In the Central Asian state has left hundreds injured. In just a few moments time that back in an hours time voted to bring you the latest global news update will see you again. Hello and welcome to cross talk where all things are considered im Peter Lavelle it remains unclear who will be the occupant in the white house this january what can be easily predicted is the state of the economy where tens of millions of citizens it appears what is called the case shaped recovery is permanently dividing the country and the house and have nots and this is. Seems to be acceptable for those who are the house. To discuss this and more im joined by my guest Michael Hudson in new york he is a professor of economics at the university of missouri kansas city and author of through give them their debts and in bangkok were joined by steve keen hes a crowdfunding professor of economics on a tree on as well as a distinguished Research Fellow of the institute for strategy resilience and security of University College london gentlemen crossed up rules in effect that means you can jump in anytime you want and i always appreciate it ok let me go to michael in new york you know this just term the new normal is bandied about and what really worries me is that the people that use the new normal where its a normal that is beneficial to them ok and theyre not particularly concerned about it ok because i hear more and more top read more and more about it kate recovery and that is admission of defeat in my in my opinion because it means the if you have the k. Its the the leg of the k. Youve given up on ok because the other part. Of the economy its true because its the in their benefit here i really worry when people talk about new normals and when they talk about the economy youre my friend well who has become normal since 2008 has been completely different from the old normal people have the normal youre go back to a balance but really the economy hasnt grown at all since the 2008 crisis all of the growth in g. D. P. All of the growth in wealth has accrued to the Financial Sector to the real estate sector to the one percent for the 99 percent of all theyve gone down and down and down so the new normal is you cant get rich again by housing and join the. Middle class like it goes through the new normal is all of the year increase in wages and debt service in rents and in monopoly prices so that they mark the new normal is the market is going to shrink and shrink and so we look like greece looks up in the last 5 years the think of the normals looking way routes that if nation and wrote this letter should. Ok stephen well im really glad that michael brought up the 2008 financial crisis as we have a reputation a reputation about it and it is this year where this was a artificially induced recession big benefit if the one percent cant not keep stressing that year when what 202020 in 2008 havent come in is that you have this massive transfer of wealth upward upward again ok and so again i mean my underlying theme in this whole program is that perhaps the country liberty speaking specifically about the United States that michaels reference to greece is a perfect one i think youre basically writing off tens of millions of people america hundreds of millions of people in the western more heads yeah i mean to do what were saying is a process where the wealthy who go will they go through debts and this is something which markland. Very very strong on and on a mathematical model. And one thing which came out of my modeling of whats called miscues financial instability cloth asus was that as a little of debt rose a even when i had the capitalists borrowing the money and paying the interest the ones who actually fight for our level of debt with a work as a basic stories they had their residual income earners in a capitalist system so as the men of wealth debt by the rich goes off the servicing shot goes up and it came at the expense of work as incomes and that turned up in the system as well and then in the response to the crossest. Economists who know nothing about capitalism i know a lot about a black. Board model that i call capitalism which is bears no resemblance to the real thing this solution was to boost consumption is what they call the wealth effect and the wealth effect was to make shares go off in value and property go up in value and then people would feel wealthier and spend more of the trouble is they doing that people are not putting him down to people with the wealth of bill gates and bill gates might buy one and soon have elemental moments of vincis coda but he doesnt go shopping it came out and thats what you need to get demand going up and its the poor youve got to direct the spending so so he had a capitalist process that he produced inequality and then the response of the managers made that inequality worse michael did and so point to the program oh i dont like the word transfer of wealth the only kind of transfer of wealth that it spends is the 10000000 families that suffered for closures and there are obama the banks not the debtors where theres been inflation of stocks and bonds and real estate under the tears that they are tears there was a trillion dollars so a save the economy a trillion was put into pushing up stop and are real estate prices and only 2 trillion was put into the socalled real economy namely a 1000000 of the corporate sector and a little bit in the labor so theres just that asset Price Inflation not incorrect or the one percent 00 already ome to maybe 80 percent of the stocks and bonds in the country didnt transfer yet more they simply use the Federal Reserve to lower Interest Rates quantitative easing and vastly increase the price of housing in stockton by putting them further and further out of reach for the 99 percent you know you did see where where is the real economy here i mean how relative relevant and is it to the larger scheme of things because this is something i keep noticing too i mean i get up you know we can. About map numbers and you look. Really going to do with whats going on particularly for average people going yeah i mean the average people who are completely excluded from this is michael says that average person doesnt. He will get a bit of i could use in a strange expression he is starting with the ending with che but i once you get this argument that you know they benefit through that Pension Funds is that your center with another percentage of the shit is that a un by would because as a fraction of the overall ownership or shares would be well on the will ended with low single figures. The vast majority of inflation of asset process benefits the extremely wealthy not just the middle class but the extremely wealthy one percent or even the point one percent and what it quantitative easing did was boost stock prices by buying a trillion dollars worth of bonds for a year off the Financial Sector which meant they had a trillion dollars additional cash in turin that was less longs they couldnt buy bonds because the Federal Reserve was being the body of last resort so they borsch is that drives up the ship process and that trillion of course i think introduces us to process by maybe mole the net increase but the wealthy will sell and benefit from the silo and then not by the occasional gamble gaining in somebody to wash it for them and the result of that is you get a trickle of that trillion dollars of on his head of easy money turning out in the real economy so did benefit to some extent but rather than a multiply this was a fraction the laws are effects you put in one trillion into the wealthy maybe you get 50 to 100000000000 for the poll. Ok but you know its a real quick here and the term capitalism is been brought up here i really dont what he said he more ok in it a little slogan but what you just described here is that you had good reserve picking winners i thought thats what socialism so kate this is that the sick when theyre deciding whos succeeds and who doesnt succeed this is this is a team yeah its an easy because i actually rig out like this is the product of it into fitters a local Central Banks stopped almost exclusively bought on the strength in the well they call the new possible school of thought and the new Classical School of thought fundamentally argues that capitalism is inherently stable so the government should get out of the why but they are in is the last 30 years theyve built models which ah good you can ensure troll the right of inflation by moving the right of interest washes fos effectively is the inflation rate is changing and that is stuff which is controlled by the Federal Reserve so in them models actually have the Federal Reserve as part of the system was supposedly a controller now its a control it leaves out the most important parts of the economy and market and i have this all the time they leave banks and it and money out of thin models and then a close thats not the real world its the real world behaves in a way thats for a while looks like its their model then goes completely gaga and they go gaga as well as i what can they do we can continue boosting share process because the wonder a conduit they have is from themselves of the Financial Sector so its easy for them to pump money into the Financial Sector if there was a conduit to the to the people through for example everybody having an account of the central bank and then not have been able to use that make an ism but they havent even set that up so its fairly again ill use one of the models to see if theyre giving food to the parasite and saying please share it with the house. Go ahead michael definitely vote your to use the word real economy the real economy that your return. It was what we used to call Industrial Capitalism but what steve and i esteem has just been talking about is finance capital ism and finance capitalism is completely different from industrial effortless and Industrial Capitalism in the 19th century seem to be moving to socialism because its more efficient to have the government provide Public Health and Public Education at a low price because then the capitalists dont have to pay their labor so much if the Government Supports their cost of living but finance capitalism wants to increase the price it wants the privatized education raise the price. Of private housing at once to not have access. Then once theyre really support the finance insurance real estate sector the Financial Sector and so who takes over the state their. Libertarianism in neoclassical economics is a you know some throw planning but they shift Central Planning away from the government and let you know officials in the wall street and the Financial Sectors so who are in a state of Central Planning that would have shot adam smith and all of the classical like on us were Central Planning by banks and their interest is not that of Industrial Capital but this is the one that is all then what the upside goes only to a small say to a group of people in all the downside goes to well People Like Us we get i dont know but when things go really well i believe transfer well it mean its an amazing mechanism we saw and it is this year comes here served as you know and you know the banks call up and they say this is what we want this is not going to take ok but main street they dont even have a number to call go ahead you know thats the problem we are completely locked out from the Economic System of the whole rationale for Central Banks taking over Economic Management fundamentally which is what theyve done and the people like Thomas Sargent and and rather lucas unwrapping all the mainstream economists who push these models of capitalism is an inherent. Stable system theyve completely focused on the Financial Sector and ignore the real economy the real economy just you know trips along an easy librium all the time and all that but it was control the interest right so the it but the end product of this is fundamentally as you cited so we had full of socialism for the rich to close they are the ones who are being elevated by tactics like quantitative easing and now you can say the same thing happening again the in goal most money going in to the Financial Sector which is driving up the stock market thats where the up out of the chi comes from and fundamentally that the problem here is that mainstream economists have not understood money creation but if youre running a central bank you know that you can put as many elements on the billions are true that those on the asset side and by would if you lock on the liability side so they have simply said were going to buy 10 trillion dollars worth of shares a few those 10 trillion become our estimates the chantry becomes a liability theyve got an infinite capacity to do that if they can continue pumping the stock market up and its actually funny to watch trump crowing about how well hes drawing it its actually the Federal Reserve the striving it up were going to jump in here gentlemen were going to break now thats a break well continue our discussion on the economy stay with marty. Was a lot about that and this other. On the i want to let you know what why did why didnt i. But there are some friends at the us our skills up at the still hoping to do something to see. Each other. But the one that you know will look at that. Dark industry comes to life in los angeles every night. Dozens of women sells their bodies on the street many of them underage. Los Angeles Police reveal a taste of their daily challenge no if youre going to exploit a child here in los angeles were going to come as you see officers going undercover as 6 workers and customers to fight the 6 trades. Welcome back to cross talk where all things are considered im Peter Lavelle to remind you were discussing the state of the economy. Ok let me go back to michael in new york weve heard twice youre the classical economy is the lead they claim that capitalism is inherently stable or you know you guys are economists i mean whats stable about 282020 explain that or viewers well for 2 centuries 18th and the 19th century almost all economists agree that a cause economies are not stable because the Financial Sector is not part of the economy the Financial Sector grows by a period. Medical arts exponential interest than the amount of debt stephen i traced mathematically grows much faster than the economy no debt grows much faster than the economy then youre going to have more and more of the economies and a spend on paying the banks for debt service and paying they are monopolies at the bank support and less and less to spend on goods and services and there is a crash thats not made in sense or economics is all about and thats why they wanted. Money creation to become productive but it hasnt been productive most almost 80 percent of bank loans are real estate loans and the rest are for stocks and bonds banks one for Industrial Capital formation they dont lend to well his acolytes whitely dont need you to explain how they can make money quickly the financial time frame is short term you can make money much quicker without taking all the effort of building a factory and making a good and developing a marketing plan for it all before couldnt make it much quicker just like pushing up using your revenue to push a prius that price and pay dividends and pay everything out and so many percent of americas Corporate Income is used on stuff buybacks and dividends its not loaded into new Capital Formation thats why rhydian does realize now if you see america deindustrializing that is not stable thats an. Unstable and yet the industrialization pays for the one percent the industrialization pays if you want to use all your money to make money in the stock market. And you really dont care about the real market and that that is making us look like greece and leaving us debt ridden and without much of her ability to grow if you make money and youre the one percent and you make money by having the name. Or said to yourself and owing money to your so then theyre not going to have enough money to buy goods and services in the factories and so fight is going to listen because were very different from the kind of Industrial Capitalism but had. Every 100 years ago it was never was it you know so you know i know im not the smartest guy in the world out there all im the talk show host but you know what you guys are describing to me sounds like you know a lot of the scheme i mean that there has to be a reckoning sometime somewhere or someone or a group of you know the ponzi schemes that did that is certainly a huge pot of it i mean what would you have as unproductive investment which can only continue being service if you take up more debt to cover the whole its created by the way to make money out of the last amount of data you took on and actually i recommend one of these days getting richard vague on your show because richard doesnt expand his read a brilliant history called a brief history of doom and he can show you from inside knowledge what the euphoric behavior of bankers is when they get caught up in one of these now growing ponzi schemes but one of what i wanted to actually talk about is also whats so good about stability because when you think about it is t