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cross-talk rules in effect that means you can jump in anytime you want. 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 has surprisingly robust sales in june despite record breaking recalls we look into how and why in today's headline story and professor derren 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 crisis monetary policy experiment it all starts right now. with now our lead story today 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 its vehicle recalls rose to record levels in the u.s. now the automaker has recalled more than twenty five million vehicles already this year and minute. we still have six more months to go in two thousand and fourteen but the problems have apparently not repeat not kept customers away from g.m. showrooms now g.m. has been struggling for months with a series of recalls and 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 to g.m. 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 g.m. is older cars seem to be causing all of these problems is 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 were headed for their biggest years 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 hopefully 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 want to loan him building this bigger flimsier car that was kind of the production philosophy of the entire u.s.

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 that the city created detroit still has stuff to offer perhaps just a little bit less of it. the. 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 geithner 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 ones that do research program i have pursued with jim robinson it's 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 old by the republican party or the congress that the politics is about all sorts of constraints that are all. the glue that powerful groups in society said 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 overall in the kingdom what sort of things were done and were not done during the financial crisis. or your response actually weeds very well to my next question because during a lot of our recent guests and 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 elite 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 state funds 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 all sort of read that there are important but it's you have 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 that invest 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 here is the law the complex there is so much that all sorts of companies spend on getting the euro politicians or having access to politicians that a lot of with big was behind closed doors 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. were trying to get to one aspect of what i was mentioning the second ago which is do politics is not just about what congress does or does not do or does or does not permit but

it's all about the influence of various power groups within society one political decision some will doubt 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 you're on the right people when it comes to making the most important decisions and we thought the way in which the financial markets reacted to the various events during the financial crisis could be a way of testing these ideas so in particular we looked at bad weather doing this very turbulence high. when very important very close question decisions have to be made with creates the. connections political connections matter. now what was the market's reaction to 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 of the treasury financial institutions debt were connected to geithner either through meetings that they were the ones that is a year or a through of 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 have to make sure who are not comparing apples to oranges we're not comparing you know goldman sachs to wal-mart or even goldman sachs to the you know small bank that operates just in the bottom up so we sort of tried to. go the extra mile to make sure that we really looking at similar financial institutions just depreciated by whether they did or did not have this

access and the ones that had a greater access were the ones that really benefited do that. now if i understand you you're saying that markets reacted as if the appointment of tim geithner to the u.s. 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 more 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 connection and i think the reason for that and nobody suggests that there is any explicit corruption here and i think that's the reason why i wouldn't use the word crony capitalism i think there are good reason for that is death as is expected most people when they come up with our they appoint other people who they have worked with difficult to 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 he appointed people from the banks we who. what's next as well and those banks who are of course some of those who are going to be regulated that we're going to have to come up with additional money or would be if to bring coal being nationalized or be

broken up so it ought 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 and of course a little bit of advantage to the financial times course quite a long way in terms of stock market. that was the author of why nations fail professor derren. 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 us his economic future didn't malden is non super optimistic about it and in today's big deal edward harris and i are looking at this year's b. i asked reporter 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 absolute dot com slash boom bust now before going to break here are a look at summer closing numbers at the bell come on back with us.

for you like me who want your comedy news and some t. want your comedy news to be a bare fisted no holds barred fight to the dad. but the truth vampire plunging into the necks of the corporate elite the billionaire freaks well they're going. well that's what you get with my new show projected tonight. and start forcing. the finish line of the marathon.

for. the. 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 walton 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 say. 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 lowering rates they will people be able to borrow more money and be able to spend more. that stopwatch have 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 cycles 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 in 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 and i mean we were grossly arguing that a code red with. that policy. it's just absurd i think genet yelland do is figure out some way to to bring out her inner helicopter priya and they're going to figure out how to put money more directly into. main street pockets. i don't know what form that's going to take when you look at what's getting fisher did when he was head of the central bank of israel he's one of the most respected economist in the world he pushed reason to everybody as they are now used by security. with they had their crisis he bought anything that wasn't nailed down for good government bonds or asset backed he was buying securities and more he was buying anything it was moving it was even

trying to pump money into the system and i think they could get 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 every we get a recession every three or four years if you go back to quest two hundred so. we're this one we're into what is now a six years so fine work work by was here 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 when japan's done that is it's gone nowhere it has created it's not 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 temper not dealt with and i've dealt with. that link the over the last ten years the velocity of money and when the velocity of 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 what action i don't want to see. a real problem i don't want to have to you know call pull over back and prop him up in the chair those were good times i'm old enough that i can remember eighty and eighty two when when he had to just crank down on the system. i'm hoping they allowed the.

money the money supply they've got just to bleed off when those bonds come back and they don't buy and they just let the the. book and their asset base just a do until down it goes when we get some inflation and the last of the money will turn it is a huge mean reverse an immersion machine that takes decades the boss of the money started turning down in the middle of the last decade was able to with a crisis and when they start when it turns 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 is by definition deflationary. 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 into consumer press the flesh 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 either i don't disagree it's only with the velocity of money each of the starts of when we have that next business cycle recession when you act 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 deflationary. it's after the next kind of deflationary big watch that jonathan are arguing that we will see inflation and by the way what we tried to make. clear in our book

was that. do you play ssion is not a worry or inflation it's not a global phenomenon it's going to be very country specific. we argue that it's essentially we better world now words every single banker per himself and not of the or managing there's their own economic of portfolios to try to take into account the world this is why india. central bank governor rajon was arguing that we need a global economic policy we need monetary coordination and basically europe and the bernanke at the time that young base is 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 because 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 so edward say very very dense topic so i want you to break it down for me really. hard to herself so we are going to go 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 caused the crisis which is basically all true easy monetary policy when the fed 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 you get the same outcome because that's what caused the crisis and you're doing it again now has a 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 the 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 fiscal agent 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 of 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 as a 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 the 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 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'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 side 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 going to have 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 that's a big question for thirty seconds 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 get excess capacity 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 that. exact 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 out us at aaron had at edward and it's from all of us here thank you for watching us

a next time my. do you like me you want your comedy news with some t what's your comedy news to be a bare fisted no holds barred fight to the dead. like a vampire fighting 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 tonight.

your friend post a photo from a vacation you can't afford college to different. the boss repeats the same old joke of course you like. your ex-girlfriend still tends to rejection poetry keep. norrish. we post only what really matters. to your facebook. that i'm. trying to. do and. all that. much and i miss that actually a politician write. something up. there's just too much. that.

can. come back nothing. has fallen in eastern ukraine kiev really launches its crackdown on to find regions off the ending of ten day trip we find out what's driving some women to join anti government forces. israel mourns the killings of three teenagers abducted in the west bank while the death of an eighteen year old palestinian boy troops during a night raid draws little attention. to the hottest militant group isis his own muslims to come to iraq and syria to help secure a vast islamic state.