our lead story today the origin time poker face argentina's president cristina fernandez his battle against holdout investors suing her country is increasing the odds that her government will default for a second time in twelve years it's almost a record now and hearing on tuesday u.s. district judge thomas decided not to grant argentina's request for more time to negotiate with holdout creditors and directed both parties to meet with a court appointed mediator to reach a settlement judge grace a rule that argentina is not allowed to pay its restructured bond holders until it reaches a settlement with

a group of holdout creditors who have refused the country's debt restructuring offer since its two thousand and one default and are owed roughly one point six billion dollars they're not interested in any renegotiating now president fernando has refused to budge he's not moving from her stance that argentina simply cannot pay out in full to the hold out hedge funds notably management they have a lot of money with argentina now this basically they snatched up all these arjen time bonds back in two thousand and one on the cheap and that's after the country's one hundred billion dollar default so this isn't their first time on the merry go around argentina but the question today is could argentina muster up the money to pay its bondholders if it really really had to steve hankie a currency specialist an expert on argentina had this to say. it's a matter of ability to pay is there a willingness is not that's been pretty much the history of argentina for a couple hundred years it's actually been and default on bombs and their creditors

about thirty five percent of the time so that's that's an incredible number actually. bottom line there's no signal today that argentina is getting ready to pay its creditors and all signs clearly point towards a default if that's the case it's not like argentina will be an unchartered territory remember these guys are getting quite good at the faulting on their debts we'll know how this all shakes out in one week's time on july thirtieth that's the deadline. now on today show when the u.s. government bailed out the banks it didn't address the massive debt overhang that is

still a major drag on the u.s. economy now mainstream economists are encouraged by the improving economic indicators but they're analysts often analysis often overlooked debt so our next guest steve keen is worried that our debt levels a nearly as large as before the great financial crisis now king is the head of the school of economics history and politics at kingston university in london now since the crisis monetary policy has been the only game in town so i wanted to get a sense of whether monetary policy is effective in the face of such high levels of debt i first asked steve to explain whether steering the economy via short term rates is dangerous here's what he had to say. and this is the thing that is myself and richard most recently. bill was himself called hudson and pitiful with holdings saying it's the level of the right of change and like i was the acceleration of private debt that really matters and by

ignoring the the private sector in the economy that's why we haven't seen we didn't see it but didn't see the crosses come. that's why we've got out of the crosses now because having to leave it very slightly american providential from about one hundred eighty percent of g.d.p. to about one hundred sixty percent is rising again now that's why this slump occurred the decline and it that's why the boom is stunning again now the rise and it but and measuring all of this is still being completely ignored by conventional economists and by the federal reserve so yes that's the real danger the fragility of the economy gets as the level of profit dick gets and we won back to not in the not in not is recession when you came out of that in america the private debt russia has about ninety percent of g.d.p. and it doubled until this process and then it fell about twenty percent so having another revival from a debt level of seventy percent of g.d.p. than the previous boom began in and of course it's only going to take that saw any

increase in interest rates or. a couple of companies going bankrupt carrying the debt levels they are because they conned minister all over the debts so the system is much more french all in this recovery than it was in any previous recovery and that includes right back into before you get back in the days of the with the great depression the economy has never been inside job because the level of private has never been this high. now what about fiscal policy here it we've come to think of deficit isn't dodginess meaning they automatically go up in about economy go down in a good one so what role does fiscal policy play given this i know that you've just mentioned it but i'd like to hear a little bit more. yeah well that's that's the passive role of fiscal policy there is like a it's like an automatic stabilizer in the same sense that if you if you have an a conditioning system the thermostat gives you feedback so the temperature drops in saw the room and then the misstep clicks on the and the temperature rises so you

get a slower load a lower level of fluctuations in temperature than you get without the without the air conditioning similar thing for government spending if there's a decline in the economy then the amount of profit thing and wages being unfolds the tax and tax revenue folds and the amount of welfare payments and unemployment payments go up so the spending rises so that's the automatic stabilisers side of it but you've also got the capacity for discretionary china and that's in the on the percent positive side that seems like the cash for clunkers campaign which just simply threw money at paypal but on the negative side you have this focus on austerity which is the absurd dangerous i would say virtually criminal attitude that the european union has taken on what to put on done during the process which means that yes the automatic stabilisers there but they didn't pull government spending out they increased taxation they go in the opposite direction and was saying what that actually doesn't practice it meant that the downturn in southern europe rather than giving the unemployment rate that america pick at a bit of a ten percent it's hit twenty six and twenty seven percent of the

a population which is worse than the great depression and it's absolutely outrageous that the us now complaining of is a bit of success because the right of decline in the economy to slow down and a couple of economies trying to get of you know a couple of pulses that taking credit for the fact that they conned drive the economy any deeper than they've already done and therefore a small revivals going on so yes if the discretionary all the fiscal policy if you if you stimulate the economy in a downturn like we've gone through you'll have less of a decline but it's still not enough in the opinion i think we have to address directly the level of private debt and this is also the god of our richard vegan his recent book. you know what about regulation we read a headline today about the rebirth of the subprime lending and fraud in the u.s. but this time it's in the auto markets not the mortgage of the mortgage market so how do you stop abuses while still granting necessary access to credit for those who need it. you know it's tends not to be a problem in a consumer items like cars or credit cards even though people get themselves in

difficulty individually when you look at the aggregate level is not of much of it not much of a trend to the ratio of credit. and things like that to incomes nobody buys a car expecting you going to sell of a twice as much next week the trouble is that when you have mortgage house the mortgage market they do that's where the danger laws so i think we have to focus regulation maybe on on housing but i wouldn't go for regulation on brother make it something that judges and force because regulators end up getting in bed with the industry the supposed to be regulating that's classically obvious in the in my own country a struggle over the way in which the regulators were completely toothless and and wouldn't been foolish rules because they're worried it might make the banks make less money ludicrous behavior they're so regulators i think it's too weak to do what you need to do you need to get a set of rules which lawyers and judges and fools that link is what i think we have to do is link the level of debt that can be generated to a borrower to the income of the asset the borrower is buying not the income of the

borrower themselves and make their high fos rule like for example saying you can't lend to a borrow if i want to buy a house more than ten times the income earning capacity of the property the and then take out this positive feedback loop we have between the level of leverage and the level of asset processes because that's really where the danger or the damage is done and we have to break that lincoln break that psychology before going to avoid falling back into yet another process. now do you think that we had enough credit breakdowns in the deal leveraging in the u.s. to. put us on a firm enough footing to get through the next downturn without more do you leveraging know why absolutely not we delivered from one hundred ninety percent of g.d.p. to about one hundred sixty percent and we're now starting to see rausing dip compared to income once more in america if you go back to the great depression the great the peak the peak level of debt was about one hundred sixty percent fell down to about

after the second world war about thirty forty percent so i'd say at the moment america's caring like literally a year's worth of g.d.p. more debt than it should be carrying if you don't really come out of this in a sustainable why so we were simply a total catastrophe but we're now back into doing exactly the same unsustainable stuff we were doing before the subprime process exploded and expecting to get a different result. now how about europe steve you're in the u.k. right now so what do you see and where is the economy headed in britain and the eurozone well you britain's doing it because they back leverage ing up one small group they stole a couple of play cards out of the struggling pac and it was a demonstrator we had what we called the first time in this game which gave people in the first time extra money to go and speculate on the market nickname that the first time venda scheme over in england of course they had what they called help to buy and that helped to sell because again giving money to. as and saying go out

and buy a property they take the money to the bank the bank is believe is it up ten or twenty times more and you get cross inflation going on and then what happens is everybody's borrowing money to buy housing that's turning up as extra money in the economy and it gets stimulated out of the rut that it's in it looks great while house process continue rising but it is certain point people look at the process of it and so on this market at all unless you're getting enormous amount of money coming in from the you know the saudi arabian and russia and all they hear all the chinese back in australia or canada the impetus runs out of the economy and you fall back into a downturn again. that was steve king professor of economics at london's kingston university. time now for a very quick break but stick around because when we return a carl denham girl is on the program carl sat down with me earlier to discuss the recent apple i.b.m. deal and in today's big deal edward harris and i are discussing the chinese and

mobile market and the future of apple's growth in da part of the world and other places plus remember you can see all segments featured in today's show on you tube at youtube dot com slash boom bust our teeth and on hulu at hulu dot com. now before we go to break here our look at summer closing numbers on fellow come on back. you know margaret mitchell author of gone with the wind one with enough courage you can do without a reputation but in a highly emotional social media driven world it was extremely concerned sometimes hysterical residents of twitter and the like hash tag their outrage thousands of

miles away at the slightest deviance from what. which they all have tagg agree is the only acceptable course well people ya'll are going to nato all a lot more courage. right on the scene. first street view and i think that you're. on our reporters' twitter. and instagram. they want to so this is back to the middle ages a public event. as you know they derive their ability to very very rigid interpretation of the law if you look at

a country like egypt for example saudi in all the very high poverty the reason this might also be i think is because the religion itself calls the boundaries and the board and that's the kind of suppression if you look at the liberal the state of a country like turkey almost ninety nine percent muslim. because of the. economic down in the final. deal and the rest because i. believe it's really.

just three years ago the european union was spending several hundred billion a few. underestimation. over. twenty sort of two sometimes fifty percent of the money spent on corruption. and also now edward snowden's n.s.a. revelations that the u.s. government is sucking up your data whether or not you're a suspect but now we're. turns out that certain functions on apple mobile devices might be monitoring your personal data as well what should we think of this well i want to get karl denninger is take on privacy issues and mobile computing as well as understand where he sees the direction of the u.s. economy heading denninger is a libertarian blogger at the market ticker and author of the book leverage about

the two thousand a financial crisis i first started our conversation by asking carl about apple's deal with i.b.m. and which i.b.m. will provide customer service in the corporate arena for apple and i asked carl what apple and i.b.m. get out of this deal and what effect it will have in the corporate arena here's what he had to say. i don't think apple gets anything out of it to truth. maybe think about apple's basic business model with regards to their or their devices that are covered by this which is the i phone and the i pad mostly they're simply replacement models when there is a problem so you you send somebody on the field they give you another one or you send in your device to give you another one really isn't any onsite repair so the the concept of on site support is well limit it would be the nice word or out right fraud would be the better word here the the one thing apple does get is

an army of sales people to go into corporations and try to push their products. whether or not that has any kind of relevance to their sales rate is another thing entirely i think the answer is no i.b.m. on the other hand has a problem and i think i.b.m. is really the reason that this deal got done demeaning to do with cook and apple and that is that i.b.m. has become a company that has become one of financial engineering as opposed to innovation if you look at their results over the last couple of years what you see is decreasing revenues and increasing earnings per share and their way they're funding that is through buybacks so essentially what they're doing is loosing e.p.a.'s which course looks great to wall street but is masking agent cherish it in their core business so my suspicion is that what you really have here is a company flailing around looking for somewhere to stay relevant in a market that shifting away from them just as it did back in the oh the one nine hundred eighty s. and one nine hundred ninety s. when the mainframe kind of fell out of favor with

a lot of corporate users now it comes to mobile technology there's another angle that we talk about a lot here and that is privacy and recently the tech the tech side ars technica noted that functions on album mobile devices allow for monitoring of personal data saying that's kind of scary now karl i know you wrote that you wrote this on marketing or this is your your purview here so what's your take. i think this is one of the most serious things we've seen to date in the area of privacy invasion the impact of this especially on regulated industries say much less ordinary consumers cannot be overstated essentially what apple has included and let's not kid ourselves here this came directly from cupertino this was not something that a hacker put in the phones or in the devices this came from the manufacturer is a means for any device that has ever been paired against that particular apple product to be able to access information that no one should have access to even

wirelessly on a permanent basis in less you wipe the unit completely clean so the danger here isn't so much that i can break into your device just random willy nilly instead if for example you want to plug your phone into a computer because you want to sync some music to it or you want to update or something like this the key that gets stored on it computer is valid permanently and when it is used it allows unfettered access to data that is supposed to be protected and this access can be made without having to physically have the phone in your hand so it's rather hard to use this over carrier connection because of the way the carrier networks work but over a wife i connection it's trivially simple. to for this to be included by apple in the operating system is absolutely outrageous and where i see the real risk here is in aruba get regulated industries you have i pads for example that are in medical

contexts you have these devices in financial industries and these companies have hard legal requirements to protect this kind of information bring to be made available is used just breathtaking. so you obviously think this is intentional ben but do you think companies like apple apple could be working with the u.s. government to create these kind of back doors that can be exploited in the event of a you know a terrorist needs to be monitored maybe but you know there's a there's a basic problem here which is that if if i want to get access to someone's data and i have a legal way to go to do that a subpoena or whatever have you and i seized the device as long as the device isn't encrypted it's very trivial for me to actually pull the data right out of the flash memory and all the manufacturers make it very easy to do and it's it has to be because how else would you access the unit in order to make

a repair to it for example or update the software so the problem isn't there the problem is that there really isn't a legitimate purpose for these kinds of back doors other than to make possible spying of some form in and you know there isn't any smoking gun that tries this to request from the government or anything like that but according to this article there is evidence that these tools have been continually updated they were put in the firmware during a testing cycle you know five or six years ago back when this was a new device and apple was trying to make sure everything worked and out it out it out you know these have received regular maintenance is diversions of the operating system and been updated so have these tools been updated which means that they're under active development and they didn't get there by accident they're being actively maintained an improved by no car to i os devices encrypted by default now. no and that's one of the things that you have to understand about how this works is dead one of the problems with this particular sort of thing is it bypasses

encrypt ssion that you would otherwise think is there most people think if they put a password or a pass code on their phone that that encrypts the phone that's not true all that goes is lost the screen so that you have to put in some kind of a code in order to access it to actually encrypt the device you have to go a step further but the problem with this kind of a tool is that it bypasses even that encryption because when the phone is running it has to have access to the key in order to be able to read the data in order to make it work so if you have a tool like this that's running in the background all the time it has access to data that would normally be locked even if the unit was encrypted. that was karl denninger author and blogger marketing for time now for today's big deal.

big deal done with the wonderful work that's in now today ed and i are discussing chinese mobile markets and the future of apple's growth now apple has moved into china where their revenue has surged twenty eight percent despite their expensive products in fact i phones quarterly revenue in china matches some of the top companies in america check this out interesting grab apple's i phone quarterly revenue was over nine hundred billion dollars equal to both mcdonald's in color combined and it's even more than amazon's revenue which remind ourselves everything she was just a computer processor so as you can see the i phone is a cash machine for apple and we wanted to get a handle on why apple is in china in the first place so ad why is outline china and first place what's happening well there in china because it's a huge market but you know there's two sides of that one is that the i phone market in traditional market in north america and europe is fairly saturated there

are only so many upgrades you can get out of people there's no growth left all the people who are upgrading their phones and going from feature phones to cheap the mobile handsets and those are mostly enjoy the not necessarily going to a i phone why is that it's because you know android cost is that a lower cost than the i phone my going to get a subsidy. older phone for may be zero dollars if you do a two year contract in the united states but in europe the subsidized model is not as much in general we're not going to see the growth so the growth is now. in north america europe but it is happening in china they just did it. with china mobile and that's why they are in that market in a big way and they're pretty successful and there's a question is there a limit to growth in china when does the market become oversaturated we have for me i think that you know there's a halo effect right now for apple and this is what we saw maybe four or five years

ago when the i phone first came out that people really liked the product apple's cool said it was so you can see all the people coming in at the top of the market in china wanting to have it on the phone but how many of those people are there in the chinese market at some point you're going to run into a growth problem and either you're going to have to cut your margins and therefore go down market or you're going to have to accept the fact that growth is going to slow so i think within the next say two years do you want to see some seriously slowing growth in sales in china ok now we've seen cheap decently powered mobile handsets start to challenge the profits of apple and samsung like you mentioned and people as smart phones are also waiting longer to upgrade and buy new ones not so good so how does apple's news out of china kind of rates of the larger mobile market in general and what's trending there well i think that we will see you know we're not just going to go after china we're going to go after the brics as well

and we're going to use this halo effect to get in there get in the premium price model we execute incredibly well in terms of how you know how we deliver our product and. how well we do in the marketplace and we feel that we can do it at the high end level and i'm going to continue to do that strategy until we get some products that come on board but again you know that strategy can only go so far you know china is the biggest market there but you know you have russia you have in india. brazil eventually there are only so many people can buy those products and then they're going to have to come up with a new product. in a number of years the i pad sales are going. nothing in terms of new products. right now and well that brings a bigger question is apple anything outside of the i phone do they have anything else in the back burner or is once they sold all the i phones they can tell every

country they kind of they done right will think about it what was the law. that you remember that apple came out with except. i mean i can't remember anything to come out with since then and now they're coming out with this phone the five point five inch i phone i phone phablet but you know obviously everyone's already in that space so that's not really end of it maybe they can come out with some wearable technology but i guess everyone's already in that space so there's nothing. in the way shape or form innovative that they can market and i think that's very much dependent upon the i phone going forward and that's a good thing for a company to do so sounds like a pretty bearish well i think that there's still a cash machine as you were saying earlier and so for the near term i think they can do pretty well but i think their growth is going to stall again as it did earlier this year thank you as always i'm sorry tech thursday. that's all for now but we

love hearing from use of things check out our facebook page and these tweet at us at aaron aide at edward and it's from all of us here in the us thanks for watching we'll see you next time. join us this month in fossil own as we follow the international teams vying for receive glory on. one home time either. delve into the mysterious cost of a cult classic under sponsorship deals away from the heart clearing the road first big brother. said monday cheer on chief we've done the future.

experiment on where you. can play. play. play.

one of the new whole show common law should be made community college face i just i feel alone. a pleasure to have you with us here on our team today i'm sure.

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