that camaraderie in this set that was in this context that has absolutely no place . over there i marinated 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 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 sick. 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 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 read up fifty 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 jams 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 hopefully hopefully something good but i think the reality is that's 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 u.s. auto industry prior to the financial crisis but like them you. it's true 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. because. it was a 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 mobile 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. republican party or the congress but the politics is about all sorts of strange stuff for all. the blue powerful groups in society so i think it's not just what the congress. did or did not prove it to decode the financial crisis but i think we have to think about the lobbying power of the financial institutions and the oversized of part of wall street over all in between to 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 of starting 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 all sort of read 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 that is the law of the complex there is so much debt 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 those big debt is really a very conservative trend toward 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. we're trying to get to one aspect of what i was mentioning a 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 on 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 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 bad weather doing this very turbulent time when very important very close question decisions had to be made with cleats e. connections political connections matter. now what was the market's reaction said 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 we found when it was the guy it was announced as the next secretary of the treasury financial institutions debt were connected to geithner either through these meetings that they were the ones that is year or through overlapping or interactions between their top executives and intimately geithner who are the ones they're very favorable stock market reactions relative to other financial institutions so we really went to make sure we were 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. 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 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 saw 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 they're 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 course connection with they have a trusting relationship and duty are times 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 somewhat older who are going to be regulated there we're going to have to come up with additional money or would be to bring coal being nationalized or be broken up so thought that's the sort of the channel that i think the financial market 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 hint malden is not 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 youtube at youtube dot com slash boom bust start t. and on hulu absolute dot com slash boom but now before we get a break here are a look at summer closing numbers of the bell come on back with.

the return and revenge of the neo cons as a middle east ascends and regional civil war in ukraine becomes a failed state washington's foreign policy neoconservatives around the world they're playing with.

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 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 lower rates they will people be able to borrow more money to be able to spend more. that stopwatch get 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 article is 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 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 and 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 pushes and everybody's ears now used 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 he would buy anything was moot but he was trying to pump money into the system and i think they did 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 if they normally yerbury we get a recession every three to four years if you go back that you question wondered so . will this one we're going to do what now a six years ago find 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 for the u.s. what it has created for the us 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 should i don't want to see. a real problem i don't want to have to you know call poll back and prop him up in the chair those were good times i can remember eighty and eighty two when we needed to just crank down on the system. i'm hoping they allow the. monies the money supply they got just a bleed off when those bonds come back in they don't buy only just lucky the. book and their asset base just do it all down because when we get some inflation and book velocity of money will turn it's this huge mean reversing the reversion machine that takes decades the boss of the money started turning down in the middle of the last decade in what he 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 dealer getting world which is by definition deflationary most of the developed world has negative demographics that's 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. 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 to place of households are basically going to be delivered and that's a deflationary environment or disinflationary how are we going to get that inflation either i don't disagree it's only with the loss that you have money of. 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. that jonathan are 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 real world 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 role 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 to go on a base of saying go pound sand no we've got to do what we've got to do to which rajendra sponsor 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 in and the link you want 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.

big deal time the wonderful transport 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 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 the. the things that cause the crisis which is basically ultra 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

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 they'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 debt is always bad whether it's from the fiscal agent 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 of debt deflation so that's what we've seen when they've tried to do austerity not 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 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 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 for jodi of the system and i'm sorry we only have thirty seconds i know it'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 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 that. exact oh well hopefully it won't but it probably will happen again to console for now hoping we will vary from use of please check out our facebook page facebook dot com slash going bust our teeth and please tweet out us at aaron aid at edward and it's from all of us here thank you for watching us a next time my.

leg. trying to. get. to the store think i'm going to. tell it. like it. let's say. sometimes for nothing. just. the elements in egypt it's not just you but still you can still be judged if you see the state to take a look at egypt but egypt kill muslims to.

sleep. i'm out in martin the stories we cover here we're not going to hear any right other big story that extra mad while some talk there's a reason they don't want to do not all about an hour or more to tell friends that we should all be completely outraged now let's break the set. this is what we do we kill people and break things. we can see something as simple as people playing soccer games we can see individual players and if you see the ball. you can almost see his facial expression you can see his amount of open crime. may be cursed. or maybe he asked. for forgiveness for. there must be near certainty that no civilians will be killed

or in. escalating violence in eastern ukraine kiev relaunching a crackdown on defiant regions after ending a ten day truce we take a look at what's driving some women to join anti-government forces. reports of a palestinian teen being abducted and killed in jerusalem and trigger street violence and allegations over benghazi israel mourns the slaying of three teams four abducted in the west bank. leader of a jihad us militant group isis urging all muslims to come to iraq and syria to help secure a vast islamic state.