today we're looking at six now most business television shows don't spend a lot of time talking about business ethics but we aren't most business t.v. shows so what prompted us to address this very subject fannie mae and freddie mac. yeah ethics and freddie mac. last summer a lawsuit was filed by perry capital and several other hedge funds which argues that the government is taking too much of the profits from fannie and freddie perry and other funds own preferred shares in the companies that they believe are worth not so small fortunes if only the government would stop how you know the profits now let me start back at the beginning back in two thousand and eight fannie and

freddie were bailed out by the u.s. government they were two of the biggest and earliest bailouts of the financial crisis hank paulson the treasury secretary at the time place the companies into conservatories shift and provided them with hundreds of billions of dollars in backstop financing there was one catch though the government never wiped out the existing common or preferred shares because doing so would have bankrupt bankrupted some major midsize american banks that would have been encouraged by regulators to use the preferred stock as bank capital cities now stranded capital structure rules would dictate that the common preferred shares should have should have been wiped out but the government didn't want to do that and hedge funds piled in thinking that these things had huge optionality values and they were right now once the conservatorship and now one is in conservatorship the government required it and fred to issue super preferred stock to the treasury department stock which they should do. they wouldn't repaying to the government before all other creditors at

a rate of ten percent so they jumped in the line now what do you know by two thousand and twelve fannie and freddie started accounting huge huge gains accounting gains now with the crisis behind it because it meant decided the common preferred stock should be worth zero and all dividends should go directly to the treasury you know stops along the way common in preferred stock holders would receive nothing that of course didn't sit too well with the hedge funds and they sued now why i think these funds are vultures and investors like warren buffett right there on your screen wouldn't be caught dead participating in the shares i do understand however that the hedge funds are within their legal right to do this but that doesn't make it ok. now with that said when it comes to ethics who really is to blame here the government shouldn't have allowed the purchase of these common preferred shares in the first place and had the elected officials done the right thing six years ago they wouldn't have found themselves in the legal battle they

are in today with the very guys that done their campaigns you don't want to be fighting with them right near a check now the government didn't want to bite the bill in two thousand and eight and wipe out the shares altogether and they're now suffering the consequences of those actions they wanted to save certain institutions and because of that political desire they now find themselves in quite a bit of predicament reports just so. dr ron paul is a former congressman and a three time presidential candidate paul has spent his career public service pushing for freedom and liberty both domestically and abroad now he has a prominent libertarian in american politics who's advocated for free markets liberty and non interventionism throughout his life i sat down with dr paul to get his take on the u.s. foreign and domestic policy and i first asked him to explain what concerns he has

about america's involvement in ukraine take a look. there are several first is i don't like our government getting involved in the fears of other people or leading only to trouble. the admonition of our early founders of the country that we should be involved in the integrity alliances throughout the world nor in the internal affairs of other nations so whether it's the middle east northern africa or whether it's ukraine i apply that principle so i do but not believe it's to our benefit i don't hell i don't think it helps our national security i think it hurts our national security i don't think it helps in this particular instance the ukrainian people so i think it would be. for everybody for us to just stay out besides we don't have the money we have to go borrow the money if we decide it we're already spending money on this effort in ukraine and i don't think we should be doing it. dr paul i take it you believe the money spent by

the us abroad would be better used to shore up our finances here at home now in your view what role does the u.s. government have in terms of projection of power or as a global super cop. well it's mainly to develop friendly relations with as many people who are that are open to it i was delighted with the collapse of the soviet system and i have been delighted with our efforts to end a lot of trade going on with not only the former communist nation of china. also with russia we've invested five hundred billion dollars in russia and they've invested four hundred billion dollars outside so there's a lot of trade going on to sort of defies the side dhea that a few people are stirring up enough trouble where they want to ruin all that so my effort in the world is to promote trade and promote friendship promote travel at the same time not be involved in trying to determine what's best for other people i

don't want to do that individual lives and i don't want to do that for other governments and other peoples in spite of the many many problems out there it's just impossible for us to do it if we don't have the authority and we're not going to be welcome and we don't have the wisdom to do it if things are to be done to help people who are in trouble overseas it should be done from our viewpoint of liberty it should be done voluntarily in the american people generally have been very very generous in helping people when they're in trouble but i want to i want our government our people to stay out of the affairs especially when they come to violence and and militarism now some people believe that u.s. political and military involvement in places like iraq afghanistan libya and ukraine is a big basically to maintain u.s. global wealth by maintaining us global a gemini you know what's your view on the on the subject. well i think there's a lot today i think a lot of countries you know are interested i think whether it's russia or china

when they invest overseas that goal may be the same and america's goal used to be that we were much more designed to have a global presence by trading and investments and you know having friendly relations but no i think now we have fallen into the trap of saying well there's some that was in the whole reason that we went into the middle east oil was an issue there were other issues as well but china and other countries are investing overseas and they're investing in oil and different things and and right now we're giving russia tremendous incentive to go in do deals with more with china and india and these other countries where if the market was working we might be able to better provide these trade agreements that and then when when when we give them trouble and people resist what we do do so that's why i don't think it's in our best interest now inside the u.s. we have a policy whereby the n.s.a.

collects data on u.s. citizens and mass allegedly to mine data in order to deter future terrorist attacks now are you concerned about this data collection and its impact on u.s. citizens and businesses well i would hope every american is except i do know there are some who i fully don't understand in our congress who say oh no we must do it this is the way we have safety or i mean this is more a principle of an authoritarian dictatorship that they have to know what everybody is doing no i am a strong advocate of privacy i complain so much because our own government is very very secretive in a free society which we had a much better freer society once before we're supposed to know what the government is doing but now all the efforts in washington seems to be to make government very sick. when we're not allowed to know what's going on if somebody tells us the truth they're charged with treason instead of looking toward to our constitution the

fourth amendment protecting our privacy actually when you have n.s.a. they're doing exactly the opposite so our government by the permission of the people the people have gone along with this because they have been complacent and think maybe they're going to benefit from this in the wrong people in charge so our government is not acting the way it was intended to and some of us are concerned about it not a fact i'm very optimistic with a lot of young people and there's still a lot of americans who have been complacent but they they don't say oh i want to give up my freedom because government going to take care you care of me quite frankly right now they're starting to realize the government all governments the more authoritarian they are the more inept they are and that's why you see collapses. so many empires around the world and i think right now we're not improving our influence in the world actually we're causing more harm to the american people and i want to tell you about this the united states has about five

percent of the global population but thirty five percent of the global wealth and this discrepancy appears to be contract and now what should the u.s. do if anything about that contraction. oh. i don't know what you mean by contraction you mean this thirty five percent is going down yes this is oh well you know it's i i'm not i would measure those statistics i would measure the measurement of freedom a free society that's productive and have property rights and trade they're going to because they produce more they're going to have more wealth that's what a free country does so if there's a discrepancy between the united states and say a country in africa which has no property rights and no freedom and no industrialization what they need is the concept of liberty and free markets and sound money in what property right. it's meaning contract rights mean so you don't want to say well there's an imbalance in the wealth and therefore we have to

redistribute wealth that is not the answer to the problem the answer to the problem is how does wealth get created and we used to know how to do this today we think wealth is created by the federal reserve if people come up short of the government was to spare in the people one something or we want to fight a war we don't have the wealth we're not producing so they think wealth comes from the federal reserve in fall asleep the foreign countries or us who are still take our dollars this was the foreigners take our dollars we're going to be doing this bad that's going to diminish our wealth so statistically the country is the more wealthy are going to have and they should never be held. down for that they should be criticized for having wealth if they've earned that wealth. time for a very quick break but stick around because when we return we're bringing you part to my interview with ron paul i asked dr paul how free markets would stimulate a faster american recovery rather than the muddle through economy we have right now

then in today's big deal edward harris and i are talking about a new proposed minimum wage and switzerland the u.s. is talking about ten bucks an hour swiss more like fourteen bucks an hour give me that for like twenty four quite a bit of money and as we go to break here are a look at some of your closing numbers a bell stick around. we'll show bush transports just a stick to the cutting board to make the most of the something the. signs flourishes in homes. are let's say. so. knowledge of danger here on r.g.p. target we've done the future. plug right

on the scene pledge the first triplet and i bring the target lead on our employers when they're leninist the lead lead on the mother. of the pledge lives are taking place there hard to take up the lives again the longer the club that sex with the perfect their lives let's play. lists.

lists lists leg lifts lists about the possible. facing the abyss ukraine is running out of options as winter approaches it was a crashing economy the regime in kiev he's hinted it may be looking to end the civil war but that may have already left the station. welcome back now to post crisis the american middle class has taken a hit and the american economy is still strongly down from the hole that it fell

into and what's the best way to get out now some people argue for government stimulus while others advocate monetary easing in part two of my interview with ron paul we discuss a libertarian perspective of how america might get onto its feet without relying on uncle sam to give it a hand. paul in a recent study of the world bank looked at income increases ranked by global income percentiles over the past twenty years and what they found was income rising by as much as eighty percent in some percentiles but stagnation or actual contraction of incomes for the poorest people those in the seventy fifth the ninetieth percentile globally which also happens to be the middle classes in developed economies like the u.s. now do you think secular stagnation in the u.s. middle class is a real phenomenon. i do but i really very cautious not to join those who say well what we need is more government to do redistribute the wealth and see what capitalism does this is not free market capitalism this is crony capitalism it's

collusion of governments and big business which is a philosophy that all governments indorse around the world right now this is characteristic if you destroy a currency you can expect the middle class to be diminished since we have the reserve currency of the world and we're printing so much money you can expect our middle class to get poorer and poorer and the poor get poorer so much poorer so if you look at the. distribution of wealth in this country you cannot blame freedom for you cannot blame free markets where you have to blame these collusion of big government big business and big labor this does not happen when we were a much freer country we had the largest in the richest middle class ever known to man mankind and that is what we need fortunately not only has america slipped away from this i even think since the collapse of the soviet system there's been too much of an endorsement of this that we need we need government and big business

working together and i don't like that because if that gets out of hand to be a benz itself toward more of a fascist system and i don't i don't think that's a good way to go now in your opinion one of the most important factors that can give america the best chance for prosperity in the future. well the best chance is to change people's minds about the necessity to work for a free society and this is the reason i spend so much time with young people and my message is well received on a college campuses because they're disillusioned they don't they don't buy into this thing the government going to take care of them they've spent tens if not hundreds of thousands of dollars on education and they're not getting any jobs so they know they can't depend on government they're sick and tired of the wars they think there's something very strange about the federal reserve system and just printing money out of thin air so the future comes from a whole generation of individuals who will become those individuals that will

influence in teaching and writing in the media and writing books and doing movies and in the last hundred years the influence has always been with big government that government will take care of us and they believed in k.z. in economics in the united states has in many other countries they haven't been socialist they have been more keynesians where they think that this mixture of big business and big government big labor that will have managers in washington will do it but no we have to get enough people in a class which is would be called you know the influential people to understand why it's in everybody's best interest to have a free society rather than dependency on government. dr paul we want to know credit based currency system so there is no limit to how much credit can be manufactured in such a system but how do we ensure that credit is not mal invested and that we sustain growth based on high return investments to prepare the country for the future is

absolutely impossible if the government distributing you know that the credit. but in a free market you can make sure that it's not mal investment it always will be there will always be mistakes you know for every hundred businesses get started in a free society you might have ninety five who will fail and you'll say well that was mel invested you know well yes but they had to pay they had to suffer the consequences if they didn't anticipate right or made a mistake and if they are successful then they have to be rewarded so it's all sorted out and that's so much different then when a bureaucrat the size and the politicians decide it and special interest decide it and money money people decided by influencing government that is very bad but mistakes will be made but if you want corrections and you want gross and getting rid of the mistakes immediately when the government passes the credit what happens are the bubbles are forming the mallets vestments form they're guaranteed and

they're bailed out and it compounds the problem and then when you need a correction you don't get it in that's why the world is becoming mired in an economic difficulty that will not be reversed until a lot more people understand what i'm talking about. do you think the fed's quantitative easing and zero interest rate policy are having a distortionary effect that will lead to mal investment in the u.s. economy oh obviously you know our government now our federal reserve owns one point six trillion dollars of bad debt i mean that can't be helpful and the housing market is still is in bad shape there's a there's a lot of distortion it's a little bit different in nature. because it's sort of some cities are worse than others. the malinvestment has just been papered over i just think of the correction that needed to be had a current state of the fed by one point six trillion dollars and a lot of foreigners still owning owning some of our mortgage debt i mean that's if

it's bad data needs wiped off those businesses need to go out but you don't need any may and freddie macin guarantee the guarantees that nobody fails guarantees that the problems will come and the corrections will be very very difficult now you just mentioned real estate and grow i'm glad that you brought that up because transcripts from a two thousand and two f o m c meeting show that the greenspan fed was worried about deflation after the technology bubble burst and that that and the bats was a key reason for leaving rates so low then now after the housing bubble burst similar figures have popped up in a responsible for the five zero rate interest policy today so mike my question is where do you see this ending and in your opinion destruction of the dollar and they can't keep doing it you know greenspan had low for too long and everybody acknowledged that they thought the correction was to make them even lower actually they're below one percent below zero right now they're negative because they're one

percent or so but you have an inflation rate much higher than the governments will ever tell us so you have a negative rate and they even want to legalize they are in me and a negative rate so if somebody wants to put money in the bank you put in one hundred dollars in a year later you get ninety eight dollars back well that's that's pure theft when it comes to it when you steal wealth that way so no it's going to destroy the dollar and the dollars pretty vital it's crucial it won't be an easy transition and you're not going to all of a sudden see another another reserve currency pop up and it be a fish on the market if the market had to choose on this they would pick an asset commodity for money and the one that's been the most popular for six thousand years has been gold. second place is been silver and that would restore the confidence and that's why the richard nations who are in better shape financially. and others they're buying gold even india is buying gold so this. there was former congressman and presidential candidate dr ron paul time now for today's big deal.

big deal edward harrison and i are discussing a big very big payday in switzerland now a referendum on when may eighteenth might put swiss minimum wage at twenty two francs and twenty two francs is about one thousand euros in about twenty four to twenty five u.s. dollars but it nice now now this proposal is made by the space that a ration of trade unions and supported by the socialist and green parties a recent opinion poll found that sixty four percent of voters are against the proposal put referendums can have surprising outcomes now cue the arguments about the minimum wage this government argues that they would it would threaten jobs and make it harder for young people to find a job in the first place now supporters they argue that the wage would help people

who work full time live decently and switzerland is of course notoriously an expensive place to live however can you tell me a little bit more about a social and economic position right now and basically what is the unemployment like in that country if there are positions pretty good in fact it's been. in the three to four percent range we have a graph here that shows there are employments been coming. and you know the been doing so well that their current has been appreciating to the point where the swiss national bank has had to buy up the currency. by a foreign currency in order to stop their currency from appreciate to switzerland is doing pretty well. ok you know when i ask you can you tell me more about this minimum wage itself like how did they come up with the number twenty two friends who they came up with in terms of you know the percentage of. the actual salaries so basically you know four thousand francs a month which would be forty eight thousand francs

a year would be about sixty six percent of the median salary within switzerland which would be about ten percent of the people who are actually below that number so that's where the number really comes from. because the question of course is that is that a really number because when you show you think about it fifty thousand dollars a year as a minimum wage that's a task that's pretty amazing you know switzerland actually has a pretty high standard of living in norway and switzerland have the highest. standard of living in terms of purchasing power parity they're the most expensive countries so really we're only talking about a minimum wage of fourteen dollars a purchasing power parity basis but nonetheless in nominal terms we're talking fifty thousand bucks and a lot of people who work in switzerland especially in industry actually commute

from across the board like in italy a lot of italians were in switzerland or here in geneva even the airport is not round the corner france and france are going to jump back and forth that would be nice so if you work in italy you can go work in switzerland make fifty thousand dollars a year and then come back to italy where the standard of living where the cost of living is a lot lower that's awesome sounds good to me. and here's my follow up with a minimum wage affects switzerland's job market and basically what sectors of the industry are these jobs in kind of that would be affected most by this minimum wage so we're talking like hotels retail things like that and you know this goes back to what we were talking about a few days ago which is basically that we've done studies in the united states. so when you look at the aggregate studies from one nine hundred seventy two i think to two thousand and eight basically most of the data shows that minimum wage changes don't have any appreciable impact on employment so if they were to institute this i

mean this is a massive hike the question is what kind of impact will we see on the unemployment because obviously you know a company that is employing someone has a small medium sized business and has to have a massive high might go out of business right so when you talk about a hike of this of this magnitude. are you going to get that sort of almost no effect on unemployment that we've seen from studies in the u.s. or is there going to be now edward you know this whole minimum wage thing this is a pretty aggressive way for the government to intervene you know just just make a lot of human wage never has to the question is is this appropriate do you think i think it really has to do with the social values because basically you know the people on the left there the green party and the socialist they really want to have a social safety net which is very. very strict that means that no one can fall through but at the same time what we're definitely seeing is

intervention by government in a way that really. tricks things for specific individual companies and i think that it's that trade off they have to deal with and i think that in the united states we feel comfortable with that kind of trade off with middleweights that we'll talk about this more it's a fun topic and i really like it but that's all the time we have for now you can see also intervention a show on youtube youtube dot com slash boom bust we also love hearing from isa please check out our facebook page at facebook dot com slash boom bust our teeth you can also tweet us at edward and h. from all of us here invest and watch to see the sun shall. with these economic ups and downs in the final months that the deal sank i and the rest of the life they meet casey will be every week

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