barclays bernie made up for years they knew that made off with a scam. as you see when there are three occasions and said this is a scam they finally it blew up and everyone lost their money there and then they went into courts and got maybe five cents on the dollar barclays bernie madoff barclays bernie madoff. on air and in the financial world. to see these developments i mean not stopping to see there is only taking no demand for credit not going to get any economic benefit in life there are and there are folks.

hello there i'm marinating this is boom bust and these are some of the stories that we're tracking for you today. first up you can't hold a good city down or apparently a mediocre car manufacturer general motors had surprisingly robust sales in june despite record breaking recalls we look into how and why in today's headline story and professor darron us in mobile who is on the show as well darren is an expert in understanding how political and economic institutions can lead to economic success and we're getting his take on former treasury secretary the secretary timothy geithner's point of view you got it and in today's big deal edward harris and i are

talking about the end will be i asked report and what it says about our current post prices monetary policy experiment it all starts right now. welcome to the now our lead story today a personal appearance by way of general motors now like the beleaguered city the american car manufacturer is based in general motors. just can't seem to catch a break yet they keep on trucking pun intended now only twenty four hours after g.m. announced its latest and massive vehicle recall on monday the company reported a june sales increase of one percent compared to a year ago beating analyst estimates for a six point three percent decline all as

a vehicle recalls rose to record levels in the u.s. now the automaker has recalled more than twenty five million vehicles already exists year and minute we still have six more months to go in two thousand and fourteen but the problems have apparently not i repeat not kept customers away from g.m. showrooms now g.m. has been struggling for months with a series of recalls in the revelations that for more than a decade it failed to disclose an ignition switch defect now the company has linked at least thirteen deaths to that ignition switch defect problem and it seems like the company's vigilance to root out safety issues has only dragged them further into the recall hole now the deeper g.m. digs into its portfolio of vehicles the more problems they seem to be finding so what's the total cost of all these recalls de gea one point three billion dollars in the first quarter quarter alone now the updated second quarter charges bring the total amount for recall repairs to two point five billion dollars this year and on

monday the automaker announced it will not cap the amount it intends to pay victims of the faulty ignition switch problem and that those payments will start at one million dollars per victim now while jim's older cars seem to be causing all of these problems if their newly designed vehicles that are driving sales last month over two hundred sixty seven thousand new vehicles were sold and with the help of more readily available credit and a strengthening economy u.s. auto sales are headed for their biggest year since two thousand and seven when over sixteen million vehicles were sold so what does this uptick in u.s. auto sales mean for the motor city itself well i hope. fully hopefully something good but i think the reality is that detroit is just going to have to readjust now g.m. built a bigger flimsier car and they weren't alone in building this bigger flimsier car that was kind of the production philosophy of the entire us auto industry prior to the financial crisis but like the music industry the auto industry took

a major hit and now has to rebound it's not going to go away like the music industry it's going to just be substantially smaller again like the music industry which is ok and like the motown tunes of the city created detroit still has stuff to offer perhaps just a little bit less of it. recent book stress test for former treasury secretary timothy geitner argues that quote politics ultimately determine what gets done and quote you can't afford to get bogged down in a protracted fight so great or seems to be suggesting the obama administration did what it could do politically during the financial crisis and not necessarily what it actually wanted to do now i spoke with professor derren asha mogul who the author of why nations fail an expert in understanding how political and economic

institutions can lead to economic success i first asked him what he thought of gardner's point of view and here's what he had to say. there are always political constraints and. when it comes to taking real time actions that's very important and you know by research especially the one that the research program i pursued with jim robinson has been all about the role of politics but i think it's also important to think of politics more broadly didn't just you know the strange told by the republican party or the congress that the politics is about all sorts of constraints that for all. the blue powerful groups in society say the it's not just what the congress. did or did not hear of it during the code. financial crisis but i think we have to think about the lobbying power of the financial institutions and the oversized part of wall street over all the beating

to know what sort of things were done and were not done during my initial. response actually reads very well to my next question because a lot of our recent guests of started using the term crony capitalism when talking about political connections and business in the u.s. now let me give you a quote that i think kind of been kept in capsule it's why we're going to quote the business interests financier's in the case of the u.s. played a central role in creating the crisis making ever larger gambles with the implicit backing of the government until the inevitable collapse more alarming they are now using their influence to prevent precisely the sort of reforms that are needed and fast to pull the economy out of its nosedive the government seems helpless or unwilling to act against them now that was your mit colleague simon johnson in two thousand and nine so there aren't do you think simon johnson was valid. you know i think he was partly right. if you think about how we got into the financial crisis

you cannot tell the story without success it was. the largest financial institutions as well as fish farms and you can also not tell the story of how we dealt with the financial crisis without mentioning all sorts of policies that we have adopted that have benefited the financials i think i would not go as far as saying the united states according to our will is a i think there are still. important elements of the equals of systems within the united states but i do also agreed that there are important to be watchful of i think the most important thing that i would emphasize. it is really that close connection between business and politics we get focused a lot on the campaign finance super pacs and all and i think that's very important and we should emphasize those more and i think we should pull back from some of the

very dangerous both of those that we have set up by allowing unlimited funding or especially transparent funding for political candidates but i think the bigger danger of it is the law of the complex it is so much that all sorts of companies spend on getting the ear of politicians or having access to politicians that a lot of with big was behind closed doors and and i think that is really a very concerning trend for the quality of. now i understand you wrote an article in february with johnson about political connections in turbulent times so what was that article about and what did your research find. well we are. we're trying to get to one aspect of what i was mentioning the second ago which is the politics is not just about what congress does or does not do or does or does not permit but it's all of. the influence of various power groups within society one

political decision some hold out takes place because you have the resources to. be influential in the political arena and some of it takes place through networks you know the right people and you have the ear of the right people when it comes to making the most important decisions and we thought that the way in which the financial markets reacted to. various events during the financial crisis could be a way of testing these ideas so in particular we looked at that where they're doing this very turbulent time when very important very consequential decisions have to be made with cleats. connections political connections. now what was the market's reaction ted timothy geithner's appointment in your research so what we found is. you know perhaps surprisingly perhaps not it really

depends on your perspective and your prior he filed when he was the guy who was announced as the next secretary or contrary financial institutions debt were connected to geithner either through these meetings that they were the ones that had this year or through overlapping or interactions between their top executives and intimately geithner were the ones death very favorable stock market reactions relative to other financial institutions so we really when he has to make sure who are not comparing apples to oranges we're not comparing you know goldman sachs to wal-mart or even woman starts to the you know small. operates just in the bottom up so we sort of tried to. go all the extra mile to make sure that we're really looking at similar financial institutions just differentiated by whether they did or did not have the access and the ones that had greater access were the ones that

really benefited due to the period. now if i understand you are saying that markets reacted as if the appointment of tim geithner to the us treasury was a positive event for the firms that he had regulated as the head of the new york fed so do you think this market reaction makes sense though. i think in hindsight it does make some sense i think what most of the market was most worried about it was either some financial institutions going under or some financial institutions really being forced. to divest to sell. certain parts of their business. or be subject to very very tough stress tests or other tests and therefore having to raise a lot more capital and i think they probably said. you know it's going to matter who you know in this process some of these decisions are going to be made

might be a little bit more favorable to the firms that have the right connections and i think the reason for that and nobody suggests that there is be explicit. corruption here and i think that's the reason why i wouldn't use the word crony capitalism i think the reason for that is death as is expected most people when they come up with power they appoint other people who they have worked with to have close connection with they have a trusting relationship and during our lives of crisis of those second layer of moments are really important because very important decisions have to be made with great speed so when you look at who want to have the geithner appointed you appointed people from the banks we who. know. shows what those bad things were of course so we're going to be regulated and we're going to have to come up with additional money or would be the debris quo being national laws are being broken up so that that's the sort of the channel that i think the financial markets probably

thought well this probably means a little bit over the advantage for those connected firms that of course a little bit better through the financial part of course quite a long way from so stock market. that was the author of why nations fail professor. time now for a very quick break but stick around because when we return john of malden is on the show the chairman of malden economics sat down with edward to share his thoughts on the u.s. is economic future hint malden is not super optimistic about it and in today's big deal edward harrison ira looking at this year's b. i asked report and what it says about our current post crisis monetary policy experiment and remember you can see all segments featured on today's show on you tube at youtube dot com slash boom bust start t. and on hulu has a clue dot com slash boom. now before we get a break here are a look at summer closing numbers of the bell come on back with us.

for you like me who want your comedy news with some ti want your comedy news to be a bare fisted no holds barred fight to the dad. but the truth vampire whining into the next in the corporate elite the billionaire freaks well they're going. well that's what you get with my new show projected in night. well to. know if all goes well over the next year the federal reserve will taper its quantitative easing program and hike interest rates sometime in the near future

but john mauldin the author of code red how to protect your savings from becoming crisis believes that another recession is just around the bend then yet another form of q.e. is in our future as well edward harrison sat down with john to explore some of the ideas in his book edward first want to understand why john sees the fed's activities as a keynesian when the fed is the monetary agent and not the fiscal agent here's what john had to set. the fed's there's a difference between what they're doing and what their intent is their intent is to drive consumers and consumption because by lower rates they will people be able to borrow more money to be able to spend more. that stopwatch has got it what's happening they lowered rates that pump money into the system and increase the assets of the wealthy i think that for instance when we get through this cycle of quantitative easing. and i say this articles there will be another cycle i think

the next cycle a quantity of easing as has the real potential to look significantly different in this cycle i think janet yellen and stan fisher and some of the others have very uncomfortable with the results of what's happened this last time which is basically making banks and rich people richer. they thought there was a welcome that there is no wealth of all the research i mean there was another research back then that those of us who were looking at that research and wait a minute this isn't going to do any good it's not going to translate it's trickle down monetary policy and that's what i was arguing in getting four years ago that's what i was arguing this i mean. we were graphically arguing that a code red with. that policy is just absurd i think janet yellen do is figure out some way through to bring out her inner helicopter and they're going to figure out how to put money more directly

into of main street pockets now i don't know what form that's going to take when you look at what state and fisher did when he was head of the central bank of israel he's one of the most respected economist in the world he puts prison to everybody's ears now use by steere of the pit when they had their crisis he bought anything that wasn't nailed there for get government bonds or our assets back he was buying securities and more he would buy anything was moot but they were trying to pump money into the system and i think they get good at least as creative if not more creative the next time this country's never gone more than nine years without a business cycle recession. and they normally are very we get a recession every three to four years if you go back to quest two hundred so. we're this one we're into what now six years go find work work by receive so we're doing

for another one in you know the next two or three years four years what are they going to do now what i would say is that manufacturing base money is the fed's doing now basically it's just sucking money out of the economy because they're replacing interest bearing assets with non interest bearing base money and you know what we've seen with japan's done that is that it's gone nowhere it has created a for the u.s. what it has created for the u.s. a certain amount of asset price inflation but why do you think that actually buying up i'm not talking about mortgage bonds i'm talking about the government bonds now buying up government bonds is actually going to lead to any sort of sustained consumer price inflation. we get into the concept that we are temper not at work and i've dealt with it. at length over the last ten years the loss of your money and when the boss of the money starts turning

back up. we will see. inflation come back and they're going to have to i mean i hope what happens because i don't i don't want to see why she ought to want to see. a real problem i don't want to have to you know call back and prop him up in the chair goes or been turned down i can remember a unity too when we needed to just crank down on the system. i'm hoping they allow the. monies the money supply they've got used to bleed off when those bonds come back in they don't buy into just what the. book and there are as a basis for doing it down because when we get some inflation and book velocity of money will turn it's this huge mean reversing the reversion machine takes decades

but the loss of the money started turning down in the middle of the last decade in water before the crisis and when it's there when you turn it back you're going to see inflation up until that time we're in a deflationary world. it's a deal leveraging world which is by definition deflationary most of the developed world has negative demographics that's by definition deflationary of and so i agree with you there so a size five point here is there is john here's what i want to say ok those are all deflationary but if you've got huge private sector debt as we do how is it possible for us to have when we have these recess and asset price deflation that translates in the consumer price the place of households are basically going to be de leverage and that's a deflationary environment a disinflationary how are you going to get that inflation in order i don't disagree it's only when the velocity of money. it starts up when we have that next business

cycle recession when you have which always. is accompanied by asset price deflation interest rates will go down naturally prices will go down naturally that whole scenario is by definition depletion ery. it's after the next got to be placed in every big. jonathan arguing that we will see inflation and by the way what we tried to make. clear in our book was that. deflation is not a rural or inflation it's not a global but not enough it's going to be very country specific. we argue that it's essentially we've got a rule now or words every central banker for himself and not of them are managing their their economic portfolios to try to take into account the world

this is why the india. central bank governor or rather john was arguing that we need a global economic policy we need monetary coordination and basically europe and bernanke at the time now it's your own base of saying go pound sand no we've got to do what we've got to do to which rajendra response is ok we're not going to like what i'm going to do good i think he's going to institute some kind of capital controls and i think you're going to see more and more emerging markets what we call emerging market more smaller economies that can't take the massive inflow and outflow of capital is created by the relentless money printing that we're seeing from major central banks. they're going to they're going to put. all capital coming into lincoln who are going to go back you know. that was john

malden author of code red how to protect your savings from becoming a crisis and chairman of malden economics time now for today's big deal. i. think bill simon the wonderful director harrison and today we're talking about the b. i asked reporter bank for international settlements report and what it says about our current post crisis monetary policy experiment at work it's a very very dense topic so i want you to break it down for me really. hard to her since we are going to get you here you go this is the real test can you give me a general takeaway about this year's annual report basically this they said the things that cause the crisis which is basically ultra easy monetary policy when we took interest rates down from six percent to one percent and created this huge

housing bubble and then you had bubbles in other places in europe as a result of easy policy negative interest rates in spain and ireland that's what's now being offered up as the panacea going forward and so what they've said is basically going to get the same outcome because that's what caused the crisis and you're doing it again ok so very good time by the way that's the b.s. perspective do you agree with that what do you think definitely one hundred percent and you know the reason that we're doing this is because we have this sort of this paradigm which says that. you know debt is always bad whether it's from the fiscal engine or from private sector agents and that means that when you get into a situation in which debt is high then everyone needs to start. cutting their debt back and when you have the fiscally. sort of get in there that is the government cut their debt it just makes it even worst for the private sector because you're

sucking money out of the economy private sector debt is high and what you get basically is a downward spiral debt deflation so that's what we've seen when they've tried to do austerity night in a number of europe and so that's what's happened in this result of things like that then people are just like wait a minute we've got to do something and so that's when the monetary agent comes in and starts going with easy money starts doing q.e. things like that and so it just makes the whole situation that much worse ok so the big i ask that a lot right but i know that you have a different opinion on a couple. of it can you explain that to me yeah i mean you know in a currency area like united states where the government is sovereign we're actually using dollars which are ious of the government it's not like they're backed by anything there's no gold backing them or anything like that so there's no solvency constraint the concept that the government needs to reduce deficits the deficit in

and of themselves have to be a policy variable that's completely wrong you know what we've seen in the past is that you know deficits are low when or nonexistent or you have surpluses when the economy's doing well and when the economy doesn't do well then the deficits are high let the deficits to happen as they will over the course of the cycle in order to act as a countercyclical tool and at the same time that allows you therefore to go and go turbo on the monetary policy so you know if you have a ten percent deficit what that's telling you is that the propensity to save the net saving the desire by the private sector is so high that they're causing the public sector to go into a huge deficit right because they're not giving up any money no one's going up any money anywhere now. what effect does this ultra easy monetary policy basically have in exacerbating the financial fragility of the system and i'm sorry we only have thirty seconds i know it's a big question for the second what it does basically is it builds up all this mile

investment because. the asset allocations are skewed towards things that they shouldn't be skewed to excess capacity that builds up and then when the whole house of cards collapses everyone's like oh my god look at all that mal investment we should wear down from her no exact oh well hopefully it won't but it probably will happen again console for now we love hearing from use of please check out our facebook page facebook dot com slash them bust our teeth and please tweet us at erin aid at edward and it's from all of us here thank you for watching us a next time my.

i'm out the martin the stories we cover here we're not going to hear any right other big stories that have struck headlines and talk there's a reason they don't want and do not. want to. think. now let's break the set. and. i would rather ask questions to people in positions of power instead of speaking on their behalf and that's why you can find my show larry king now right here on r.t. question for.

well the underlying. issue you know. the a.

pleasure to have you with us here on our t.v. today i roll researcher. coming up on r t a new n.s.a. leaker a new document shows that a federal court allowed the n.s.a. to gather information on a hundred and ninety three world governments all the details on that just ahead. as concerns grow over desolate privacy there's also a consumer demand a new phone is on the market that's designed to protect your privacy from snooping government agency has more on that coming up. and it is certain ukraine government forces clash with an idea of separatists ukraine's president decided to end a ceasefire as the violence returns more on the conflict later in the show.