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I
welcome to Sputnik orbiting the world
with me George Galloway and me G China
has the largest economy and the largest
population and the largest armed forces
in the world and one day it will be the
world's most important country last week
however a fall in the phenomenal growth
rate achieved by the communist state
sent a shock wave around the capitalist
World it used to be said that when
America sneezes the rest of the world
called a cold is this therefore the
start of a new Asian flu or is it a
hiccup rather than a racking cough who
better to turn to for answers than
Professor Steve Keen of Kingston
University Professor Steve thanks very
much for coming back on the Sputnik how
alarmed were you by what happened last
week in the markets and what does that
actually mean not the least bit alarmed
amused more than alarmed because this
has been coming for some time
and it's all for two reasons one is that
the QE has basically pumped up asset
prices quantitative quantive easing
printing of money it's not the printing
of money it's the printing of reserves
that actually they circulate like it's
like the oil and the Petrol in a car
engine so what the what the Federal
Reserve has been doing is pumping up the
oil not the not not the petrol which is
nonsense they shouldn't be doing it but
what actually happens with that is the
banks and the people who receive the
money who are normally Pension funds in
England all they can do with that money
is buy assets which is driv asset prices
up even higher without the Justified
profit returns that that actually
ultimately what you have to have to
justify share valuation so they've been
pushed far too high and now of course as
soon as they start to take QE out that
starts to fall down so there the
fragility we're seeing in the market
I've been expecting for some time and
I'm thoroughly enjoying what so where
does China fit in and what China's
getting the blame for it China does have
part of the part of the causal Factor as
well because the reason China went
through the financial crisis
and came out the other side with growth
is they turned on the capitalist spigot
they haven't previously accessed on a
grand scale which is credit and they
basically this the banks which are
largely State dominated in State control
but lended the private sector we just
basically told lend to anybody with a
pulse and you therefore had an enormous
property bubble which began in China we
all know about these Phantom cities and
so on in China uh that was driven by
private debt in China growing by up to
as high as 30% of GDP increase in
private debt in one single year
averaging about 25% of GDP per year and
my argument which sets me apart from
virtually all economists is to say that
demand in the economy is the sum of
turnover of existing money plus the
injection of new debt what that means is
China was getting about 1.25 times its
economy every year now when you keep on
doing that when your debts going at 25%
per anom and your GDP is growing at
about 10% your debt ratio Rises
dramatically and that's happened China's
gone from a private debt ratio of about
100% of GDP roughly in 2009 to 200
something per now now you simply can't
sustain that why did they do
that because when the global financial
crisis hit China's exports plunged they
lost something of the order of 40% fall
in their export volume they tried to
replace that by domestic demand
political pressure is behind it as well
as you can imagine because so many
people had jobs in the sea in the cities
lost them and had to return to the
countryside a huge reverse migration and
was either facing the political
consequences that could have led to or
try to restimulate growth and they they
hit the credits big seems to me to
suggest that China's economic uh
strength and its uh huge advances kind
of built on Sand not completely because
when you do go there you do see there's
an incredible range of industry and they
were really were very very successful on
the original program I was actually in
the shenzong free train Zone when the
concrete was being laid for it 1981 82
and I met with the managers who were
actually doing that and they were the
first people in China apart from the
journalist I was traveling with uh who
really impressed me because they had a
plan and it made absolute sense that was
that there's a particular segment of the
CH American Trade act that allows the
reimport of products that have been
exported and processed in the third
world country without paying any tariff
so the Chinese knew about that they were
exploiting that to attract American
multinationals to establish over there
they were then offering them incredibly
low wages which of course was what the
most of Southeast Asia was doing to
attract capitalist investment at that
stage anyway but they added the
condition that the firm had to have a
Chinese partner and I think with either
five or seven years the Chinese partner
had to earn 50% of the business so what
they were doing is creating a capitalist
class and then also getting that
technology because being dominated by
Engineers the Communist Party wanted
that engineering of the West to be
brought across so dramatic success in
doing that they built all these huge
capitalist corporations which are
Chinese owned now so that's the real
base but just like Japan got into a
bubble economy in 1980 and tried to
credit its way to growth and rise asset
prices with a socalled Bastion of growth
it all collapses because you cannot
sustain that rate of growth of debt
indefinitely and when it slows down your
economic performance collapses and Japan
effectively has collapsed Japan Japan's
growth rate went FR just been doing the
numbers on it recently average growth
rate in Japan in real turns from uh from
25 years before 1965 to 1990s to 25
years the average growth rate was about
5% per anom since 1990 the average
growth rate has been I think. 3%
perom I mean I'm old enough to remember
when Japan was the coming the Rising Sun
The Rising Sun now it's set is the same
potentially likely to happen to China
yes it's possible and what worries me is
that China there isn't there is a
relatively easy solution to this the
whole cause of this uh the growth was
out of encouraging increase in debt the
debt leave it up asset prices what then
happened for this is both Japan and
China in the aftermath the design was to
keep those asset prices High what they
should have done is say The Leverage is
too high Drop The Leverage use the
state's capacity to create money and and
the government as well as Banks can
create money that you could have reduced
that debt burden the debt burden dropped
the asset prices as a result but not had
people go bankrupt by using the state's
you know money to replace their their
debt Le debt created money that could
have got the Chinese the Japanese out of
it the the Chinese could do the same
thing but what worries me is they're
falling back into trying to maintain
those growth rates of asset prices like
they were wheat production targets back
in the 1960s and that simply is going to
fail isn't this uh flow from the big
question of whether China is fish or F
uh is it capital is it capitalist or is
it communist because as you describe it
you're of course an eminent Economist
and I've only got a school pass in it
I'll be it an a pass uh the what it
seems to me the main the principle
fundamental difference between socialism
and and capitalism is that capitalism
you're talking about keeping asset
prices high and so on the rest of the
people who don't have the assets have no
interest in exactly the high price of
assets what they want is the creation of
more assets or more Goods so that we can
spread them uh more equally amongst the
mass of the people does this portend
therefore uh the collapse of the Chinese
attempt to synthesize communism and
capitalism could if they try to continue
pushing those asset prices high if they
if if they realize look the asset price
inflation was a mistake we can reverse
it with the state's capacity to create
money to cancel that debt reduce the
leverage do it in a fair fashion so
people who didn't speculate also get
money which is the modern Deb ju I've I
I've been pushing for almost a decade
now they could get out of it but the
trouble is if they try to maintain it
then it won't simply won't work because
that level of Leverage is so High the
gearing is so high that to maintain it
you have to actually increase the
gearing you can't just sort of Flatline
if you Flatline at the level of debt
they've got now asset prices will fall
so if they try to continue increasing it
you get a level of debt ultimately you
can't service and you go bankrupt so
what do this all mean for the world you
say you you you were quietly pleased at
the correction that this uh
caused uh but some people are pan pcking
I was in a bank the other day and
they're panicking about the idea that
another 2008 style crash might be on it
and then the housing bubble will finally
pop through well it's certainly there
there's going to be a 2008 crash in
China it's happening now okay they might
be able to save it off by Rel leveraging
which is what Australia did to get out
of its crisis back in 2008 but there're
so highly lever it already that the room
for that is really quite minimal so
there will be a crash in China no matter
what they do it's question of how they
handle the crash in the rest of the
world in particular America and England
in particular we have delived from the
really high levels of death that
occurred in 2008 but not a lot CH
Britain's come down from a private debt
ratio of 200% down to 170% and it's
still slowly
reducing uh when you have a huge crash
like 2008 it's because you've got Rising
debt adding to demand and then suddenly
you go to Falling debt which subtracts
from demand if you haven't had much
Rising debt you don't have much you it's
like you're jumping off that rather than
jumping off the ladder you know you
don't fall as as as hard so I expect
stagnation for the West rather than a
big crunch like 2008 but a definite
crash for China and if if you're talking
about you know the Chinese economy's
demand dropping so that the change in
debt is no longer sucking in goods from
Canada and Australia and and so on you
could look at something like about one
quarter of the Chinese GDP effectively
in terms of demand for the rest of the
world's Goods about one quarter of that
disappearing from Global demand now
that's definitely going to suck energy
out of the rest of the world economy let
me ask you the idiot question that I
asked on Twitter uh the other day and
didn't get a reply if if oil is so cheap
and borrowing money is so cheap how come
capitalism isn't booming because there's
too much debt already and this is the
the real secret you the conventional
economics can't understand this because
their idea about about debt is you know
George lenss to Steve and then Steve
repays George Well I lose the when I
repay you I lose spending power but you
gain it so you your extra spending
capacity offsets my decline that's what
they think about banking which is
nonsense in in banking we I borrow from
a bank and I then add to demand without
affecting your demand and then if iay
repay the bank I take money out of
circulation and that cuts demand so when
you get a high level of of debt to Banks
you get to a point where people will not
take on more debt and what that means is
the credit growth which has been part of
what stimulated demand and therefore
production for the previous 10 or 15
years is suddenly not there and when
you're talking about credit growing at
the rate of say 10 20% of GDP per anom
that's a huge hit to the level of demand
in the economy and then you slump and
that's why we've got just so there's so
much debt there nobody wants to borrow
and with that low level of borrowing low
credit growth and one major component of
aggregate demand is gone Professor Steve
you're one of the few people who makes
economics sound like common sense I must
say thanks for joining us on the Sputnik
coming up after the break the woman
woman who inadvertently introduced me to
my wife Tony Blair's sister-in-law
broadcaster and journalist Lauren Booth
don't miss
it welcome back to Sputnik I met gatri
at a conference in Leiden in the
Netherlands but she hadn't come to hear
me in fact she'd never heard of me I
actually came to hear Lauren boo whose
conversion to Islam had fascinated me
little did I know that at soon be
married to one of her supporting
speakers I'm glad to say he joins us now
but before that I ask the public the big
question now what do you think of David
Cameron linking Muslim women's language
ability to extremism or even terrorism I
think he said he sometimes tends to talk
from his immediate emotion and feeling
and and I sometimes feel that he just
needs to take a back step a little bit
it helps the Muslim women to if they
speak English I do agree I think if you
live in a country you should speak the
language especially if you've been here
for a long time but I don't know how
helpful and how much link it's got to do
with extremism I don't think that's an
assumption you can make um just because
if the their language isn't as you know
if they're not speaking English as well
as others I wouldn't say that means that
automatically means they must be linked
in some way to terrorism or something
not at all I wouldn't
agree Lauren when you converted to Islam
did you expect it to be so difficult for
a Muslim woman um it's not difficult
being a Muslim woman it is quite
crushing to read about yourself
consistently in the
newspapers as uh someone who's either
lost their mind or has joined uh some uh
extremist faction I think that is that
is the difficulty and the pressure the
being Muslim that's easy well yes
because you see in media and you must
feel it around you as well in on the
streets do you feel pressure especially
being a white woman wearing a hijab I
think um when I first came to Islam six
years ago I was so PR proud of londoners
who showed no interest at all actually U
I'm tall uh I'm 6 foot I'm white-
skinned now it's changed the hijab
number one people are feeling aggressive
80% of attacks on women according to one
study were were those who were wearing
the hijab or the nikab 80% of uh
islamophobic islamophobic attacks and
now as a white woman coming to Islam
that wasn't a problem until recently and
we saw this week Jack Le's a young
Syrian young British Aid worker going to
Syria Jack they called him had Jack
ready with his own alliterative name
which is which is Handy for the Press
turned out to be Obie bunam turned out
to that that he's just over there his
family knows where he is he's a charity
worker and he's a charity worker and
they've the newspapers have gone out
their way to destroy his family's life
and humiliate him um and you know this
thing about white Muslim convert really
is making headlines now and you have to
see that are we going to be the new
Target if so why what is the agenda
David Cameron who has not a few problems
of his own domestically and
internationally uh nonetheless took time
to launch two attacks on Muslim women uh
in the last week or two first of all he
said that uh Muslim women not being able
to speak English well enough may be a
contributing factor to extremism even
terrorism even though most Muslim women
speak English perfectly well most of the
women who can't speak English well are
not Muslim never mind these inconvenient
facts uh and secondly that a small piece
of cloth worn across the face by a very
small number of women uh was something
that uh we simply couldn't put up with
and uh must be one way or another This
Witch Hunt atmosphere is intensifying
look we knew this was coming and like
you said it's it's two announcements in
very short time and hundreds of
headlines as a result all about Muslims
and extremists and Muslim women being
focused on now and let's look at those
figures George sorry David Cameron says
22% of Muslim women have limited or no
English that is not borne out by the
2011 census which said only 6% struggle
with their English where are these uh
figures coming from and there is no you
know that the media talks about a debate
about the nicar going on has anybody
actually spoken to women who wear who
choose to wear the face Veil it's a
small minority within a minority this is
not a major story for the British people
it's not even a major story for British
school children why are they giving it
this attention I'll tell you why I've
Got a Theory it's the old don't look
over here look over there um you
know attempt what abouty what abouty it
is exactly that I'm sure um as you say a
tiny number I think it's
2% of if if there are 2 million Muslims
in Britain 1 million of them are female
2% of that 1 million wear a niab and
what's it got to do with anybody else
anyway and then how many of those women
how many of that 2% we them in schools
or in surger now my feeling is this
David Cameron you're really concerned
about this why not hold a conference for
all of these maybe two 300 women who are
teachers in ncab and do some training
and see how they're adjusting ask the
children who are being taught by them is
this a problem we already have checks
and balances in ofstead if you're a
failing school you're in trouble if
you're a bad teacher you're in trouble
why this Focus the focus is because
we're meant to be prejudiced against
these women we're meant to be frightened
of Muslims right now and this is a
disgrace and he's he's shown his hand
and I think uh all good people we need
to be waking up and uh and to this
agenda on the contrary though uh there's
a huge increase in racist attacks on
public transport 37% up on trains in The
Last 5 Years and some spectacularly ugly
videos emerging uh of uh attacks on
buses verbal and physical on Muslims
sometimes by other women uh this is
spreading and it's terrifyingly
dangerous I alluded to the point earlier
uh I represented many Slovakian people
in uh my last parliamentary constituency
hardly any of these slovaks could speak
English well none of them were Muslim uh
in the East End of London where I also
represented in Parliament almost all of
the people spoke English very well
because they were from former British
colonies and English was the if you
forgive the pun lingua franka uh so it's
having its effect it's deliberate for
sure but where will it all end I mean
are we headed for widescale attacks on
Muslim property and people like we saw
in Germany recently well actually
Middlesboro hang on G G4S painted the
doors of uh a bunch of migrants as David
Cameron would call them painted the the
refugees doors red so they could be
recognized by the local population and
the doors were being smeared with
excrement so we actually have this
horrendous response happening I think
let's look forward let's try and and
look positively here what do the Muslims
bring to this country what is the
because this is what people will be
asking themselves what is the what is
the quality nobody's asking what
positives this this community
contributes and I think it's very uh
telling that today a new study found
that um girls who go to single sex
schools do proportionally a great deal
better than those who go to mixed
schools in fact the results are 75% get
top grades as opposed to
55% in single SE schools huge difference
so actually some uh times girls work
well in with other with other girls that
has been a a fact you know um David
Cameron went to his segregated eonian
school where we probably didn't see a
woman for many years uh and that's okay
and I think we need to just adjust our
thinking on this we we as Muslim women
we're not a problem we are an attribute
to this community and to this society
and stop criminalizing our just behavior
and to link um a tiny minority of
granny's or future wives who don't speak
much English with extremism is not born
out those going to Syria are young men
they've been radicalized by
islamophobia um by uh foreign policy and
they're not women and their English is
good and English is so good ridic
broadcasting on that's it they're
getting a message across more
thanis and this from a government which
like the government before it cut
expenditure on teaching people English
they hared it they're such Hypocrites
hared it did they yes they're such
Hypocrites these people you cut the
spending on teaching of English to
people for whom it's a second language
you sack people who were are earning a
decent living teaching those uh people
women and men and then you damn the
population for any perceived even though
it's largely illusory lack of
proficiency in English what kind of
people have we got here look David
Cameron is an extremist and he doesn't
represent the majority of British people
that that that's that that's the truth
here he even speaks in this weird 19th
century language when he talks about
Muslims he gave us he gave a statement
saying um it may be that in these
patriarchal society the men folk don't
want the women to speak English who says
men folk in the 21st century unless you
have this idea that everybody's in
tribes and you all have to see the light
of whiteness and and be like us Johnny
Foreigner I mean really get over
yourself move on get with the 21st
century we're an inclusive Nation we've
been living together for years don't
fracture it you said The Red Doors in
Middlesboro and of course there were red
wristbands not sure where the red comes
in on all us why they've decided to
Brand refugees as Reds maybe there's a
subliminal message there too uh in
Cardiff they were uh forcing U Asylum
Seekers to wear a red
wristband uh when they turned up for
their breakfast which they need to have
of course because they don't get
benefits and they're not allowed to work
even though almost all of them would
like to uh do so and when ab bruhaha and
the liberal press was raised over this
there were people who argued well that's
what happens at rock concerts and on uh
um uh holidays uh group holidays uh
what's wrong with forcing people to wear
that's interesting uh let's do that rock
concert thing the rock concert right you
have security guards on the outside you
pay to get in and you're only there for
a short period of time and then you're
out again so what you're saying is you
have these wristbands you're here for a
bit uh on our say so and then you're off
again it's not about welcoming people
into society it's not about creating a a
good social strata where we're all
living together it's not about then
anymore it's about them and us and this
Rec rhetoric is really divisive you you
strike me though and I'm glad to say as
pretty optimistic about the future yes I
am because actually you know when you
when you force through nonsense like
this and you make such statements that
such polarizing statements you you you
push a Tipping Point when the good
people of Britain come out and say this
is nonsense we don't agree with this
when I go you know when I'm doing my
shopping you chat to people especially
in the north of England they they don't
buy this rhetoric so I think they've
gone too far and made a nonsense of
their own policies to his backlashes
yeah Hallelujah finally God willing just
finally let the woman
speak how's Tony Blair is he ready for a
film that's coming out uh I haven't
spoken to Tony for a while but I'm sure
he's looking forward to it and he's got
his red bow tie ready for the big night
very good Lauren bu thank you for
everything and now it's your turn to
tell us what you think through the
portals of social media what's rattling
guy now why did David kman try to make
the link between English-speaking Muslim
woman and extremism even terrorism
Johnny reg says he sounds like an Isis
extremist telling women what to do and
Jamie Hunter says born and raised in
Newcastle we don't speak a word of
English and Dean ner says LOL please Mr
Cameron tell me how many languages do
you speak that's question I think he
speaks only one and even that is 19th
century Arcane English as Lauren Bo
pointed out exactly and about China Mary
Finley says they will use it to convince
us that the problems they've created are
all China's faults good point and that's
all we've got time for this week which
alas means that's the end of the show
but you can stay in touch with us
through Twitter at rtor Sputnik or on
Facebook Sputnik on Russia today it's
goodbye for me G and from me George
Galloway it's been
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marvelous