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tv   Inside Story  Al Jazeera  October 8, 2013 5:00pm-5:31pm EDT

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>> house speaker called again for redestruction talks with president obama on tuesday. thousands of people are gathering at the capital of washington, d.c. to bring attention to immigration and calling on congress to pass a sweeping reform bill. and a second team of weapons inspectors will go to syria, u.n. general secretary ban
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ki-moon called for the extension on monday. and north korea is on high alert. the nations were said to conduct naval exercises in approachin h approaching storms will cancel military exercises. those are the headlines at this hour. i'm tony harris. "inside story" is next on al jazeera america.
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[♪ music ] >> hello, washington's fight over the debt has drawn the ire and eyeballs of capitols across the globe. american politician versus been in the international press calling to question americ amers economic supremacy as well as it's position of global leadership. perhaps no nation is more concerned that china. which holds the biggest piece of u.s. debt, a figure in the trillions of dollars. there are jen sin concerns that the united states could now do what was previously unthinkable, default on its obligations. because republicans and democrats cannot be reached. >> i guarantee you we'll move beyond this, and we'll move beyond it in strength and
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determination. >> secretary of state john kerry stood in for president obama on monday as he spoke before a room of international leaders for apec forum. after the u.s. government shutdown on october 1st the president decided it was best to stay in washington. >> i want you all to know that in 2004 obviously i worked very, very hard to replace a president. this is not what i had in mind. >> with an around half a million workers currently furloughed, and a debt ceiling looming, america has been gag lines all week. in europe, quote, paralyzed itself. in france, the newspaperly monde wrote, jefferson, wake up. and another newspaper, quick,
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let's steal hawai'i white the government is shutdown. the world's largest economy defaulting on its debt is no laughing matter. >> the ongoing political uncertainty over the budget, over the debt ceiling does not help. the government shutdown is bad enough, but failure to raise the debt ceiling would be far worse. and could very seriously damage not only the u.s. economy, but also the entire global economy. this is mission critical that this be resolved as soon as possible, mission critical. >> they are no strangers to terms as mission critical. nations across the continent are still weary. deputy in austerity, riots and high unemployment greece announced it is only now projected to make positive gdp
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growth in six years. a global hit such as an u.s. default could risk everything. in japan, they are serious about the stateside stalemate. >> to ensure that this problem does not spill across in a manner of issues we call on congress to work hard at negotiationnegotiations with the house and resolve the deadlock as soon as possible. >> no nation is more worried about an u.s. debt default than it's largest debt holder, china. according to the u.s. department of treasury china owns over $1.2 trillion in u.s. bonds. >> the u.s. totally understands that we're concerned about the developments in the u.s. fiscal cliff and ask that the u.s. heed the reasonable demand to insure the sof safety of chinese investments. china also understands that president obama and jack lew and the american administration are fully aware of the extreme
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importance of maintaining american credibility. >> reporter: over the weekend secretary of treasure jack lew went on non-state of the union to rally for a rise in the debt ceiling. >> you can't pay all the bills if congress doesn't raise the debt ceiling. these are not new. this is paying old bills. it would be like someone saying i ran up my credit card and decided not to pay it. you can't do that. the united states government is too important to the world. our currently is the world reserve currenty. >> reporter: economist predicts without a solution a default of loans could cause the dollar to plummet. hurting the economy. that could trickle down to consumer loans from credit cards to student loans and the stock markets to plunge. all of this could risk a great oh global recession. it would also be the first ever intentional default of debt in u.s. history.
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>> joining us in studio jill, a financial adviser with new state partners. a london based firm that advises governments on finances issues. and in london, chairman of the european movement in the u.k. a former adviser to the u.k. parliament e.u. committee and charles, professor of international affairs at georgetown university and senior fellow at the council of foreign relations. we're eight days out. there is no sign of blinking on either party. they said remove the gun from my head and end the shutdown, pass the debt ceiling and then we can talk. that doesn't seem to be a starter right at the moment at least with the republicans. what do you think happens if, indeed, we get to the 17th and there is no plan to raise the debt ceiling? >> well, i think that right now you've got two big problems.
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one is the big picture which is the united states remains the world's most powerful country and people are asking are the lights on? is anybody home? that's rattling everyone, including the financial markets. and then there are the day-to-day events such as obama not going to asia for this apec summit. there was supposed to be a trade negotiation in europe that was canceled because we could not pay to send the delegation, now the $6 million question will the united states default? >> wait, that negotiation in europe was canceled because we could not pay airfare? >> we had a delegation from the u.s. trade rep going over to brussels on monday to negotiate what is free trade with europe. guess what, mike fromm called from brussels sand said sorry, we can't come because we don't have the money for our staff to show up. >> you're sitting in london. you're involved with the e.u. what does it look like to e.u. members when the united states can't afford to show up to
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negotiation a trade deal? >> well, the trade deal on the table at the moment is very significant for both partners, both for the u.s. and the european union. we expect to generate up to 1% of gdp. they're very eagle for make this happen quickly. any delay is having an negative affect oveeffect over here. it's been very clearly stated that it will have an effect, and only now we're trying to emerge from years of austerity and low growth. if this continues and the worst happens it will have very negative effects as a whole. >> i know you're involved in negotiating sovereign debt and you're attending the imf international monetary fund this week. is this the talk of the
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corridor? >> it's a strange coincidence that you have this discussion happening in all of the united states when all the financiers of the world are converging in d.c. >> had a are they saying? >> frustration, confusion, just as you said, are the lights on? how could this happen? the feeling is no matter what sort of domestic squabbles might be going on, as valid as they may be, it can't come to such a serious point where the entire world is at stake. >> and for those people the central bank governor, this really is the future of the world. >> well, the united states is such a dominant force economically, financially, and in so many ways that as you said, the reserve currency of the world. it's incredibly important.
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i can't overestimate the importance to the rest of the world. you just can't pick and choose when you're going to be the leader economically. >> charles, there are some republicans i think 54% of republicans, that does include some number who are in the house and in the senate, who say that if the united states gets to the 17th with no plan, that there is basically no problem. it's not an issue. they argue that the united states has lots of money. they will be pay the interest on their debt, is that true? >> it's not true in the sense that we still live in a fragile world economy. if the united states said that we can't pay our bills i think the affect on financial markets around the world is huge. i don't think we're going to get there. partly because i think that the republicans may well blink and you could get right today you could get a vote to stop this silliness by getting moderate
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republicans and democrats to vote together. if that doesn't happen, my guess is that president obama would make a decision to go ahead and raise that debt ceiling even without congressional short because the stakes are too huge. >> what happens in europe if, in fact, the president is unable to get an increase on that debt ceiling and the u.s. careens towards default? >> we'll have to consider what measures can be made to protect it's only economy. not least its banking sector which is a fragile state. i think the political consequences here are quite serious, and those who are watching on the other side of the atlantic they're concerned if the u.s. political establishment does not compromise on something like this of such paramount importance, how easy it would be easy for the u.s. t in the world
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so it's imperative that some accommodations come along. and without the u.s. the europeans here cannot promote their own objectives globally. >> we'll have more with our guests after this break. you're watching inside story. stay with us. what happens when social media uncovers unheard, fascinating news stories? >> they share it on the stream. >> social media isn't an after-thought, it drives discussion across america. >> al jazeera america's social media community, on tv and online. >> this is your outlet for those conversations. >> post, upload and interact.
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>> we're back talking about the risks of the debt ceiling. >> jill, you help dea governmens
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deal with their debt issues. what happens when states go into default? >> usually it's not the size of the united states. when a country defaults--first of all, a country does everything in its power to avoid a default, and it will engage with interested parties long before a default would actually occur. in order to avoid that default. they would like to negotiate a solution or some kind of alternative scenario. >> pushing off debt. >> yes, proverbial kicking the can down the road? you would find some other solution rather than defaulting on your correct. >> now you think that this is a game of chicken and each side is waiting for the other side to blink first.
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if we go down this road and the president does not use some form of executive power or there is still some stalemate how does that impact the view of the united states internationally, particularly those who hold the most debt, the chinese and japanese? >> i think it's very problematic if the sense that we are already in a period in which people around the world are questioning not just does the united states stand by its arrears, but the whole question of whether the whole american political system has become so dysfunctional that it's not an efficient actor abroad. my feeling is this will pass. when we get a deal and congress starts behaving like an adult the president will go to asia. he will send a trade mission to europe. but the longer this goes on the
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more damage is done. in that respect i think that we are seeing over time day by day, hour by hour the credibility of the united states erode at the margins. >> that's the most important capital that the united states does have, that it stands by its word and it's word is it's bond. are you seeing in europe distancing of european nations from the united states, looking at askance remembering the harsh language that the u.s. directed at european governments when they got into trouble? >> indeed, there is an element of truth there. but don't forget the european university is collaborative of 28 states. they're accustomed to difficult
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negotiations so there is an element of understanding and accommodating when it comes to the u.s. negotiation. but it is imperative that the u.s. get their house in order, and we shouldn't forget also the monitoring issue, those who will be affected if there was, indeed, a default. many who are watching these days, and whether they should move some of their assets into the euro. that can have an affect o on the value of the yo euro. this is all playing a significant role in the mind of european leaders. >> in 2008 we learned the lesson of how closely in betweened the global economy is, if we didn't know that before, we learned it in 2008. has anything changed since then,
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that europe or asia is any more independent from the u.s. economy from then? what is the impact going forward? >> i don't think we can imagine what that would be in actual terms. the u.s. dollar is so center to so many economies, and as a reserve currency, and we say that the united states is so central economically and as a leader. what signal would that send to the rest of the world in terms of credibility and the political ram my cases an reverberations would be endless. i can't even imagine. >> now, as you said charles, you said this is going to come to nothing, we'll get past it. but we have gone through the sequester which is code for draconian, we have gone through government shutdown. it's not supposed to happen. we're there. what gives you confidence that
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these two parties will side step this next cliff? s. >> only that at the end of the day the cost will be so dear that the speaker of the house bites the bullet and moves to strike a the deal even though the tea party is not right there with him and ultimately politicians looking to get re-elected say at some point the national interest needs to trump my political interest. if that happens, and i think it will, what jill and petres are staying the u.s. is the currency. are they now going to say the american political system isn't sufficiently stable that i want to keep my reserve in dollars. the long-term implication even if we get out of this crisis we
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might see countries move their assets into other currencies. >> my thanks. when we return we'll check in with our own financial expert ali velshi. [[voiceover]] from al jazeera media network comes a new voice of journalism in the u.s. >>the delta is a microcosm of america. [[voiceover]] we tell the human story, from around the block, across the country, with more points of view. >>if joe can't find work, his family will go from living in a motel to living in their car. [[voiceover]] connected, inspired, bold. >>about a thousand protestors have occupied ...
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>> joining me now, al jazeera america's ali velshi host of "real money with ali velshi." thank you for joining us. the sage of omaha warren buffet said that not raising the debt ceiling would be equivalent of throwing in a nuclear bomb, is he right? >> he is a smart businessman. people are using all sorts of ways to express the seriousness.
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this ithere are a group of peope saying this is overwrought and it's not as bad as it seems. the united states has not missed a payment since 1790. some people say that the united states has never missed a payment, that's not true, they did in 1790. that is the best place to park on earth. that's not something to trifle with. it's not going to cause a recession, although it might. some think it will cause a worldwide recession. that's not the most serious part. the serious part is why are we trifling with something when we don't have to. there are other ways to fix our spending in the united states. >> if it's this so bad, why isn't there a move on the part of the markets. before they actually get to the table and begin dealing with this?
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>> you know, she'll l the one thing that the financial crisis did to us is it ruined our ability to be shocked by big numbers, and it ruined our ability to understand market drops. so what you haven't seen which you saw back in 2008 and 2009, is big massive swings in the market. 350, 500, 700 point swings on the dow. but you've seen greater losses for a while. if you look back a month ago, the dow and the s&p had hit all-time highs. they're off about three and a half to four percent loss. that's huge. you're seeing it bit by bit. wall treat is coming around that they will increase the debt ceiling, but as we get closer and it's not happening you might see substantially rougher movement. >> that's my next question, how close do we have be to that
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limit before the markets wake up and say, holy cow, this might be happening. >> the financial crisis taught us not to be afraid of large numbers and large moves. we've learned that congress will bait until the last minute to extract the best deal that both sides can do. the problem is we've seen them go to the deadlines. the shutdown, something that people said wouldn't. happen. and how much worse could it be to stand our grounds and you heard that speaker boehner said that the debt ceiling they will not allow the united states to reach the debt ceiling. i don't know where the deal is going to come from because they've just do the to increase the debt ceiling. it might be a temporary deal. it might an permanent deal until we start understanding that it's the 15th of october, and we do not have a deal, the 17th is the
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day that we could start missing payments. you could see a reaction, but wall street is letting us play this out for a while. thethey're giving republicans a little bit of a cover right now, but that won't last for long. >> it is republicans aren't closely tied to wall street. there is a lot of republican money that comes from wall street and goes into traditional republican coffers. are they saying to republican politicians listen, you got to get us out of this otherwise we're not going to be writing those big checks to you? >> you would think that's the case. but from what i've been hearing and people i've been talking to, they're not. there are a lot of people on wall street. moneyed people who are telling republicans, stick to your guns. we're spending too much money. you have to hold the democrats'
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feet to the fire. one can be sympathetic to that argument. there are those who say that we spend too much, but the debt ceiling is a very dangerous tool to be having that discussion. we have senate, congress, that's where they're supposed to be fixing these matters. the fact that they can't get fixed in congress and then we have this debt ceiling to do it, it's very dangerous. now we have supporters on wall street who are not putting republicans' feet to the fire. >> tell me what is going to be on your show later on today? >> we're going to be covering this. we'll explain what happens after october 17th. and we'll have a budget expert on the show. this guy knows everything that there is to know about how these budgets work. it sounds a little boring but it's actually very important.
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>> thank you, that's it for n

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