tv [untitled] April 6, 2011 8:00pm-8:30pm EDT
yes. contingency plans for the shutdown have been made capitol hill appears to be in chaos you heard or chaos why is everyone moved into crisis mode we still don't know if a government shutdown will really actually happen so is the panic justified or is it just a lot of hype because if you're worried about the government's financial fallout it's possible the worst is still yet to come. and did portugal it appears already to be here the country is crumbling under the weight of its debt is now saying it needs a bailout this after bailouts in greece and ireland does this threaten the eurozone
stay on that little economy. and what is the u.s. can't get its books together what would happen if the u.s. lost its golden aaa credit rating people started worrying uncle sam couldn't pay his debts. all these americans accidentally killed your family. and looking back at a rocket outrage over the toll of u.s. air strikes killing civilians hidden from american view what are we seeing deja vu in libya. prime minister has made it official the country in the midst of a sovereign debt crisis is calling for a bailout from the european union this after sovereign debt crises and bailouts happen in greece and ireland so joining me now for more on what this means for the european union the euro zone and if we can compare it to the u.s.
in the midst of its own deficit problems debt crisis from knight bill florida is karl denninger of the marketing group mr jenner and i want to thank you for joining us you know first of all portugal of course is a very small country small economy but this comes on top of the eurozone greece and ireland amid concerns about a much larger economy and not spain so what do you think the toll of this portugal announcement is going to take on the eurozone and the global financial economy. i think the first question one has to ask is where is the credibility behind the projections of both the european union and over here in america we've heard of stress tests we were told that everything was ok the banks were turning around and buying this debt thinking that they were going to be backstop and now all of a sudden loops or trickle isn't ok and as recently as a week ago we were told they were going to need a bailout so this is the third time and i'm wondering how long before the market
says ok that's enough well that said though do you think investors were expecting that because the guy was actually hit too hard after the news today why do you think that it if you look at the bond yields in fortune gold it's been rocketing higher for quite some time so the market has been expecting this but again we come back to credibility and it's there's only so many times you can tell somebody everything is going to be all right and then come back to the well and say oops before investors turn around and say you know what we're tired of being lied to now you're going to have to prove it and that's when lending begins to get very expensive ok but what about the role of investors what about the role of office for example in some of these sovereign debt crises because that is a big market with a hot market so that they play any role in that i've made a claim of all. i don't think wall street personally is responsible for portugal there were a lot of relegations that wall street banks were running derivatives in greece i don't know that we are really going to the bottom of that but portugal is just simply a matter of we're spending more than we're making which incidentally is what we're
doing in the united states as well finally people are throwing up their hands and saying we don't think we're going to get paid and that's where the problem was comes from we are but to be you know it would be a little disingenuous to compare portugal and the u.s. apples to apples the u.s. prints its own money it happens to be the global reserve currency i mean at the differences are ways in the u.s. is responsible for a lot much larger portion of global output still even though the economy has taken a major hit but you make a good point the u.s. is spending a lot more than it takes and it has a deficit problem that it can't resolve we're seeing a stalemate on capitol hill and in the white house and between the two right now so what should the u.s. be learning from portugal because you mentioned there is kind of a crisis of faith also portugal's parliament was able to pass austerity measures the u.s. government seems to be at a stalemate f.r.s. dealing with this deficit issue what do you think should be taken away from here. i think the primary thing to consider is credibility because that is all
a government or an individual or business has and when it's lost it's very hard to get it back so we have gone down this road now for four years where we have made claims that we can fix this with quantitative easing interest rate cuts and all of the other platitudes and all that's happened is our deficit is skyrocketing we most certainly have a longer leash than portugal or even spain does in this regard but it's not infinite and the lawmakers in washington seem to have this idea that they can continue to play this game on an indefinite basis there is a line in the sand beyond which international investors in particular are going to throw their hands up and say we're just not going to deal with this anymore and then the federal reserve is left with all bad choices right and wanting in fact as global investors can say forget it we don't want u.s. debt and i'm curious if you think this most recent crisis and portugal this most recent bailout that possibly right reignite concerns over the e.u. will reignite global concern over us that i even saw that just on the blog this
afternoon and evening after the news came out. i think it's a real concern and what i would also be welcome news to see what happens with arlington because i don't believe that story is over by any stretch of the imagination if the irish refused to knuckle under and frankly i think they should then you're going to see another round of the big problem that comes up is that the banks have been buying this debt from the sovereigns including the united states under the premise that it will always be money good and there is never any risk associated with it we're finding out in portugal that's not always true same situation applies in our land and ultimately it could come here but it did it it's more of a problem in the european area right now and as long as it stays with or trickle it probably doesn't do you really think that i just don't go into unless we get credibility back ok and what if we don't i mean what are these bailouts going to run their course right now i mean it looks like portugal will get a bailout but one of the one of the buck stops you know is the bailout won't always
laugh when the german citizens get tired of so much that i was actually i got away so it's the question but ben what about just in terms of globally i mean what do you think will happen if for example quantitative easing program is due to run out what do you think will happen if there is not a quantitative easing three that's kind of been propping up the u.s. economy in some ways i don't think you're going to see a quantitative easing story because the impact that we've had i'm moderately prices from the previous quantitative easing has been extreme and you can blame out on quantitative easing i mean oil prices clearly have been very affected by what's going on in the middle east whether effect economy prices there are some issues there i mean speculation really you can only blame for part of that. that's true but we have a crushing delivery point for west texas intermediate school and yet we have oil trading up and hundred dollar plus range that doesn't make any sense that you have a glut of supply and at the same time you have a price starrer those who've been so good together well i think i'll try to
unfriend says they're there and it is a delivery on that but i do hear your point i hear your point it's a great point so what do you think related just to get you quickly on because of course the top of mind of the u.s. budget crisis right now what do you think is the biggest concern facing the u.s. right now is that this kind of short term budget deficit issue that we're looking at or is it the bigger picture fundamental inability to get the house and order as far as the budget is concerned with these are the data these are the are bigger spending issues and you have to pull ones back on the camera because we're arguing over a fraction of one percent of the budget for this year the truth of the matter is we need to find five hundred billion dollars worth of cuts this year five hundred billion more next year on top of the five hundred so that's a trillion in trouble and then another five hundred after that that's not going to happen without a major changes in entitlements there is no way to solve this problem without getting into that again nobody's willing to take it on so i do believe it's
a problem but it's something that's going to come by just six or twelve months down the road and that is a much bigger conversation that maybe we'll be having separate twelve months down the road but thank you for bringing us home with how portugal really is something that affects the united states now karl denninger with the markets are. and as you heard me discussing with my last gas and you can imagine if you've been watching the news or reading any news papers the u.s. lawmakers and president obama continue to haggle over the two thousand and eleven budget cuts they cannot agree and a government shutdown looms it's been one of the talk doom and gloom stories on the mainstream media for days now the president's gotten into the mix too telling the public warning the public about the cost of the shutdown take a listen. you've got to start thinking differently because you know if you need a passport can't get it planning a visit to a national park or monument to bury it can't get there contingency plans for the shutdown have been me we were all capitol hill appears to be in chaos this is not happened in fifteen years what does this potentially mean for the american people
whether it's when the economy is just beginning to grow we're just starting to see it in employment the last thing we need is a disruption that's caused by a government shutdown but is this really the big deal everyone is making it out to be earlier i spoke to economist and financial analyst max i asked him with the u.s. saying it will still sell its debt will still operate as usual in that regard and with people expecting us to just be a very short term shutdown if it does occur i asked if the panic about the shutdown is really just hype here's what he had a sec. at some point some of these news stories are all but suggested people stock up on shotgun shells water flashlights and of course that's fairly ridiculous a number of ways i think there's still a very good chance that we'll see a last minute deal tomorrow and or we'll see them kick the can down the road because that is a bit of past time on budgetary matters in washington for
a long time to do another stopgap that gives them another seven or eight days i think a symbolic value about the lack of compromise the lack of ability to work together on the serious fighting over symbolic positions ahead of the election cycle for two thousand and twelve is probably more alarming and more something for people to worry about even though the government being shut down for a day or two which i still think is in no way a sure thing well it's interesting and an interesting point you make about symbolism because i want to look at even what these cuts are that they're debating right now i do believe we have a graphic that shows what portion of the budget this is if we could bring that it's just when you look at the pie of the budget it is such a small portion that they're looking at well these are the things that actually it would mean if there was a shutdown in there you know parks passports wouldn't be issued those kind of things that's kind of what the media is playing up but i want to look at what's not being discussed and that's how small this portion of cuts is of the actual budget and that's my question to you obviously you can't see it but the you know thirty
seven billion dollars that they're arguing over is a tiny piece of the pie to this argument in the gridlock that yeah does this take away from the death of our budget deficit yeah that's nothing that's nothing to take away from the bigger picture which is the toll of our debt the continuing borrowing and continuing spending the fixes like quantitative easing that come at a really high cost. we'll have a dress rehearsal for what are going to be bigger bigger massive fights about the four trillion dollar twenty twelve budget and also how to respond to the debt ceiling the fourteen trillion dollar debt ceiling that we're about to go crashing through unlike many other ceilings that's not a ceiling you want to really go through that's not something we should have ever been forced into the situation of having to debate like we are right now i do think that part of the reason we're seeing this much fighting over it is because it's pretty clear that the republican party at the federal state and local level is going to run as the budget cutting party in two thousand and twelve for state houses and senate seats and house seats of the presidency and this keeps them front and center in the news on that subject in terms of the thirty to forty billion
dollars that they're fighting over here it's nine or ten days of budget deficit so it's a very small number given the four trillion dollars government budget we're going to have for next fiscal year two thousand and twelve on the other hand because we never really deal with the eighty nine eighty eight percent of the budget that's non-discretionary it's a bigger piece of the discretionary spending and both sides have large it up their proposals with ideological things to excite their bases which are making compromise impossible which would which is going to have a pretty significant symbolic value if nothing else and i would also add that most people are covering what depends on how long the government stays down how big of a deal it is and shuts down for a day and resumes that's one thing if this gets worse and worse on the impasse cascades over several days then we're going to have a slightly different thing we need to debate here i'm your and other shows right and really about i want to ask if you talked about the debt ceiling isn't that a bigger debate that's just down the road it's a lot more important i mean if they can't get that debt ceiling higher i mean that's when the u.s. would actually default on debt i mean that's what's at stake it's much bigger deal
right. well if they couldn't actually get the debt ceiling raised which i think is fairly improbable a little bit like not being able to get a project that what you actually have not so much as united states consulting on dead we have a situation in which massive emergency cuts would be made in the helter skelter disorganized fashion and that's what everyone wants to avoid because no matter what your ideological commitments are the having a dysfunctional and disorganized american government on display for the world for many days and in many ways is the worst possible outcome whatever your priorities for the budget might be for the years to car. at the new school and as we've been talking about a lot in the show the impact of credibility on a country the belief that a country can pay back its debt that you should loan to them well what if that was a challenge for the united states that's not so farfetched take a look at what could happen. while u.s. lawmakers in washington big over the budget and blame across the aisle for the
gridlock calling opposing colleagues relatively small that stream group of logs who are dragging down the budget negotiation process give me a for another group of decision makers has been waning in on the debris one of the country's top credit agencies telling the feds something has to get done on this debt ratings agency standard and poor and moody's have been warning for months that the u.s. debt could threaten the country's golden aaa credit rating telling investors in u.s. bonds essentially they may have to worry about getting paid the u.s. debt problem is big fourteen trillion dollars big meanwhile the solutions lawmakers are coming up with to solve this problem are small this tiny dot represents even the larger sixteen billion dollars in cuts republican lawmakers originally proposed meanwhile the u.s. government each year continues to a lot more than it takes in resulting in more than a trillion dollars in budget deficit so with all of this there rating agencies as
unsustainable and a concern and if that half the u.s. has been on for over forty three cents of every dollar we spend this year. we borrowed against the future of our children continuing on this trajectory of borrowing and spending however would not be an option according to financial analysts if the u.s. was downgraded so what would happen there would be another crisis economist max broad wolf says even putting the u.s. on official downgrade watch would be devastating it would create global shock waves in part because most models and understanding of the global investment landscape include a broad landscape take is their sort of central aim for the u.s. ten year treasury bond as the risks. and if that asset goes from risk free to risky for us bond holders like central banks and investors all over the world so goes the
stability of currency as just one example and so goes the low interest rate the u.s. pays to borrow money as it is the interest the u.s. pays on its debt is staggering it was one hundred eighty seven billion in two thousand and. four paws on it increases to eight hundred forty four billion that number would grow exponentially faster with a downgrade because the us would likely have to pay higher interest rates to borrow money meaning less money to spend at home then we have to start cutting really aggressively and for many things they're too important for americans really to to be able to agree to cut them right now drastic cuts in everything from energy to education to the military certainly and in dangers the u.s. position is an empire around the world being able to reach into every corner of the earth yes absolutely whether the u.s. would really be downgraded is up for debate the u.s. has the exorbitant privilege after all of printing dollars the global reserve currency to pay its global credit card bill the scarier scenario may be that the
u.s. has even reached this point i think much more disturbing out of court in my opinion the fact that the u.s. financial situation already. possibly merits of a situation that once would have been unthinkable perhaps a downgrade for the us whether it happens or not lauren lyster or washington. and earlier i spoke to my foreman chief economist for john thomas financial exactly agree with my report here as part of our discussion. first of all there is absolutely no risk whatsoever of the united states not being able to pay its debts because its debts are denominated in its own currency the u.s. dollar of which it is the issuer so there is no issue of sullivan see there cannot be an issue of see the united states is always going to be able to pay it debts i think a lot of what is going on here is fear mongering and look if you look like to be.
getting more you know downgraded several times by the rating agencies the ten year yield on the japanese government the equivalent of our ten year treasury is yielding one point five percent so the interest rate will be unaffected however i will say this a lot of people view this i think through sort of a prism of misinformation some of the misinformation in that piece you just related that i really do believe like and i think our nation impelled this information in the sense that a downgrade would lead a lot of magically and necessarily to higher or skyrocketing interest rates that just isn't true why what it was. more people were concerned about the i think a deliberate attack what if us with right now is the reserve currency to u.s. dollar it because as you said as they said in that package the u.s. has no inability to pay it back because it is shoes dollars it could print the dollar to make a payment on the debt i mean there's no way that it's not going to be able to make
that payment on the debt when i think in latter day i dollar wasn't a reserve currency anymore a lot of people talking about that event different countries and gauche a trade then their own currency if the third dollar more and more people are talking about i think in which the u.s. dollar wouldn't be there with our currency in any way are to to pay ends yet is not the reserve currency in their interest rate is one point five percent and they have debt that is two and a half to three times bigger than what the united states has and the reason why they're able to have a low interest rate is because the bank of japan the central bank sets. the interest rate low and their debt is denominated in yet just as our debt is denominated in dollars so it's a non issue you know the rating agencies should understand this but i mean they cannot join it is how connected i like warning it is that even politically difficult for them to cut out what warnings because i mean anybody who is doing that is making a name for insolvent if the us and these are paying their political lands than the warnings are ridiculous they are in applicable to
a sovereign nation that issues its own currency i've had discussions with the rating it look these are the same agencies that rated the toxic subprime debt aaa so i mean how do we take them with any level of credibility after that the fact of the matter is any country whether it's the united states whether it's japan whether it's any country that issues its own currency never has an issue of solved and see if its debt is that nominated in its own currency it could always make that payment but i was very worried about when he left and with us that what are we worrying about then why can't we just spend spend spend spend and have that fourteen fifteen sixteen trillion dollars then continue on its back with a problem like that a debate about that well there's no problem the debate is that people have a misunderstanding of this they view the reality in a way which is mired in misconception and myth and this is this is pervasive from the common person on the street all the way up to the highest levels of policy
including our own president who goes out there publicly and says we are out of money that is in possibility the united states of america issues the u.s. dollar they can spend it any amount that it was to the. that was my government chief economist john thomas financial now let's not forget meanwhile battles continue overseas and u.s. military intervention appears to be facing roadblocks well diplomatic meetings bring up more questions than answers but we want to bring up those questions anyway i'm voice from the u.s. france and britain are reaching out to libyan rebels and indirectly are in talks with moammar gadhafi regime and a former u.s. republican congressman is actually in libya meeting with gadhafi himself to persuade him to step down so we're asking if this is a sign no number of nato airstrikes can drive khadafi out and he's not going anywhere meanwhile the u.s. defense secretary robert gates is holding talks today in saudi arabia meeting with the king he told reporters afterwards they talked about developments in the region
and of course iran but we're asking what's really behind the meeting and what will we see in the aftermath because we want to take you back a couple weeks you may recall gates was in the region recently visiting another persian gulf ally bahrain i was back on march eleventh he had a meeting with the king there and just days after he left look what happened saudi train rolled in along with a thousand troops they were in the country to help the monarchy suppress anti-government protesters and the bahraini government declared martial law and images like this of a violent crackdown hit the internet people being shot point blank presumably by the government that the u.s. stood by and as protesters died in bahrain the u.s. urged for humanitarian help in another country in libya and less pointed out what they saw as this reality looking at the. ships you know richard protesters in the capital groom that is were these my distant streams in the ocean . and let such as it grows off through the conclusion gates would have had to know about the saudi intervention and us was therefore complicit in it an effort to
counter iran's influence in the region just a reminder goff rain is sunni rule but it has a shia majority believed to be sympathetic to iran and reports came out that were worried too they were concerned they were becoming the target of a proxy battle between the us and sunni ruled arab countries against shiite ruled iran so we're waiting to see what comes out of the gates saudi meeting you know he already told reporters he has evidence that iranians are trying to exploit the situation in bahrain we're watching where it's going to go next meanwhile thousands of protesters have taken to the streets another day in yemen against their longtime president and the pentagon has come out calling for a swift transition of power amidst the protests and violence against protesters by the government but the pentagon remember has also said there are no plans to suspend u.s. military assistance to yemen now we're asking is this just another sign the u.s. war on terror makes for dubious bedfellows putting the u.s. and yet another compromising position and when it comes to u.s.
military intervention in the war on terror and now like we're seeing in libya the toll of u.s. airstrikes hits far away from home when filmmaker highlighted the realities that went unseen by the american public during the war in iraq in the film the true story of our less ali and animated film about a twelve year old iraqi boy who lost his limbs as a result of u.s. air strikes he went on to become a symbol of the iraq war here's a snippet. i'll be the americans have accidentally killed your family. you bastards i'll be the americans have accidently blown your arms off you. look out. i told you.
that earlier i thought the spoke rather to the filmmaker william roth and i asked him if the airstrikes were staying in libya have reminded him and brought up those feelings he had that inspired that video he made about iraq here's his take you know i actually feel it was a totally different situation. in iraq was something that was planned for ten years khan's united states. were this operation so see a kneejerk reaction to. the west side with no one in the west wanted to invade libya what about the billion tall what about the civilian toll that something you're very critical of i mean isn't the same thing happening at the bottom of the air strikes and libya oh sure there's no way you could go to freedom. without killing innocent people because of course it so there's no you know in your film that you made on iraq are very critical of the
american media coverage of just that of the iraq invasion not showing the carnage that was on the other side of those bombs of where they were landing i want to play a little snippet of what you did and your short film. here you can see it. here strike against targets a. city over five million people we can only imagine how terrified they are now mr ross you know that's kind of like deja vu for me it looks a lot like the coverage we've been saying of the air strikes in libya a parody of what that would look like do you think the american media is failing in its coverage and of libya to show that side it would. be. stuck in so many. so i don't know what's going to show right now. the same kind. the rate we're hoping it will be split on many american typically since so is iraq what turned you off to the american media what is your criticism
of the way the mainstream media covers u.s. wars that the iraq certainly it was a review of sorts so as a cheerleader for the bush administration. surely the things the administration want to show the schools to be painted happy smiling children going to would even make it to bits united states think twice about her involvement there he say anything different now about ghana's down or with our continued involvement in iraq or involvement in libya but i think. the american public has become a lot more cynical of course in the middle east certainly there's were a lot of americans very sick of being in afghanistan we're sick and still be going to iraq and we have there's no desire at all to go into libya so then why do you think these a policy of continued to be advanced by the united states because it doesn't matter what people think it seems that policymakers don't make the same decisions. well if
you. are. really going to situation we sort of. there's. this is going to. be way something that no one could interest. it's true that there's your. government work but yet it continues and you know i want to ask you you are an artist but also as i you are a software engineer you made this film it seems to be like this so inspired you this the horrors of the iraq war which as you mentioned you see is a different situation there were fraudulent claims false pretenses for the war and i think that that's a more widely held criticism than criticism of other wars that the u.s. is involved in in afghanistan for example or drone strike which strikes in pakistan for example those don't go as criticize there is as much popular outrage over that do you think that that allows these u.s. wars to be.