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tv   [untitled]    September 21, 2010 3:30am-4:00am EDT

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the main stories we're covering this hour. making inroads in sweden europe's far right parties are setting austria as the next target the freedom party there is capitalizing on a wave of islamophobia and immigration fears by using a controversial anti muslim computer game. world leaders are in new york to assess where they stand in their efforts to battle global poverty and the u.n. millennium summit looking at whether promises are being kept especially since countries say the recession is making two thousand and fifty deadline harder to achieve. and the power of the mind of russian scientist claims people
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can use thinking as therapy he says he's developed a device which captures the energy field which humans generate to help the early diagnosis of illnesses not want to season cancer. back with more on those stories in around thirty minutes time but up next to financial analyst max keiser and stacy habits shop in the swords of currency wars market battles and the france's first lady. i am ask iser and this is the kaiser report i hope you're watching the show because it's the antidote to all those other shows like are there and c and bay say jim cramer and those people will put you into the poorhouse only on this show to get the straight dope only on the show that we've been saying every week for months every month for years by gold another new let's go to.
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stacey herbert yes max gold is hitting all time new highs every day it's hitting a new time all time high check out this chart that's it waking up out of bed one morning and up up up up up so max you've been telling everybody buy gold that's right and why well because the global banking system is in freefall it's a catastrophe that peak credit in two thousand and seven they try to jam seven hundred fifty trillion dollars worth of derivatives into a global economy that was only about fifty trillion and son it's like a fog groff farm where they stuff the goose of the dock with all the grain and the liver expands and then the goose dies in this case the global economy is dying and the result is the golden egg the golden golden goose is popping out of the who well max the question was also put to alan greenspan when he was speaking on
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september fifteenth at the council on foreign relations headline reads greenspan's warning on gold when he was asked why gold was rocketing yeah he said fear of money has no place to go but gold if all currencies are moving up or down together the question is relative to what gold is the canary in the coal mine it signals problems with respect to currency markets central banks should pay attention to it yes now what does all this mean you see banks if they were in the interest the policies of the people they would have raise interest rates already sufficiently to attract capital the savings. to drain interest away from gold but because the central banks and the wall street banks in the banks in the city of london and the banks in europe are so greedy so corrupt
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and so. which like a draconian they are so lost on a stick they're just god awful they keep rates at near zero and must steal billions no trillions for themselves you see that's what i'm saying that are . timon's max actually that you bring that up the financial times used that word this week about these low interest rates they said referring to china where inflation is high and yet interest rates on savings accounts are low they called it financial repression so you know i mean alan greenspan the saying central banks should pay attention to it what is he talking about because central banks are causing it that's one central banks are causing it and the world has always been on a gold standard whether they recognize it or not gold is not going to go away and all that's happening is that as these bankers find themselves marching toward the good genes the people doing the job job are saying well let's touch ourselves and
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buy more gold finally on this topic of alan greenspan and gold now many people in the mainstream media the financial media will argue that central banks would never intervene in the gold market they don't care about gold well here's a man who was the head of the u.s. central bank for two decades so of course he carries he's he's saying that's the number one thing for people to look at well yes that's a lot of central banks watch gold like a hawk because if it goes up there ponzi schemes go down so too for james cramer if gold goes to twenty five hundred james cramer of c n b c will be on the street selling apples and all who get back is a lot of rotten tomatoes smashing into his face alan greenspan warned that the price the gold going up is something to look at currencies that this is a danger for currency so we're going to look at the currency wars this is something that we've been talking about for the whole year is an issue to look at for two
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thousand and ten first headline reads yen intervention fans feelings of anti japanese rage across china so this is from business insider and they're saying end to japanese rage reached the highest levels in years last night in china this was following. japan's intervention in the currency markets to keep the yen from rising you know it's now at a fifteen year high yes so we're in big seeing the beginning of this war like real war going on between various nations trying to beggar thy neighbor well a couple of points days number number one you know at the end of the show we give out the e-mail address and say send us an e-mail and i say i read all my emails and i read all the comments on you tube for the hundreds and thousands and millions of views that we get on you tube for this show and the fact is i do and i want to make the following point i do not look like sulu from the old star trek episode put a picture of here from the old star trek episodes and you see that there is no
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comparison between me and sulu. that's point number one point number two is that as we've been saying on this show and we've been saying this for years world war three will be fought in the currency pits ok and now china and japan are long term obvious series clearly and now they're fighting each other in the currency pits you see the same thing happening in a common means around the world because they use these leverage derivatives as warren buffett himself as call them they are weapons of mass financial destruction do you need a fricken map to go find the reality here don't. don't jim cramer's interest well you talk about this currency wars to geithner was speaking before the senate banking committee last week and here's the headline that emerged from that geithner says u.s. is considering ways to push china on un so of course it's an election season coming up mid-term elections in the us and there siding with japan and this currency
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conflict emerging over in asia so he said quote the pace of appreciation has been too slow in the extent of appreciation to limited we are examining the important question of what mix of tools those available to the united states and multilateral . approaches might help encourage the chinese authorities to move more quickly tim geithner is smoking his own belly button lint don't doesn't he understand that if you want appreciates it'll give five hundred million chinese newly in the middle class purchasing power and that they don't need to send their savings over to america anymore and american economy will go belly up within a matter of minutes i mean the guy is seriously deluded if he doesn't understand well this is what actually another headline suggests this is from china chinese think tank warns us it will emerge as a loser in trade war so responding to this state council think tank in china warned
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that the us is going to lose in this situation during and fang a policy grew at the development research center said china could respond by selling holdings of u.s. debt estimated at over one point five trillion this could trigger a rise and u.s. interest rates. you know buying gold is like eating chinese food after you buy some you feel like buying more. you know this is think about it john has been buying gold they watch the show and they say max you know we followed your advice to buy lots of gold same thing russia you know kremlin call me up all the time i'm actually at the red phone right here grumbling yeah thanks for telling us to buy gold we just bought another. but you know gabriel stein from lumbered street research in this article response to this threat from china now this threat from china is the mother of all threats this is the thing that everybody for the last decade or two has been warning about once china start selling treasuries so here's
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gabriel stein responding to this who is gabriel stone he's a guy they are utterly wrong the lesson of the one nine hundred thirty s. is that surplus countries with structurally weak domestic demand come off worst in a trade war he went on to say bring it on it will weaken the dollar which is what the u.s. . once the interest rate effect can be countered by the fed so he's responding basically saying we've got our own command and control of interest rates we can fix interest rates whatever we want as a group of westport connecticut peter schiff has said all essence will deflate against gold you know we talk about war is them the other issue we're always talking about is the warfare state of america and this headline is very shocking veterans agency made secret deal with prudential this is the line this is the what this is like makes me think as an american myself i feel so embarrassed
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and so ashamed the u.s. department of veterans affairs failed to inform six million soldiers and their families of an agreement and they able in prudential financial incorporated to withhold lump sum payments of life insurance benefits for survivors of fall in service members apparently this is a verbal deal struck in one thousand nine hundred nine under the clinton administration that they would actually not have to pay the lump sum that the survivors the beneficiaries of these policies would want a lump sum and they want to keep the cash you know invested as they want but apparently prudential has been sending them a check book that they could make monthly payments and then investing the money on their own and making up to eight times what they were paying in interest it wasn't enough to make a big bonus selling weapons to start phony wars in territories that the american knows nothing about they've got also cash in on the dead soldiers on the back end as well i mean this is like being trapped in
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a mutual fund from you know hades i mean they're making a market in dead us soldiers isn't that a bit own acceptable in america today i mean what are you training the kids don't elementary school how to become an arbitrage or for dead u.s. soldiers or potential securities that's all palling and there yet they've got a license. they are doing business how come nobody shut them down because geithner smelling you know the the vapors of his own delusions the menace. u.s. secretary of defense robert gates had this to say until today i actually believe that the families of our fallen heroes got a check for the full amount of their benefits this came as news to me again it was a verbal agreement there's nothing written down yeah look robert gates again another u.s. politician who's an empty sack of bones uttering platitudes to nobody in a vacuous echo chamber that is washington heard by no one except the gold market
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that's saying you know what we don't believe you and the move or one final headline another triumph of mack's geysers predictions speaking of politicians and empty sacks of bones it's hell i can't stand that carla bruni reveals what michelle obama really thinks of being first lady well this is a new biography of carla bruni and she apparently revealed that michelle obama says it's hell being first lady and many are speculating that well perhaps barack obama really does want to be a one term president in the book however carla bruni says one term with french president will be enough for her husband and suggest he might take tips for miss friend tony blair why not start making money so another friend of carla bruni is quoted as saying that the sarkozy is a very impressed with how much money tony blair is made by j.p. morgan and all these oil deals he struck in iraq how much money tony blair has made
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committing genocide in iraq he cashed in on the way out thanks tony blair your genocidal maniac now of course tony blair barack obama nicholas or cozy they use the presidency merely to grease the skids of their careers to impress the bankers on wall street is just a resume burner sure yells president isaacs for four years and and then i got a job but go but. i was going to do it for this part of the show don't go away much more after the press. when the news is not enough. when it's something really crucial when you want to get down to brass tacks when you bring special coverage. this time the latest news from the international market for scientific discussion and experts to opinions on the pricing issues of the region. arctic forum. polar
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interest. question more on the. welcome back to the kaiser report time now to go to new york and talk with smith naked capitalism dot com and author of the con how an enlightened self interest undermine democracy and corrupted capitalism and welcome to the kaiser report max great to be with you all right first if your book is called come on tell us about the con that corrupted capitalism well economics says there is a lot of blame for the financial crisis it's the discipline used to have
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a lot more diversity and if you go back to the one nine hundred thirty s. you had a lot of different schools a lot of different frameworks on opinion what happened right after world war two is that there was a very self conscious effort to make the discipline more mathematical and to make the math as they like to call it tractable they had to assume stability i mean when you when you hear people talk about economics or economics models you all the time you'll hear discussion of. well liberalism that's hard wired into mainstream economics or if you assume that the system is going to be stable if you assume that if there's any disruption things are going to eventually go back to being normal whatever you define normal that means you really don't have to intervene very much that means in fact interventions probably a bad thing because the economy will self correct and that isn't that is a line that's very popular with businesses you know if you can you know they would
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not prefer to be left alone they'll prefer to be to be free to do what they would like to do so if you believe the economy's going to be stable that gives you license to do all sorts of things like deregulate now if you soon in fact as keynes did this is a part of keynes that got airbrushed out that economies in fact are have a tendency to be unstable then that gives you more of a kind of a case for government intervention now you can debate whether the government can intervene sensibly but there really is a fundamental. disconnect in terms of the point of views between a view that the police and instability versus one the police economies have tends to be stable and the second set of problems with financial economics is very large in that all the mainstream models. have assumptions in them again to make the math easy that understates the risk so that people who use the normal approaches that are well established international economics wind up taking on more risks than there are aware of that they're taking are let's talk about one word in that description they just offered the word is equilibrium so you're saying that over
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the past twenty or thirty years there once diverse field of economics has like a lot of things in america and world culture become reduced to a monoculture or a mano way of thinking and this way of thinking believes are posits that you can mathematically assume or calculate what an optimum economy is going to be and treat it like a physical physicist would look at a time. structure and you completely ignore the fact that economics at best is a natural science like psychology and again getting back to this word equilibrium according to professional economists things are in equilibrium however when you look at the facts on the ground like this huge exploding poverty rate in america clearly there is very little equilibrium what do you think score yeah well in fact this is in fact economics has chosen classical physics as its model and you will
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see economy you know for example now the discussion is gee maybe we have what they call structural imbalances and maybe now we're at a new bad equilibrium you know that's that's the way the current situation is being rationalized to fit in the current economic model but in fact you might be able to make an argument in sort of very specifically how commodity markets you know you really have a lot of players that don't have much power and you've got physical supplies that you know maybe in some markets you do have you know if there's too much supply prices go down if there's a lot of demand prices go up you might you know the those kind of markets you might be able to argue that there are forces for equilibrium but the the the place where this argument really breaks down is in financial markets in markets that involve credit and financial assets they don't have any propensity to equally librium in fact as we all know they have their predisposed to boom bust cycle so that was a particularly dangerous set of assumptions to to use these kind of equilibrium
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notions in financial markets and as we know financial markets when they become a large relative to the economy in fact have a lot of impact on the big economy on the real economy you know we have a financial crisis that's now rolled into being a real economy crisis ok the boom bust cycle in economics this is if you go back to adam smith today of course when he wrote wealth of nations in the theory of moral sentiments he used nature as one of his references and he noticed that the tide comes in and the tide goes out and that. yes economies will expand and economies will contract and economics has given us some tools to deal with this principly on the monetary side the ability of the fed to change rates one way or another to try to create more demand if demand is lacking etc but over the past fifteen years though with the introduction of quantitative analysis and funds and high frequency trading and algorithmic trading in two thousand and seven we had a situation where by some estimates seven hundred fifty trillion in derivatives
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around the world for a global g.d.p. for the globe of roughly fifty trillion so there were a fifteen times moral highly leveraged bets in the global economy then there was even a global economy now that's not equilibrium that's not economics that's an outright fraudulent ponzi scheme is not true well that's right and in fact in fact this is something that keynes talked about a long time ago he said that when you know capital markets i'm not i'm paraphrasing him but basically said that when a capital market becomes more like a casino it doesn't do its job of allocating money efficiently to the economy and that's basically what we've seen that the side bets have gotten so large they started swapping really economic activity you know for example the subprime crisis i mean everybody likes to talk about a lot of people like to see the crew financial crisis as a subprime crisis when in fact that was merely the trigger and if it had just been about subprime loans you know planned he wouldn't have been wall bernanke
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a surplus a promise contained if you just looked at that level of defaults as bad as it is that when the swap the economy will swap the economy was that for every triple b. sub prime bond you had ten times that amount of bets on top of it so that when the sub prime went down it was multiplied ten times but all these bets you had sitting on top of it that's what caused the crisis was all the leverage of all these additional instruments on top of the really economic activity right now so obama comes into office. creates a seven hundred billion dollars stimulus program on top of the seven hundred fifty billion or so bailout of wall street banks that hank paulson got congress to agree to back in the two thousand and eight period and people are saying well ok this is going to offset this black hole in the economy at that time however what was not fully disclosed was there was another five to ten to fifteen trillion at least in additional blackhole debt obligations or claims that had not worked their way through the economy today there's no inflation because there's another fifteen to
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twenty twenty trillion of black that hole still to be worked through how why is it . smith that the government can't get wall street or any bank in the world to tell them honestly what their true liabilities are one of the worst is that you've got a lot of double counting mean it's this is a good defense but unfortunately because so many of these markets were unregulated there never was any central reporting and therefore you've got exposures that go across firms you know double malt you know two times three times four times you might have the same you know credit default swap the spin hedged multiple times back to back and so and then the question is gee do you net this out well. how do you even measure these exposures intelligently and this is one of the reasons the big reason that bear stearns and i g. were bailed out with a credit default swaps exposure is that if enough of those went down even though they were theoretically hedged if one side or hedge goes down or wall you're not
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hedged so then even there even have a good they don't even have a good way even if they had the exposure it would still be a a monster task to sort out what it really meant they don't even have the methodology for figuring this out if you're reselling the same package of bonds two times three times four times what the incentive to pay yourself two times three times four times for the same business if i go to the grocery store and i buy a quarter milk and it cost me. fifty cents or a dollar to buy the quarter milk the grocer can't look at me and say hey thanks for buying that quarter milk for a dollar i'd like to charge another dollar for the same quarter milk like to charge it through another dollar for the same quarter milk and if this is what wall street does all the time they keep charging people fees for the exact same thing that they just sold we have evidence of the fraud it's called the bonus for me so why can't the government simply say ninety percent of your bonus is a goldman sachs j.p. morgan the rest of wall street were the result of outright fraud and we'd like that
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money back please because you're criminals like why can't that happen well it goes back to an article that simon johnson wrote in the atlantic called the quiet coup the problem is that the banks are now sufficiently powerful and sufficiently plugged into the process that it's very difficult to claw and you think back from them you know and the second bit is in fact you know they've given money to employees we don't have a good legal. process for actually going through the banks to the employees and then demanding the money back particularly since a lot of them have gone off and spent right right we don't have good legal process to go after banks who stole billions but we've got a really good legal process to go after star poor slob who stole a razor from wal-mart you know at three o'clock in the morning or who's dying from starvation that's an asymmetric legal system that i love and know that that and it and it's and it's a huge fight and we also have an ideological problem because we are. we have this notion that there is a hard line between private sector activity and government activity whenever you
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hear people talk about these debates ago you know if you intervene too much in the economy it's socialism we don't have a pure capitalist economy and the there may be sort of some little sectors that are darwinian where they really do sort of live in dire their own merits but you've got massive subsidies of all sorts of people getting various tax breaks you know and with various forms of government you know r. and d. support you go down the list of the way that business get support from the taxed. they are and wall street is pre that you know pre the crisis there were a fair number of subsidies because there's restricted entry you know you have to have certain licenses to be a wall street firm that already means you don't have a fully competitive market and now we've had all these bailouts you know and we've have the fed continuing to support the financial institutions with the super low rates that's a transfer from savors to the big to the major financial firms so we've had a tremendous amount of support and yet we so operate with this fiction that they
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really should that because they have shareholders and because they have boards of directors because they have all of the forms of a private company that they should have the rights of a fully private company this is a huge problem in the in the debate is we have this idea logical layer that they're private sector companies if you start interfering with these you know potemkin private sector companies you know you're no different than che guevara you know with you know with machine gun and and going into interfering with you know private x. enterprise expropriating the people really have those two extremes in their head and they don't recognize that there's a tremendous amount of gray and the gray that these banks fall in is really already very heavily state supported all right eve smith make it capitalism dot com thanks so much for being on the kaiser report thanks so much really appreciate it ok and that's going to do it for this edition of the kaiser report with max kaiser and stacy herbert and i want to thank my guest yves smith naked capitalism dot com and author of econ and if you want to send me an e-mail please do so at kaiser report r
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t t v are you until next time this is the next guys are saying well you all.
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