Warren Mosler on the Economy and the FOMC Meeting

You're looking lovely today you -- cool if -- -- -- just -- he never sit here Mary looks great every single woman -- are you do a couple of that can be a tough response been there done that I'm really yeah. All right you know -- know things like now I'm sure it didn't add things look fabulous on Wall Street the Dow is up now 96 points NASDAQ up a point S&P up five everything's in the Green. Tenure US treasury in the Green at one point 954 gold is up 1570. Oil. Is even up 84 cents and I'm thinking it's all thanks to the earnings reports that came in from AT&T and 3 AM. He could be yet another thing he should tell one. It don't ever and I've done this is you know been there done that I don't tell woman that she looks like she could have a lot of babies -- she's got good tips for the. That it had set I don't I don't do that out that that just translated you have wide hips yet but I McCain's. And and don't tell us she took offense until we look just like our moms. Lineup because our moms are usually good 3040 years -- minutes let's. We're we're learning a lot you get. You know most of our listeners are mentally any tips you can provide us with -- -- Will make this a regular you know weekly thing right -- both -- our next guest he's the author of the book the seven deadly innocent frauds of economic policy and he's a senior economic advisor. To the United States Virgin Islands Warren welcomed the show are you doing today. Are reporting very good -- I hate you know I had all these questions I was gonna ask you and I know I but I I wanna ask you one new one that I didn't say in advance. The the problems in Europe. Seemed to be related around the European Central Bank why -- rather than allowing this turmoil to continue in Europe why -- they simply. Buying up these bonds I -- the Spanish treasury auction going off. It it's so well over 6% why don't they do the same thing are fed did here in the United States. Well it would be like the -- -- state parks here -- our California Connecticut to hope that. So it's a little more problematic and they see it as a moral hazard can't. Where everybody knows that. Central Pakistan followed them that -- -- whoever can run of the largest deficits we have we -- -- part of the stability growth. And that's if you're working in the -- -- they -- resolved -- more -- How do -- look discipline of a country that is it complies. Particular to -- are running 50% deficit hyper inflation. Well what are they gonna do over there towards me a problem seems to be getting worse it's you know. I I've talked about this in the past and you you've the year contagion will what you -- -- six months ago was in fact happening today. -- all based on their ideology based on they're understanding. Monetary operations which is good. I are there are optimistic that they're definitely the big question is what can we do you protect -- it's of these people. And it's. The last thing they did that we are we -- the last time with the Greek deal was that. Where the private sector took a haircut a response the PS seismic private sector while -- have to write off 100 billion euros in -- got. -- more than twenty sensible dollars for the bonds. That the ECB held Greek bonds did recently bought from the private sector didn't take any discount -- -- -- hundred billion was taken from the re dating bondholders. That was a new policy implemented and -- you know what's even worse is it to people respond to substantial disk so it was in this country. So they'd -- money on the deal. -- with the north slope there and so we are you got. And so but it septa is dangerous precedent when they're out there if they -- they -- bombarded too much but it would abide Spanish bonds. That would mean you know any risk of I haircut on. You know by the Spanish government down the road -- they would have to write the -- you know pick. For the Bible and that's what -- -- -- for the problems would dot com from the bonds the European central -- -- just from the remaining bottled. -- -- this the European Central Bank by sponsors the -- to remain viable increases. Well how can the eurozone stay together given that information -- mean you've got -- elections in France would indicate that. You know the French electorate wants to. To to get out of the eurozone do you think that the eurozone ends up breaking up. I don't I don't know what breaking up deeds you know some form. What former brother does that mean go there are two different purchase as that -- just default saying you know. People use words like breaking up as he gets the specifics of what that means -- gets cloudy. Well I'll I'll give you specifics do you think that the German goes back to the mark in the if they -- Greece goes back to the drachma and French France goes back to the frank I mean it do you see everybody do you know what this is an experiment developed in the 1990s. Thanks but no thanks we're gonna go back. Because it it would seem is as this taste out what's going on in Europe now that would seem even worse and more expensive. Well right now there's no popular support for. If you go to even agrees there's -- popular support because. It had plenty of truck -- crisis in the past and they saw what happened 20% inflation and currency dropped to 50%. And just major problems with the what they would call the body itself this time around -- -- crisis rather work but that's happened before. -- a -- have to cut -- that's happened before but this time there wasn't any inflation and the currencies stayed strong itself. It's not obvious. People over there that there's any probably bureau fixing the problem has with profligate governments and spent too much to now have to pay for their. Ascent up the fact the truth is probably is -- But it's not obvious to anyone that's in your own fact what's obvious to everyone is that is not the -- Why did -- do it. Marinate it don't you think -- -- that social programs and entitlement programs in Europe are excessive. Well a remote access has publicly in the past this sort of led. Massively higher interest rates for the average person you know massive currency depreciation and they -- as -- government robbing their money probably the real well this kind. You know the average currently there's not seeing inflation agency -- -- -- domestic trip -- -- -- Pretty far yes on appointments are a lot of public sector workers are losing their jobs you can compare -- that that occur at all that's. So but what I'm saying is to your first question yes leaving the Euro. There's no popular support for them because it's obviously -- -- that the Euro. Police say that orbit the French elections on Sunday -- went out there watching them you watch the same thing. I mean that they'll guide that one he won on a platform of pay on that a pullout of the Euro zone that was his platform. Well the plot for a visit to go back to different try to get that it's too. You know spend more dark not comply with the yesterday's pictures. Yeah that that is that's true -- a social -- and. I don't wanna have it both ways it's. We're yoga -- bureau bewildered about the higher deficit spending you know signals -- so -- Against what you say they expressed are you broke leaving year old brother or rewrites its growth and stability -- want to write rules but. They don't want it appeared in the Euro and politically because. People are -- think the Euro is protecting them against their government. With the I agree with that why we don't talk committed to Euro the Euro is a problem. They don't it's not obvious the garden street & Associates. But if that's the case Warren why. -- Germany isn't -- allow France to stay in -- enact some austerity measures that's what they insisted on with Greece Italy and Spain and Portugal. You know it's it's just interrupt you were little -- don't get -- -- post -- -- brother. He took particular that the market slowed it talked about it was not a white or fiscal could we need -- -- And it's Germany at the end of the day has. -- funding all the periphery like mr. -- exported to -- increase in the money bars to pick it by fifty billion dollar for the military equipped. If if appropriate certificate setup. They all talk out both sides of the violence and no exceed German. Manufacturing flaw in export tricky because. They don't put too much respect to general customers right now now Theo so it's a balancing act it. It's hard to say we're -- go except that. Let's let's put this or that range of outcomes is absorbs yes you can have the total collapse aboard the streets of world war three. Air or you can have them do the right things you're -- -- back right so -- to -- -- everybody thinks -- problems. I was so as soon as very. Difficult to how to play. Warren we gotta run its -- -- you appreciate your time here. That's -- those are joining us up next we're gonna be joined by.