tv Boom Bust RT July 15, 2014 1:29pm-2:01pm EDT
rick summit held in brazil right now sorry no more soccer for you above for fun you know what this means for the murder market but the brick seventeen's it's all start right now. now our lead story today actions and consequences massive fines placed on foreign banks by the united states or garnering a lot of pushback from the international banking community now this comes following the nine billion dollar fine that french bank b.m.p. perry boss has agreed to pay the u.s. government after conducting billions of dollars worth of business with sudan iran
and cuba all of which are not on america's good list no they're not but the curious thing about this situation is that france france is supposed to be on america's good list aren't they but important ally in fact there is another u.s. ally currently being slapped with fines by banking regulators as well german commerce bank the german bank has been accused of conducting business with an iranian state sponsored shipping firm and could be forced to cough up between six and eight hundred million dollars in order to resolve investigations into its compliance with u.s. sanctions now over the past five years over half a dozen foreign banks have settled with u.s. authorities over sanctions violations to the tune of more than twelve billion dollars again these are not u.s. banks they're foreign banks back in two thousand and twelve british lender standard chartered was accused of hiding two hundred fifty billion dollars worth of iranian transactions from regulators and ultimately forked over six hundred million to us if they were. now here's the question what effect will all of these sanctions
ultimately have that's the million dollar question or the trillion dollar question potentially monday reuters published the following on this subject which i think sums it up pretty nicely financier's may grumble that the united states is acting like an imperial power and punishing foreign banks for doing far beyond us territory but in the end they are more likely to bow to washington and kick against the dollar muscle in fact instead of turning away from the u.s. major lenders in europe and asia are reacting by doing more than ever to fully comply with u.s. laws going so far as to cut ties completely with any business that puts them on washington's bad list remember you got to be on the good list if you want to studies in the dollar basically foreign banks would rather miss out on potential transactions than god forbid be excluded from doing business in the u.s. dollar essentially they could no longer do business that's what it would happen if they were excluded from it and well countries may be looking at other ways to prevent their own banks and markets from being damaged by the scale of u.s.
penalties for now each bank on its own has little choice but to toe washington's line but as i stated in the very beginning actions do have consequences mark austin of a hong kong based bank trade group said quote regulators in some jurisdictions are beginning to recognize that they need to band together as they won't get very far on their own we are seeing a change for now the us is content to so we serve its own geopolitical interests but the things we do in the present could and likely will have policy implications in the future that were completely i mean completely unintended and truly detrimental but only time will tell. but. the u.s. government slammed the b.n.p.
terry boss with a major fine and now they're going after german and commerzbank for also violating u.s. sanctions but how does banks obligated to follow u.s. sanctions or are they basically being bullied into playing by u.s. rules i want to check with dr paul craig roberts are we finally call p.c.r. now dr roberts is a co-founder of reaganomics and has also been an editor and columnist for the wall street journal businessweek and scripps howard news service i first asked him what he made of the whole billion pieces to ration here's what he had to say. to the great u.s. law through the different you know you know what you see what look i'm going to experience. what marriage. united states. to all cultures and says everybody regardless of their sovereign state. best of a on a low end because we announce that there were sanctions on iran
if you buy a can and a country finance business with iran we are going to penalize you and if you don't pay we're not we'll let you conduct operations in the united states so i'm not sure what the bike is broken any law goes in montana and united states government does not have the option of dictating law to sovereign countries but it's been doing it for a long long time it did it to switzerland. and now they're starting on the commerce fight in germany they're trying to same thing to it that they just did to the french by. i think that part of this is that washington uses. american clout over of the people by threatening them to be excluded from the american market. and all of to her those financial institutions in order to end
bantz the financial interiorly isn't all the american banks so when they beat up on barclays they beat up on the french by the beat up on the german by then goldman sachs j.p. morgan city buying by america they can start a movie any easier oh noes own the territory of those black so i think that's also part of it in fact a truth i think should be the main. the main part of it but i don't think the world should accept the fact that the united states government can. decide. what countries they're buying it's these other sovereign countries what the banks and sobbing countries who they can do business with and yes i think you see the dollars importance diminishing over time is that right. yes i think it has to diminish over time primarily because of the sanction thing. because you save if
you're not if you're a country and you're not far off the dollar payment system of it no sanctions can be applied to. and there's really no benefit in the longer of being in the dollar payment system it grew up at the end of world war two because united states was the only country that had an economy all the rest was strong and so how were you going to settle international payments you looked to the strong currency the country that actually dominated manufacturing trading and so that became the world money but today countries have recovered in many countries whose occurrences are just isn't practical and there's no reason not to settle trade in their own currencies it's it's actually very costly for example japan and china to settle their trade in dollars because the chinese if the chinese buy something from japan then they have
to transfer their have to pay a fee to convert their currency in the dolls' then they give the dollars to japan and then japan has to pay a fee to convert the dollars into yen so what is the point of these countries doing that there's no known reason any longer and as the united states increasingly i mean to say why should city in order to print money to pay its bills in order to impose sanctions on the activities of countries that it disapproves of i think more and more people will leave the dollar payment system now if the dollar does diminish in importance or what gains you just mentioned some some examples that is the gold or you know the chinese currency the euro and there is no assets because there doesn't seem to be a lot of options out there. well you don't need
a world currency anymore as i said the situation and days totally different from one thousand nine hundred five. the world was destroyed nobody had an economy except united states every on the economy was destroyed or had never gotten past third world status that's not the situation today there are many columns and so they can settle their trade with their own currency there's an absolutely no reason to prefer the dollar over the euro or over the chinese currency or over the russian ruble it is there's no reason for this now some imagine countries they've appealed to the us to help them against chinese maneuvering so do you think china is a strategic threat to its asian neighbors what's the u.s. and help defend against oh no of course it's not and. look there there is some very small island syria there and people are
warning to argue that well that's between them and china scant nothing to do with us there's no reason for us to be involved in that and is certainly no reason for washington to make an enemy on chatham and china's far stronger in the news of the war countries and it's a big discrediting and we have huge trade relationships with it so. it's just a silly fang that washington is doing trying to hold it all into its hedge enemy all over the world they really should stop it. china's not threatening anybody it's the united states it's building bases from the philippines to vet now naval and air bases to surround sound it's united states mistake and nato to russia's borders that it's calling now for troop build up eastern europe that's building missile bases on russia's borders is trying to but george you're in ukraine in. the
aggression is not coming from china or russia what are the economic implications of allowing china free rein in asia. or to mina loughran or that it's not up to the united states who does business with china or china does with this growth. with the whole notion that we could disallow is if somebody can sense that's it so i think that people will do business with china because it's profitable and we paid since they have a good deals and they approach people in that way they say hey look let's do business we come in and say let's have military bases let us buy your government and that's your payoffs and some of the you will do we won't we'll put military bases it's a totally different approach and that was dr paul craig roberts.
time now for a very quick break but stick around because when we return dr barry eichengreen is on the show he's a well known professor of macro economics and political science at the university of california berkeley and he sat down with me earlier today to discuss the practice of mixing regulatory and foreign policy like oil and water and in today's big deal edward harris and i are discussing the annual brics summit mean how the result right now and don't forget you can see all segments featured in today's show on you tube you tube dot com slash investor t. and on hulu dot com dash to slash us now before we go to break here are a look at some your closing numbers the bell on that.
little. she grew. to believe most sophisticated. doesn't do. anything. to teach. you and. this is why you should. only. welcome back now with all the fun that u.s. banks have been slapping on foreign banks recently they sure haven't made themselves any friends however it has demonstrated that the u.s. won't allow its currency to be used in ways that contradict its foreign policy aims that's for sure yet no friends but they got that point across but as the world's reserve currency such actions might prove disruptive for countries that disobeyed
u.s. foreign policy rules so i want to check in with dr barry eichengreen now i can green is a well known professor of macro economics and political science at the university of california berkeley and he has done considerable research. the following is a severe thunderstorm watch announcement from the national weather service the national weather service has issued severe thunderstorm watch number four hundred twenty three effective until nine pm this watch includes the following counties in delaware kent and newcastle and cecil maryland in the following counties in new jersey burlington capitan cumberland gloucester hundred in missouri mind within
salem in the following counties in pennsylvania bronx box chester delaware montgomery in philadelphia in the following marine locations delaware bay waters north of east point new jersey despite the beach delaware and chesapeake bay north of tools island maryland remember a severe thunderstorm watch means that conditions are favorable for the development of severe weather including large hail and damaging winds and close to the wash area while severe weather may not be imminent present should remain alert to rapidly changing weather conditions and listen for later statements and possible warnings stay tuned to no weather radio commercial radio and television outlets or internet sources for the latest severe weather information repeating severe thunderstorm watch number four hundred twenty three has been issued from one forty five pm until nine pm for the following counties in delaware kent and newcastle and cecil maryland in the following counties in new jersey burlington capitan cumberland gloucester hundred in missouri one weapon salem in the following
counties in pennsylvania bronx box chester delaware montgomery in philadelphia in the following marine locations delaware bay waters north of east point new jersey despite the beach delaware and chesapeake bay north of tools island america. find a major bank from an allied country for violating those sanctions now because the u.s. dollar is the world's major reserve currency what impact will be fines of fines have on the u.s. reserve currency status if any at all. i think very very limited impact the reason that the united states is the only country to use these kind of financial sanctions is that the dollar has the exorbitant privilege of being the the world's currency the vast majority of foreign exchange transactions and finance for imports which is what the government of sudan wanted go through the dollar and go through new york
financial markets so that's why the u.s. could do it what impact will it have i think. some governments that are unhappy about the fact like france and other governments that are worried about the fact like a ran north korea will look for alternatives to the dollar i think there are very few alternatives in the short run european markets are not as deep in liquid as markets and the dollar chinese financial markets are far from as deep and liquid as markets in the dollar so it would take mass migration of importers exporters foreign investors both private and public away from the dollar toward another currency in order to change that situation and that simply is not going to happen in the short run. but could it potentially happen in the long run.
shameless plug for my book exorbitant privilege i think it will happen in the long run that the united states is no longer large enough relative to the world economy to be the only supplier safe and liquid assets to the world as a whole so there will have to be other suppliers and i think the eurozone and china as the two other big economies on the world scene are are the plausible suppliers but both europe and china will have to get their act together financially for that to happen so will it happen this year no will it happen next year no but ten or twenty years from now i think there will be two full fledged rivals to the dollar. now i'm glad that you bring about china because the chinese renminbi is increasingly mentioned as a potential reserve currency but a lot of things out to change to make that happen like you just mentioned now recently china construction bank was maybe official renminbi clearing bank for
london and bank of china for frankfurt so what importance do these moves have well the fact that there are official clearing banks chinese clearing banks and london and frankfurt will reduce the cost slightly of europeans exchanging their pound sterling in euro as for chinese renminbi they don't have to go through the dollar in order to buy renminbi there are now a couple of big chinese banks that can source renminbi on shore in shanghai and sell it to. european banks and firms who need it for their international transactions so that will promote the use of the renminbi in europe i don't think it's going to change the financial landscape in the short run but it's a positive step from the point of view of renminbi internationalization. now paul
craig roberts told me that the future of the international monetary system has to match our multi-polar global economy in which the us is just a one actor do you agree and if so why well it's like george orwell in animal farm right all the animals are created equal some are more equal than others i think we will move toward a more multipolar monetary system that better matches our multi-polar global economy because as i said before the united states will not be big enough to provide safe and liquid assets on the scale that the twenty first century global economy requires but the dollar is likely to be first among equals for a considerable period going forward simply because the us treasury bond market is the single largest financial market in the world it's deep it's liquid it's
a safe haven it's the market that investors instinctually move toward whenever a bad financial thing happens because the fed is there to provide dollar liquidity when it's required the willingness of the european central bank to provide euro liquidity isn't open question in some sense and the ability of the people's bank of china what with chinese capital controls renders its ability to do so an open question as well. that was dr barry eichengreen professor of economics at u.c. berkeley time now for today's big deal.
big deal time with that word harris and it's good to see you remotely and that's now audience out there in today's big deal edward harris and i are discussing the annual bric summit and what the summit might mean for emerging markets so before we begin the brics nations are can you guess is drum roll i know you know brazil russia india china. she has a song south africa yeah ok the brics and their group together due to their size and the strength of their economies and this summit is a multilateral forum for these economies and coincidentally enough it's being held just days after the world cup wraps so edward we've been talking about currencies a lot on the show today and is there anything on the on the agenda at this summit that might have an effect on our international monetary system or any fundamental consequences on what we use as a reserve currency truly fundamental because i think the answer is no but i'll prob ever you would know actually i think there is something that's interesting enough to build a silly agree on it but they're talking about an alternative to the billion dollar
i.m.f. and then some other fifty billion dollars to go along with that in terms of liquidity but basically what it boils down to is that the as it's been developed is really about western europe you know the whole of europe in terms of the e.u. and north america and there had germany over policy issues in terms of the global financial system and so as the emerging markets have because much more important from an economic perspective they're looking for a greater voice and they feel that they've been blocked in the. in the world bank and all these other multilateral lending institutions from having this greater voice and therefore the brics is the most important emerging market countries are going to out and say yeah we're going to actually do it on our own we don't make our own multilateral institution and do an end run around these other institutions . now as you mentioned there are a bunch and i mean a bunch of multilateral forms on economics we have the o.e.c.d.
g seven g twenty brics now but are these primarily diplomatic and political organizations or do they have any serious economic implications basically what i mean is that what is really joins these economies together with. good question because ultimately the fact that you even asked the question suggests that they're really just talking sessions that there's nothing that really gets solved in those sessions but i think to a certain degree it's important for them to coalesce on certain ideas and come together in order to over time sort of formally policy so when we had very eichengreen talking about what's going to happen terms of the multipolar world that's what we're talking about with regard to the brics if you think about the european union the fact that the euro even exists is really a result of their understanding that they couldn't compete against the united states in terms of having economic power unless they came together as one currency and even the europeans they don't have the depth of the u.s.
markets they don't have the treasury market because they're all ball balkan you have the german market you have the french market you have the spanish market so eventually they're going to want to come together and have one market that has nothing to quiddity to be able to rival the united states. now ed can you explain to me the purpose of a bricks bank would it be like any other sort of you know developmental bank such as the world bank or the enter american developmental bank is a developmental bank what would it be like it would be essentially be their alternative where they it's like the europeans when they talk about the european monetary fund we control the levers of power we control we the brics we control all of the political operational machinery of this particular organization and as a result of that you know we get to decide how things get implemented so when bad things happen then put it to you that gets provided is politically in our hands
rather than in the hands of the united states and its allies now many of the brics nations have been in the news lately russia and the west have experienced a lot of tension over ukraine china has been flexing its muscle muscle in asia but each country has very different political traditions and economy so really quickly how do you think these countries differences affect their ability to find common ground they very much do and so i think that will fall in this particular summit that we're not going to necessarily get to any concrete conclusions but at a minimum we're going to move in that direction. and thank you so much i will be back with you in the flesh tomorrow but that's all for now thank you thank you we love hearing from you so you out there in t.v. land please check out our facebook page and drop us a line facebook dot com slash combust r t and please tweet us at erin aid at edward and age from all of us here at the bus thanks for watching c.n.n. .
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international tragedy on the moscow metro at least twenty one people are dead more than one hundred sixty injured after a train derailed in the morning rush. images from inside the tunnel shows scenes of chaos and destruction in the last hour all the bodies have now been recovered in other news it's really doesn't care too much about palestinian lives. as a volunteer or as human shields hoping their presence will prevent israeli airstrikes on civilian buildings like hospitals cease fire talks failed to bring rest by. britain's top diplomat.