we've been anticipating this all week and it's now finally happened the european central bank has introduced a number of different measures aimed at stimulating the eurozone economy measures like negative interest rates and cheap long term loans to banks now these c.b. credits deposit rate for banks from zero to negative zero point one percent all in an effort to encourage banks to lend to households and businesses european policymakers are trying to counter the chance of deflation in the eurozone the negative deposit rate makes the e.c.b. the first major central bank to use a negative rate so it's pretty dramatic stuff now policymakers also lowered the

benchmark rate from zero point two five percent to zero point one five percent following the move the euro dropped to its lowest levels in four months e.c.b. president mario draghi was quoted by the wall street journal as saying quote are we finished question mark the answer is no period if we if need be within our mandate we aren't finished here now that's about as clear cut as you could possibly make it obviously more easy to follow and this is just a first step so here's the question is this move a good thing well my colleague edward harrison says no not at all now for one thing the negative deposit rate is a tax but he also wrote in a post on his blog credit write downs this morning quote the z.b. has been forced into this course of action by circumstance the policy stance in europe is backloaded austerity and internal devaluation is deflationary by design with fiscal forward his hands tied monetary policy is the only. game in town and

the mandate compels them to act because the u.c.b. wants to prevent a debt deflation and has been forced to act preemptively with prices falling near deflationary levels eurozone wide so bottom line the crisis in europe is not over not by a long shot. with the e.c.b. announcement thursday it seems like monetary policy is the only game in town the u.k. and japan are maintaining their quantitative easing programs and only the u.s. seems to be pulling back from these unconventional methods now the e.c.b. announcement is historic negative interest rates four hundred billion euros of a long term refinancing operation and halted sterilization of government bonds which the wall street journal says is effectively its own q.e. program so they're kind of just like you know us and japan now economist dr thomas

poly is here to discuss the e.c.b. is announcement as well as keynesianism in the context of the world monetary policy of domination i love that term now dr polly is the author of from financial crisis to stagnation welcome to the show again it's always a pleasure having you here dr polly now i want to first talk about macro economics here but before we get there first first i want to talk about you know that you see b. and what went on here now they lowered rates instituted negative deposit rate instead of credit operations to induce banks to lend to small businesses and households but here's my question can you walk us through what these steps are and what these measures mean for the euro well. the big news here was the negative posts are great but also sitting on a lot of excess reserves. we depositing them with central bank and have been picking up zero percent no they were small marginal penalty of one tenth of a point. my own view on that it's a i'm a little apprehensive about it there are some potential. side to this that i don't

think i've been addressed enough. one thing that you are doing in a sense is you're throwing cost back into the banking system at zero there was nothing either way now this is a small little tax so presumably it's going to pass that back either it will be on the positive or conceivably it could be passed on to lenders so you could actually have a sort of a paradoxical situation that. if it goes depositors you could see some dissent a mediation a movement to cash this is trends not to be good for economic efficiency the bigger points that's this is this exchange rate issue too and you mentioned in your introduction here that the euro was weak today. that is something people have been afraid of this kind of competitive devaluation i mean it's not as if germany needs help from a weaker euro right now they're a big surplus country so this plays into the global situation some years back there was talk of currency wars and so on this feeds that sort of thing and then a final point i would say is that i am apprehensive the longer these measures

go on the greater the build up of financial fragility in the system and here you could see possibly today i noticed that the gold price was up for instance you would expect people to move money to things like gold silver commodities so you could get some commodity inflation which is not what we need right now at the wrong type of inflation and the other thing that's in the background here the longer this goes on as you force people to search out eal beyond levels which they are comfortable with you run into a phenomena called bond price convex that if at any time yields start to go back up you can then have a large fall in bond prices which if there's a lot of holdings of it spread throughout the system can be a cause of financial for duty. financial crash possibly that sort of thing so that is something else but this is the longer this goes on in this way. these things build up and that. why i think your introductory point was very right monetary

policy is never the tool to fight depressions and that's the problem in europe using the wrong tool and it can possibly backlash but here's the question isn't it the only tool available to them right now. i suppose it is and this is this is a long time coming of the e.c.b. has a couple of years back when it america's drug will do anything we care they have been pushed trying doing everything they can to push down. government bond yields making it taking pressure off government by government finances but the bottom line is the europeans if they want to stay with the euro they've got to take some other measures and i think we did the simplest measure is some common financing which would then allow a european wide fiscal expansion and that's not something they have to do and that's something that our policymakers should be saying publicly that's put some pressure on them you know will the e.c.b.

be effective in this you know they're just they're small first steps and some people say it will be a little taxes all these preparations but it's not a huge push will be effective and if so why or why not well put for the. reason is that some of the reason already is that some of the negative reasons the more you the more taxes you put on again you push in costs on to the banking system that actually could work in reverse but more importantly is there's no finance constraint in europe in any of these companies they're not short of finance it's not a cost to finance issue so that means monetary policy is the wrong tool that people are not investing because there's no demand they've got surplus capacity lowering the cost of finance doesn't make them invest anymore if anything it pushes them into those speculative assets that then come home to have problems later on if you could imagine building up a situation where we'd be afraid of expansion we're going to pull the house down which is never going to know not just this is very problematic this is not a solution to tell people that it is. actually pushes the political debate and the

policy debate in the wrong direction the european b.c.b. should be saying look this is all we can do and they should be saying this is not what is needed but in fact that's what they don't do that's where they kind of this is that this is the double bluff as it were or speaking out of two sides of the mouth on one hand they do these things regarding monetary policy but then they basically endorse the fiscal austerity that comes out of brussels and pushes for long term flexibility to push put wages under pressure they should be speaking out against that they've got a very big bully pulpit use that that's the wrong thing we don't need nominal wage flexibility in europe we actually need wage increases not wage deflation you know i want to move on and talk about flimflam in general terms which i absolutely love and i've used in my personal life as well now in late april you wrote a post called the flimflam defense of mainstream economics this is fantastic so what was all this about and can you basically explain in layman's terms what this flimflam is chop and i was going to refer to my book by book as a chapter on this little help people understand if they're interested in knowing

more. there is a. school of thought the cult itself knew keynesian economics and it sort of tries to occupy the space that keynesians have traditionally had and it distorts changes message it says that the problems in capitalist economies why we don't go to full employment is because of rigidities price rigidity interest rate which unities zero lower bound to the normal interest rate those sort of things prevent the economy from going to full employment and that's not what keynes said or toward you cannot read the general theory and find that in that in fact this story of rigidity asian market frictions being the cause of unemployment was the story that keynes is great rival author pigou at cambridge made in the 1930's they were competing for the how to understand the great depression and the friction story was made by people who wrote very much against it and now along comes the new keynesians saying that actually keynes was all about friction. so they're telling

a story that gets people to misunderstand the economy and that has consequences and absolutely does and i want to ask you let me see if i have the story that you're saying that new keynesians and person they generally share the same political view on some level but that the economics behind new keynesianism it's a bait and switch if you will is that it is very much that. there is some there's a lot of overlap in values i would say there is some overlap in policy particularly when it comes to fighting recessions use fiscal policy. monetary policy but the post came to be much more aggressive about that and you. came to it rather slowly. now with the difference is that if you have this story about frictions well then what's the deep underlying message underlying message if we didn't have the friction to go to full employment remove the frictions so therefore you start to promote deregulation because it's

a friction that's why larry summers was behind all that stuff in the nine hundred ninety s. that's where you start to create wage flexibly that's why you don't like unions that's why you're slow in the minimum minimum wage all those sort of things that's what say we need. against crime so sorry to cut you off i'm going to have you stick around later to continue this but we have to go to break that was economist dr thomas come back. for us a quick break but stick around because when we return a look at leveson is on the show the founder and former operator of lava bit sat down with me earlier today to discuss in detail what happened to his company's encrypted email service and in today's big deal edward harrison and i are talking about digital privacy or lack thereof but before we go to break here are a look at some of the closing numbers of the bell stick around. certainly tony blair has benefited from war. deaths and he totally destroyed iraq

and. he's calling for a rag and i did a little back of the. i figure that for every dead u.k. soldier in iraq it all had about twenty five thousand pounds to tony blair's retirement. the tried to. pull out of. your life for the short changing every minute. sometimes made no law oh well. like. most things since. most cases it's.

sometimes for nothing. this season to. look just keep still we can still be jobst if you see a stage eight look easy. but he was. plenty. bright promising. first rate. and i think you're. on our reporters twitter. and instagram. to be in the. lobby.

one year ago today journalist glenn greenwald published the first of many revelations about the n.s.a.'s dragnet program a program that secretly gathered tons of data about the communication activity of ordinary american citizens now behind the whistleblowing was edward snowden snowden used an encrypted e-mail service called lava bit its owner leveson recently wrote in the guardian newspaper about how the federal government bullied him into installing surveillance equipment on his servers now these demands force leveson to have to shut down his business now before we air our exclusive snowden anniversary interview with the us and we want to read we want to read you a quote from supreme court justice hugo black now black wrote this in response to a one nine hundred seventy one supreme court case of the new york times a verse in the united states quote the press was protected so that it could bear

the secrets of the government and form the people only a free and unrestrained press can effectively exposed to in government and paramount among the responsibilities of a free press is the duty to prevent any part of the government from deceiving the people question more. recently wrote an article that appeared in the guardian detailing what happened sure in christian email service love a bit so can you explain to the audience what exactly transpired. i can't give out all the details there are still a few things i'm restricted from saying but the important. way to capture it the important way to summarize it is to effectively say that as a business that was focused on protecting my users' privacy i was steamrolled in a secret proceeding into turning over access to all of my unit users' communications without any kind of oversight and really denied some of the basic

fundamental rights that our justice system has in place in order to ensure a fair hearing. now why did the government want your encrypts and keys and why were you so adamant about not giving them to the government. quite simply i thought this was an unprecedented level of access that no government should be trusted with. particularly given in this individual sick circumstance. the fact that they were misrepresenting themselves to the court the f.b.i. agents who met with me told me that they were intending to capture content and passwords and that they were going to be doing it for multiple accounts and they went before a court and completely lied and said no we only asked for the encryption keys because he was being noncompliant will the simple fact is they wanted to break the

encryption on the messages on disk and in order to do that they needed to capture user passwords but our why do you think these kinds of matters are being conducted entirely in secret. i think for the very reason. they were trying to avoid what's happening now and by happening now i don't mean the rush to encryption i mean the political and public backlash. people are not comfortable with their government spying on them twenty four seven. now do you think that the n.s.a. is just as course of that large companies like google amazon yahoo that have a bevy of lawyers on their staff or do you think that they were purposely trying to intimidate you because they knew you were relatively unprotected.

i think that this particular case moved at the speed that it did. because as a small business i was not prepared to defend myself in a courtroom a thousand miles away i have lawyers here in north texas i do not have lawyers on retainer in virginia and going through the process of finding a lawyer that was familiar with this highly specialized area of law and then furthermore finding one that could represent me in virginia was an incredibly difficult task particularly given the fact that i couldn't advertise i was aware of mailing lists where topics like this are discussed and my first instinct was to send a message to one of these lists asking for help and i couldn't do that i would have been violating the court's order i had to interview lawyers individually and that took in some cases several hours to relay the facts and just find out what kind of

understanding of the law in this particular area they had and how they thought i should proceed what larger implications do you think that your case and the whole n.s.a. surveillance apparatus has for the u.s. technology sector. what i learned in going through this process firsthand is that the government feels entitled to access. they take it as an insult when they cannot access a private network or a private individuals communications they view it as a threat and that is a mentality that needs to change but our what do you think of edward snowden's revelations have they been helpful or harmful for the american public. i think they've been helpful. as a technologist i understood what was possible but i also

understood how big a danger it was and i was familiar enough with the law i do have a degree in political science to know that our intelligence agencies at least for the first sixty years of their existence had it in their charters that they could not use the capabilities they were developing against the american people and i felt together with that i didn't have to fear a big brother watching over everything that went over the internet our focus as secure information security professionals was on protecting information from small criminal organizations from the person in the next cube spying on you as you surf the internet or typing your credit card number we were not worried about organizations as large and well resourced as the united states government from doing something that we would consider wrong and what edward

snowden did is he told us. one that they were doing it but more importantly gave us the proof we need to do something about it now for many living in america and some living abroad the revelations about the n.s.a. have engendered a rethink about the power of the government so what message would you leave viewers with on what we must take away from everything that's happened tween snowden and n.s.a. everything else. was i think we need to remember two things our constitution established that there were certain unalienable rights that no government should be able to take away from its citizens those rights were a right to free speech a right to due process a right to privacy a right to face your accuser. and what we're seeing is this fear of

terrorism is allowing weak willed men to permit those rights to be stripped away and we're seeing a legal system a third branch of government that is supposed to ensure this doesn't happen being complicit in that effort i think the second thing we need to remember is that in order for a democracy to function it depends upon informed voters and we as the voting public can not make informed choices about who to support and who to vote for without transparency into our government's actions. and what we're seeing is that people who voted for our current president are

finding out what he was really doing behind closed doors and realizing that they never would have voted for him in the first let alone the second place if they actually knew what he was doing and if we want to ensure that we remain a free society tomorrow we need to make it imperative that we recapture that spirit that we protect those unalienable rights and that we demand transparency into our government's actions. that was the darling of us and time now for today's big deal. it's my favorite big deal day this week thursday here's stays with the one and only

edward harrison almost got caught up in ok now we're taking a look back on digital privacy in the context of the one year anniversary of edward snowden's and i would say revelations now on june fifth twenty thirteen guardian newspaper journalist glenn greenwald revealed a top secret court order to collect information on millions of calls both in the u.s. and between the u.s. and other countries the surveillance state that's all i have to say the surveillance state so taking a step back from all of these revelations what is your takeaway from this my biggest takeaway basically is that it's actually private companies that are collecting all the data the u.s. government is piggybacking on the u.s. government going out and collecting tons of data on things that we're doing rather it's that we are getting private companies are getting data for whatever reason through whatever means the u.s. government is. piggybacking on taking that data collecting it and then aggregate it together i think that is a very negative i mean it's

a completely negative and i couldn't agree more but at what concerns you most about these types of programs like what really keeps you up at night you know the fact that we've seen private sector and the public sector together you know what i would call corporatism working together in this sort of surveillance the apparatus it's not just that the government is out there doing whatever they do is to tell terry in a way rather the government is actually working in concert with private sector organizations either you know they do it willingly or coercively the government right you know compels them to do this and you bring up the private sector and i'm glad you do because i want to talk about my least favorite social media to. i'm sorry but i hate that thing. now i heard that facebook can obviously we can all know this it can store your mobile phone contacts if you have a smartphone but here's the super creepy part it can actually i've read this i don't know how true it is going to fact check here but that you can turn on your phone's microphone and record your conversation no need to blog your buddies on

your facebook app when i immediately just today i'll say this to the audience i don't got rid of my facebook app on my phone just because i probably won't do anything they can subtract me anyway but it's infuriating what do you think about it you know we give away too much data to these companies organizations thinking that you know a little convenience here a little give up a bit of their what's the problem and we see that data gets good not just by the government but also by data aggregators in the back. who actually are completely unregulated so i think it's a problem and we have to watch what we give up about ourselves you know it's no one even snuck in and took this information we divulged it on our own volition now we just spoke to look for leveson about his work to create a truly encrypted e-mail system and google they have released an end to end which is a way to encrypt e-mail securely so can you tell me a little bit about these technologies and do you think google's going to be any good to me better than geno what do you think's going to happen there it's still in

beta testing but it's a good thing this is exactly what love is it was talking about and encrypts and this is where you know forget about the middle of the the middleman doesn't know what you're doing it doesn't have the encryption keys it doesn't make a difference you were doing the encrypt and the other person on the other side is doing the decrypted as a result of the you know for no one can eavesdrop on the communication the real problem is usability we're not at the point where this kind of technology is a very usable and we need to move further in order to make it usable because that's what's going to stop it from being adopted now we know that google it gives of some of our information but it does sometimes fight for us we like it more than facebook gives it all. away from carolyn asked me to give her a vague on list but given google truly is the type of company that well it won't either soon it will be a pay for service this isn't in their interest to create such a thing if you don't pay for it no let me have a quote for you by a letter is yeah i want to hijack this i want to discuss this. and here's the quote here every minute should know that his conversations. his correspondence in his

personal life are private. and he said i have urged you know i have urged congress except when the nation's national security is that state to take action to that ok now here's the interesting part is the first part people stress but they were always drop the second part and this is exactly what we're talking about right now we're talking about giving up your privacy but when the national interest is at stake the government decides they're going to step in and they're going to jack that process not call we're going to talk about this a lot more but we have to go now we'll see it next time tomorrow big day end of the week.

some people say that when it happens in time not a very nice one occurred. at some point i could no longer stand i decided to kill myself. you know i was scared of what i'd done but i punched her but i didn't understand. when. the woman should. run from. everyone who sees the speech. to also speak to the children's father for my has then became a control of both she felt that he couldn't do anything. why you crying don't cry i know i'm tired of crying too don't cry bad. dramas the chance be ignored to the. stories others refuse

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back in baghdad the u.s. is sending troops to iraq where the sunni insurgents have ceased several key cities across the country. sirens sound in eastern ukraine is the army pounds defiant cities with shells local militias ten civilians have been killed in the latest spike of violence. because in britain may be facing a lifetime behind bars if a proposed new bill is passed but experts warn it could potentially see those working to improve internet safety sent to prison as well.