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hello there i marinade this is boom bust and these are the global financial stories impacting your world today president obama and senator elizabeth warren may be friends most of the time but not when it comes to the trans-pacific partnership now Warren says that the trade agreement could undermine Wall Street Reform and i'll tell you how exactly she says that it does this coming right up then David Beckworth is on the show today the Ocado Institute's scholar is joining us live on the show to discuss the US and European economies and sports economist Victor Matheson tells us his thoughts on the National Hockey League it all starts right now you our lead story today is the trans-pacific partnership trade agreement this week President Obama laid out the case for his expansive trade agenda known as the trans-pacific partnership agreement however members of his own party were the ones providing the pushback saying that the trade pact is a bad deal for American workers labor unions have been particularly vocal about the downsides of TPP hosting protests and rallies while progressive members of Congress have opposed the DL saying it's a bad bargain senator Elizabeth Warren has been a vocal critic of the 12-nation trade pact she argues that the deal will benefit only the richest Americans worsen income inequality and allow private companies to challenge domestic financial regulations before an international tribunal President Obama criticized senator Warren during a town hall hosted by MSNBC saying quote I love Elizabeth were allies on a whole host of issues but she's wrong on this when you hear folks make a lot of suggestions about how bad this trade deal is when you dig into the facts they are wrong now it's very important to point out though that wall Obama criticized Warren for being wrong about the facts of the deal the facts themselves have been pretty hard to come by that's because the Obama administration has deemed the negotiations to be classified the deal is being negotiated in a secret process led by corporations and foreign governments which is a primary issue for progressive Democrats TPP transparency it isn't just hard to come by it's almost non-existent however Warren is particularly concerned with the process in the agreement called investor state dispute settlement this grants foreign corporations the political power to challenge the laws and regulations of a government before an international tribunal this non-governmental court it has the power to levy trade sanctions against if any nations and as procedure differs from those used by the World Trade Organization which allows only sovereign governments to bring trade challenges investor-state challenges have become an increasingly popular tool for corporations challenging regulation that they simply just don't like and since they don't have to go through the normal courts corporations love investor-state challenges I mean if you were a very big foreign corporation wouldn't you want to have an unfair advantage over a domestic company it's basically like having a home-field advantage at a visitor's stadium to discuss the US and European economies David Beckworth is on the show now now David is an assistant professor of economics at the Western Kentucky University just Western Kentucky University not V and an adjunct scholar at the Cato Institute he also worked as an international economist for the US Department of the Treasury David welcome now David the wall street journal's Greg it wrote about a recent paper by the IMF that argued there's not enough public debt in safe acid economies like the US or Germany so do you think this argument has merit and if so why well it is not interesting observation that is made in the article and spread the lanc you made that argument initially and what he shows is that if you look at a number of countries that have safe assets the u.s. in particular you'll see there's been a huge run up in its public debt from about five trillion to over 13 to and that's marketable securities at the same time it has the lowest financing costs that's had in a long time historically low interest rates and so it poses a bit of a puzzle how is this possible normally if an entity takes on more and more debt its credit race go up it's considered of a more risky bet and as a consequence faces higher interest rates but the case of the u.s. Germany and UK is if they're going down the way I would approach this particularly in the case of the u.s. is kind of to step back and think of a country that has a comparative advantage in providing financial services to the world banking services to the world so if you have a country like that it would you would think it would export financial assets to the rest of the world now if it's exporting these assets the rest of the world it will be beat by definition exporting debt and so I country that specializes has a capacity for creating debt and people want it by definition should be seen a run-up in some of its it's dead and it shouldn't be viewed as a problem the u.s. is effectively a banker to the world if you look at the u.s. is balance sheet the public and private balance sheets consolidated you'll see that most of the liabilities or a disproportionate share of them are highly liquid ass that don't earn much interest if you look at the asset side where the u.s. owns asked is the rest on the rest of the world it's higher yielding riskier assets like foreign direct investment right and what this means is that most of the world oil a lot of the world make vest funds in the u.s. a lot of the time they're parking their funds here to get safe liquid assets like commercial paper Treasury bills because it functions for them is a form of money a safe liquid asset in return we're taking those funds investing in the rest of the world yes David if the user Germany issued more safe assets then that would necessarily mean an expansion of fiscal policy then no it would um and that would be controversial and obviously certain parties wouldn't like that but there's ways maybe to package it to market it that would be more palatable maybe they're starting to sovereign wealth fund miles kimball has talked about this if in fact we do have this comparative advantage and exporting debt why not develop a sovereign wealth fund that would manage just like Norway has a sovereign wealth fund for oil you could do something similar with debt now let's talk about monetary policy here there's a lot of different explanations for what exactly contributed to the housing boom but Stanford econ professor John Taylor believes that the Fed pushed interest rates below their natural level contributing to the housing boom and you know Ben Bernanke Larry Summers they believe otherwise so David when you look at this question did you find any evidence to support Taylor's view when we first say that there are a lot of things that contributed to the housing boom so I I don't think there's any one strong answer but I did find evidence that's consistent with Taylor's view a number of authors of myself worked on a paper where we saw evidence that pointed to the Fed raised a lowering race beyond where they would have otherwise been and the reason for this is that there was a huge productivity surge in the early to mid 2000s as you know China was opening up Asia was opening up rapid technological gains and what this productivity surge did is it put downward pressure on inflation and that made the Fed nervous and then it lowered rates but at the same time when you have rapid productivity grant gains it increases the return to cap it makes people want to borrow more firms when a borrowed morn that puts upward pressure on interest rates so all else equal rapid productivity growth should lead to higher natural interest rates the Fed pushed rates down and inadvertently it ease policy more than it should have and this was one contributing factor to the housing boom the New York Fed has come out recently arguing that quote the fundamental factor behind the boom was an increase in the supply of mortgage credit which was brought about by securitization in shadow banking along with a surging capital inflows from abroad so how does this view fit in with your research well I think they can complement each other again there are many moving parts of the story but if you look at the increase in supply of credit it came to the US a portion of that came from oversea this is this is Bernanke saving glut theory and what's interesting is that if you look at the u.s. it's it's a kind of a monetary superpower a large portion of the developing world pegs their currency to the dollar as a consequence when the Fed sets monetary policy its decisions or felt in those countries so whenever the fatties is here it effectively countries overseas have tip to ease and tighten when the night when the Fed titans and the way this would work is a real simple examples is is to think of this scenario the Fed eases monetary policy more dollars are being created and if a country like China wants to maintain its peg to the dollar it's going to have to buy up those dollars otherwise the dollar would appreciate but in order to buy up those dollars it puts in some currency and now it has dollars it takes those dollars and it goes and it buys us assets like mortgage-backed securities and Treasuries so in short when the Fed eased and given these countries peg their currency to the dollar the money got recycled back into the u.s. so some of the asset purchases by foreigners was simply recycled monetary policy not all of it as some of it and there's evidence to support this if you look at simple statistical analysis of the two series David last time we spoke we talked a bit about how the European Central Bank is that interest rates more appropriate for Germany than for the eurozone periphery and how you believe this contributed to a European periphery housing boom so it doesn't this view kind of fit Taylor's view more than the Fed view it does now the Taylor rule is not perfect it's a good first approximation there's other ways you can look at it as you know I'm a big kind of nominal GDP targeting you can tell the same story with the nominal GDP rule but a Taylor rule definitely points to the problems that they're occurring in the eurozone in terms of monetary policy and I think it you can also use a Taylor rule to look at what happened in the US John Taylor said the Fed kept rates too low for too long you know what we'd effectively did in that paper was to show why the Fed did it Taylor makes the case others make the case that that was too easy too long but a deeper questions will why did it do that and I think the answer in part has to do with the huge productivity surge and the feds inappropriate response to it David I wish we had time for more questions but sadly we're just going to have to have you back on very soon so I guess that's a good thing something to look forward to thank you so much for your time in your insight uh-huh and thanks like I said time now for a quick break but stick around because when we returned Bianca foschini is bringing us a roundup of the biggest financial news stories impacting the equal mobile economy today then in today's big deal edward harris and i are taking a look at Iceland's radical move aimed at ending booms and busts all together and remember as always you can see all segments featured in today's show on YouTube at youtube.com slash boom-bust RT and also on hulu at hulu.com / boom dash bust now as we head to break here are the closing numbers of the bell don't go anywhere Thank You mr. president what is the state of black America like the rest of America black America in the aggregate is better off now than it was when I came in office please somebody help us should you see you're feeling helpless man we can't change the hamate Delta's help us oops people of America when are you gonna wake up this is all a setup she is the united states are supposed to stand for something it's easy to talk to talk but do you walk the walk this former frogman is looking at you we're a frightful society today who turns to our government and says make us safe it's the real Wizard of Oz behind-the-curtain stay vigilant and question more action more if you want to know what's going on in city in your street never back down like Tyrell then the treatments once you speak to analyze investigate for the bottom to the top your speed your my life alone whether they like it or not I got peppers are miss Barling with the wisdom and the pearl between outrage to the evidence what's going on in this world the hot little wind it up welcome back to the show its kind out for our daily news roundup with the one the only Madame Bianca Puccini thank you so much for being here as always and you know Bianca I understand that the energy information administration the EIA this is a big body they are reported a decline in oil production so what's this all about what's the deal with the decline I know that this is a big number from dia so tell us right so there was a decline in production so that shop prices up a little bit but the US oil industry is obviously still kind of reeling from lower prices so we're gonna take a look at that and then some pretty bad news coming out of Tesco yeah yeah all right mm-hmm oil prices in the u.s. rose on Wednesday after the Energy Information Administration reported a decline in production even though last week the EIA said US production declined by only eighteen thousand barrels a day us crude rallied on twenty cents to the news to fifty-six dollars and eighty-one cents a barrel at the same time US crude stocks increased by 5.3 million barrels to a record level crude oil inventories have been swelling dramatically since the end of last year as a consequence of shale oil drilling Tesco suffered a record pre-tax loss of 6.4 billion euros for the year to the end of februari compared to a pre-tax profit of 2.26 billion year old euros the previous year the largest portion of the loss was due to the decline and property value of their UK stores 43 of which are set to close the retail giant is also under investigation by the Serious Fraud Office for overstating its happier profit in August by 263 million euros and following the news that their disappointing earnings report on Tuesday yahoo has hired advisers to determine the future of yahoo japan the company's shares rose after the announcement about yahoo japan which has a market value of nearly 25 billion dollars on the tokyo stock exchange and their 35.5 percent stake is worth about 9 billion dollars before tax those are some of the major financial stories affecting your world today thank you Bianca good stuff interesting with yahoo japan that they're bringing in consultants hatchet men yeah that's all have done but that's interesting we'll definitely be keeping a close eye on that man thank you so much thank you welcome now to get his insight on the sports industry Victor Matheson is on the show victor is a professor of economics at the College of the Holy Cross and is an expert in sports economics we started our conversation by discussing the NHL which is doing better now than it has been in years the league believes revenues in the 2015-16 season could exceed four billion dollars so I first asked Victor how this will affect the league's current salary cap take a look at what he had to say so the way that all the professional sports leagues in the united states work they have an agreement with the unions we're all sports related revenue is shared with some specific percentage to the players as a whole so in the NHL that number is about fifty percent so any dollars that come into the NHL from hockey related business half of that goes into the players half of that sticks with the owners and so any increase in money eventually makes half that makes its way into the pockets of the players through both the salary cap as well as a salary floor now the salary cap in the NHL was introduced back in 2005 to limit team spending kind of in order to bring teams closer together in terms of competitive balance and you know given that the Los Angeles Kings last year's stanley cup champions they didn't even make the playoffs this season would you say that this model has een successful for them yeah in most of the sports in the US where we do see a salary cap we have a lot better competitive balance at least season to season than we see in sports where there isn't a salary cap of any type so for example if you look at soccer in europe none of those legs are operate with salary caps in place and guess who you see in the champions league every year year after year you see Barcelona you see Paris saint-germain you see real madrid you see all the big spenders bayern munich you don't see those little teams coming up and really being able to challenge at the highest level but what interesting i'm glad that you bring up the comparison to european soccer football they they don't seem to have a problem with getting fans in the stadium that's for sure why do you think that is well so they don't have problems getting spans in the stadium for Barcelona and Real Madrid however if you go way down the list to that 20th best team that team that really doesn't have any chance of competing in any given year well then you have some real struggles so yeah those stadiums look full when you can put Neymar and and Ronaldo in front of the fans but when you're Wigan or when you are gijon or when you're the other tiny teams are spread around Europe you know things don't look nearly as rosy for them compare that to a team that's the 20th best team in the United States and and they're still going to be selling out games for the NFL they're still going to be selling out lots of games in the NBA and NHL NHL commissioner gary bettman has suggested that next season's salary cap could be increased to 73 million dollars and that's up from 69 million this season you know however Bevin he made this prediction before the canadian dollar plunged 10% to the US dollar basically revenues from canadian NHL teams are now worth eighteen percent less in u.s. dollars and sports banking officials say that at least one quarter of the league's overall income comes from canadian sources so how will changes in the value of the Canadian dollar impact league-wide revenue actually this has been a huge problem with the NHL for as long as we can remember teams north of the border have had significant problems in competing with the team south of the border despite the fact that there's a much stronger fan base in Canada than there is in most of the United States in fact because of problems associated with exchange rate fluctuations in fact most NHL players are actually paid in US dollars even if they're paid in even if they play in a Canadian city that can make it really difficult for teams north of the border to actually make those large contract payments to and then though those big salaries to two players because they cannot guarantee that those revenues are going to be there to meet those US dollar-denominated big player contracts now given the long grinding and you know oftentimes brutal playoff season of the NHL the casual fan could potentially lose interest so is there an argument to be made for tightening up the playoff season by making the earlier round shorter uh one realtor decision about the NHL over a lot of years is that there were so few teams in the league as a whole and so many teams made the playoffs that in fact it wasn't the playoffs that were considered too long it was actually the regular-season not considered too long I think you could probably make a better argument that let's keep the Stanley Cup a long where you really have the most excitement going but maybe shorten the regular season that being said certainly you could shorten the earlier rounds one thing that does do is it makes early round upsets more likely which is nice if you're the underdog on the other hand if you're the NHL and you want those top flying teams making it all the way to the finals the longer you make those early round games the less chance there is of upsets and the more chance you get the powerhouse teams making it to the semi-finals and finals and the NHL isn't the only league with a long growing playoff season the same argument you know can be made for the likes of the NBA so do you think that the other league should consider maybe tightening up their playoff season or is that like you said is it kind of like the NHL where shorten up the regular season keep the the playoffs along yeah that's I think what we've seen is you need this balance between it being special to make the array the postseason but also you want those regular season games to be meaningful as well we've actually seen baseball recently expand their playoff schedule by adding in additional rounds of playoff games most interestingly the last time though they expanded their playoffs the playoff series that they expanded was a single game plan so Major League Baseball i think is quite cognizant of the fact that you don't want to drag these playoffs so on too long but you do want to give opportunities for lots of teams to be able to at least have a chance in the postseason big time this guy mr. Edward and today we are talking about Iceland's radical money moves aimed at completely ending booms and busts all together no they're not going on the gold standard who's something else but you know I want to talk about this because the UK Telegraph they reported this a couple weeks back but it's important you know Iceland they want to strip banks of their money creating powers so I want to talk about this but before we get there remind us what is endogenous money yeah so basically we all have the ability to create money whenever we do a transaction you know a credit transaction really we're creating money credit that could be used for for purposes elsewhere and so as a result of that we you can say that money's created endogenously by the system it doesn't have to be presented by the central bank now both an pettifor and Richard Warner they told us that you know some ninety percent of the money created is created by banks hey that's just which is a shocker yet not really if you're kind of in this crowd you understand this a little bit better but you know if we all have this ability to print money via endogenous money essentially what makes bank money different from your money or my money yeah so this whole concept of endogenous money is true but you know getting your money accepted generally is is the big missing link until why banks are special in our system is is that they have a government monopoly it's like an oligopoly basically the government says we can create money and that the money that with that the banks create we will guarantee that it is essentially like the money that we created so you know that means that whenever you go to the ATM and you get money out of the bank even though you're actually getting money that was created by that bank but you're actually getting a dollar for you know or that that money is fungible as if it were government money so that makes bank money different than the money that you know and I owe you that I might get right that I we write on the back of the napkin to one another her but I have to ask you you know is the creation of bank money and credit kind of at the heart of all booms and busts yeah definitely and I think this is what the Icelandic people are getting to is is that you know if you create lots of money to credit in this case and that's not necessarily say the two are synonymous they're they're similar then you're going to get a boom and if that boom is geared towards assets that are not productive eventually going to get a boss and usually the bust is as large as the boom that preceded it ed has any other country ever done this I I'm just kind of curious it's kind of amazing yeah it's a big thing no country has done it but people are really talking about it and you know I think that if we get another massive financial crisis people will talk about a lot more than they are already right now absolutely and you know now in Iceland specifically the country's central bank is gonna become the only creator of money if this all goes through and aunt pettifor says that this would be terrible so why yeah I think that what her fear is is is that if this happens that money would be restricted that you know I'm still getting to grips with the concepts there are different ideas that are floating out but from her perspective the concept that you know all of the transactions have to be reserved against means that you know if you want to do something you may not have the bank may not have the reserves in order to get it done and it would restrict credit and therefore the economy would would grind to a halt it's kind of fascinating we have to keep a really close eye on this one and I mean it came out a couple weeks ago quietly and I'm God that we're really talking about it now and we'd love you to send in your comments but you know the FT's martin wolf he has endorsed a similar strategy to Iceland so what what exactly did he said yeah so he was saying basically that this is a good idea and what it really allows the economy to do is it allows the government and the central bank to create the money and then to credit balances as a result you could almost say that it's like an in GDP that is nominal GDP targeting mechanism that they can say we're only going to create enough money in line with a nominal GDP growth and as a result of that what it means is it takes it takes banks and makes them less boom busty and turns them into really just very simple intermediaries between a a saber and an investor and that's it that's all they do I only have ten seconds but is this a huge jump in governmental control and power what do you think I think that it potentially is I mean my qualms about this whole thing is is that it's centralization and so I think that it deserves some investigation ed let's investigate it let's get on it and thank you so much and I tell us more we'll have to hear more in the very near future however that is all the time we have for now so please check out our Facebook page facebook.com slash boom bust our teeth and you can also tweet at us at arenae at edward any from all of us here at boom bust thank you so much for watching we'll see you next time bye