tv Boom Bust RT July 17, 2014 11:29pm-12:01am EDT
let i marinate this is room bust and these are some of the stories that we're tracking for you today. first up we're looking at what effects u.s. sanctions on russia will have on the global economy along with how the downing of a passenger jet in eastern ukraine on thursday will fecht tensions and that region then jim bertha's on the show the director of money for nothing inside the federal reserve is telling us who benefits the most from quantitative easing and who benefits the least and in today's big deal it's tax thursday which means that we're terrorists and i are talking all things technology it all starts right now.
when the u.s. government imposed further sanctions against russia in response to the four month uprising by pro russian insurgence in eastern ukraine these latest sanctions limit financing options for some of russia's largest corporations including oil producers rosneft gas company nova tech and lender gas problem bank speaking from brazil president vladimir putin said that these latest sanctions will only have a boomerang effect that will ultimately hurt the u.s. interests following the announcement on wednesday russian stocks fell to a six week low and the ruble weakened the most against the dollar in four months
now another major element of this story develop thursday morning when a malaysian airline passenger jet was shot down over eastern ukraine killing all two hundred ninety five civilians on board the crush immediately sparked speculation about the cause as other planes in that region have been downed in recent days amid fighting between ukraine and separatists it's unclear whether this incident will prompt more sanctions against russia but the u.s. is putting pressure on the european union to take a tougher stance over ukraine and approve new sanctions that will hit the russian economy many reports say that the e.u. is expected to cut off large scale financing to russia widen sanctions against various companies and seek to suspend the financing of new public sector projects in russia by the lending institution the european investment bank now the new sanctions will prevent rosneft no protect gas problem bank and state development bank be from accessing u.s. debt markets for new financing they also bar v. e. b.
and gazprom bank from u.s. equity markets shares of rosneft declined as much as four point six percent in moscow wednesday while nova tech fell as much as nine percent late in trading on thursday markets were down crude and gold were up and the ten year was down eight point three basis points to two forty five. i've now this it situation is changing by the minute and artie's news team is keeping us up to date with all of the latest developments so stay tuned immediately after boom bust for the latest details i. want to enter subjects that we address here on the bus to understanding the effects of federal reserve policy and our two next guests today are looking at how monetary policy simply isn't generating healthy economic activity first up jim bruce the
brains behind the documentary money for nothing inside the federal reserve says one of the biggest problems with quantitative easing is that it actually benefits the rich so i first asked him to tell me who benefits the most from quantitative easing and who benefits the least here's what he had to say. you know there are some interesting comments in the last few days by paul krugman talking about how the the wealthy or are very opposed to higher inflation because you know you know that there's been some some billionaires here and there who have opposed q.e. and things like that and he sort of suggesting that that rich people are you know don't want to inflation and so they don't want the fed to help poor people with their with their policies of q.e. that have been so effective that's sort of the implication and the irony is that q.e. has benefited the owners of financial assets and those are the wealthiest people you know whether it's stocks or bonds or real estate. you know that is the wealthiest you know i think it's the richest one percent own ninety three percent
of that of that wealth so really. you know the fed's help the wealthiest they've been trying to have that translate into economic growth it's going to help the poorest people and maybe there has been some benefit to people lower on the run but the vast amount of the benefit in incomes and and in household wealth has gone to the wealthiest households now we haven't seen anywhere near the level of inflation that we saw in the one nine hundred seventy s. despite the fed's massive expansion of its balance sheet so why do you think that is i mean everyone talks about it's velocity the fed has pushed money into the system but the money hasn't gone anywhere they've they've they've created these huge deposits on on banks' balance sheets which then circle around and just sit at the fed unused and the fed's been paying the banks to leave them there so so the feds create a lot of money it hasn't gone into the system it's going into the stock market in different areas but it hasn't gone into the economic system as
a whole so we haven't seen prices rising and in a broad way really much at all over the last five years somewhat but but but not much. so so i think to some degree because the policy hasn't really worked you know if the fed was trying to boost spending in a broad way they should be writing checks the average household or something like that they should do something besides pouring money into banks which are lending it out to households so so we haven't seen inflation because their policy hasn't really been effective. i think the fed is a little bit worried about rising inflation here because some of the metrics they're looking at have gotten to the point you know inflation is getting a little bit of traction lately i think that's another reason besides financial asset prices that the fed is beginning to talk about easing easing up on q.e. for example and eventually returning to more normal rates. let's talk about fiscal policy here and supply side efforts no one else seems to be talking about those two
pieces of the puzzle right now and everyone seems to be talking about the fed and not at all about reducing x x x s capacity boosting wages or basically improving america's infrastructure which is very very important so aren't those big issues you know bigger than the issue of zero rates. absolutely and i think that's the problem with with we've had a recovery based entirely on central bank policy that's the reason it's only helped the wealthiest and has barely trickled down to you know the lower ninety nine percent of american society and i think you know going forward we've created an economy that really is run by the central bank more than it's ever been and u.s. history and i think if we actually want to have real economic growth in the u.s. we need real economic activity investment you know research and development infrastructure you actually need to do stuff. to grow an economy people need to
take you know to do economic things and i think the weird thing is that since the crisis with the financial system on its back we got into this mode where where the fed because it could take such drastic you know action they sort of stepped into the breach left by congress and an executive branch that weren't doing anything in the crisis and but now they've remained the only game in town and we're all sitting around focused on financial markets and bond prices and stock prices and companies are now you know emanates picking up companies are buying each other but that hasn't actually grow the economy usually you know a merger might lead to layoffs more than anything else so we need to i think in america focus on economic growth and i think the fed has created this big distraction of pumping up and stimulating financial markets which really are in a place that you know financial markets might steal your growth
a little bit by allocating resources effectively but it's not a place that growth comes from growth comes from real economic activity and i think the discussions should circle over to those things but as long as the stock market is gaining thirty percent a year like it did last year people are going to be talking about stock markets and bond markets in the places where we're sort of easy will. it can be generated but true wealth you know comes from actual real economic activity which i think we've been neglecting indeed silly thing like real economic activity and now finally i just want to ask you do you think inflation is even an issue here given that low wage growth and high household debt means demand destruction when inflation ticks up yeah you know i i don't think inflation is is an immediate issue i do think i agree with the fed that there are you know i think inflation is trending up i think there's a reason to. worry about inflation particularly you know if you look at the the labor market yes there's still a lot of people outside of the labor force but you know the recent statistics have
shown you know job openings are you know are very high an employer's are having trouble filling them so i think there's good reason to expect that wages are going to finally begin to rise a little bit the great irony is that when wages rise that's sort of the average person finally catching a break after five or six years and the diary is that's when the fed's going to take the punch bowl away when that when the average joe is finally going to get a little sip from that punch bowl they take it away after the wealthiest americans in the financial markets have sort of been feasting on the fed liquidity. that was jim bruce director of the documentary money for nothing inside the federal reserve . time now for a very quick break but stick around because when we return economist and author george magnus is on the show magnus is sharing with us his thoughts on the latest b. i asked reporter and in today's big deal edward harrison and i are talking tech plus remember you can see all segments featured in today's show on you tube it you tube
little little. league. with the washington well it's a little. bit later. there's a familiar pattern that one perceives going to actually do and doesn't do too much for our revenue in biotech our culture giant song seventy six year old american farmer in the studio fallout do you think this is going to the create or the cia do you think. what's triggering a race in america is the largest economy in the wrong it's also the largest debtor nation in the history of the world breaking a set is mostly about alternatives to the status quo but one may need real alternatives to the points on the working poor the american dream the next they were just trying to survive it's time for americans and lawmakers in washington to wake up and start talking about the real causes.
federal reserve policy argue that monetary policy is only benefiting the rich investors who buy financial assets and passing over the rest of the economy entirely furthermore it can lead to asset bubbles and increase financial instability in fact the twenty fourteen b. i asked report says that easy money will lead to some serious future economic problems we wanted to get george magnus's thoughts on this george magnus is an economist and author of the book uprising will emerging markets shape or shake the world economy i first asked him his thoughts about the big i ask comments on monetary policy here's what he had to say. you know this is it is a good question and i mean it's a roast you know
a huge amount of control to see amongst economists and policymakers to be i.e.s. itself recently with new units annual reports that. central banks need to pull back from easy money q we zero interest rates and sons of will but how much they overstated the case i mean i'm not i'm sure if you ask them they grow would say we didn't know stage it but i think they certainly made a very strong case which perhaps in reality they may kind of pull back from a little bit in private. you know because nobody really wants you know a situation where we basically raise interest rates very aggressively and very sued and snuff out that kind of so much you know the recovery that we do have in terms of economic growth. but you know where you've the question you ask really it's the kind of nail on the head about you know where what we feel about the risk of financial instability and about asset bubbles by staying weighted to monetary
solutions only you know the words that we only use the. pools of the central back to manage the economy whilst the government basically sits there with its arms folded and does nothing or is pursuing policies which restrict to restrain demand long term economic growth so the issue for me is not really about should we raise interest rates you know in the next six months or not it's i think you know the argument should definitely be framed in such a way that we we need to return monetary policy to a kind of a normal sensing of where interest rates can go both up and down over the foreseeable future but we have to do this by balancing that against you know budgetary and structural policies as well so i just think what's happened is that out our obsession with monetary policy has become extreme and actually extremely
dangerous now let's look at europe is that true that euro zone governments have to worry about bond big reason that governments in your land are committing to austerity. yes it is in a kind of a narrow perspective and you know we had some problems today which it actually caused why do disturbances not just in europe but actually in global markets too arising from the situation of a major portuguese bank which may be in trouble. because its parent company has got financial difficulties. and of course this is kind of a reminder to everybody that you know the problem in europe hasn't really gone away and that we still have very considerable issues in terms of stabilizing european
banks and trying to sort out the balance between. you know we well managed well capitalized banks as fiscal policy and debt to countries and how we get growth because the problem is i referred earlier to to deflation in some countries like you know spain portugal italy greece and these countries you know the more you get into this or the closer you get to this situation of deflation the bigger the debt problem becomes. because in real terms of course that new inflation adjusted terms the value of your debt and your liabilities whether it's the sovereign or whether it's private sector just gets bigger and bigger so the europeans really haven't resolved this we cannot resolve debt problems of the euro zone's debt problems without resolving the simple tasty the issue of economic growth and there again you know that throws into the limelight the issue of what is the e.c.b. doing and can the e.c.
be sold this. why in array of problems on its own and the answer to that is a very loud no actually can't do that but the policy makers in the government sector don't really want to listen. or the church now japan seems to be at a crossroads here after twenty years of pain so it's a cautionary example in my mind but what should we avoid that the japanese didn't and what turns europe the u.k. or the us into the next japan. well i mean this the area of the developed world which is most similar not identical i would say but most similar to japan is europe. because the two issues that japanese never really paid sufficient attention to early enough were. resolving the dysfunctional nature of the banking system in other words the into
mediation of credit they allowed zombie banks and zombie companies to basically trade water for far too long so there was no real adjustment we say. and of course the other situation which was probably related to that was that they allowed deflation to develop now in japan's case deflation never really it was damaging. and it certainly has left a very nasty legacy. which temporarily at least japan seems to have gotten on top off with the latest policy initiatives but they allowed deflation to become embedded so that actually proved very very difficult to get rid of using you know traditional policy measures or even when they did use q.e. the end of the one nine hundred ninety s. they didn't do it big enough or for long enough and so i think this is the big danger in in europe where if you look at the growth of of nominal g.d.p.
so the monetary value of g.d.p. is actually pretty stagnant or declining and it's clearly declining in those countries that border the mediterranean so. the dangers that we seem to be repeating or the risks that we seem to be not taking to you know enough attention to are. an excessively cautious approach by the european central bank which mirrors the bank of japan in the one nine hundred ninety s. . and an inadequate. approach to fixing the banking system and allowing you know bad banks and bad companies to go to the wall which which the japanese also didn't allow to happen in the first ten fifteen years of their downturn either so i think in europe that's where the parallels with japan are plus it's they're less clear i think in the united states in the united kingdom
although were we to make big policy errors to course that could happen as well. that was a columnist and author george magnus time now for today's big deal. big deal time with edward harris and it's tax thursday my favorite day of the week and while saturday we do have some tech stuff that's a little bit lighter and we're telling you about all the latest tech stories from the past week not just one but a bunch so first the department of justice is claim that microsoft must hand over e-mails stored in dublin ireland however microsoft has balked at this request so at what's going on here why does microsoft want all this data and what is it going to do if they handed over what's going to what's the precipice precedent set here will basically microsoft has offices all over the world and they have data that the u.s.
government wants to get to and that happens to the servers actually happened to reside in ireland the u.s. government is saying that they have the ability to issue a warrant for that even though it's within the united states and microsoft is saying actually you know yeah and so given the fact that the u.s. government the u.s. supreme court recently decided that even when you have a cell phone you can't search a search that cell phone without a warrant it seems that you know the concept that you could actually even with a warrant go outside of the united states is not going to be something that's going to be legally going to hold what what made the d.o.j. think for one second that that would have any sort of bearing in any sort of legitimate court anywhere that it just seems silly it's like oh no this isn't this is nonsense well you know no one's ruled on that yet so they could set the precedent as it was now scott when a second she's a woman scholar second maybe there's data there to check it out is about over net
neutrality now netflix apparently submitted a document urging the f.c.c. to reclassify come. it's like horizon and comcast so tell me what netflix is saying here and what it means for the netflix net neutrality right you know the specific customer some of which they have been paying for netflix and they were only getting like five percent or eight percent of their content total and that this is just outrageous and that really of arising they are common carriers and of the telecommunications they should be regulated as utilities and as a result of that that means that it gives purview of what's happening there to regulators to be able to say that you know they can't have these fast lanes which is what they really want to do and force companies like netflix have to pay so they're really saying to scrap the whole thing the way that you're doing it right now call these guys utilities and be done with it and then we can get some sort of
regulation on them because they are basically it's a trust violation that they're just too big now comcast has also been in the news lately for something outside of the neutrality and this is pretty bonkers to me apparently it has terrible customer service shocking and there's been a viral story came out where a guy couldn't convince a comcast customer service rep to cancel his service so outside of actually convincing comcast to let you cancel your service should we be afraid of cutting the cord here because comcast is not afraid to make you afraid that seems like what we are actually the wall street journal had a great story yesterday. different ways you can cut the cord and i think it was a reporter who was saying that they spent you know two hundred fifteen dollars with comcast every month and they figured out a way to get their bill down like seventy five dollars. in doing so they could go to things like netflix they could watch the latest things online from their various . companies the interesting bit was they said. these companies like comcast they
don't want you to cut the cord i think that it was actually. directv is saying that they get money from having these bundled packages they try to bundle everything up together so you know they make it so it's very difficult for you to get the individual pieces and if you can sort of find out ways to get them online you can probably reduce your bill right and what i found also interesting is that you know there's all this stuff coming out with comcast and how basically they're structured in a way that you can play a comcast they're called like retention employees that when you call to cancel they get paid if they keep you from canceling and if they don't they're not going to make commission for that month which is bonkers and have a gross in a lot of them and we shouldn't do a story on that maybe tomorrow you know you have got another one interesting actions well ok now let's move on to an sets out and analytics company has come out with a report that says google play accounted for sixty percent more downloads than apple
app store it's a huge difference yeah but it was still making the. i mean were they ever not maybe someday but not anytime soon it looks like but what's the story with this what's going on here so two things you know as i was you know it was making the cash and still i think that the last time that they looked at the numbers will still make an eighty percent more revenue than google you know the amount of revenue that we're getting from i.o.'s devices was eighty percent more than that it was from google but now the number of downloads is actually going up so much because google android phones like eighty percent of the market for mobile devices and so eventually we're going to see android pass apple you know my take on the whole thing is that we are almost seeing. a wind hell type of situation here where. google is going to have with android so many customers all of the developers are going to go to android for and eventually they're just going to be so dominant
we're going to see the numbers move up from eighty to eighty five maybe even ninety percent while in the next i would give it three years years three. i hold you to that i like it now in the wake of microsoft's big layoff they're letting out eight hundred thousand employees they've also decided to stop making android devices you know so what's going on here both in terms of you know the major layoffs and this decision to stop we're going to second going back to the devices that microsoft and also read and that was that happened for the right they're not going to enjoy it tells you that their corporate strategy is terrible another thing eight hundred thousand layoffs that also tells you that's huge that's forty percent of their their population i think microsoft's kind of in trouble over the long term microsoft population is to say. thank you that's all for now we love hearing from music we'll check out our facebook page facebook dot com slash boom bust our team and please tweet us at any at edward and h. from all of us here at boom bust thank you for watching we'll see you next time to buy.
i. was. joining us here and i see international i live in moscow my colleague sean thomas you've been here if i was continuing with the breaking news coverage certainly it is eight o'clock here in the morning in moscow seven o'clock in ukraine where this incident took place and the news teams have been working around the clock to try and get the latest information as the news story continues to dominate this morning's world headlines the investigation is not one to find what caused the malaysia airlines passenger plane to crash in eastern ukraine all two hundred ninety eight people on board the bus being seven seven seven were killed it's reported that eighty children were on the flight including three influence the plane hit.