tv [untitled] July 20, 2012 7:30pm-8:00pm EDT
just smear their opponent the bottom line is it's up to each of us just sort through the noise to find the truth right so. that's going to do it for now for more on the stories we covered head to our youtube channel it's youtube dot com slash r t america you can also follow me on twitter at was wall well we're back and have our. well see british soil. that's the time to. go. to. market why not. find out what's really happening to the global economy with much stronger no holds barred look at the global financial headlines tune in
to conjure reports on r.g.p. . well good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these your headlines for friday july twentieth two thousand and twelve rising food prices are being called the next crisis by some as drought pushes agriculture commodity prices to record highs the writing an economy in a tough spot already but is this part of a bigger bust cycle that is all part of the natural historical trend of collapses tied to technology where we need to hit a real rock bottom in order to move forward to a golden age well we'll talk to author and professor car lots of her red who's certainly thinks so plus morgan stanley and citi group are reportedly among wall street firms preparing to eliminate jobs as revenues reported so far in two thousand and twelve drop for us third straight year that's according to bloomberg
but is a step in the right direction for the broader economy do we need a much bigger shift away from finance and speculation for capital to move where it would be more productive in the u.s. we'll look into it and a viewer has inspired me to wrap it in viewer feedback yes that's what you heard at that time it's friday will get its days capital account. so when we are talking about booms and busts crises and what we've experienced of course over the last few years there are many things economists factor into their analysis technology isn't typically one you hear but what if you look at the
economy through the lens of major technological revolutions over generations over centuries when you look at the investment it takes to roll them out and then the subsequent financial innovation of that industry so speculators can invest to their heart's content do you find a unique analysis of financial growth and financial crisis let's take an example that we can probably all remember the internet boom it created major new technologies but it was followed by a speculative frenzy that created a price bubble for tech companies and those prices did not accurately rafat reflect what these companies were actually worth and it all imploded now that's just one historical example but it's not unique least not according to carlotta perec she's a professor and author of this book here technological revolutions and financial capital the dynamics of bubbles and golden ages we spoke to her about it all
earlier. so professor perot's thank you so much for being on the show first of all . it's a good thing ok so now let's start let's kind of set up your theory for our guest because in your book you write about how this wing of the economic plan occurs every two or three decades bringing us from gilded ages to golden ages so i want to bring up that chart which is what you just scribe of this process as sixteen year cycle of capital going from twenty to thirty years at what you call an installation period to a crisis and then a deployment period now we're going to break this down through the course of the interview but maybe you could start by just explaining what this installation period is that begins at all. is what we have been through the past year. the first thing. is the change by revolution and it's revolutions agree about six years so what happens if.
ever none of us live poor and therefore we don't realize that the for things that are happening have happened before we always think we're unique and this is the first i'm going to have. is precisely. this new technological revolution we tell us about thirty years for us to learn all the new things so we get a new infrastructure and we've got now the internet and we have all the information revolution all these new things have been happening for thirty or forty years. reducing the industry because everyone these were evolutions transforms all and that's what makes it possible to have a. good. now the way google is is by nuns who get interest and can get financial returns profits with these new technologies
which is what happens. so here it goes for thirty years finance controls everything in sight where the investment explodes who gets the money. during the time or. social phenomena that happened because. it's from. abduction and what happens. it's a. major pox ok ok and before we get to a major crisis and the collapse and the next days let's go there are a few of the examples of these technological right revolutions over the past two centuries that have fuel the instillation periods you mention five in your book maybe you want to kind of go over them our audience is looking at them you can't you can name those those keep periods of technological revolutions. there have been five this is that the first one was the make an isolation of call.
outs that come out for the internet. then we come out maybe come out panic and go about the surge of britain that's the great power then we have the second one. and railways that we have the railways and then the panic and after that golden age of the story and. the next one is heavy engineering it's fairly naval civil chemical electrical. engineering things which. feel that was the first globalization it's the first time that we can have. global prices and global trade. even ships were able to. the southern hemisphere in just two
weeks so we had huge globalization in agriculture in meat. in refrigerators and just just with ice and. i mean two weeks they could go all in the whole world changed because we have a first globalization and we have big call ups in the southern hemisphere and particularly bearing prices in argentina. the city of london for about two years and then we have the. golden age of the. fords model. the age of mass production cheap oil balls electrical appliances on all the rest. roaring. then twenty nine the. recession of the nineteenth thirty's. and the golden age post-war fifty's and sixty's who just too great to be in history
. in. microprocessor inaugurate to the information revolution and we've had the installation on till now. we have had the big big. now if we know how to do it the global sustainable golden age of the knowledge society so maybe there is some good news head before we get to that though i want to talk more about what you discussed in the installation phase of the decoupling of finance so the burst of the bubble leads to financial collapse which then swings the pendulum towards the next phase in your view book before this we see what is documented in this graph where the growth of financial profits relative to g.d.p. for outpaces those of non-financial profits and this is in the ninety's and the two thousand so does this decoupling of financial and production profits occur in each
of those cases that you mentioned technological revolutions. just the poor isolation of. the one the one thing. has done because there is a very interesting phenomenon which is what produces the bubble which is that even though finance has been has been funding the new technologies the installation especially the infrastructure. internet in this case what happens it is that so much money because it's so successful that everybody wants a piece of the action so you get so much excess money i do you get such interesting new technologies that we both technologies for nucingen finance the financial innovation and it's all this financial innovation which in part because we've got so you know spread out. that creates the bubble i mean because so this separation
of financial profits from real profits because finance actually couples from the real economy there is much more money moving. by these the roof. on that. and also the inflation of assets because there is the hyper inflation of a sense of the bubble because if you have so much money going into housing then you just have housing prices rice you have a huge amount of that breach and all that money. market and the more it looks like things are getting more and more expensive when you have the more they have on the more money the more goes and. the bubble but also in the choice but before it's that's that's a really interesting analysis of the role of technology in as i haven't ever thought of it quite that way so at the point where you hit the crisis stage which is right at this intersection of the installation and the deployment deployment
phase can you explain why the influence of production capital does come to replace the influence of investment and finance capital which as you describe has already decouple so if so how does it refocus back to production capital well first of all it's certainly doesn't help american market you. ask who we've brought about by the state but on fortune on the. point is very much of by the most powerful part of the finance. system which is finance so it's not easy so what happens is and that's why. the recession they so important on fortune of these bubbles is the political question and they this when people get worried about what finance us they were going on about not having done about all the problems that are created by the cult following. then the politicians tell you it's gone but of course they have enormous pressure from finance who are trying to stop it from
happening so for instance the whole of the nine b. thirty s. which is a very long period on the war on the loft of the war was recession on the question on we couldn't get the economy out of the hole because the measures that had to be taken which were the welfare was based on old things going to the r. one. and the things that in the end were done on the greatest boom in history not be done because business we will accept that's what's happened you know i mean things like transaction tax or or things that would really be bringing who are human creation expansion all the possibilities that there are now we green technology and so on it is almost impossible to do it because the race was this done so the question of how production capital comes by and why it has come back has to do with first of all whether they will help that's. on the secondary when
they're finance is really we really oriented towards patient capital and we creation. so what is the proper role of policy and regulation because we certainly talk about a lot of failures on dave's show of it so we'll hear more from car a lot of her as on what she says to that lot still ahead you responded now i'll answer i may even wrap checkout up your comment caught my eye this week and your feedback but first your closing market numbers. it'll be easier if he
a day early. welcome back so before the break we were talking about the over financial ization of the economy the massive expansion of the casino like atmosphere on wall street that is not productive for the economy and ok yeah i get that we talk about that a lot on the show but where are we now looking at the rise of tech companies for example like google and apple that are doing very well and are arguably much more productive in terms of what they're producing how did they factor in to our guest argument and what is the proper role of policy to reverse the financial railroading of wall street how do you incentivize banks to finance the real economy and not their own speculative portfolios how did j.p.
morgan to finance small businesses and not london whale terry well there's more with her a lot of progress to answer that question she is a professor and author of technological revolutions and financial capital the dynamics of bubbles and the golden ages. none of these guys in the financial sector are themselves. financial power are the or the growth. the production of more of the very are also playing on still profits on fortune what do harm really it's the quantum where. are the board going to have policies that are should make it more profitable for for finance who. really. consider the us a question i have for you what should what is the proper and affective role of government in incentivizing that type of investment you're describing because for example we've seen dodd frank
regulation in the united states which has not ended too big to fail it is not and did a lot of the casino like practices at the biggest banks so there is one example of regulation failing to do what you're describing and in addition you may see so. banks for example print a lot of money that they're hoping gets out to the real economy but they can't force banks to lend that money out to finance businesses and so what you see is banks decided to do what they want to do which recently has not been to finance the real economy seemingly so so what is the way to create the right incentives for the investment you're talking about. of course what it isn't it is not. your average number of that's not what's needed and much less. bureaucratic what you need to do is to radically change the conditions of the market so but it is
much more profitable profitable for them to fund the real economy than the going to do in the consumer so for instance just new york at something very simple. capital gains tax on capital gains is less than half the tax on what people earn by really working by really making real profits in the real economy now that's completely absurd of course that what generally happens in the installation that everybody wants to have financed to go hungry like it was in the eighty's is completely the trying of this in real trouble so people want you know whip it out get the economy moving get the financial world moving so you know reduce interest rates and all sorts of things who move the economy then finance it's a bunch of. it works fine for a while for a while but warm thoughts so now the thing is not to control finance but.
rather to keep more profitable so you have to change the fact system in a way that is profiling the appearance of go welfare as they come up with a situation of. income before that so that's one of the big things the other thing the one thing i want to jump in with professor pres what about interest rates when young zero percent interest rates that doesn't incentivize banks to lend to people because they're not getting a lot of interest on loans it incentivizes them to speculate where they can't to chase yield so do interest rates need to come up. or what not what you might not. you have. to go to are surely having. better rates when they borrow that's not where people get sober house proposals but
he is making proposals for what would you get the money going to all the people who are very well great abundance better because what's the government going it's big money for. the banks it's not printing printing money from people who were kind of over time there but there are a couple slight things that i want to touch on and i was hoping you could quickly answer you mentioned google you mentioned some of these tech companies are you saying that for the golden age if we do get to it it's not going to be goldman sachs and j.p. morgan leading us into this next phase. well first of all it. but normally what happens is. the financial world does not need the economy but serves the economy in the way it's for the economy and make money out of the pockets of the many they are now making money by. by this french alas of.
their own without really generate you can well they're not generating real well because well because. it's about a better life for everybody and we thought what we have ahead of some possibility is a golden a sustainable about global. universal i see. a green green growth across the economy and so full. well we'll have to see if that green economy is the next phase and we do see real change in that direction it could go either way i think that was author and professor.
all right it is friday and last week i was detained in new york so now i have an opportunity to respond to you with some of your feedback and it's a good time to do it because there are a few things i need to clear up about monday's show some confusion that i noticed from the comments on our youtube channel here is a sampling of them kuka new cooking one said weird ending someone else said strange cut off interview maybe our tea was being swatted as a branch and three some of the g lauren don't say goodbye or anything great show nevertheless i wish it could have been twice as long but there were several comments to this effect people were confused and our dedicated viewers definitely deserve an explanation so welcome to live t.v. we had some technical problems with our guests during the live t.v. show monday we improvise we pulled it off lucky for us our very nice guest paul
craig roberts was able to stay and tape a nice long interview with us which we posted online which is what our online viewers saw you all clearly enjoyed the content judging by the comments and the likes but we're also a little confused with the presentation so that explains it don't worry i'm going to say goodbye and all my shows continuing on and boo who is seven four six said have the bank stars kidnapped lauren where's lauren today there were a few comments to this effect i thought it was a little interesting i watched the show back to see what that was all about i think i was just maybe a little more calm than usual i don't know thinking back maybe i had a little less captain nation. that day so i guess the moral of the story is i need to switch back to double espresso overdrive so i don't throw everybody off in the audience so consider it done because frank our floor director quits coffee and my mom. i'm back in action and i will continue to be on the paul craig roberts
interview which was on monday which had to do with his article he wrote with nomi prins on live war and what their analysis of the real scandal was t.f. market advisors tweeted me this is peter cheer and he disagreed with an aspect of the argument he tweeted that floating rate bonds wouldn't have been helped by live or much as they are floating rate now that ties into an argument that nomi prins and paul craig roberts made in their paper in the article now peter chair was nice enough to send me a whole bunch of information which i'll go through this weekend and try to present you with this alternative analysis he laid out on live board next week so you can look forward to that i'll try to get him on the show too and after new york which was last week and some other days where we had multiple guests and we didn't really have the opportunity to do loose change in the studio while we did this week we did yesterday and someone actually wrote us a poem which was very touching and it actually may have been inspired by a song a gene autry song which our line producer found and brought to my attention but
since we can't play music on air for copyright reasons i actually like to think that maybe it sounds more like a rap so let's bring it up i'll try to do my best interpretation of what this viewer wrote it looks a little something like dimitri and lauren back in the saddle again. as good friends loose change it be jingle in lauren cool classy keeps the tingle in their back in the saddle again. yes i know i know that was a really pathetic thank you for my control room for indulging me in a little fake applause with that but this viewer also said this week shows have been superb a plus. plus which is the part that i really care about so thanks and he also said i like how the real greek on the show was not enough for eternity cheers to dimitri for being real now magic two hands gets all the credit for that poem you're awesome thank you and he with that comment about dimitri was referring to a story we did about wall street clients pain consultants to help their daughters through
sorority rush and group dimitri who is the actual greek was never in a fraternity which he pointed out the irony are you're dead but that story inspired me to use a word that some had never heard and heavens trail tweeted and said is loser is stephen a word even though i don't think it matters it was meant. no viewers and heavens first lose the earliest to lose their areas whatever is said is not a word absolutely isn't but that is right i do take creative freedom to make up words when it seems appropriate and loose change certainly seems to qualify we also reserve the right to make up images and now seems like a good time for that because we were inspired to do just that in response to this economist cover we're almost out of time to respond to it because this is the last day this issue is on newsstands but we were just so shocked by uncle sam's hastie's of bolding biceps we just don't know where this is going to go next but we were
thinking you know maybe if the qana missed if angela merkel did everything the economist has wanted her to do are we going to see this next this is what we came up with miss universe for angela merkel oh no seems like the likely next step though it probably won't be happening in the case of europe judging by the current state of affairs and view with that because that's all we have time for but thank you so much for watching and don't forget to come back next week we have a packed week because dimitri is heading off to vancouver to score lots of great guests from a burra financial conference you can follow me on twitter at lauren lyster go to our you tube channel or you tube dot com slash capital account c s n h t on hulu and have a great night. wealthy british style. is not on the tireless.