumption the more greenhouse gas emissions the more being house gas emissions the more the use of the these are the result of the use of fossil fuels the more consumption is linked to higher fossil fuel you use this in turn is is this is linked to climate change so for me there is a direct link there's a direct sorry about that there's a direct link to. the dissent librium if you like iran unstable financial system which generates too much credit for speculative activity and too much credit for consumption and the rise in emissions and climate change and we need to manage and to break that link if we can. and thank you so much for your time in your patience

we really appreciate your insight and hope to have you back on the show. that was them credit for economist and author of just money now it's time for today's big deal. mr edward harrison joins me now to talk america the land of opportunity at least for some time now a recent study from the equality of opportunity project it was called the equality of opportunity for object has mapped out the ten best and the ten worst cities to give me the ten best and worst cities in the us for economic mobility now researchers from from harvard and berkeley used millions of anonymous earnings records to measure the chances that someone born into the bottom fifth of income earners reaches the top of it now the results show that ten of the top cities for

economic mobility are all located in either the west or northeast with four in california alone now here are some of the cities where the legendary american dream of economic mobility is most achievable check this out number one salt lake city now this is interesting to me and i want to talk about this because as we just mentioned in the headlines salt lake city is also the city which goldman sachs has chosen to open its cost of city hall but what do you think about this. well i think it's interesting because you know some of the other cities are a lot bigger than salt lake city that are in the in the top but i think it's more about innovation in those cases but it's all the cities not just about you know the innovation but also about lifestyle you know the compactness of the city the walkability of the city the fact that it's not a huge city and one of the big things i think about salt lake is that it's very close to the mountains you have like a park city which is really close by so you can do lots of different things yeah it's a great quality bush and john are our line producer knows a lot about and he says there's laid out like a grid kind of

a grid like you mentioned walkability but i want to get to some of the other top five now number two is san jose california number three san francisco. oh number four seattle washington and number five san diego california now ed given california's financial troubles what do you think it says about the states that three of the top five best cities for economic upward mobility are all located there that seems odd to me you know you would know i think it goes back to what i was saying about technology. and that sort of thing when you're thinking about you know the whole go west young man i mean it's still there you want to go to silicon valley you want to go to seattle you want to go to the shores of california in general rule and that's where a lot of the innovation in america is being done and still today right but if you think about san francisco it's also one of the costliest cities again erica so it's you know you think for economic mobility that seems difficult or at least poses a problem you don't think so you know i think that underneath the data you'd like

to take a look at that because there's been you know all the so-called gentrification the huge increase in wealth from silicon valley people moving to san francisco to work in silicon valley and driving up the prices a lot of people are against the right now it makes a lot of sense now all of the top cities they have strong measurements of social capital and tend to be walkable like we mentioned and they also have a culture of mass transit and like america now the most now and most cities in the top ten are hubs of like you said technology social entrepreneurship entrepreneurship say that we're three times us and you think culture now ed what do you think about the strong measure of mass transit what does that say about the city because i personally think i am a huge fan of cities with good mass transit i think that it speaks to the dignity in which a city builds its mass transit system just getting to work and says a lot about the place that you know would certainly about the american value system i think in the fifty's you know after we built the highways and so forth everyone

was moving to the west because of the car culture but in these cities they have great mass transit and that means that people are thinking of. because they're thinking about ways to get around to have a livable sort of location where you can work and do all the things that you want to do but i could talk about traffic patterns for hours to see how much they drive me bonkers now hubs for attack entrepreneurship and you've culture that's interesting to me as well but doesn't this kind of have it says something about an intrinsic level of hustle to each one of the cities you know like the fact that they are you have to be an entrepreneur you have to be able to get up and get going it is a self-starter if you will know you will you know the reason i really like this story is because we hear all the doom and gloom and so forth about the us and even the global economy but it's seeing is that there's still some vibrancy there you know the whole you would talk about the youth culture it's about innovation technology about just livability of these cities and i think that's

a great story it truly is now i want to quickly for a number six through ten on we have a list right here for you pittsburgh a little bit cold but we've got steeler sacramento manchester new hampshire very cold boston also crowded and my fave new york new york area they're also kind of a good to see that's all for now but you can see all segments featured in today's show on you tube at youtube dot com slash boom bust our t. we also love hearing from you so please send us a note on facebook facebook dot com slash boom bust our team you can also tweet us at aaron aid at edward m. age from all of us here boom bust thank you for watching have a great snowy night by.

wealthy british. right let's go to. market why not. come to. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines cons a report. that was a new alert animation scripts scare me a little. there is breaking news tonight and they are continuing to follow the breaking news in. the alexander family cry tears

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