tv [untitled] September 13, 2012 1:30pm-2:00pm EDT
live from the top stories tonight protesters stormed the u.s. embassy in yemen as the wave of fury spreads across the muslim world in response to the u.s. made film which mocks islam. between protesters and police in cairo is another demonstration of. least two hundred twenty people. but he said governments must speak strongly cautious when dealing with religious sensitivity warning of the dire consequences that can follow otherwise. through
the economic. capital account straight from a washington d.c. studios. good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for wednesday september twelfth two thousand and twelve germany's constitutional court ruled the sandwiches the euro zone's permanent bailout fund does not violate the country's laws ruling against plaintiffs that were reportedly spanning the entire political spectrum who alleged that it in fact did what is next the big question meanwhile the european commission president called for a better ration of nation states and unveiled plans for the e.c.b. to supervise all the euro zone banks who was the lack of a centralized banking regulator what caused the debt crisis and is more integration
a solution was made to a member of european parliament and u.k. independence party member godfrey blue and just fight more attempts at integration and consolidation in europe there are more signs of fracture running parallel for example while spain reportedly mole's whether or not that country will need to be bought on buying which would enter spain into the e.c.b. workhouse the crisis at the same time reportedly fuels the independence movement in this banished region of catalonia we'll have more let's get to today's capital account. today more hokus pokus in europe to report the e.s.m.
is upheld but the decision adds a cap reportedly making large scale bailouts cost prohibitive it also reinforced buddhist dad veto power over activation and jose manuel barroso in his state of the union speech called for deeper integration in europe but in reaction we feel it was nigel farage that put it best but you make it clear that the asian state should continue to exist it mustn't have any democratic. yet the euro responded positively another example of this. and that example would be markets responding to policymakers not fundamentals where down left is right and the world resembles more of
a wonderland then ality while earlier today for some reality i talked to godfrey blue member of the european parliament in u.k. independence party member first i asked about the e.s.m. ruling which he thinks was more driven by politics than the law. well i think one of the problems we have this came as no surprise to us or an important of the german constitutional court would come to this view because there's been an awful lot of overturning of countries constitutions my own country as being one is quite legal membership of the european union under our own constitution so this came as no surprise to us for this to be because we're now in a situation where a great number of the senior judges in europe in european countries are political appointees of goals who pays the piper calls the tune i see ok so you think there's a little bit of collusion a to put it i guess
a little bit more aggressively there speaking a kind of this direction towards technocracy and consolidation and jose manuel barroso state of the union address in his prepared remarks he stated we will need to move towards a federation of nation states and he also said in this age of globalization food sovereignty means more power not less how do you interpret this statement as it implying that somehow because the world is becoming more integrated super states take over the role once reserved for the nation state. well it's very frightening isn't it what he was saying and he came out with a phrase which we thought was absolutely fabulous which was extreme populism i'm not quite sure what extreme populism means but i would argue that that's called democracy to you and i and he goes that extreme populism we all feel that was highly amusing but of course what you also have to understand that there is in the history of democracy that an american or an englishman would understand in this
place. you will democracy in america there for example there where you are emotions and goes back several hundred years now it goes back something like eight hundred as we understand it now it's it's moved in the state of those number of years. parliamentary democracy in the european. noonan is extremely new we have an awful lot of countries who've just come out of the soviet system of course there were a number of countries of course within my living memory and i'm getting a bit old now my living memory were input point of fact fascist so you know this franco in spain there was dr salazar in portugal so there was a fascist element so democracy in the european union is something which is relatively new i see so you think it's the newness of it and ranges on people being able to call it extreme populism what maybe your i would consider the democratic process now the european commission also unveiled sweeping plans for the european
central bank to supervise all euro zone banks today god germany and mediately raised objections i know the u.k. has objections to their proposals one of the risks is that the e.c.b. will be overstretched reasonable to understand why there are i believe six thousand banks that will be overseeing do you believe that the lack of such supervision has caused or contributed to the crisis. well we have a problem when the eyes of the commission here neither the. neither the politicians here fully understand international banking conference is this is the problem now what i'm facing in my committee my parliamentary committee and what the commission facing is that they cannot face the truth of the matter and that is fundamental economics none the professional economists now have but you know i'm in politics now but that's not my main field on the financial economists and what they will not accept and don't seem to want to accept. these that if
a country spends more money than it raises in tax revenue it will eventually go broke it's no different to you or me or our family is or a small business so over in states simply will go broke if they continue to spend more money than they raise now the view here in the european union commission in the parliament in the committees in the e.c.b. . he is somehow we've been struck by a meteorite somehow it's a tsunami somehow this is an act of god they do not yet associate the fact that this we have a financial crisis in europe is because the sovereign states and spend more money than they gain in revenue and that's what's called the bank that's caused the banking crisis fractional reserve banking banking that lends money the commercial banks lend money they don't have it's fueled by central banks of course who manipulate interest rates and isn't it funny that they're getting very cross yet how some of the accusations of commercial banks. manipulating interest rates what
of course the greatest manipulation is of interest rates the central banks then let's get more into that let's search overdrawing because he recently said that the o m t which everyone knows by now is the unlimited bond buying program announced last week but this one seemed to address distortions and financial financial markets and this is a pretty stunning statement since markets have become completely dependent on the actions of governments and central banks which would imply that it is a druggie and his fellow policymakers in fact that are creating the very distortions that their actions are purported to would drive say and what do you think you agree with that. yes of course you're absolutely right what we have here is extreme moral hazard we have a situation where governments have spent more money than they've actually raised in revenue they've gone broke banks have gone broke so what they're doing is monetizing the debt so they are making in effect the taxpayer pick up the time for failed commercial banks which of course i would argue is immoral banks should
be allowed to fail we're already now talking about in my chamber the softer noone of banking insurance deposit insurance and the people here have no idea how that works of course if you have deposit insurance for a bank the system they're suggesting is that is on the written yes you can buy the taxpayer so we haven't moved to wait. this because people don't understand how the system works in fact if you sit around the average inability table in europe you won't find it doesn't matter how well educated people are they won't have the slightest idea how the banking system works and why we're in the mess to start with and if we don't understand why we're in this mess to start with there's no possible hope of us getting out of it they can look to the us for a lot of lessons on many things that you just talked about with deposit insurance then and some of these that bailouts now following on this point i also want to ask it seems that the preferred creditor status. bailout that is that that is the creditor first in line to be paid by whoever bails out ahead of other creditors it
seems this distinction adds further to these distortions and markets we're talking about what impact do you think this will have on the market. well i mean what they're trying to do is to give the implication the some form of gold plated guarantee a little line to bring private private investors into buying bombs well they're not going to do that if people private the private citizens who are private investment houses. which are actually junk status if they don't if they don't have. at least joint status as investors and if the e.c. be your any c.p. agency has priority over them as credit is they won't invest so well that will happen is you'll find in about six or seven weeks the market will actually understand what's going on and they will turn their back on it i mean most of these sovereign debt. portugal greece and spain and italy go on junk status
well most of them are junk status and so consequently there's no reason to invest in them especially the coupons that they give i mean you know would you then the spanish government money for sort of you know ten years on own five percent or six percent i mean it would no serious private investor would go near it and you know that's a really interesting point i want to touch on that in the end but first i want to bring in the political implications because there seems to be this similar dynamic with the market trying to break out despite the policymakers constantly trying to smooth things over the markets go along with that for a while but then figure out what's going on and then these fractures emerge it's kind of similar politically because with these moves towards integration in europe you see both moves from countries that would keep on this plan towards integration you have spain's prime minister for example indicating they're figuring out whether or not they need help from the e.c.b. these bomb buying program which would of course tie them further to integration because they'd be in a so-called program they would have certain terms the to meet but you also see more
fractures there is an f t's story for example that the crisis is fuelling the independence movement in the spanish region of catalonia is there a different response to integration at the federal level of these e.u. countries versus the regions with in those countries. well. i think one of the major problems we have is that nobody actually signed up to this when the original idea of the european union came into being it was regarded as a single market. bring downtown or if so it would facilitate trade and that is what the people of the european union have been told since its inception or certainly since the british joined in one thousand nine hundred ninety two and of course now it transpired what this is all about is political union on a single state in a single super state but of course as you know it isn't based on the sort of system that is in the united states it's more of an old soviet system it is centralized
there's a drive for harmonize ation of taxes because they actually use phrases like tax competition they don't they don't understand that if politicians didn't have some of rein back on the taxes that they were allowed to raise they would raise taxes to one hundred twenty percent that's what politicians do and so nobody's been addressed nobody feels they've been asked about this because we have free movement of labor which you might argue is a nasty and libertarian might be a good idea but it doesn't work with welfarism lorin the problem is they haven't readdressed welfarism so you have people going from the east of europe into the west of europe all north of europe where the welfare systems are significantly better and until we reform welfare you know you're always going to have an immigration problem because it's economic integration and that causes disturbances to cultures. still ahead from economic immigration to what you could call capital immigration despite that trend in some debt stricken countries none have left the
from stocks on t.v. don't come. welcome back before the break our guest named the problem of economic immigration where people move for employment within the u.n. there is also of course bank deposit immigration you could call it where you see bank deposits immigrate from say greek banks outside of the country greece of course an example of a very debt stricken country with a program that has put it you could argue on a deflationary spiral down despite this and problems like this in other countries we haven't seen an accident despite the fact that many have predicted we would see
one so i asked our guest godfrey blue member of the european parliament if he's been surprised that no country has left the far. well the main problem we have here which president referred to today in his state of the union address and it's the first time there's been any public knowledge of it is that we can't go on like this in the first forum in mediterranean in portugal and spain southern italy greece we're talking about fifty percent fifty percent youth unemployment fifty percent no society is sustainable when humph you know people under twenty five don't have a job and of course the reason they don't have a job is because they have currencies which don't align interest rates that do into mine they have completely different styles and types of economies different cultural backgrounds so on and so forth so this whole thing was doomed for them to stop this whole euro system was doomed from the start as i said it would be many
years ago when i was a guest lecturer at cambridge university in the ninety's i explained exactly how this would go wrong why it would go wrong and in what manner it would go wrong i would actually have some of the people who forced this through this political currency forced it through i would have the range i would like to see and i've said this on russia today before i would have them arraigned acts of fiscal financial court in the hague and i would send some of them to prison i really would i'd send some of them to prison and well you know i think we need a politician like you over here and congress right here in washington i have to tell ya you know but but i do want to follow up do you think we will see a country accept the euro zone or do you think that's off the table that that's behind us and if you think that countries don't accept because it sounds like you think the euro zone is going to break down is that going to come near term say this year or next year. well it has to it has to break in some form it can go on
as it is because what happens of the the mainstream media who don't understand these things as you understand them on your program and some of your programs what they don't understand is that it doesn't matter how many g ten o g twenty summits you have it doesn't matter how much talking you do over the weekend in davos and all the rest of it if you broke your broke and we're broke you can't talk your way out of this sort of corner and as soon as we need to get back to real money back to i would argue money sound money real interest rates the abandonment of welfarism and the way it's not just social welfare is that it's corporate welfare ism i mean this is many people in my country rich landowners getting energy subsidies and farming and landing subsidies there are people out of work so it's not just social welfare it's corporate welfare we need to get rid of that sort of thing we need get back to small government government it's not interfering in our lives as much as they do fewer regulations this is the only way the economy can grow and it cannot
be sustained as it's going at the moment of course what may happen the danger of these happens these things happening of course as you know is when societies broke break down you get extremist politics and this is how if you go back to the nineteenth thirty's this is where it all started and i can't believe that europe's done it again and they've done it to themselves and we'll have to see if there is a next that i can get a pen down on now but i do want to move on because as someone who understands financial markets and this touches on something when we talked about earlier. have you been surprised by the way markets have reacted more broadly dissention bank intervention particularly and europe it appears traders room war and currencies managed by reckless central banks rather than punishing them in a foreign exchange markets based on fundamentals and your career is a financial professional politician have you ever seen markets are just. well
my my opinion i would say this wouldn't like because i'm old now but when i was in investment banking i knew my job and i've got a feeling now that these days in international investment banking we have a lot of children who don't really know what they're doing and consequent you see county movements moving in completely the wrong direction the euro should be moving down not up and start not because of course being people are being stored investors are being forced into stock markets because there's this search for yield there is no yield. there's no sovereign bowman's who are producing a yield so they're being forced into the stock market which move the prices of stocks up but this is a this is a purely temporary phenomenon. and they will crash as soon as the children in the city of london and probably new york and hong kong suddenly realise actually just how things work at the moment they don't they've all been to college they've done keynesian economics and they don't really know very much plus they call themselves
and most of them a terribly overpaid got it you figure the there before we go quickly this does beg the question of how and why and we return to a market where price is more accurately reflect reality without crashing the entire system maybe as we are in the twentieth anniversary of the week now and as black wednesday in the u.k. where speculators. crash the british pound so to speak are there any lessons. where the should be less and shouldn't when we crashed out of the red in one thousand nine hundred ninety two. as soon as we came away from the artificial peg to the deutsche mark which we did was totally artificial the economy then. me had interest rates. and money supply and all the other things that go out to make an economy which was suitable for the united kingdom and if you look at the graphics and i'm sure you have from one thousand nine hundred two to the year two thousand recalling the shop food it lurched forward. and you would see the same thing with
the iberian peninsula in greece if they were out of the strait jacket of this appalling euro experiment suddenly it would be cheap to go to spain cheap to go to portugal feel that it was cheap to go to greece and so on and so forth cheap to run the company in dublin these these countries have to come out but just coming out the cheap short of devaluation is not nearly enough they need to understand that they cannot pay themselves more than they actually when they need to learn the lessons from that but i would argue that they should go into hard currency as well learn the lesson. tough lessons that the generation now has to learn that he blamed on the older generation for racking up so much debt which i would argue in some countries that sovereign debt would constitute odious debt that was godfrey blair member of european parliament with that analysis.
ok let's wrap up with loose change the way i say dimitri because i know you're excited about this story let's talk about the i phone people have been and see over the latest i phone announcement but it has finally arrived. the new i phone five is just seven point six millimeters thing that's eighteen percent thinner than the i phone four s. and best of all it's the world's thinnest smartphone. big who cares what is the world's than as i phone but hey a battle sell more i phones i guess they're going to go with that and some such as j.p. morgan believe that slim phone could help to generate some much in the way of sales that new i phone could add or could could up g.d.p.
growth by point five per cent that they could add to g.d.p. growth to that extent so does this make too big to fail dimitri it's a question you were so excited to bring up so maybe i should've let you was out only when i was there and i just wanted to grab the we are king kong here he is so you know the big the big new york and then we go. to big fell out of the debate if there are no and we got rid of militants mark on the show he thinks there's a lot i have to hype for probably years i mean they're brilliant marketers they're great and you know what i disprove the one of the new i phone i don't know why i don't know what is sure you are you're a logger. and i went on google with this shameless are a lot of. our producers here i want to do remotes from the apple store oh god i want we're going to choose the world you know i would just wonder if what's driving
this whole conversation of too big to fail based on this j.p. morgan prediction has to do what j.p. morgan's predilection towards size and large size because. pinout saying that size doesn't matter in the making the argument that the bigger bank the better the bigger the better the smaller averts bigger is not better that's a homeowner bigger is not always better than when a bank that definitely applies. there goes on oh ok you're just tapped out and. so let's move on because i want to talk to myself we spoke about college and education a little bit in this segment having to. do with employment with my guest these days the value of college in america is being questioned and this is in part of course because of rising student loan debt more than a trillion dollars and it many financial experts are saying college may just not be worth it take a look. at the rising cost of college has changed the equation so
college is less all fordable and less good of an investment i think that it was five or ten years ago which is something that has become part of the discussion in the us for sure but guess what the us is not alone and we just have a minute to me i'm not a war new but south korea there's an article in bloomberg that south korean youth are coming out of college going to the top schools and they can't find jobs if they are. and they used to learn you know the story is going to be worked up you're going to have you know everyone orders knows but i think education is b.s. pure b.s. like the dumber you look you know it really is that how you thought when you went to n.y.u. and set four years there and graduated from i was earning. three majority learning i did i did sort of you i had to on learn universe is a measure of education the action of the owner of the stuff you learn so you have
so where's the time go do it because they're worth your time. with that i'll just let him get that final word and that's all we have time for do you win today thank you so much for watching though and have a great night and in the meantime you know you can follow me on twitter at lauren lyster give us feedback at youtube dot com slash capital account watches and h.d. on hulu and from everyone here at capital account had a great night.