tv [untitled] June 11, 2012 8:32pm-9:02pm EDT
reportedly has to cut back after a decade of overspending on i guess a nineteen global know it all doesn't come cheap we'll tell you what we think in todays loose change let's get to today's capital again. so when we talk about bailouts or bank recapitalization or rescue plans what usually capture the headlines are dollar amounts the names of various abbreviated technical vehicles for bailouts be them the f.s.s. for the s.m. there is usually mention of a country's top politicians a technocratic commission or international organization thrown in here or there is usually a merkel somewhere in there but when you get into the actual nitty gritty of what's
behind titles like a stability facility or a so-called solidarity fund are you really looking at something more like this. solutions that channel the workhouses of the victorian era of the dickens novel in their conditions this is all over twist as they were depicted the workhouse which was where the poor had to go for help with food and a bed and they worked for it but life was intended to be so harsh that only the truly profoundly down and out would apply the work was so bad that it would deter anyone who could avoid it from coming and it would punish those who sought help this was work like breaking stones or breaking bones well it surely seems a fitting comparison for bailout programs that impose more loans on countries and harsh austerity on the public begging for scraps only to be met with what optimus
might call tough love look. yeah don't ask for more when the terms are this bad this is the comparison that younis verify makes between the workhouses of a dickens novel and these so-called bailout funds he's here to tell us how it works and also how spain is going to fare entering this so-called work house also what this means for greece ireland and portugal and their crushing plights he's a professor of economics at the university of athens and author of the global minutes america the true origins of the financial crisis and the future of the world economy and we are so how be to have him on this show on a day when there is so much news going on in europe in spain and that has major implications for greece so first of all thanks so much for being on the show
professor good morning it really is all mine so let's start with this spanish bank bailout because that's what's all over the news and i know you've been writing about it this is a bailout for the banks but the funds are funneled through the sovereigns so this increases the debt for spain possibly by as much as twenty percent according to one number i saw in the financial times so my question what does this do to the spanish government's solvency going forward this bank bailout. it simply ensures that the spanish state is insult and this is our love all over again let's not forget that isn't why island is in the workhouse of the year percent is not because the state overspent but because its banks went bust and their losses were transferred onto the shoulders of the irish taxpayers and given that either could not bring its own money it had to borrow and borrow and blower on behalf of banks
at some point the solvency of the irish state simply fell through and island hope to resort to the workhouse of the sort of this is precisely what's happening now in spain the difference is that the death of the of the spanish state approach exceeds a trillion euros so i'd like for islands that would look at the workhouse and forgotten their spain is the thawing of the backside of the uterus zone it effectively is going to be lead to the disintegration of the eurozone if matters that allowed to proceed the way they're proceeding wow that's a pretty bleak prediction i know one time you said that spain was too big to bail out do you still agree with that. rather than just look at the numbers smaller than a trillion years how much money does the a percent have to play with at most two hundred billion yeah add to that the fact that there is italy waving around the corner and the guardian in spanish disasters are highly intertwined and i think you have you have an answer so you don't think
that there is a way to to salvage spain i want to get a little bit more into the details of this spanish bailout although i know that we don't know yet where the money is coming from exactly but if you look at the bailout funds one of them is the as and one of the concerns about this fund the european stability mechanism is that it's considered a senior creditor by european authorities meaning that it has to be paid back first if spain defaults on its debt meaning that investors who buy spanish bonds now risk being behind the s.m.'s spain can't repay what does this do to spain's ability to borrow. it diminishes it it increases the yields on the spanish bonds increases the cost. which the spanish government will have to borrow already that course is where to put it so it's a look complete get them in spain is out of the markets effective now and europe
has no plan as to how to refinance spain's private sector debt and public sector that now there's another dimension that this perhaps the most significant which we tend to forget and that is that spain is in the recession so by posing. the fear so stated now which is what is happening already the spanish state is going to load more than ten billion of its budgets very shortly followed by another ten billion that is going to accelerate the recession the recession we accelerate the capacity of the spanish states to. go to a sufficient axis not finest of itself this is just that it's that deflation of the cycle which is creating out of control and one thing that i want you to elaborate with that is that on paper people have said that spain's bailout it's not subject to some of the tough conditions that ireland or greece or portugal had to
submit with their bailouts but you brought up an interesting point which is the austerity that they have already had to submit to it so is this really so much better than the other bailouts or is it more the same. on paper it is better on paper spain is going to get up to one hundred billion dollars its banks without any new austerity measures but in reality that is not so because that cannot forget that this is not the first bailout for spain the seat of the last few months the first official bailout there was another one of the arrow which was effectively mr dragging out there you see been found put printing hundreds of billions on behalf of spain providing it as you could it be to the spanish banks so the spanish banks that borrowed from the e.c.b. at one percent could then lend i don't much higher than that it's the spanish they it was a way of ensuring that spain were to remain liquid the spanish government of course
but for the mr draghi to effect that liquidity good vision of the spanish banks and therefore in directing financing financing wondred. he exacted from both their own end the three matter very see the use of the measures that were put in place over the last two months so the austerity measures have already been place what has happened now is that instead of simply financing this banished state through. in that it gives its banks now that this death that this race between him and sold them as they've been is all in banks it's clear for all to see the europeans are also providing loans in spanish they directly in order to recover dollars that banks the same banks that were being used up until very recently in order to finance really and the arrow of them this from the state now if that sounds complicated it is because it is an extremely emain complication which we have in
europe instead of a national plan for getting out of this whole lot to be clear what you're saying which sounds absolutely insane to even the average person is that you have the banks propping up the state and also the state propping up the banks is that right . well think about it very simply you have two really bad swimmers extremely weak in stormy waters clinging on to each other sinking very fast towards the bottom of the sea. this is what well your analogy was much better than mine i thought big definitely sums it up and paints a vivid picture speaking of bleakness i want to get a little bit more into your work house comparison to really give our viewers an understanding of the so-called stability fund the f.s.f. which is another one of these bailout funds that is likely to fund this vanished bailout you compare it on on one hand to a c.d.o. which is a collateralized debt obligation which anyone who knows about the two thousand and eight than actual crisis knows and that conjures up how much have they could those can cause but also you make the comparison to the victorian workhouse for those
maybe more historically oriented like we saw in oliver twist i played a clip so how did these comparisons play out to listen ok let's take these two groups one of the time. when greece or the car accident in two thousand and ten. the european union in its wisdom decided to create a bit out forms be of the same google which was to convince the markets that you to be standing behind us we could members and therefore hoping that it would never be used. but as an additional safeguard germany in particular insisted that the episode would become very an advertising for for all countries like especially delhi and spain that make think of using it as an alternative to financing themselves in the markets so they wanted to put it there but they wanted at the same time to make it very unattractive so that the large countries like italy and spain would want not what you do use which is a little bit of
a contradiction. turning out of the to the to the structure of the effort. and my analogy of the c.d.o. think about what was this the oh it's the earl was finance a law. debt instrument it was a paper title which it was let me look like it like a box which contained small pieces of other people's deaths including governments companies mortgages and so on each one of them with its only interest rate and its own default rate all that was packaged together it was so complete get the nobody knew what was inside and they were selling like hotcakes and deal of course that the bottom fell out of the market now the f.s.f. borrows in the international money markets and provides bailout funds by issuing its own bonds those bonds are like studios because they comprise a little piece of that one by germany one both france one by one by the know and so on each one of them with different default rates each one of them we've given
a new that is an interesting plea one of the company that this is security days and bulk of that you know a small chunk of those percent bonds is spain right so in other spain is appealing because the for loans yet is becoming sort of it moves on one side of the equation to the other. the really it can no longer go and the those chunks within the episode ones that they used in order to provide bailout funds to greece the portugal and now to spain into becoming. a borrower from the epicenter and that has . even will. issues that are not going to affect we are simple and just like human but i was to be observed wow an interesting comparison this many years after lehman collapsed we'll have to see if the rest of europe is going to suffer the same fate because when we get back after the break i want to talk to you about what this spanish bailout means what these sinking swimmers mean for ireland for greece for portugal so we will have much more with you on is very focused professor and
thank you. so before the break our guest was talking about l.t.r. owes the e.c. be three year one per cent loans meant to shore up banks and i just want to point out something to our viewers that's important to remember because while the e.c.b. and governments try to redirect money to insolvent banks and certain countries it's important to remember that the money is moving with in the eurozone banking system too which affects the dynamics of what this chart essentially shows is capital moving out of the banking system in italy and spain and at the same time deposits are going into two surplus companies in this case germany and the netherlands so
this all compounds the problem so it's just another element of this to consider as we talk about the broader implications of just this latest news for the broader euro zone yanis varoufakis professor of economics at the university of athens and author of the book you see here the global minute america the true origins of the financial crisis and the future of the world economy is here telling us everything we need to know about just how bleak this is so we talked about spain before the break i want to ask you you said on paper yes spain looks like it's a better situation better conditions for this bailout but in reality it's not that different than what we've seen with other countries so the question becomes should ireland greece portugal should those countries try to negotiate the terms of their bailout or they is spain submitting to the same thing they did when he did shoot you are going to be true every european should reject the kind of pursuits
you mean with europe who goes every year to. the new women's. everyone from the i mean all the way up to finland and from ireland all the way down south east towards greece is going to suffer and there may be some beneficiaries at the moment let's not forget that germany's borrowing costs are almost zero these days and also there is a cut of the flight as you said in germany from which german banks are benefiting but the it takes a completely foolish disposition to think that these benefits are sustainable for a country like germany once spain becomes a lost cause like greece ireland for example it would be absolutely impossible to maintain the euro zone and when that happens the breakup of the euro will mean that countries like germany if we use its export markets in particular china if it has to reconstitute stage market invited and then suddenly all the monies that are
being owed to the central bank of germany by you all the better sense of banks and that is what that diagram of yours showing is simply never going to be returned to the bank we're talking about a complete at that implosion of the whole continent and as far as this sounds horrible as far as revolting against that implosion against the e.u. against troika bailout terms you've written about the iris referendum this was a chance for irish voters to reject the e.u. fiscal treaty and they didn't you use in your view was that they were blackmailed because they were told if they voted no the money from the troika would cease they would be cut off so now we're looking at a greek elections there on june seventeenth in your view is this the chance to send the right message to brussels and what to the message to look like as far as the election results in your view. well indeed the irish people were black means they were told that forget about the fiscal pact the fiscal pact that we were voting for
or against them is nonsense that we all know about your video. but if we say you know then ireland is cutting itself off is some funding in the future and it's not a hard job in dublin in cork to fix european policy let the germans the french do it we should simply play the role of model prisoners and continue to be funded so that you know island does not fall through the cracks like it breaks that now the same strategies being pursued as we speak in greece the good people who are going to the polls on sunday have been told that unless you vote for barclays that will. adopt the more the prisoner strategy and in particular the conservative part of the new democracy and this wasn't sparkly. and if you vote in a party which is recommending. that existence do that due to the policies that are being pursued at the moment then effectively greece is going to be thrown out of
the euro all sorts of things will happen this is precisely the outage scenario what would it take for this scenario to break down. the greek people on sunday voting for a party like series or the radical left party or at least not to vote for the bailout terms and conditions far it is we should affect only asking of greece to do something that is not possible to do and that is stick to the terms of condition of its bailout which neither we as greeks nor of god and his angels if ian they were to send them on athens and form a government could possibly stick stick to it because the only just a manageable and just a follow up we just haven't met but i do want to ask you this because you are great this is your country my question to you know after the election face here is that does get the most votes what is it about this party that gives you hope that it would not end up selling out greece like some other politicians are you have. well
i don't trust any politicians have to tell you that but the only reason why i'm. giving them my vote of confidence we confidence confidence is because they're saying the right thing they're saying that the only way greece can stay in the euro and that gets should stay in the euro because it will be apocalyptic to get out is if they say says no at the time of the terms of if you want to could go and conditions about being placed on it but spain up on portugal from ireland and it's the only part you know that says that so they will have my vote even though i think i will only manage to vote for them but i don't need the rest of their electoral votes i know you haven't been doing this he asked about that vague manifesto but i every day of being on their show and laying this all out for us thanks so much that was the honest fair fox professor and author.
let's wrap up with loose change let's come back to the united states we've been over on the other side of the atlantic not that you can really separate them because what happens there affects us here but let's talk about the u.s. situation let's talk about the mortgage crisis first let's back up because when you usually hear about eminent domain stories the narrative usually involves a battle usually goes a little something like this. the town argues they're offering more than is required by law to those who choose to relocate the township is providing them with thirty five thousand dollars over the value but the problem is if this point the value of these half demolished homes is close to zero. who eminent
domain in a world where we witnessed a housing crisis will listen to this now a mortgage firm wants local politicians in california to use eminent domain to solve the housing crisis reuters reports that the move would keep cash strapped residents in their home by condemning their mortgages instead of their houses and the mortgage for and would use private money to fund the public condemnations of underwater mortgages it sounds like mumbo jumbo the bigger picture that i take away from with this is how crazy this is got an eminent domain is used as a gauge to indicate how much a country values its citizens freedoms and the fact that it's being used in this way that seems like such overstepping such a derivative of eminent domain to me seems really alarming i mean i agree with it's not supposed to be used for this certainly but i think it's what i think is crazy about this is that it isn't even that this is being used to correct the problem that started with the market this is to correct the problem that was created by the
government trying to correct the problem so it's all these problems that are perpetually one over the other if they had all the schools all back to the fact that. you could go as far back to the credit boom but the point is banks have assets on their books that are they need to be mark. you need the falls to happen in the bankruptcy as all these things and the things be allowed to happen other reach into the pocket for eminent domain to try and solve this problem i just find a reason it's really absurd and where do you draw the line even if it was well intentioned i mean i just don't think you can i mean i don't mean as opposed to be there to create economies of scale you need for some reason if the larger society benefits by have by running a highway through some you know some farmland confiscate the farm then you give an overpriced but this is just i mean it's just crazy but i agree it's so we agree so let's move on back in two thousand and nine some argued it was too soon for president obama to win the nobel prize because we know hope and change is worked out but it seems he may have won the prize and its money just in time. when president obama won his nobel peace prize last october he promised to donate
the one point four million dollars in prize money to charity today the white house released a list of those charities ten of them and all. will those charities windfall that no others will get from the nobel prize because the nobel foundation now says the money that it awards will fall to one point one two million dollars they have to cut back i think by a fifth because of years of overspending so i guess it's a little expensive to anoint the elite chosen few who get to just kind of really persuade the conventional wisdom just by saying something because they have a nobel prize i buy the i buy by the fall don't listen anyone with a nobel prize i don't want to hear it because it's a it's annoying to know it alls so i don't want to know anything about you know should we auction off these titles because there are people out there be willing to buy you know his nobel would be much better you know ray some think that's a good yeah i can what do you think like more in buffett's lines it could be the
nobel prize because warren buffett last month for three point five million we found out you know the money goes to charity anyway because that lunch money goes to charity are you going to hear of warren buffett yeah i like that idea he's going to be our hero actions off his. his dinner with warren buffett i'd rather i mean if i'm going to pay that much money i do have a nobel prize in the book nobel laureate dmitri you can see this yeah all right i like the some of the yeah i mean overall richard what do you think about. the prize laureate dmitri you know sort of both so there's no arguing i asked. you know what you're say by the clock because we're at a time when melbury right if it's all about political capital anyway then i think we're on to something let us know what you think and that's what we have time for thanks so much for watching our show be sure to come back tomorrow and see another one and in the meantime you can also follow me on twitter at lauren lyster you can give us feedback on the show or catch any you missed and also subscribe to that a you tube dot com slash capital account and you can see it's an h.d.
u.n. secretary general demands the syrian government immediately grant observers access to the town of homs banki moon calls on both sides to pull back i mean fears the country sliding into civil war this is the violence flares up again with the stain heavy shelling of the city of homes. first around election results said president how long's party on the way to a majority of the french parliament with a decisive round to do sunday. russian police raid the homes of prominent opposition figures are connected with clashes of last month's protest rallies organizers have also been summoned for questioning head of another massive demonstration planned for tuesday in central moscow. more headlines at that next half hour next stay with us.
welcome to the lower show we'll get the real headlines with none of the mersey are coming live in washington d.c. now it's an hour we're going to have our monday hangover panel anthony rand hours on edward harrison will join us to talk about the economy in real terms then we have a couple more interviews we filmed while we were in providence for the net roots nation conference rolling stones michael hastings spoke to us about his latest piece. the last p.o.w. from our wars in iraq and afghanistan we're going to ask the pentagon would really leave a man behind and we spoke with truthout strace leopold about the outcry over possible white house leaks to the press could john brennan be the man behind the leaks all of that morphy tonight including a dose of happy hour but first let's take a look what the mainstream media decided to miss.