worried that our debt levels are 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 want 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. and pitiful with all things saying it's the level of and the rate of change and like has the acceleration of private debt that really matters and. the the private debt factor in the economy that's why we haven't seen we didn't see it but didn't see the crosses coming it's what 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 and it's rising again now that's why this slump occurred the decline and it that's why the boom is starting again now the rise and it but and measurably 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 private dick gets and what you want back to not in the not in not is recession when you came out of that in america the private debt ratio is about ninety percent of g.d.p. and it doubled until this process and then it fell by 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 a tawney increase in interest rates or a couple of companies going bankrupt carrying the debt levels they are because they conned minister all over that 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 back in the days of the with the great depression the economy has never been so fragile because the level of profit has never been this high. now what about fiscal policy here we've come to think of deficits isn't dodginess meaning they automatically go up in a bad economy and 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 stabilisers 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 conditioning similar thing for government spending if there is a decline in the economy then the amount of profit thing and wages being unfolds a tax that 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 saw 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 those automatic stabilizers there but they don'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 picked that 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 e.u. is now complaining of it's a bit of success because the right of decline in the economy to slow down in a couple of economies trying to get of you know a couple of pulses that taking credit for the fact that they conned drove the

economy deeper than they've already done and therefore a small revivals going on so yes it did this question of 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 guy who made by 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 us but this time it's in the auto markets not the mortgages mortgage market so how do you stop abuses while still granting necessary access to credit for those who need it. 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 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 mortgage your house with 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 ought rather 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 with 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 accomplish and to a borrower 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 dying where the damage is done and we have to break that link in break that psychology before we're 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 we delivered from one hundred ninety percent of g.d.p. to about one hundred sixty percent and we're now starting to see rising debt 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 got a year's worth of g.d.p. more debt than it should be carrying if you can 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 is doing ok because they back leverage ing up one small group they stole a couple of play cars out of the struggling pac and it was a demonstrator we had what we called the first time in this game which gave people . 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 nickname 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 them so i combine this market at all unless you're getting enormous amount of money coming in from the you know they sold the arabian and russia and all they hear all the china is was a 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 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 it you tube dot com slash boom bust our teeth and on hulu hulu dot com. bust

now before we're going to break here are a look at some of the 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 hashtags their outrage from sal's of miles away at the slightest deviance from what. which they all have tagg agree is the only acceptable course well people y'all are going to nato lot more courage.

they want to so this is back to the middle ages a public event. for that and as you know they derive their villages from the very very rigid interpretation of iraq if you look at a country like egypt for example the sound being on the very high poverty the reason this might also the i think is because the religion calls the boundaries. and the board and that's the kind of sense of russia if you look at the liberal the state of a country like turkey almost ninety nine percent muslim up economists. led . led to the series of explosions going off places trying to play the players play polo going to be going to want to be

a lot more to the story changing every minute lead the law the web of my old love like the legislative listening to say the gold plates cases most elite clubs lead sometimes from nothing and the lead this season and it's going to stand up to it's not just me about the story because you'll be just if you see a stage eight looked to be a little above the jungle on the selling legs splayed. at the. leg it was terrible they come

up very hard to take i love to get along here the club has never had sex with the perfect there's no. play. list. of the. just three years ago the european union was spending several hundred billion a few are also in the public procurement interest to michele that each other

through. twenty is sort of two sometimes fifty percent of the money spent on corruption. 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 it 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 and eight 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. you know the guy who gets anything out of it to treat truth. if you 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 you know there are a whole slew. there are simply replacement models when there is a problem so you you send somebody on the field to 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 outright fraud would be the better word. 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 using e.p.a.'s which course looks great 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 site ars technica

noted that functions on alpha mobile devices allow for monitoring of personal data the i say nothing kind of scary now carl i know you wrote that you wrote this on marketing here and this is your your purview here so what's your take. i guess 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 a 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 that 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 a 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 for it 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 that 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 up 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 they don't 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 that 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 at marketing for time now for today's big deal. big deal done with the wonderful person 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 weighs as to 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 add why is outland 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 twice it's because you know android cost is that a lower cost than the i phone my going to get a subsidy. older phone from to be zero dollars if you do a two year contract in the united states but you know 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. 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 school 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 smartphones are also waiting longer to upgrade buy new ones so how does apple's news out of china kind of rates of a larger mobile market in general and what's trending there well i think that. 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 india. brazil eventually there are only so many people can buy those products and then they will have to come up with a new product launch. in a number of years the i pad sales are going. nothing in terms of new products. right now well that brings a bigger question is apple anything outside of the i phone do they have anything else in the back burner once they sell all the i phones they can tell every country they can or they don't 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 i 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 innovative maybe they can come up with some wearable technology but i guess everyone's already in that space so there's nothing. that's in any 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 it 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 you said please check out our facebook page and these tweet at us at parenthood at word and it's from all of us here in the us thanks for watching

we'll see you next time. join us this month impossible as we follow the international teams find the receipt gloriously. on homes how much we. delve into the mysterious cost of a cult classic underscoring he pulls away from the heart clearing the roads for speed over. technology j h g r g we've done the future. we chase profit very large very attractive and now very globally recognized source

of oil for the world and into the future the world's cheapest and best petroleum deposits have been mined out we have to use more energy to get this energy industries grow like a cancer in each of these squares it's ten kilometers where. and goods whole area is slated to be claimed that's your drinking water that's our wildlife service that's where fisheries we chop stop this is the end game when it takes two tons of sand to make one barrel of oil you know here at the bottom line and that's where. we chill ourselves. you surely know where you.

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a legal shall we leave that may be. hard to see pushing through although your party there's a good. shoes that no one is asking with the guests that you deserve answers from. politics. fish farms waters do you have a pond to me because. i saw you spread all over the food you have in the whole. drama zone to nutritional inquiry furthermore those restrictions.

are really. what's inside the feeling. the netherlands prepares to receive more bodies from the mh seventeen disaster as experts at the crash site continue the hiring search for the rest of the victims. of the downing of the malaysia jet sees a relentless campaign against russia as the media follows the u.s. state department's lead while ignoring k. questions being raised by moscow. there's still no sign of a british journalist who's been reporting for r.t. missing now for nearly two days since disappearing in east ukraine it's thought he could be being held captive by kiev security. and. israel's ground operation in gaza.