tv [untitled] August 11, 2011 5:31pm-6:01pm EDT
biggest issues good voice face to face with the news maker. i am max kaiser this is the kaiser in for a check of the debt bomb. we went to new york city and they downgraded america s. and p. did immediately as we told you they would others doubted us but we guaranteed it and now we're back in france and guess what. stacey herbert tell us more well max i'll tell you the headline as soon as max kaiser arrives in france to pull a read france may be vulnerable to downgrade following cut to the u.s. yeah well there's a tremendous ripple effects of thing with this downgrade because the u.s.
dollar is corus connected to the u.s. treasury bond market and it's connected to the thigh bone connected to the hip bone connected to the foot bone connected to the yeah baby it's all connected so to downgrade you start to pull the thread on the u.s. dollar the whole kit and caboodle gets on ravel yeah you all might also say however that it's own related to s. and p. itself and moody's and fitch because the u.s. and france are in such bad shape due to all the so-called aaa rated collateralized debt obligations and other credit derivatives that s. and p. allowed to be rated aaa and then these country's banks bought these toxic debt yeah that's an interesting part of the history isn't it during the period leading up to the financial crisis the selling of collateralized debt obligations see the rows as they're known and other flora and fauna of the derivatives fear spawned by the which are self blith masters.
fish and moody's and s. and p. gave these cancer nations these abominations their aaa rating and it created this huge ponzi scheme now they've pulled the rug out from underneath them well max another story related to this financial chaos going on at the moment bank of new york mellon charges depositors' america's biggest custodial bank has been forced to start charging customers who have deposits of more than fifty million dollars as more investors take cover from the mark. turmoil so they're saying that they're basically trying to force people out of cash and into somewhere else because they're receiving so many people coming in flooding the banking system with all this cash and this is something we've spoken to james turk about where he envisioned reverse capital control that instead of capital controls being on money
being taken out of the u.s. it would be against money being brought into the u.s. in order to avoid the hyperinflation of all those dollars that are overseas yeah another great point trying to stop the money from coming in by charging essentially negative interest rates people say you can't take interest rates below zero but you can by charging people to hold their money at the bank they start off with these big fifty million dollar posits and then they work their way down to mom and pop are out there with a couple of thousand dollars on deposit and you will be charged one or two percent or more at the end of the year you have that much less in your account as the bank is trying to pay off their bad loans that could have should have been ring fenced and dealt with back in two thousand and eight but instead will lead to metastasize and grow into this enormous economy killing tumor of bad debt and i mean this is another actual point for those who argue that there's deflation and there are some people who argue there's massive deflation so here is
a bank is able to charge money for people to hold this amount of cash but it also the article points out that the news of the levy emerged as a sale by the u.s. treasury of twenty billion dollars of ten day bills offering the zero yields further demonstrated investors have now become intent on preserving capital. yeah the trend is obviously toward negative interest rates and that's negative purchasing power and oh by the way that's a good reason to buy gold again we come back to gold well let's move on to the other to play rated securities about to be downgraded muni market prepares for a loss to play ratings so the two point nine trillion dollars municipal bond market is preparing for hundreds and hundreds of downgrades after standard and poor's lowered the u.s. one level to double a plus the first ever reduction for the country so s.m.p. is likely to cut its ratings i mean it's a pull debt secured by the federal government so just pre-funded bonds tax exams
backed by u.s. agencies and credits that are most dependent on federal spending write the aaa rating of the u.s. treasury bond is a reference rating that is connected to all these other aspects of the economy like the municipal bond market also on the corporate side i was just looking at zero hedge that made the good point that institutions like options clearing corp or the group that is responsible for clearing of short sells they're all being downgraded too so this is affecting the fundamental infrastructure of the entire system itself was being downgraded as the entire ponzi scheme unravels yes i also read while we were in the states that j.p. morgan is the next for a downgraded by s. and p. and the reason why is they said that j.p. morgan rely so much on the u.s. government despite all their protestations despite every year when jamie diamond
collects his tens of millions of dollars bonus he says because i deserve it nobody works as hard as i am i'm so clever i can print money but it's the u.s. government according to the rating agencies that give taping morgan its its rating right well nobody works as hard at fraud. jamie diamond but as you point out all they do over there j.p. morgan is they take the risks on their. books and they stick it on the federal government's books that worked beautifully for years as long as america had a aaa repeating but now that america has a double a plus rating and interest rates are going to by definition creep higher that is going to be a huge wall of arbitrage agency arbitrage cock the nightmare bamboozlement that will no longer serve j.p. morgan in their quest to hide losses and that starts going down like a pile of bricks short j.p. morgan some of frank sell it short make it in fact it better naked short at this at
this time would have been bank for america if you follow this next head by max bank of america getting smashed as a i.g. johnson to the lawsuit fray in a big way so it sure american international group is expected to sue bank of america what might be the largest mortgage security related action filed by a single investor the suit seeks to recover more than ten billion dollars in losses on twenty eight billion dollars in investments and mortgage backed securities this is again one of barack obama came into office stacey by not shutting down the too big to fail banks and by letting a.i.g. live another day they're committing massive moral hazard on a incredible epic biblical scale now they're out suing everybody who's involved all the people all accounted parties here that are suing each other are bankrupt and they're suing each other for the right to drain the federal reserve of more of the citizens capital and noticed a keyword and we just said counterparty you know this extends to financial markets
as well because when you go from dumb aaa to double a plus suddenly when you start to downgrade all these dishes that are the intermediaries for all these men are to manipulating fraud deals you have counterparty risk so when they say well look for example to sixty trillion or six hundred trillion says me derivatives out there they say well it's not really a risk because they're all offset each. there through the counter-party obligations but if the intermediary that's responsible for making those obligations good goes bankrupt then you don't have a good coverage there you actually have a six hundred trillion dollar risk according to the report there's a growing trend of investors pursuing private lawsuits claiming banks misled them into purchasing risky securities the trend also stems from the lack of prosecutions on behalf of the justice department against the largest financial firms and their executives so there you go max you talk about barack obama refusing to prosecute these are these people that too big to fail so the banks toure's this is why we're
still in the situation this leave says up to the biggest firms out there who can sue it because mom and pop joe baca donuts can't sue j.p. morgan and bank of america and all these other banks but you know the giant bankrupt organization a cap and i think this is so important because at the time when they led a.i.g. directly with this massive fraud number they and when hank paulson went to congress and extorted three quarters of a trillion dollars it was all that we got to keep his work it's open we can't afford them to go bankrupt we can't afford the counterparty risk we can't afford the systemic risk and barack obama just put his foam as most of the. and now two nephews lenora it doesn't matter barack obama but i'm not in forcing the law by not following the constitution it's going to blow up anyway well apparently a.i.g. is planning to file similar lawsuits against goldman sachs j.p.
morgan and deutsche bank and of course after that will come the rating agencies because j.p. morgan goldman sachs and deutsche bank were selling products that were aaa rated by s. and p. but with all these things falling apart everybody losing their aaa america falling apart into a bucket of fraud and nothingness i want to bring up one final headline to think of another option another reality that we could be facing today what if barack obama had been a leader the bull case for gold gold is rising because the world's monetary system is being debased and there's no sign of stopping well what if barack obama instead of engaging in this elaborate stupid awful theater with john boehner what if he had just come out and said you know what forget all these negotiations we're just going to go back to a gold standard and we're going to value it at twenty five thousand dollars an
ounce by and just left and that would have you valued all of their debt and they would be on the road to starting over again that's genius it's the reverse nixon it's the reverse nixon now dixon defaulted on the debts of america by dropping the gold standard when he owed all this money to foreign creditors well america is in the same position now and they could effectively do the same thing they could effectively default by devaluing against gold. that's exactly what's going to happen anyway and barack obama if he were a as you put say if you were a real leader and had the gall and ace of was a richard nixon which i can't believe i'm saying that after having been dragged through watergate as a kid and be and been humiliated but compared to barack obama richard milhous nixon looks like a genius statesman compared to this no spine and leader list none nobody bagga nothing a bag of worms and that's a genius idea simply and it's going to happen anyway they have to bring back the
gold standard you know that the smartest guy out there in the punditry universe jim records you know he points out that those who criticize this idea say there's not enough gold and he would point out and i would point out that there's something called the price discovery mechanism you know markets reflect supply and demand if you have six hundred trillion dollars worth of worthless to rivet of well you some of that's going to end up being repurposed as a gold standard at twenty twenty five thirty thousand dollars an ounce that's just the way markets work except market driven capitalism or go home. hey sarah thanks so much for being on the kaiser report thank you don't go away after the break i'll be speaking with painter chef.
welcome back to the kaiser report time now to go to connecticut and talk with money manager radio show host author all around nice guy peter schiff europe aciphex capital peter schiff welcome back to the kaiser report thanks for having me out all right peter schiff as we have been talking about and as you have been talking about the u.s. as downgraded been downgraded by s. and p.
their debt from aaa to double a plus did the s. and p. go far enough well of course not but at least they wait so in the right direction you know it wall street parlance any downgrade means get get the hell out you know they never like to put a sell out anything so you have to look at they go from a strong buy will buy it means you know look out below and so they did the minimum that they could do but really what s. and p. is saying as far as i'm concerned is get out u.s. debt eighty dollars in ahmed debt because what they're really downgrading is not treasury bonds but the dollar because s. and p. knows as alan grier. band said it warren buffett said they don't have to default they can print but that's worse especially if you're a bond holder and you get paid back with monopoly money and so what this means is that all debt in dollars should be downgraded whether it's treasuries muni's corporates you name it if it's pay you back in dollars get rid of it all right now let's talk about the whole rating agency motif you know how they how they have the
role that they've played in this crisis and what's been going on the last few years because during the lead up to the crisis they document very well in your book crash proof and crash proof two point zero you talk about how the rating agencies were a remez in that they gave the derivatives a collateralized debt obligations and these other concatenations bastardizations the securitization is triple a rating so why suddenly did they get religion how did that how that happened because they were they were in you know again it's funny that the obama administration is saying well why should we listen to s. and p. after all they got it so wrong with the sub prime they think we should listen to moody's it fish but they also got it wrong and what everybody got wrong was they rated stuff aaa it should have been aaa and they're still doing it at least s. and p. is learning from its mistakes whereas the other agencies are not and the obama
administration is criticize again for learning from its mistakes that's interesting i'm looking today and the the unintended consequences i guess you could call it because now fannie mae and freddie macin being downgraded some of the institutions like the office cleaning corp and other part of the infrastructure and the architecture of the markets are being downgraded and miss bowman markets are being downgraded because the player of the u.s. government as a reference rate to talk about how this is going to trickle through to these other pieces of the infrastructure and what consequences certainly because if the u.s. is not aaa if the u.s. . double a plus then if you used to be a double a plus when you got to go down to double a because you're not on par with the treasury if you are somewhat rich left more risky than the treasury you're still more risky because the treasury can tax everybody to pay its bills and if the treasury doesn't tax it prints and it debases that dollar that affects all bonds not just its own bonds you know it's also crazy about the rating system why is
china the world's biggest creditor nation we owe china trillions how can they be rated double a minus and we're all and we're a double a plus now what kind of trial i does own world is the world's biggest debtor a bigger risk than the world's biggest creditor. now why what's geithner's comments he says s m p's being irresponsible as an s. and p. being responsible like pimco saying it's big government this big irresponsible they're the ones that are racking up the debt and you know the obama administration is all over s. and p. because they claim they got the math wrong that they didn't count is two trillion dollars of assumes savings over the next ten years why should they count it it's not going to happen and in fact there are real math problem is with the administration using eusebio budget numbers all of these deficits assume a rapidly growing us economy for the next decade with low inflation low interest
rates this exists only in a dream the reality is we're already going back to recession so you can take all those rosy scenarios and throw in a trash can where they belong on the budget deficit is going to be much worse than both the administration and this in p. believe so i mean they're all wrong about the math all right i want rick go over that once more just because everyone's talking about this two trillion dollars steak just review that again why that's really a false canard in all this and also a comment on warren buffett's remark that moody's that s. and p. is somehow wrong and that the his investment in movies that they're right yeah of course you have people forget that he's got a dog in this hot because he's a big shareholder in moody's and if s. and p. has got it right that means moody's has got it wrong so when he comes out and tax moody's he's got it i mean s. and p. he's got it genda also this guy said that he would buy treasuries even if they had
no yield so it was good i mean what good is his opinion if it's that moronic you know i don't know maybe maybe you have you know senility is catching up with warren because obviously he can't be a great as great an investor as people think if he's saying he's willing to buy treasuries even if they pay zero you know if that's the case let's sell him some. special treasuries it will save the taxpayers a lot of money if warren buffett a really buy our debt if we pay nothing and of course he also said that the federal government has a pretty impressed well you know what good is that to our creditors it's great for the government because it you know it inflates away its liabilities but it also inflates the way the public's assets including the asses of ward a warren buffett of course he's criticizing. s. and p. for missing some private housing bubble he missed it too he got it completely wrong in fact many of his companies might have gone bankrupt if the financial institutions were bailed out by by the u.s. government but big the two trillion dollars math error so-called is again based
on s. and p. not calculating the full amount of the savings that congress claims are going to be made over the next ten years based on what they agreed to but almost all of the two trillion in cuts happen sometime after two thousand and seventeen they'll be a different president will be a different contract congress they will not be bound by anything that was agreed to last week the only thing that counts are the customer made to the two thousand and eleven budget and there are not in fact i just heard barack obama speak and you know last night talking about the need for more tax cuts he wants to cut taxes for the middle class and for the poor any western spend more money on government infrastructure that means he is advocating for bigger increases in the deficit right now ok now you bring something up there it sounds similar to what was experienced during the lyndon johnson kind of guns and butter you know they want it
all and this led to a huge over expenditures was the lead ultimately to nixon closing the gold window in one nine hundred seventy one states arab or do i do the show with brilliantly asked me earlier in the show can obama if he was really a leader do our. reverse next and just say we're going to reopen the goal window and twenty twenty five thousand dollars an ounce to inflate away these debts well that does it inflate away the debts i mean that that is it it's time to remodel ties gold put the u.s. back on the gold standard yes that's what we should do but there's no chance that we're going to do that certainly not under obama you know that was the last time the u.s. government actually did default we defaulted on our promise to pay goal and basically rendered a dollar fee aat with no real value but i think that the loss that you're going to see in the dollar in the decade ahead is going to be far greater than the loss in
the one nine hundred seventy s. because the dollar maintained its reserve currency status despite the fact that we defaulted on that promise the dollar now is going to lose that status right now the only thing that's standing between the dollar and complete collapse is to foolish actions of the bank of china the bank of japan the world is propping up the dollar because they believe foolishly that it's in their political self-interest but as they said when they figure out it's no longer in their interest they will pull the plug and the dollar is going to collapse much worse than it did in one nine hundred seventy s. hopefully at some point we will go back on a gold standard but the price of gold will have to be much much higher for that to happen talk about what's happening over there bank of mellon they're charging fees on the posits over fifty million dollar deposits can you talk about what that charging of fianna deposit means is in a negative interest rate will we see more of it other words banks charging people to guest on their casket i think i feed this is
a byproduct of too big to fail because people that have a lot of money want to put it in the shoe gentle ease because they feel that they're too big to fail and so they're but their deposits are safe but the reality is none of these deposits are safe because they're all the dominated u.s. dollars so what people need to do is convert their their dollars into other currencies work. or goal of it look at the swiss franc that hey this was frank is up almost three full cents you needed dollar thirty two to buy a swiss franc in fact with the euro dollar forty wanted to have the swiss franc is rapidly approaching parity with the euro and it just took parity with the us dollar that happened very recently and now it's at a thirty percent premium and look at the swiss franc i mean the yet imagine where the yen would be if the bank of japan hadn't flushed you quote a fifty billion dollars down the toilet last week to buy u.s. dollars and of course u.s. treasuries what is your pant doing with all those dollars that they're buying their blind treasuries now because they want to but because they think there's
a gun to their head but they're mistaken so instead of paying somebody to hold your dollars sell your dollars and get into this was frank or get into gold and i've got about thirty seconds left i just want to go swing back and revisit the gold standard idea clearly as you point out what with the problem today is inflation and by returning to a gold standard you are coming back to it with something that will hopefully restrain government from spending and from the printing presses from rolling out at full speed so. what clearly you know as we're saying before if you go back to the gold standard got to find a price that would make sense given the fact they've had all this money printing going on for so long i know you've got a long term target on gauld in the thousands but i thought about what at what price what i don't know because it depends on where we are when we go back to the gold standard obviously if we go to the gold standard today the gold price will be lower
than if we go to it two years from now when it's going to have to be that much higher so a lot of it depends on where we get religion and of course we have it all depends on how much gold we actually have you know relative to all of our notes that are in circulation because it's a relationship between the supply of dollars and a supply. goal that which jet that would set the back and what we're able to give for each of our ious but once we do that then the spending stops then the deficit stop we can't do it anymore if we actually go on a gold standard if it's real then we have to abide by it and so i don't think we're going to go to it again until we have a real crisis as long as the world is buying our bonds we're going to keep selling them is why there's a world is gobbling up our paper we're going to keep pretty as long as we can live beyond our means we'll do it a lot as long as politicians get elected by plunging us deeper into debt they will
do it it's not so they can it's not until there are real consequences like a collapse in the bond market a collapse of the dollar a sense interest rates soaring that sends consumer prices soaring that case the stock market that puts people in the streets protesting you know that is not until all that happens we're not going to do the right thing all right there seth thanks again for being on the kaiser in park thank you all right that's going to differ there's this on the kaiser par with me max kaiser and stays here but i don't think my guest peter schiff is going to send me an email please do so at kaiser report r t t v dot ru until next time this is nice guys are saying.
restored and even more than a thousand suspects await trial that acknowledge it beyond the brian comes on the spotlight. and social media could now be under threat the government wants to crack down on criminal groups operating online all from london coming up shortly. also this hour ease road decides to construct thousands more funds in just feet of money at these jerusalem just two weeks before the united nations a vote and recognizing the palestinian state. and to form a u.s. military construct is that granted permission to see the government of the claims of a president and torture. and a very warm welcome from all of us he must go this is o.c. with me thanks for joining us the british parliament.