Transcripts For CNNW Fareed Zakaria GPS 20140323

Well show you some of the artistic options. First heres my take. Whatever happens in ukraine over the next few months and years, the crisis has reminded me that there are really two kinds of rulers around the world. Those who think about the past and those who think about the future. And if it werent abundantly clear already, it is now. Vice preside Vladimir Putin is the first group and his country the poorer for it. Weve all learned some lessons in russian history. Crimea was the first great prize for russia and a mark of russias rise to great power status. It also gave the russians something they never had, a warm water port with direct access to the mediterranean and wider world. Russia held on it to the region even though it lost the crimean war in the 19th century. It maintained its grip on the region after reclaiming it from the nazis in early 44. Then came the strange and fateful twist when soviet premier nikita crish nof gifted crimea to the ukraine. Why he did that, we mains somewhat unclear. What ever the reason the consequences are lasting and dramatic. History is bunk henry ford said. He did not mean it was unimportant but rather people should not be trapped by it, that they should not think backward but rather forward. His exact words were, history is more or less bunk. Its tradition. We dont want tradition. We want to live in the present and the only history that is worth a tinker is the history that we make today. The history that leaders make today has much less to do with geography or constraints from the past. When singapore was expelled from malaysia in 1965, the experts said that small swampy town in the middle of nowhere could not survive as an independent country. It is now one of the worlds great trading hubs with a per capita income higher than that of its colonizer Great Britain because its founder thought less about the disyang vangs of history. When the nationalist chinese were abandoned by the world on a tiny island after the communist revolution in china in 1949 most assumed the place would not survive. In the most precarious position with zero natural resource, taiwan became one of the Fastest Growing economies for over four decades. Thats because it didnt worry about geography. It obsessed about competitiveness. When paul took over rwanda, the country was more deeply ravaged by history than almost any nation. Scarred by a genocide of a speed never seen before in the past. Rwandas also landlocked with no geographic advantages at all and a bloody war in the neighboring democratic republic of conga. They looked to the future, not the past. The result is a small african miracle. A country healing its wounds. There are those who are still trapped by history and geography, think of pakistans generals, still trying to establish strategic depth in their backyard while their country collapses. Or think of putin, who is as secretary of state john kerry said, playing a 19th century game in the 21sst century. What has he achieved . Ukraine has slipped out of his grap, his people suspicious of moscow n crimea the 40 who are nonrussian are probably resentful. Moscows neighbors are alarmed and once warming relations with poland will be set back, trade and investment with europe and the United States will surely suffer. Meanwhile russia continues along its path as an Oil Dependent state with an increasingly authoritarian regime that has failed to develop its economy or Civil Society or foster political pluralism. But no matter, moscow controls crimea. In todays world, is that really a victory. For more go to cnn. Com fareed. You can read my time column. Lets get started. Ill be back with much more later on in the show. For now lets go to cnns jim sciutto for the latest. Thank you, fareed. Lets begin where you left off. Wrist russias annexation of crimea which president putin finalized with a flourish of the pen. Also at the end of the week, of course, came the u. S. And eu sanctions against russia and countersanctions from moscow. The sanctions target some 20 individuals seen as close to putin and a bank used by that inner circle of his called rosia, russia in russian. The eu sanctions 12 individuals including Russias Deputy Prime Minister and chairwoman of the upper house of parliament, so how is moscow reacting . Well go to Cnns Fred Pleitgen in russias capital. Its a small group but a powerful group and these sanctions designed to hit them right in the wallet. Are they working . Any signs theyre working . Are the russian leaders of that inner circle hurting from them . I would say, jim, they hurt a lot more than the first round of sanctions that happened last monday. You can tell that russian reaction to it has been a lot more sour than you would have seen in the past. Its really a mixed bag of reactions that were seeing from the russian government. There are those in the Foreign Ministry who say we have to hit back with really hard sanctions against the United States. Theres also people in the Government Office who are saying they want mirrored sanctions and to hit additional u. S. Lawmakers, not just the ones theyve put sanctions on. Vladimir putin had a very interesting reaction to all of this. He was in public and said, he really didnt want to have any sort of counter sanctions. He felt there neednt be any sort of reaction. There is the case these are hurting these very these people close to Vladimir Putin very, very badly. You can tell that there is a degree of nervousness, not just among them, but among a lot of the other top russian business people. And especially the fact that bank was hit was something that really hit russians very, very hard. There were apparently some people abroad trying to pay with visa and mastercard, highprofile russians that couldnt get any sort of money. However, its not something thats deterred Vladimir Putin at all. The process of annexing crimea as you mentioned went forward. Theyre talking about what the additional things are going to be that theyre going to do in the future. Doesnt seem as though its holding Vladimir Putin back. There is a more sour reaction than you would have seen in the past, jim. Well, the u. S. News aiming right for the very top. Thanks very much, Fred Pleitgen in the capital moscow in russia. In the end will the u. S. And eu sanctions against russia be at all effective . What could make them more effective as well . What about russias countersanctions against washington . Officials like House Speaker boehner and Senate Majority leader harry reid . Do those have any bite in the u. S. . Were going to two experts. Juan who worked in the white house and Treasury Department in the george w. Bush administration, wrote the book on sanctions treasury war the unleashing of new era of financial warfare explains how they took sanctions and other economic sanctions to a new level against enemies like al qaeda and Saddam Hussein and also a cbs Senior National security analyst. And ian bremer, the president and founder of the eurasia group, one of the best in the business when it comes to analyzing how Political Developments will affect markets and economies. Welcome to both of you. I want to start if i can with juan. You are the architect of this strategy of sanctions, as your book mentions. Going back to Saddam Hussein. But also continuing currently with iran, sanctions that arguably have had a great deal of success. It is early admittedly in this game, but do you see any signs at this point that the sanctions against russia are working, are changing puttps behavior . Thank you, jim. I do think these are the kind of sank shngs that work will work but likely in the long term. The premise behind these kinds of measures is to unplug russian banks, businesses, key business leaks, from the International Banking and commercial world. That is what has been at the heart of the isolation of iran and other sanctions of processes that weve put in place. What youve seen with the naming of banker, the 17th largest bank in russia, the first salvo in beginning to unplug the Banking System from the global system. Thats why you saw a shiver in the markets, which i think is a good indicator, and also in the investment community. Ive heard from a lot of them where theyre very concerned about the instability and uncertainty as to what comes next. That ultimately hurts the bottom line of the russian elite, russian businesses, and putins inner circle. Whether or not that can impact short term, thats a different question. I dont think these are a silver bullet, but certainly these can bite and they will cost the russian economy. Reports of Russian Energy traders, for instance, uncertain whether they can access certain banks in europe to make trades and thats hitting russia right in the wallet. I wonder if i can bring you in, because youve been something of a skeptic of this strategy. Ive been following your comments on twitter and elsewhere. Im just for the sake of our viewers going to put one of your recent tweets up regarding the u. S. And russian standoff over ukraine. You said recently, war of words between u. S. And russia. Pretty much a draw. Actions all putin. Do you still agree with that now that weve begun to see some sanctions that all the actions are on moscows side as opposed to washingtons and europes side . The actions are asymmetric, theres no question this is having a negative impact on the russian economy. Putins Approval Ratings have gone up 15 points since this ukrainian crisis has begun. Gave as historic speech that many rush yap, a strong majority, were waiting 20 years for a russian leader to give, that said look, the americans have been happy with russian decline, assisted it in terms of nato enlargement and were not going to take it anymore. Were going to stop them at ukraine, we consider to be our territory. The fact is that putins interest and russian governments interests in maintaining their hold on ukraine is greater than that of any economic sanctions that the United States and to a lesser degree as were seeing the europeans can effect upon them. As a consequence we can cause damage to the russian economy, certainly rupture further u. S. Russian relations and that may be something we wish to do because we want to prove a point. If what were trying to accomplish in the near term with the sanctions if the goal in the near term is to try to bring this crisis towards a close, certainly the sanctions will not accomplish that end. Juan, ian makes a good point there, that going in, Vladimir Putin must have made a calculation of what the economic costs of this might be. Do you think hes made such a calculation and how high do you believe a cost that hed be willing to endure on this, particularly as the sanctions begin to target not just individuals but entities like you mentioned the bank row see ya. Putin has had first mover advantage all along and weve been calibrating and reacting with whatever measures we can absent military force. I think what president putin probably calculated was twofold. One, that the response would not be as vigorous as it could be. Europe is obviously dependent on russian oil and gas, trade between europe and russia is about ten times the trade that the u. S. Has with russia. He understands the dependencies there. He also understands that russia can bite back. His aides, his foreign minister and others, have made very clear that not only will there be tit for tat measures, listing of u. S. Legislate tors and others, they can take simpler measures against western businesses and banks. Weve seen them use tax investigations to harass. They can do things a bit more nefarious in the economic realm. I think hes calculated not only is the west probably cowed in going too far in the measures, but that russian bite back can actually deter further economic pressure. I think thats where we are in the policy calculus in washington as well as in brussels. Ian, i wonder, though, you know, you can bend boehner and mccain and reid from russia but its a different situation, right . Russian leaders have a lot of investments abroad, they store their money abroad, own apartments in london and new york, boehner, mccain and reid dont do the same in russia. Can they really exact a price thats equivalent from american officials, from european officials . No. Because the economy of the United States is vastly greater. Were not very exposed to russia. Europes economies are much more exposed and why the europeans have chosen thus far not to go after the ollie gashgs, after the russian bank. The European Response a little softer than the american response. Putin very aware of that. When the United States says kigsly our formulation has been look, if you dont behave, were going to isolate you, thats exactly the language we used against north korea. North korea is a tiny country. You cannot isolate the russians. The russians have a strong economic relationship with china. Which is going nowhere. Putin is going to go to beijing in may, sign a Massive Energy deal. Its going to make it clear if the americans want to isolate the russians, thats a lovely policy . Principle. Its not one we have the ability it follow up on. I would think after our experience with the failed red line on syria, we would want to be a little more temperate as to ensure when were making embolden claims against countries doing stuff we dont want, that we can actually follow through with them. We are not going to be able to do that here. Well, you make a good point. That alliance between russia and china key in the u. N. Security council could be key here as well. Thank very much to both of you, ian bremer, juan za ratty. I have two intriguing developments to tell you about the search more the missing Malaysian Airlines plan. Ill tell you about them after this break. Predibut, manufacturings a prettin the United States do. Means advanced technology. We learned that Technology Allows us to be craft oriented. No ones losing their job. Theres no beer robot that has suddenly chased them out. The technology is actually creating new jobs. Siemens designed and built the right tools and resources to get the job done. But when we put something in the ground, feed it, and care for it, dont we grow something more . We grow big celebrations, and personal victories. We grow new beginnings, and better endings. Grand gestures, and perfect quiet. We grow escape, bragging rights, happier happy hours. So lets gro something greater with miraclegro. What will you grow . Share your story at miraclegro. Com. Every now and then i get a little bit hungry and theres nothing good around turn around, barry i finally found the right snack [ female announcer ] fiber one. I finally found the right snack cmon, you want heartburn . When your favorite food starts a fight, fight back fast, with tums. Heartburn relief that neutralizes acid on contact. And goes to work in seconds. Tum, tum tum tum. Tums iwe dont back down. We only know one direction up so were up early. Up late. Thinking up gamechanging ideas, like this dozens of tax free zones across new york state. Move here. Expand here. Or start a new business here. And pay no taxes for 10 years. With new jobs, new opportunities and a new tax free plan. Theres only one way for your business to go. Up. Find out if your business can qualify at startupny. Com so our business can be on at ts network for 175 a month . Yup. All 5 of you for 175. Our clients need a lot of attention. Theres unlimited talk and text. Were working deals all day. You get 10 gigabytes of data to share. What about expansion potential . Add a line, anytime, for 15 a month. Low dues, great terms. Lets close new at t mobile share value plans our best value plans ever for business. [ male announcer ] bobs heart attack didnt come with a warning. Today his doctor has him on a bayer aspirin regimen to help reduce the risk of another one. If youve had a heart attack, be sure to talk to your doctor before you begin an aspirin regimen. Welcome back to Fareed Zakaria gps. Im jim sciutto filling in today. Its now been 16 days since Malaysia Flight 370 and the 239s souls on board disappeared without a trace. But in recent days, a series of satellite images have been found showing large pieces of debris in the southern ocean. Most recently, today, malaysia announced french satellite images showed, quote, potential objects unquote, in the same vicinity of the southern corridor of that search area. Neither france norma lay shah have released those yet. Joining me miles obrien. Miles, i want to get to those new satellite images but another Interesting Development today, thats malaysian authorities saying, indeed, there is no evidence that turn to the west after the plane lost contact was, in fact, preprogrammed into the flight computer. Thats a key detail. That information was used to but tress the theory that this turn and, in fact, the disappearance might have been intentional somehow on the part of the pilots. I wonder if you can walk our viewers through how important this word is from malaysian authorities. Its a game changer if it turns out to be true. Weve had so much inconsistent information i never know what to take as gospel for a moment. Lets assume that wasnt preprogrammed in. That was the run really shred of evidence that was out there that would indicate that the crew might have had some intent to do something that was nefarious. Now, so if you accept that it wasnt preprogrammed in, that raises the possibility or puts a higher on the list of possibility that some sort of catastrophic event occurred shortly after that signoff which for some reason, made it impossible for the crew to communicate and necessitated a turn to the nearest piece of land or landing strip. So, you know, at this point it seems to be a theory, just about every hour, but if its coming from the malaysian authorities and theyre trying to set the record straight we should take it as what is true. If thats the case we need to probably scale back a lot of the discussion about the crew possibly having some intent here. Yeah. You raise a good point because there has been so much conflicting information. We always have to allow for the possibility of another change. But i wonder if i could talk about the search. So for the third time now we have three satellite images that started with the australian images and chinese and french images today which show what appear to be possible large pieces of debris in that south indian ocean but then the search planes that go to that area and in the last several days still have not seen anything, whats happening here . Is it just such a large piece of the sea that invariably its going to take a while to find what the satellites see via a search plane . Yeah. These are small objects in a big ocean. Couple that with the fact that theyre moving. By the time that satellite image gets to the searchers and theyre designing a mission to go and look for it, theyve moved along and then you couple that with the fact that the conditions there are terrible. Youre getting close to the pole. Any time you get close to the pole, the southern oceans, horrible weather. High seas. Low clouds. Low visibility. Not good conditions at all to conduct a search. There were reports that the p 8 aircraft was down at 300 feet above the surface which is not an ideal altitude for them to do their work. I mean they can look out the window and do what they, you know, what they can, but with the seas they were and the ceiling the way it was and the visibility its a very difficult challenge to identify these moving pieces of debris. You know, it isnt a news flash the ocean is filled with a lot of debris. We have to keep that in mind. There is a hunk of plastic the size of texas in the pacific that we all know about as well, so lets not forget that. Yeah. 10,000 shipping containers its estimated floating in the waters as well. You make a great point, the p 8, thats a 737, so a 737 flying at 300 feet, difficult maneuver and must be hard to see considering the speeds theyre going. One thing i could ask you before we go about the politics. One of the frustrations has been, you know, whether countries are sharing all the information they have and quickly. Sensitivity is about sharing radar capabilities, satellite capabilities. But you have this collection of countries including countries that dont generally get along very well, japan and china, for instance, flying planes together in the search, the u. S. There. Do you get a sense that the politics of this are Getting Better and there is real cooperation, Real Intelligence sharing in the search . Yeah. You know, i think this is bringing the some of these rivals together which is a good thing, but having said that, you know, theres still some information, there are holes in the information. You have to wonder why authorities at some level werent scrambling jets to intercept this primary target that was passing over the land mass of in ddonesiaindonesia, t aircraft. Were the military facilities inoperative or the people there who are manning those facilities not paying attention, these are questions which countries dont necessarily want to volunteer because it might indicate some sort of breach in their defenses. So i think theres you know, theres a bit of a i guess game here of how much to reveal and that does ultimately impede the investigation, particularly when you start thinking about the possibility that this aircraft might have headed north. Is that still a possibility . Is that that certainly should be considered. Weve been focusing a lot on this location off to the west of australia, but, you know, thats based on primary radar returns which are kind of sketchy and in marsat, satellite return from a turned off Communications Device called the acars on the aircraft which is not designed to track an aircraft. We have sketchy information to identify this location. And you make a good point. Another reminder to our viewers, though, most of the assets are now focused in the southern indian ocean marks lay shan authorities made a point saying the corridor search area still open and kazakhstan has offered their air base as a Central Point for searching that area. Thanks very much to miles obrien joining us, aviation analyst in washington. Coming up next, fareed will be back. In this day and age where computers and robots are doing everything from making cars and practicing law, how to make sure you dont lose your job to a machine. Right after this break. [ female announcer ] with five perfectly sweetened whole grains. You cant help but see the good. Whole grains. Nascar is about excitement. But tracking all the action and hearing everything from our marketing partners, the media and millions of fans on social media can be a challenge. Thats why we partnered with hp to build the new nascar fan and media engagement center. Hps Technology Helps us turn millions of tweets, posts and stories into realtime Business Insights that help nascar win with our fans. Now for our what in the world segment. Many people are worried that in tomorrows economy, a machine might take their job. This is jeopardy. The idea challenge. If you think your job is safe you would do well to remember watson. Thats the ibm computer that beat jeopardy champ ken jennings. If a computer can handle the complex challenge of playing a game like jeopardy. Watson. Who is jude . Yes. Its mastering the subtle judgments we used to think of as the sole province of humans. The m. I. T. Colleagues wrote a book called the second machine age, insightful and sometimes startling look at how computers are becoming smarter by the minute. They know computers can pull off some truthfully remarkable tasks these days. Driving cars by themselves, and even talking to us. I found a number of supermarkets. Why is this happening . While all machines improve over time, computers do so on an exponential scale. The law states computer Processing Power doubles every two years or so. A fascinating way to visualize the power of growth is the myth of the invention of chess. In one telling the invenchtser of chess a brilliant man from india, impresses a ruler with his new game. So much so the ruler invite limbs to name any reward. The inventors request seems modest. He asked one grain of rice be placed on the first square of a chess board and double the grains on every new square until all 64 squares have rice. The king is bemused by the small payment and tells the treasurer to go with the man and pay him. Looks like small numbers at first. One grain becomes two and then four, eight, 16, 32, 64, 128, 256, 512, 1024, 2048, keep going and you will see by the time you get to the 33nd square, the last square on the top half of the board you have over 4 billion grains of rice in total on the board. The treasurer is said to have winced when calculated they had enough in the gaineries to pay this guy out. But were not done. You now have to get to the second half of the board and you begin with over 4 billion on the 33rd square which becomes 8, 17, 34, 69, 137, 275, 550 billion, 1. 1 trillion and on. When they get to the last square the 64th square, the total on the board is over 18 quinn tillen. That is 18 with 18 digits after it. 18 quinn tillen rice. Biggest mound than mt. Everest. Some versions when the king hears this he orders the inventor be executed. Computing power is now in that second half of the chess board. You have the results in your hand. Nasa says that the computer if your cell phone has many, many, many times more power than the computers used in the Apollo Space Program to get man to the moon and back. The eagle has landed. Remember, Computing Power continues to improve dramatically every year. Now that computers are reaching such great heights, where does that leave humans . Heres an example. From the book, when the computer deep blue defeated Garry Kasparov in 1997 it may have appeared humans could no longer match up against computers in chess. But in tournaments in the ensuing years, when teams of humans and computers played against the best machines, they did well. Like when a human chess player using a simple laptop computer was able to defeat a chess super computer in 2005. The combination of a human being and a computer, appeared to be the best of all worlds. So human beings still have a role to play. To succeed in tomorrows world they will have to use their creativity and insight and they will have to use computers. Up next, how do the worlds greatest athletes keep shattering records . Well be right back. Peace of mind is important when youre running a successful business. So we provide it services you can rely on. With centurylink as your trusted it partner, youll experience reliable uptime for the network and services you depend on. Multilayered Security Solutions keep your information safe, and secure. And responsive dedicated support meets your needs, and eases your mind. Centurylink. Your link to whats next. Suddenly youre a mouthbreather. Well, put on a breathe right strip and instantly open your nose up to 38 more than cold medicines alone. So you can breathe and sleep. Shut your mouth and sleep right. Breathe right. All sectors are looking great. So you can breathe and sleep. Excellent. Hey, what are you guys doing . Oh, well were double checking the distributed Antenna System. So when all you fans post to instagram, there will be more network to handle it. So, uh you guys hiring . Do you know how to optimize a nine beam, multibeam Antenna System . Nope, that a deal breaker . Pretty much. Alright. Enjoy the show at t is building you a better network. Have human speed and strength reached their pinnacles . We often thought so. In 1936 jesse owens set a world record time of 10. 2 seconds to complete the 100 meter dash. In 1968 jim heinz did just that, clocking in at 9. 95 seconds at the mexico city olympics. Could anyone go better . Of course they could. Record speeds have constantly been bettered all the way down to sam bolts time of 9. 8 time. What is behind these advances . My next guest says its not just physical, it is also in the mind. Steven kotler the author of the rise of superman decoding the science of ultimate human performance. He joins me now. So when people look at these kinds of athletes we always think that todays athletes are just much stronger, much fitter than the Baseball Players of the past, the basketball players of the past. But youre saying thats not the only thing going on. Certainly the physical capabilities have gone up. Our Training Programs are better, et cetera. But elite athletes, theyre pretty physically equal. Its a mental game at the upper edge of performance and president people that have the edge there are the ones winning. You call it something called the flow. Flow is an optimal state of performance. It is means we feel our best and perform our best. Everybody has some experiences. Flow are those moments when we totally lose ourself in the moment and Everything Else goes away. Why do you look at extreme sports as a way to study flow . In extreme sports something astounding has happened in the past 25 years. S theres been nearly Exponential Group in ultimate human performance. Nothing like that has ever happened before in history. These guys give us a phenomenal case study for looking at flow and the level of performance has gone up so much we know these athletes have to be in flow to perform. If theyre not the general rule theyre ending up in the hospital or dead. Who are the most impressive athletes you studied. All the athletes i studied are astounding. If theyre in the book their stories are there because they did something impossible. Theres a paradigm shift in athletic achievement. The one i look at as a climber named dean potter. Dean potter is a free soloist, climbses without ropes or protection. At the time he started climbing, he went down to pad gown ya and free climbed 400 foot walls, staying in flow three and four days at a time. Thats whats incredible. They have figured out how to extend the state, not just a brief moment of victory, it can last for days in certain cases. You write about surfing. Surfing is a phenomenal example. Its a thousand year old sport, the tallest wave anybody has surfed is 25 feet. Above that was believed scientifically impossible. Now were pushing into waves 100 feet tall. Thats a 75foot jump in wave height after a thousand years is insane and thats what were looking at across the boards in all action Adventure Sports. You talk about how this is something that can be learned. And it can be learned relatively quickly. I mean, one thing you talk about which is you dont need Malcolm Gladwells 10,000 hours to make this work. No, you really dont. One of the things that happens in flow you get a big neurochemical dump in the brains. Theyre tags for memory. The more neurochemicals that show up the more things saved for later. In studies run by military snipers when they induce flow artificially the time it took to train novice snipers to experts was cut in half. The 10,000 hours might be 5,000 hours. Wow. So what does this mean for somebody whos not going to try to become the greatest surfer, what does it mean for if i want to perform better in my tennis game what should i be thinking . The great thing about this is we know there are 15 flow triggers. These are preconditions that lead to more flow basically. And anybody can tap into these triggers. Anybody can apply these triggers in their life. What happened in action Adventure Sports is simply that they surrounded themselves, they built their entire lives around these flow triggers. But anybody can do this. Business, education, health, it doesnt matter. Across the board it all works. Fascinating. Steven, thank you for joining us. Up next, economics can often be complicated and boring. My next guest makes complex topics like the Federal Reserve seem as easy as pie. And tasty too. Tim harford the undercover economist is up next. Stay with us. Turn around every now and then i get a little bit hungry and theres nothing really good around turn around every now and then i get a little bit tired of living off the taste of the air turn around, barry finally, i have a manly chocolatey snack and fiber so my wife wont give me any more flack i finally found the right snack but when we put something in the ground, feed it, and care for it, dont we grow something more . We grow big celebrations, and personal victories. We grow new beginnings, and better endings. Grand gestures, and perfect quiet. We grow escape, bragging rights, happier happy hours. So lets gro something greater with miraclegro. What will you grow . Share your story at miraclegro. Com. You want a way to help minimize blood sugar spikes. Support heart health. And your immune system. Now theres new glucerna advance with three benefits in one. [ male announcer ] new glucerna advance. From the brand doctors recommend most. [ male announcer ] new glucerna advance. Cmon, you want heartburn . When your favorite food starts a fight, fight back fast, with tums. Heartburn relief that neutralizes acid on contact. And goes to work in seconds. Tum, tum tum tum. Tums i takbecause you cant beatrning for my frzero heartburn. N. Woo hoo [ male announcer ] prilosec otc is the number one doctor recommended frequent heartburn medicine for 8 straight years. One pill each morning. 24 hours. Zero heartburn. Up next, economics can often be what could baby sitting tell us about the Federal Reserve . What could prisons tell us about the wider economy . If you think there are no connections think again. Tim harford is an economist that makes the complicated simple. He writes the undercover economist for the Financial Times and a book the undercover economist strikes back how to run or ruin an economy. Listen in to our conversation. Tim harford, pleasure to have you on. Thank you. Most people i think dont really understand what the Federal Reserve does. And you have a nice analogy about baby sitting that explains it. Yeah. It must be amazing to be the chairman of the Federal Reserve. You or i, when we log into our Bank Accounts and check our Bank Statements online, its just a fact, the amount of money thats there is the amount of money thats there. When janet yellin, the new chairman of the Federal Reserve, when she logs in she can create as much money as she likes. Add an extra zero or another ze record as many as she wants. Thats what its like to be a central bank. The baby sitting story, this is a real story. This happened in washington, d. C. , in the late 1970s. It was a baby sitting coopt that fell into a depression and the reason was, there wasnt enough money to go around. They had these little tokens they were exchanging to do baby sitting for each others kids. Everybody in the baby sitting coopt wanted to baby sit and build up a reserve of tokens before they went out and because everybody wanted to do that nobody went out. This is a classic keynesian view of how depressions happen. But explain the analogy so everybody is saving, nobody is spending. Everyone is saving. No one is spending. Prices dont adjust. I dont phone you up and say ill baby sit for you but you give me twice as many tokens. That isnt happening. And in the end, it was fixed by what we might Call Central Bank action. So the equivalent of the Federal Reserve in this case, was the baby sitting coopt committee and they had the ability to create more tokens and just give them to everybody. And that fixed it. Which is really strange. Once you had more tokens you were willing to start trading then. Yeah. The analogy once the fed put morse money into the System People who were saving feel like ive got a little extra i can spend this. Absolutely. Its strange when you think about it because the willingness of people to baby sit was still there, there were people who wanted to go out, people who wanted to look after each others children and somehow it didnt happen and it actually took that monetary stimulus to make the economy work. Very important lesson. What is the analogy with the prisons . So in economics, youre trying to look at the system as a whole and that can be hard, so what i wanted to do was find simple systems that you could see the whole system working. The baby sitting coopt is a famous example. This other example was a prisoner of war camp in the second world war. This really happened. There were prisoners who were exchanging goods and services for each other, swapping cigarettes, futures market, breads today versus bread on tuesday, different price, they were exporting coffee in germany because they had coffee coming in from the red cross and they were in germany and the germans wanted coffee, the coffee would go over the wire. Sophisticated economy under the circumstances. It fell into a recession. The reason it fell into a recession tells us something about how modern economies work. No problem with the economic system, prices adjusted, lots of trades going on, but the red cross supply sources dried up and so you have these two visions of why we have the recessions. The baby sitting coopt recession is internal problems that can be fixed with a government stimulus and the prison camp, which is the economy is fine, but we got a shock, the red cross dried up, Oil Prices Went through the roof, a banking crisis and nothing the government can do about it. Thats the big divide in economics is the economy like a prison camp or like baby sitting coopt. You mentioned one thing in the first example, prices dont adjust. Most free marketeers would say but that never happens. Prices adjust very easily. One of the things you point out is prices can actually sometimes be very sticky. You point out that the price of cococola has not changed in 75 years. Its changed now, but there was a 76year period where it did the change. Some prices do adjust quickly. Ask the at first the Cocacola Company arrangements with suppliers and retailers they didnt want prices to change. They advertised a coke is 5 cents, thats what it cost for a serving. They made these tea trays with the cocacola is 5 cents. They put adverts on the side of buildings, painted into the brick work. You had to knock the building coun if you wanted to get rid of this advert saying coke is 5 cents. Vending machines, you put one coin in and get a coke out. How would coke increase the price . The president even wrote to president eisenhower who was a golfing buddy and said mr. President , have you considered introducing a 7. 5 cent coin because thats what it would take for coke to be able tone crease its price but not double its price. Sometimes prices stick for a very, very long time and those same factors, advertising, consumer expectations, the cost of changing prices, they can make prices stick in a less spectacular way every day. It makes a difference to the way economies work. Tim harford, pleasure to have you on. Thank you. Up next, why the brits could have to say cheerio to more than whiskey and hagers if scotland votes for independence this year. Okay, listen up im reworkin the menu. Mayo . Corn dogs . You are so outta here aah [ female announcer ] the complete balanced nutrition of greattasting ensure. 24 vitamins and minerals, antioxidants, and 9 grams of protein. [ bottle ] ensure®. Nutrition in charge™. 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Low dues, great terms. Lets close new at t mobile share value plans our best value plans ever for business. According to amnesty international, 21 countries executed citizens in 2012, but saudi arabia was the only one to use the method beheading. Beheading was a common practice in Medieval Europe and during the french revolution the guillotine was invented as a human method of execution. So when was the last french execution by guillotine . 1832, 1899, 1939, or 1977 . Stay tuned and well tell you the correct answer. This weeks book of the week is stri stringer. Its an excellent debut book on the congo, one of the most corrupt and broken countries in the world. The book is also the authors if personal journey. He he was a matt mission in the u. S. When he decided to buy a oneway ticket to the congo. The result is a very wellwritten book. For the last look in six months the people of scotland will cast their votes on succession from the uk. If they vote for independent theyve been warned they risk losing the pound as their currency. London could lose some control over oil and gas in the north sea but they might have to say cheerio to something more symbolic, the beloved union jack. The current flag which hasnt changed in over 200 years is a mix between englands cross of saint bo george, scott lands of st. Andrew and irish of st. Patrick. If scotland leaves would the flag get the boot. Charity and the guardian to choose from 12 options. Should britain incorporate the welsh flag of saint david, slide the welsh flag into the corner, adding the royal coat of armors to a modified union jack the winner this one. The brits are nothing if not traditional. Scotlands blue replaced with black to perhaps mourn the loss of scotland. Luckily many say this wont be necessary, after all what would happen to all the british overseas serer to er tterrito few countries that include the union jack in their flags. The answer to the gps challenge question is d, 1977. This was the same year that jimmy carter became president. We meet again at last. The first star wars came out and apple 2 computers went on sale. If that seems archaic, lawmakers in some u. S. States have recently suggested that firing squad, electrocutions and gas chambers be used since there has been a lethal injection drug shortage. Thanks to all of you for being part of my program this week. I will see you next week. Hello, im jim sciutto in new york. Reliable sources will begin in a moment. First, the very latest on the search for flight 370. A third satellite image data shows possible debris floating in the southern indian ocean after two other satellites also spotted objects there. This latest satellite data comes from france, according to malaysian authorities. Today eight planes searched the ocean near where earlier satellite images were released by china and