tv [untitled] August 31, 2011 11:30am-12:00pm EDT
they'd be virtually every collection removed the clothes of the other maidens merchants believe the book goes on though you don't read this and shift it was hundreds put repercussions hundreds. at seven thirty pm moscow time these are the stories on our top stories i should say on our t.v. people in libya say their lives are now at risk from a mass of weapons falling into untrained towns as nato says it will stay in the region for security. police have identified two out of the three suicide bombers were brought down and struck central brussels north caucuses of the chant killing nine and leaving more than twenty wounded. the czech president compares the euro zone membership to being in a straitjacket as the clocks leaders grow ever more desperate to stall the debt
apathetic ravaging europe. and un go home say the swelling settlers ahead of september's vote on the recognition of a palestinian state as they prepare for a possible on finding experts say they might just be calling for an. up next is our debate so cross talk and this time host peter the bell and his gas argue over the role of the u.s. federal reserve amid the continuing to deteriorate ssion of the world economies cross-talk is coming up in just a few months. we'll . review the latest unsigned stem signals from the rooms. we've gone through huge earth coverage.
hello in the welcome to crossfire computable about the u.s. federal reserve has met and decided little as the global economic recovery slows now it's time for congress and the president to take things from there given the deadlock in washington and the debt crisis in europe is there any reason for optimism. to cross-talk the prospects for the global economy i'm joined by martin henniker in hong kong he's an associate director at the tight group in warsaw we have patrick young he's the executive director at divi advisors and editor of the gathering storm and in washington we cross to daniel mitchell he's a senior fellow at the cultural institute all right gentlemen this is crosstalk that means you can jump in anytime you want to very much encourage it but first let's look at the fed's recent meeting at jackson hole. in the end ben bernanke his
lack of an announcement that there would be for there. were so close and caviar there was something in it for almost everyone the fed can't tell us specifically what it's going to do but it doesn't specifically what's going to happen so the more specific the fed makes a promise from our libel the fed is have to go back to go back later and to change it because it promised us something they can't deliver on the questions behind any further action by the world's most important central bank remain and will dominate economic discussion for months to come can we do more well it's what happens if it doesn't and most of the economic policies that support robust economic growth in the long room are outside the province of the central bank. there is still the widespread view that the fed will act to provide monetary stimulus beyond the july statement that with keep u.s. rates at record lows for up to two years but there is also the view that it needs to keep something up its sleeve in case the euro zone's fight to prevent
a financial system meltdown is a. third european situation and there is the. recent lack of coordination. the insurgency on the markets the bigger issue but as bernanke himself has acknowledged there is no fiscal side to efforts to support the world's largest economy the role of the fed in this circumstance is largely to prevent further meltdown with american politics as divided as ever and the role of the fed becoming more contentious there isn't any signs of a strong recovery on the horizon most of churn i crossed party. ok mind if i go to you first in hong kong what do you think he was so coy about that because he says he said he still has some tools in his tool box is he really because john mccain easing really hasn't helped the economy grow at all it hasn't created jobs certainly made a lot of people rich on the stock market. well maybe it's not it's not
at all about recovering or or stimulating the u.s. economy but it may be much more about preventing the national bankruptcy of the united states because the reality is the u.s. is sitting on a fiscal gap of two hundred and eleven trillion us dollar and fiscal gap is really the number you need to look at not in making noise figures they use for official national debt numbers because they conveniently include a lot of things of exclude a lot of things from though official book so if you look at all the unfunded liabilities including social security medicare and many other items they have already committed to why they don't actually have the funding that's the fiscal gap calculation that's two hundred eleven trillion of missing funds is not too different from the situation there greece is in and if they don't print if they don't engage in many many for as i pointed out easing measures of their of their inflationary nation down the road then that's what then i face a national bankruptcy and on that note i would also say maybe as you said before
our federal reserve bank may not actually be anymore as a world's most powerful central bank that but that may be china now the i.m.f. predicts that china may be the number one economy in two thousand and sixteen the i.m.f. is always cautious in real economic output on this probably that might happen early and already is the number one car producer number one car market number one commodity consumer and so on so far saw rethinking the u.s. and western countries generally on decline china is rising and more of a crisis is coming down the road particularly in the west and wal-mart and the currency market because money printing is what they have to do to get out of this that for if there anything. in washington what is the role of the fed right now i mean again we look at quantitative easing part one part two maybe it will be three out there but it doesn't seem to have an impact on the economy except for maybe an area i guess you could make the case some people have kept the economy from going into freefall but it can't seem to grow the economy really is. the federal reserve
has a difficult position because the more they try to follow an easy money policy is just like pushing on a strang they just create more money but that winds are just sitting back at the fed in the form of access reserves deposited by banks the banks have more than a trillion dollars of excess reserves at the fed that's of course on top of the more than one trillion dollars that non-point actual companies are just sitting on the problem in our economy isn't the lack of liquidity in the world's awash in liquidity it just doesn't know where to go japan's long term prospects are terrible european welfare states are collapsing and of course the big government policies of bush and obama have made the united states very unattractive so i really think the fed is completely out of the picture all they can do is make things worse by giving us i guess nine hundred seventy s. style stagflation what america needs to do is dramatically reduce the burden of
government spending we heard that they grew about the giant level of unfunded liabilities in america we need to do the entitlement reform to reduce the long term pressure of medicare medicaid and social security unfortunately washington is a corrupt town so are politicians that like to make government bigger because that's how they make themselves better off ok let's talk about the political dimension of the second factor if i go to you in warsaw i mean what do you what has quantitative easing actually achieved except for make rich people richer. well that's exactly the point actually peter i mean it's really achieved up salute me nothing the thing that's interesting about quantitative easing is that when it first came out the fed had to make a large argument about the fact that the economy was in danger of deflation and actually there was no real danger of deflation even before quantitative easing the fact that america night has an element of inflation ok it's only a few percent but it's there has meant that effectively that gold club has had to
be thrown away from the armory of tools that they can potentially use and you're absolutely right peter i think the thing is that in many ways i mean the a shoe has been one of the fed trying to do two things first of all in the post lehman world there was this idea that we had to intervene to prop up the banks the best way to do that was actually through quantitative easing it was a way to throw money at banks that were flying during that we're going to try and of course the problem is the banks themselves weren't terribly intelligent so they took the free money they made a great deal of profit out of it and then lo and behold they decided that they'd pay huge bonuses to a lot of traders because these traders they regarded as being superman that was very unfortunate because ultimately if you give me money for nothing it's very very easy to make a profit from it and that's all quantitative easing has achieved for all of us what do you think about me again you know where are the also quantitative easing just created asset bubbles all over the world in the united states is exporting its
problems there everyone and where you are in china they're not very happy about that. yeah definitely i think that's that's the major risk globally that we're going to see and i live it with us in a financial crisis where everybody was panicking out of stocks and panicking out of cannot it is going for the perceived safe haven of the rest and southern bonds now to some extent this has happened again as a first reaction to the crisis and it was until people realizing that the crisis isn't quite over yet but some of that money has started to flow out and back into gold and service so i and i put arsenic so i actually gold and silver are down by thirty to fifty percent this time around they're recognized as a safe haven and we think other commodities and also stocks to some extent particularly in the emerging markets that don't have or don't suffer from this excess debt burden. this may be recognized increasingly as the new safe haven so obviously it's not a nice and i'll let s.
and rest knows what resides and effects of this crisis and there's this time around the bond market we're not we're not given all demand safe haven but more of a trap and one can be a physician position for that but clearly i think everybody agrees here the federal reserve policy is. particularly good ones are one thing i would say it's maybe also even too late to save now and then to example say draw because if they're if they're a u.s. economy and every u.s. government is trying to implement massive saving measures it will be very difficult because they increase taxes and cut spending what will be as a result probably we will be slowing down oil is in the short i mean i can't really afford that at this moment because the deficits are already out of control so i was saying some form of better reorganization s. as you have to happen in the eurozone is probably the only solution probably as western countries going forward but it's not all it's not there are a lot of emerging market countries goal of
a lot better ok. we're asking the fed to do much too much is it really the rainy day you decide to break the u.s. economy in the global economy i mean are we asking too much of the fed right now. the federal reserve should focus on one thing and one thing only which is to maintain a stable dollar european central bank actually has the right idea they have a single mandate now they're not maybe not doing a great job of it but their single mandate is to preserve the value of the euro we have what's called the dual mandate in the united states where the fed is supposed to somehow preserve the value of the dollar but also be an economic manipulator and somehow try to generate more employment and more growth and that's where we get these easy money policies and things like that which of course as we've already discussed don't really work or if they do work they give us inflation which of course is actually a net negative in the long run so the problem is the legal dual mandate isn't
that's a problem but the real problem is that the politicians and the central bankers can't resist the temptation to try to artificially goose the economy there's always this pressure to artificially lower interest rates because borrowers outnumber lenders and at the end of the day that gets you in trouble and unfortunately your solution is to do more of the same right before you go to the right patrick what do you think is the of the of the fed is it playing the right role in this economy. look the problem we've got is that for many years the fed told us that it was a brilliant arbiter of central banking it was the greatest central bank the world has ever seen i know what's happened is after the growth faded we suddenly have a crisis and the fed sits there and goes oh well actually we can't do anything to help you i'm terribly sorry it's a cult and it's a disaster for government ok we need time to let the government only the second now after
in india is available against sigrid central shirts in limbo and the taj mahal the same time as president but you're the famous results of beatrice a poet clothes are going to go on taj mahal hotel charges some rent hotel. hotels. in the radio the judge the hotels church in new delhi her. babyhood tones clearing collections among the plaza the imams maidens hotel the dog was a medicine ship and it was promised safer cash cow that's. the kitchen sisters. come up the phone to.
welcome back to cross talk i'm here a little to remind you we're talking about learning to use fact mum can say. ok and i to start off again with martin aren't you the interesting thing at jackson hall the informal meeting that was extremely formal it looked to me and i think it is a lot of evidence of burning. he is saying don't look at me anymore ok it's not my job it's you people in washington in your gridlocked politics this is why we have this problem and on top of it we have an election cycle going on right now is very lanky passing the ball and say look it's a fiscal problem too not just a monetary one. well it is by very clearly the federal reserve is to blame for quite a bit of it you know that i mean there isn't there's a big difference between a different federal reserve. and if you look at alan greenspan he clearly caused the housing bubble by inflating the economy by keeping rates artificially low and i
don't think that central bank has ever done a lot of gods since the inception of the federal reserve as a matter of fact in the united states or clearly a lot of the blame. should be going for them on the other end zone now or as we are already seeing this very high debt go out and clearly there needs to be some other political solution because i don't think there's any is a greater fix that as i mentioned apart from some form of debt restructuring but one point that was made earlier i do want to comment on also though is that the european central bank is any better and then the federal reserve in my opinion clearly that's not. the moment ruining their eurozone but bailing out every eurozone country they can find in every bank left and right as they're desperate again records are not of italian debt spanish debt italy is sitting on two trillion euros of their best know it's absolutely impossible even if germany was going to spend all their money that they have bought and italy still wouldn't
be enough to to keep rising afloat or right now the eurozone is in the process of total is integration as a result of those policies and the e.c.b. is already doing one it easing without even calling it at least in the u.s. they are polite enough to say oh we are going to do another round of quantitative easing although i said before work in the eurozone that they did you know without even announcing in their german and america ministers distracting people by talking about actually doesn't run the euro bonds while at the same time the e.c.b. it is actually buying our wired lee any any government bonds from. there can come up as i just mentioned so clearly no on of the e.c.b. is ruining the eurozone just as it's happening with the united. safe. country. isn't really a place where you would like to invest it ok daniel it's interesting that he is known as an expert on the great depression of the one nine hundred thirty s. and you know and not to defend bernanke your the fed in its policies but at least
we had in the one nine hundred thirty s. i judge gannett political figure known as franklin d. roosevelt and he could create a consensus he could get things passed in congress he always had a majority and that's why it's very different right now because obama is very weak and we have a very disorganized and i would say you intensely selfish congress i mean. it's really is just as much their fault as it is alan greenspan's or bernanke ngs. well a couple of things i would say first i would agree with what was just said the fed caused the current economic troubles by inflating the housing bubble and i also agree that the european central bank even though theoretically they have a good single mandate price stability these indirect bailouts they're doing are reprehensible but my main point is that franklin delano roosevelt extended and exacerbated and worsened the great depression with all of his spending the higher tax rates more government intervention i mean hoover and roosevelt between them
were two terrible presidents that kept the economy in the dumps for a long time now the only good thing i can say about the current political situation is that we do have gridlock because gridlock at least stops politicians from doing additional stupid things now and the long run gregg lock is a problem because we had desperately need to fix these entitlement programs this giant un kind of liability that the politicians have given us and that's clearly not an issue for the fed that's something that has to be done in the real sector of the economy so i am not optimistic i think america a less something dramatic happens we are basically baked into the cake as we say we're going to become another greece within ten twenty thirty years i mean i don't have the exact figure if i did i'd probably be a rich well street guy but i know that the the prognosis is very grim ok patrick
kennedy there are some pundits out there and experts who say that this is really a political problem ok obviously that's if there's a financial crisis going on here but it's there it's not it there's not a monetary solution is a political solution and it has to have leadership in washington and i would say in europe we don't have leadership in either areas. look the situation is exactly that peter i mean you know you and i we were educated on opposite sides of the atlantic but we both know those great stories that in the white house in the oval office in fifteen hundred pennsylvania avenue that's the place where there's the desk and the buck stops here and frankly it's sickening having to listen to the american president blame storming everybody else for the nation's woes before the united states of america suddenly get on the backs of europeans at least there is somebody who vaguely seems as if he's in charge of the picture in the united states of america the euro zone is a fiasco we have a series of politicians who got no concept of economics no concept of a commies and they're busy destroying the eurozone in one fell swoop and all of
this is ultimately only helping the world go east this is a huge political act anomic problem it's being driven by a large number of politicians who've got no idea what they want to do what they're trying to do all they're trying to do is desperately hold on to control and actually that's the nub of the problem because they need to get out of the picture they need to run away from it they need to help us entrepreneurs get there and be able to invest and the reason we're not investing in the united states of america at the moment is because in the new europe such as poland where i'm speaking to you today all the way through that wonderful crescent of russia all the way down towards china and hong kong that's where the opportunities are because people want to work they don't have incredible entitlements there are huge invented costs in the economy and ultimately all that the washington mafia is doing is killing the united states of america the greatest economy we've ever seen in the world and that's a tragedy martin here in hong kong joe biden was in china just recently to try to
mend some fences i know that there was a basketball game fight but. what do you what are the chinese saying behind closed doors to people like joe biden because the mess that the continues in the united states and in the euro zone impacts china in a really really big way. first of all our personally i agree this was what was said about videos on the usa and then about asians and save some emerging markets countries really wanting to work and looking at the physical economy so that's what's happening in china they are focusing on knowledge of physical production wanting to work running two programs whereas the physical production has really given way to the gimmicks of finance in a large part of the united states and then in europe as well so while they are focused on the production of course china now is clearly way worried about what's happening with the united states and europe not only because it's they consume one out of but also obviously there are there are quite
a lot of treasuries but i think the consumer market is playing the most important role and that's really the only reason why we think we're actually still buying treasuries so far because they don't want to let the u.s. follow a cliff at least not all of a sudden before they replace their exports because their local consumer market but that's what they have been working on clearly and i'm sure they would also have a mind it or buy it and that's. they are quite concerned about the u.s. spending and would like to improve the deficit situation but clearly i would think they have just been buying time to develop their own consumer market to address their own issues they have some local government in china something that also talked a lot of oil but if you add those two as a nation and they have much less. of a problem then the west and also tax revenues are quite strong so reacquire hopeful that a lot of their wealth that's not in the united states or in the eurozone will be having a chance to survive this crisis and will be getting out of it relatively unscathed us. q e three it's been hinted out there indeed we
do have the meeting coming up in september if he does go down that path continue down the path of quantitative easing is actually a level of desperation in your mind. bernanke is a political animal and he wants to keep the white house happy so do i think three is possible yes hackler him for here three years from now we might be talking about q e seven but it's not going to work the analogy i said before i like pushing on a string you don't achieve anything america's problems and for that matter europe's problems are in the real sector of the economy and governments that are too big governments that are depressing private sector economic activity governments that have giant unfunded liabilities which of course raise the threat of giant future tax increases which just add to the downward spiral in economic performance that's what needs to be fixed otherwise we're all going to be in this very dystopian
future where you might as well stock up on bottled water canned goods and ammo. phadrig same question to me if bernanke he does go down this path of q e three and we continue with this political gridlock in washington there's no reason in the world why i did locke's going to come doing it anytime soon would that be bernanke saying capitulation you know i do nothing else we could do he claims he has tools at his toolbox but i don't see him look that's a great point that's just been made the whole plan of this he's a polish. would a disaster he's supposed to be looking after the economy the last thing we want is a politician of this job and of course he's going to through anything out it because the one thing that i think is still in the d.n.a. of the democratic party in the united states of america is if you want to win elections it's the economy stupid and that's something which obviously helps. i don't wonder if a martin so that no one had ever heard of suddenly appear for what looked like
a very mediocre democratic pack and beat an incumbent president more than twenty years ago and right now if we look to have an incredible reversal of fortune that's exactly where we sit bernanke is going to do anything he possibly can to try and rescue the economy or at least to keep his political masters happy and the problem with out is ultimately he will do anything even if it's completely the wrong thing and it has no merit whatsoever to the general economy or the nine point one percent of americans who are unemployed of whom half of been unemployed for more than a year and that's a travesty ok gentlemen i saw no optimism in this program thank you very much many thanks and i guess it is becoming more so and in washington and thanks to our viewers for watching us here are keep see you next time and remember prost our rules.