they wait substory. let's give this guy like you would smear that guy stead of working for the people to choose the mainstream media or working for each other dr wright was visited by. the dead rather.

hello there i'm marilyn aid this is boom bust and these are the stories we're tracking for you today. first up we're walking out on today's show pair yourself now if you've ever wondered about the financial ization of our global economy well then today's your lucky day we have a condom is thomas palley live in studio to discuss just this and bubbles are for a bath tubs or blowing i guess as you can see behind me or at least that's what some would have you believe when it comes to our current state of affairs of our economy here in the u.s. plane coming up and finally added harrison and i just got housing in today's big deal think the u.s. housing market is dangerously overheated well think again now let's get to the show .

today we're talking about or alleged bubbles one bubble you hear a lot of noise about lately is tech but is the tech bubble moniker really warranted today it's not the mania that we saw in the ninety's where you could put a dot com after pretty much any company name and praise whatever amount you wanted but having said that there are some similarities particularly in the sector of cloud computing reading printing and social media the valuations of many of these companies are thirty to fifty times trailing revenues that is historically excessive yes during the bubble of the ninety's companies were trading at two hundred times trailing revenues but still it's a disproportionate number basically what i'm trying to say is this ok for these companies to continue to trade at these levels. for now for now being the t word or

words if you will but they better grow really really really fast in order to keep up there you have it as always we'll be tracking this and keeping you posted on all the latest. now nearly a century ago the world was emerging from a horrific world war but the roaring twenties along with technological breakthroughs like radio and mass production of cars brought good times to the u.s. in particular now financial assets soared so it was also a great time to be rich as chronicled in f. scott fitzgerald's a memorable novel the great gatsby and now the movie as we all know but all of this came to a sudden halt with the great crash of one nine hundred twenty nine and after the great crash then came the great depression that's when john maynard keynes became

a household name and today as we face the twenty first century secular stagnation the same themes are back the financialization of economic the financialization of the economy income inequality and secular stagnation and yes keynes he's back to that name you're going to hear a lot lately here to talk about all of this and much much more is economist thomas poly author of the book from financial crisis to stagnation welcome to the show dr polly such a pleasure to have you here and great to have a resource like you on the show to first and foremost you know you often describe. you often hear it described as post post keynesian economics opposed to keynesian economics. and laypersons terms can you tell me the difference between post keynesian and keynesian right well we think it is keynesian at the coal in that it is is that the amount of economic activity we have depends on the amount of demand in the economy. so you're hearing that all the time people are looking to the

consumer consumption spending business to invest house houses being built that's the demand side of the economy if we don't get that out we don't get employment but the post piece is a twofold one is provisional economics sort of has a message that you get what you deserve the post kyneton say no what you get depends on the institutions where you have trade unions where they have labor laws where the corporations can move overseas that sort of thing emphasize things like power bargaining strength and the whole array of that sometimes it's very direct if you're in a union you bargain directly but if you are an individual worker can you find a job elsewhere how many vacancies are there that sort of affects what you can get so that's a very big difference the other point is in the financial system where you know when keynes was writing we were sort of still on the gold standard and so the financial system was very very restrained in the amount of money that could be produced it was tied to the quantity of gold we severed that link progressively

first in the thirty's then and then finally in the seventy's and we now have a what's called a fit money system which means that the production of money in the economy is much much more elastic and that's a big part about how we can why we have these bubbles and so on because we can really pump up asset purchasing power because there is now gold to be tied to the us as you know that's exactly right now what about the so-called new keynesians now like paul krugman most people would consider a quintessential keynesian economist is he right well that they pose a great difficulty for keynesians and for post kynges because they're not really keynesian what they've gone and done is occupy the label keynesian by calling themselves and you can see and it's been hard to understand here but if you go back to the 1930's there were two people that at cambridge cambridge u.k. this is came to on one side to be ideas of that became keynesianism it was a man called author. pigou. argument was that we had unemployment because of

frictions in the economy prices couldn't adjust wages was sticky imperfections in the market. that has become modern economics and that in fact is the position of the new came to him so they would say we've got a problem today because prices on adjusting because wages on adjusting for some talk about it something called the zero lower bound you may have referenced it doesn't interest rates can adjust so there's some stickiness in the economy that's completely but that's really nothing to do with keynes so we're in a difficult position you talk to the public and then they're being well i'm confused well because guess why someone has occupied the keynesian nest and is giving them non keynesian explanation is the big game as well. if maybe we should have a case against the keynesians for for violating brand and trademark law. oh yeah you know when you copyright this i'm sure you could i'm sure you could on some of these days. now if the economic crisis we hear about the.

moment now in reference to this kind of economic instability and that post keynesian economics high minsky wants detail can you briefly describe in layman's terms again if possible the minsky financial instability hypothesis what is that he was a great great thinker and an institutionally oriented thinker and he had a view of the world whereby the financial economy has a genetic propensity to instability because things start off stable and the arrangements are hunky dorey everyone's boring ok i'm going to be able to repay the interest and i'm going to be repay my principal then i begin to get a bit more psychologically confident until i take on slightly more risky financial positions i leverage up and so maybe now i can pay my interest bill but if i had to call it i couldn't pay the principal i'm way i'm hoping for some capital gains to put things off and they. it gets more bubblicious and then you get really unstable

and that's the ponzi moment and that's when the the system everyone is really buying assets not on the basis of what they're going to but on the hope that's going to someone else will pay more down the road is a bigger fool down the road now that process there's two different levels there's that cycle probably goes on every business cycle but then also below it things go on over a sort of a twenty to thirty year period where everyone gets sucked in we stored in the one hundred eighty s. and the one hundred ninety s. the regulators start as i o. well this is a perfect world after all we don't need the regulation in the more larry summers was a big player in this in the nineteen ninety s. so then the whole governance structure begins to get eroded and when that happens you put the two together the the normal. bubble boom of a business cycle plus the erosion of the structure could boom come two thousand and eight that's what we had and i mean it's kind of like permanent optimism if you will keep you keep betting on success and a future and it's not are as over are that's not herd behavior is

a lot of psychology that plays into that sort of confidence of self reinforcing exactly you know i want to talk about your book you wrote a book called the financialization financialization the economics of financial capital domination can you explain to us about nationalization is well financialization is a situation in which the financial sector increasingly comes to dominate the economy so you see it in a number of ways you see it more and more of the profit share instead of going to industry and producers of goods and services and it gets redirected via the financial sector you see that instead of profits things get converted into debt and more of the payments to capital get paid back in the form of interest and you see it in terms of the control over corporations who begin to take on the goals of wall street so rather than being long term players building a product building huge industries of the future they want to short term profits and you see that then in terms of the way that c.e.o.'s are compensated. stock options and so on they've got it but the only thing they're interested is pumping

up the share price rather than growing a company that's going to produce income and jobs long into the future so that's how financial education really plays to distort capitalism and that's a very important point because people need to realize that there are different types of capitalism and it's interesting that you bring that up because just based as i went on our sixty minutes and said that he you know every company thousand benchley and his his goal of his vision for amazon his company was to not let it go out of business that's all that he looks foreign and he was minus take a hit and if you look today he took a big hit do you think that this is while it's moral business is it good business. this is a very big point i mean i believe that capitalism is has a social purpose the social purpose is to make sure that we live well we're happy we have good incomes and so on and therefore you write the laws of capitalism so that it produces that outcome so yes i absolutely think that corporations have an

obligation to the society in the spirit in which they work and their full set of stakeholders which of course call. workers and consumers to not just their stock options not just. told us and not just their c.e.o.'s but no i want to go back to this as an economy becomes dominated by you know finance capital what kind of economic transformation builds in the society you know we're going to societal responsibilities now well one of the most important things is you have financial position you have a massive concentration of wealth and wealth is political consequences so you see this process and it becomes harder and harder to reform the system because the political not just the economic system is kept captured by the plutocrats and the wealthy but the political system is too and i would even say talking as an economist and where we were at the beginning you know we were talking about those new games into the world of ideas gets captured by the wealthy to the new kantians are in the big. those of supporting the system right there yeah that's there's that

so you can see it we have all three dimensions ideas politics and the economy financialization captures the mold on behalf of the rich dr polygraphs get a quick break please don't go anywhere so you don't go anywhere either out there in t.v. land because when we return more with economist dr thomas palley then in today's big deal at a harrison i will discuss housing is there a bubble there or not stick around to find out and as we head to a quick break here's a look at some of today's closing numbers at the bell come on back. as the media leave us so we leave to the. bush and to the play your part of the there's a good. news that no one is as good with the guests that you deserve answers from.

politics only on our team. i know c.n.n. the m.s.m. b.c. fox news have taken some not slightly but the fact is i admire their commitment to cover all sides of the story just in case one of them happens to be accurate. that was funny but it's close enough for the truth from the might think. it's because when full attention and the mainstream media work side by side with joe actually on here. and our teen years we have a different breed. ok because the news of the world just is not this funny i'm not laughing dammit i'm not god. i'm.

sure you guys stick to the jokes well handled it makes sense that i'm. back now with economist dr thomas kelly thank you so much for being here i want to continue our conversation that we were having before the break about the financial ization of the economy now the financialization of the economy is really an asset based economy dependent on bubbles to fuel growth that's kind of what we have learned through all this is that what we have here right now in the us well i think that yes the answer is yes what we've done we had a. crash a crisis. we didn't make any really fundamental reforms to the way that we organized the economy pay income distribution all those important things so instead we've been falling back to things we used fiscal policy to stabilize the economy

and stop the slump from continuing that's the period two thousand and nine to two thousand and ten two thousand and eleven and on top of that we then had been with the easy money policy which is really about inflating asset prices that's the name of the game to try and blow back in the bubble and they've partially succeeded but it's pretty hard to when the bubble has a big hole in it somewhere because people know what happened they know that this is not quite credible they have to really blow hard and i don't believe it's sustainable well i want to bring up japan and i know a lot of people draw the parallel but japan employment somewhere similar method for a long time not of the same degree but. that hasn't. it has it hasn't worked i mean that's the story about stagnation it doesn't mean you go you know you have one bubble and if you have a crisis it doesn't mean you have another crisis or you can have a long period of stagnation and guess what some economists have recently discovered that would you know my friend jamie gold is a great economist at texas he says

a friend of ours now whom i thought ok here's a great thing it's an idea the. not exist in economics until the right economist says it so we have to wait for paul krugman and there is some is five years off the stagnation had begun before we could have a conversation about stagnation and that's only just beginning by the way i think that'll be the conversation of the next couple of years i don't agree with that and there's been a lot of talk about the so-called secular stagnation because as you said you know former clinton and obama administration official larry summers he's been talking about you know big name nor has it do you think that secular stagnation is a result of this financial ised economy it seems so now there's an intimate connection mind you there are different theories of stagnation some people argue that it could be due to demographics and slowdown of population growth and retirement and so on another story i've heard it's about technology and the slowdown of technological innovation that's called bob gordon has talked about i

think it's a long history of that i don't think those are either of those are true the real problem is that we have weak good demand in this economy as a result of income distribution trends wealth distribution trends the forces of globalization and i think that that we've done nothing to address that and so therefore you've got to find another source of demand is talking about fiscal policy and government spending infrastructure i think that's great because we have a lot of needs where we need to repent for structure but we've got to get the other part talked about how are we going to fix the income distribution problem how we're going to fix the negative forces that globalization has on the wages and incomes of everybody so how much do we in the u.s. from this current growth model that we have. i would start with sort of things like we are talking about the minimum wage i would institutionalize it by the way the way you have a minimum wage and you tie it to the wages in the economy don't tie it to inflation you talk to wages in the economy so it keeps growing steadily in the future it

doesn't become a floor that's never raised again we need to change our labor laws we need to be able to let people people want unions and many many cases we. given the opportunity to join unions right now corporations can crush them by threatening to move jobs we need to address the problem trade deficit it's a massive sort of a hole in the economy which demond leaks out of so we're going to have to deal with the problem of the current image manipulation that goes into a trade arrangements trade or arrangement should be ensured some sort of balanced trade we want to be trading with partners that have good business practice and engage in fair economic practice so the whole. globalization question is up for grabs and that's the t p p why it's so bad it's about it's about institutionalizing everything that's bad that's been done in the last twenty years now goes totally global with p.p.p. and that's why it's such a dreadful awful idea and by the way all the polling data arrives in is repub republican voters hate it even more then democratic voters and so republicans have

a real obligation to make sure that none of their guides and women and men the congresswoman. abandon them because too often the republicans are the ones who are really bad on this democrats eighty percent good twenty percent bad republicans are about one hundred percent bad on this issue now speaking of multilateral trade agreements how do you feel and i think i can guess that how do you feel about fast tracking trade agreements well that's a terrible proposition because. you go to an up or down vote and that gives congress away from avoiding confronting the issues and having a debate about all the pieces of it which if they did it never be able to pass it but here they might just do the dirty and middle of the night vote and get it done right now are you concerned that the globalization has become a form of labor arbitrage if you will that big companies use in order to keep wages down absolutely labor and everything arbitrage you know. an idea that i call bodge economics and it comes back to it's

a great way to understand the global economy and you know the guy who really came up with the idea jack welch jack welch the nine hundred ninety s. was on a t.v. show had an interview i said what i really like would i like to have my factory it's on a barge and i could float them around from whatever country to whatever country wherever the cost so low it's not that labor is one cost to shore but you might want to avoid regulation costs you might want to void environmental protection costs you might want to take advantage of a devalued currency so you put your. factor in a budget you floated around and you can have a global race to the bottom in every dimension not just labor markets environmental regulation everything. this is jack welch's brilliant idea and that's what all this globalization is about it's about creating the environment for bodger economics and that's what we've got we've got to really pull back in that barge put an anchor on it and given today it's kind of making economies dependent on bubbles for growth now given what we're living in today the model well that's the net what do you do once you start to undermine income distribution you've got to find some way of

filling the demand gap that gets bigger and bigger and bigger and that's by the way what happened between one thousand nine hundred and two thousand and eight we took on board these ideas that we're going to flexible as a labor economy was going to make us all super super rich didn't it undercut the middle class it sent them on the way well they're not to extinction but really weakened their position and so how do we fill the demand gap well that's where wall street came in that's why we're. regulation to allow wall street to. the economy make people push up asset prices so they could use. it worked for twenty five years much i wrote a book in the united. well i think historians will see the two thousand and says something you know we were jobless recovery. but they managed to pull one more rabbit out of. the house. two thousand and eight but now it has expired and that's

the story behind stagnation income distribution which we hid for twenty years now right out in the open and everyone gets it but right now they're understanding it in terms of what they need to do is understand in terms of economics and. i have one final question for you and that's about technology every time there. is a technology. absolutely if you don't create new jobs as well then you're just going to be displacing jobs. but technology is a great thing it makes our lives better but it makes our lives. where people have protections and people have access to income if all just goes to one person and you have technological progress guess what you're going to have a really big problem so we need to get our income distribution right then we'll start to really get the benefits of technology as well as slowing down to people i wish we had more time we're going to have you back thank you so much it's been extremely informative that was economist and author dr thomas.

talk. another potential. now in the u.s. . the bureau of labor statistics has been keeping track of rental costs since at least one thousand nine hundred three now its index shows a steady rise of about three percent a year over this thirty year period now rental should track the inflation rate home prices should do the same and if price or price rises much of the end of price rises raises the price goes much above the rental rate families theoretically should begin to rent not buy their forgot their housing bubbles that become visible and can legitimately be called bubbles now when housing prices diverged

significantly from rental prices that's when called bubbles almost everyone understands that the two thousand and seven financial crisis was caused by the collapse of the housing bubble it turned out to mr harrison while it might not seem like it on the surface housing is one complicated asset of the economy are we on the verge of the next housing bubble today not at all because if you look at the numbers and i think what you'll see is that we had. to in the during the house the actual housing bubble but then we had a massive down to good example might be a place like phoenix phoenix with one hundred twenty seven percent and then it crashed you know prices were cut in half over a you know a decade a twelve or thirteen year period got up about forty four percent in nominal terms that's in fourteen years that we've seen prices go up that period and that tracks pretty much with what inflation has gone up i don't know what poll of these graphs that we have here one is showing nominal house prices from the one nine hundred

sixty s. to today for soon as we get those out there it is nominal for as the other is going to show the exact same thing only adjusted for inflation ed you've got to tell me what does this data tell us to go back and forth between those growth you'll see is that the one that has nominal house prices joes going from like you know twenty on a scale of twenty to one hundred sixty you know the one hundred being the spin out . and then if you adjusted for inflation then suddenly you have something more like eighty going up to you know like one twenty or so really what you're seeing there is a lot of the price inflation is really it's the effect of inflation you know you're tracking inflation i mean we are a little bit elevated now because the last year was really good but we're not ridiculously elevated we're not in what i would call a bubble period why do you think so many people are talking about it i think a lot of people are talking about because we have bubbles all the time just like thomas paley was saying is that we live in

a financial world and at some point in some time there's going to be a bubble somewhere because of all the excess liquidity sloshing around the fact that you know the financial sector is such an important part of our economy that's really what's leading to the financialization which leads to then the bubbles are there currently housing bubbles elsewhere in the world there are in fact many people point to specifically australia and canada and you know we talked to steve keen about australia but you know canada they went down a little bit as we did in two thousand and eight two thousand and nine but as we continued to go down they went back up and they have a ridiculous household debt to g.d.p. level and also a income to rent level so you know how much you can get from your house versus how much how much you're actually how much your income is versus how much the house cost and also how much you can get from the house versus you know how much rent you

can get and both of those are tracking in a very negative way and they're well above the means so if the economy turns down we should expect that house prices they're going to turn down as well see it and as always thank you you are filled with insights and we love hearing from you that's all for now but you can see all segments featured in today's show on you tube a you tube dot com slash boom bust our teeth we love hearing from you please drop us a line on facebook facebook dot com slash boom bust our t. you can also tweet us at. to n.h. aaron aid from all of us here boom bust thank you for watching see an x. time but. i'm the president and i'm a society i'm big corporation trying to convey to whom can.

i see the bank try to get all that all about money and i'm actually sick for a politician fighting the boss and with the tax rate. there is just too much. of a side. that. 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. alexander's family cry tears of joy at a breaking feather that they're having read arquette a court of law found alive there's

a story made for movies playing out in real life. jesse ventura is going off the grid we want you to join him he's opinionated of course outspoken american original bucking the political system and doing it in a bare knuckled no holds barred way yes he ventura has a lot of his mind and he's ready to un load it's all on this edition of politicking . politicking jesse ventura on larry king or a t.v. has a new show featuring the former governor jesse ventura the show is called off the grid and that's exactly what jesse is.