tv Keiser Report RT November 20, 2018 11:30am-11:53am EST
have lost as much as one hundred seventeen million dollars as a result of the failure of p p meow according to savers who say they were burned and many of them have been coming to china's major cities seeking restitution more than four hundred peer to peer lending platforms collapsed from june through august according to shanghai based researcher in cannes group that still leaves about one thousand eight hundred a number of chinese investment bank china international capital corp expects to contract to fewer than two hundred after more dominoes fall it's amazing how quickly it's unraveling said san and zap rotten managing director of shanghai based consulting firm zap an asia we're just at the start of what could be a very messy reconciliation in the p.d.p. industry well first of all p.p. now would be an excellent brand name for kitty litter. yeah you know p.p. . p. . true they could always pivot paying kind they in cat litter ok get
a peta piece scandal unfolding it's all falling apart pay back a lot of cash lot of cat litter this reminds me of micro lending in bangladesh you know it started off crimean bank great idea it's capitalism working for the greater good but it got you know taken over by sharks by wall street sharks and the interest rates skyrocketed and it collapsed here p.p. lending on paper works i mean it's a good idea you are taking the. need for people to save money combining them with the people need to borrow money in a p.d.p. marketplace and you're getting rid of the the banks and it works it's great but what happens is you know the sharks come in they they take it over and they ruin it and now it's going to collapse and sounds like there's going to cause a multi-trillion dollar fandango well it's multifold what happened here there is a lot of fraud going on obviously grew from one billion dollars to two. and to
a billion dollars in six years there there was a global liquidity crisis that has been happening and the chinese government did crack down on leverage and over leverage after the financial crash when they injected a lot of money and then said there was a crackdown on the small investors and small and medium sized enterprises so they had to turn to the peer to peer market and that has become laden with fraud in fact there they are they have warned investors the chinese government and regulators have warned investors that they could lose everything although not all troubled p.d.p. platforms are accused of fraud officials have said that many failed sites needed cash coming in to pay money going out and other words they were ponzi schemes other sites attracted investors for only a few weeks before the owner ran away with the money and they also expanded so it used to be mostly you know people looking for money for their wedding and they needed the money upfront of they would pay them back in an interest and that was
like smaller amounts but then these days p.d.p. sites offer investments in what's called commercial bills or bankers' acceptances which are like short term bonds issued by small businesses such bills issued by companies and guaranteed by commercial banks are usually part of business transactions and the bill can be sold to another financial institution or to the central bank before it refers and some cases involving allegedly fraudulent p.d.p. platforms investors claimed that the underlying bills didn't exist and the money never went where it was intended right take a platform that makes cash very easy transaction matching lenders and borrowers and then you use that. to collateralize. a money raising and so the bonds that are sold against the platform because ever escalating pyramid scheme until blows up i mean that's happens frequently it's highly predictable but again don't blame capitalism looked up all of the problems fraud well the chinese.
the government is worried because there are thousands of people showing up in cities across china demanding their ten thousand dollars or twenty thousand dollars back you know these are small farmers out in the middle of nowhere showing up in the cities and causing riots because they've been defrauded by some exit scam right and so the billion chinese people listen to uncle max. by bitcoin. well we've got to take a break and when we come back we will be celebrating the joys of the second half. you know world of big part of. lot and conspiracy it's time to wake up to dig deeper to hit the stories that mainstream media refuses to tell more than ever we need to be smarter we need to stop slamming the door on the back and
shouting past each other it's time for critical thinking it's time to fight for the middle for the truth the time is now for watching closely watching the hawks. dallas. i mean the dollar a dollar here's what i believe. we got garrett over here we care the music with us . we are here we were dragged here. by you know going to get rid of those who are not go away we will not die quietly. real the heart of what we do is the truth.
so what we've got to do is identify the threats that we have it's crazy to confront a shouldn't let it be an arms race off and spearing dramatic to follow through the only personally i'm going to resist i don't see how that strategy will be successful. ok to kill time time to sit down and tom. join me every thursday on the alec simon show and i'll be speaking to guest on the world of politics business i'm show business i'll see you then.
welcome back to the kaiser report i'm ask iser time now to turn to tyler jenks the inventor of hyper wave. welcome thank you very much max you know it's great to have you on the show because we rarely get people on the show this experience that you have and we have experience on wall street you survive as long as you do it because you must be doing something right there's a very few people actually who can claim longevity in this topsy turvy world we call money management and you recently got involved a big coin and we're going to get to that good but before hand i'll just say they've been managing money for a long time big institutions big money very successful so we won't go into the details there but let's talk macroeconomics so we want to hear charts over there are high for a way is the i think the most for me to want to talk about very important chart this is the this is i think the ten year bond yield which has gone down for
thirty seven years it looks like it's heading up you know i believe your work suggests that the bond bull market is finished yes ok so let's talk about that because this is the key metric driving the entire global economy in my view curious what you think take away tyler i agree completely this this is the single most important element of where we are today and we've dodged bullets since one thousand nine hundred forty four through all kinds of mechanisms but the real problem started in the year two thousand with alan greenspan because he responded in a way that the federal reserve had never responded before and then he passed it off to bernanke he who passed it off to young men who passed it off to powell and they're all doing the same thing which is the only thing they can do and i wrote some things recently the basic. i am in awe of what they were able to
accomplish however in accomplishing those things they have left this in a much more dangerous situation because the banks open source second so we referring to the greenspan put yes in other words when any time markets were down a little bit he would ease is the credit is the money exactly of the party going and his response to that was well you know our job is not to try to predict which way this economy is going or the markets are going or to have any kind of proactive stance whatsoever we're just here to clean up after the mess exact which is in contravention of what let's say of paul volcker who took his role as central bank seriously and said you know what we're going to raise rates because there's this inflation problem and that would. be the role of a central bank so if they're not going to be proactively engaging in lender of last resort and becoming the buyer of first resort for these government bonds or so thankfully the what they did was it became a hedge fund. is not
a fair statement yes what happened at the peak of the chart you just held up was paul volcker so you hit it right on the head that was the and basically what had been a forty year increase in interest rates and inflation and we don't need to go into the details of it but that pinpointed the top and interest rates and inflation have been dropping ever since so the federal reserve in order to keep the party going dropped rates down to zero and kept them there too long under greenspan from two thousand and three the way to two thousand and six until we created a bubble in the housing market and the mortgage market and what you are really seen the fed do is they are attempting to keep growth going. through bubbles acid
bubbles and they took the form of mortgages and real estate now they're taking the form of stocks who knows what's next i don't believe there is a next i think we're at a terminal point and which that game continues to worsen the bubble of bubbles it has popped and that's a call that we have had many folks on the show make that bond market rallies over the past five years almost every major economist in the united states and around the world has made that call been wrong it's famously called a widowmaker that you know you go short bonds and they continue to rally interest rates going down there has been a horrible trade but you're kind of putting a pin in and saying here we are and based on your work on hyper away what you'll get to in a second but before we do i want to ask your opinion on something because you are somebody who has mastered the game i guess you could say what do you make of this unprecedented incarnation of negative interest rates it came out of nowhere at the
start or been in any textbook ever written in the history of economics and only governments are offering bonds with a guaranteed loss of negative interest rates shouldn't that have been a signal of some sort. absolutely once you get down to zero the theory says you can't go any lower and central banks have prove that wrong at one point it's not there anymore but at one point thirty percent of all central banks and their countries currencies had negative interest rates mainly in japan mainly in the u.k. germany for a very short period of time the us hasn't gone there yet but it doesn't really matter everybody else has by following our central banks lead of keeping interest rates at zero for years and years and years and years and what that does is. it assures as long as there is some. i'm growth that business will continue to
grow because banks will continue to grow because banks are getting free money and they play the spread called the net interest margin between what the federal reserve will loan them which is the only thing the federal reserve can do just one little aside here a lot of people think the federal reserve moves interest rates up and down they do not. the market moves interest rates up and down the only thing the fed can do is change overnight lending rates between themselves and federal reserve banks right this minute it's fair to say they control short rates short rate but made it medium medium to long as they have the market exactly or even hundred eighty day were commercial paper thirty days they don't control that the market does however if the banks that are borrowing at zero can lend at twenty five basis points or fifty or one hundred they make a lot of money which then they can loan out that gets businesses going and you can create growth artificially the problem is that it leads to well investment does
away with you have corporations it's a banks that are technically insolvent if they can continue life by borrowing from the fed is zero or less than zero in the case j.p. morgan they were borrowing at less than zero they were being paid by the fed to borrow money that's right so he's exactly right so say what deutsche bank same with all these are the big all around the world right so it leads to so that they determine that this is growth and all growth is good but that would be like saying mr jones us cancer and it's good because it's growing the cancer is growing and the faster the cancer grows the better for mr jones that's right there's not any sense that's exactly right it all sounds totally counterintuitive and stupid but that's the world we live in and unfortunately there's an end point to that in the end points mathematical it's when the interest on the debt gets to the point that growth can no longer pay it off and there's a very simple. way of looking at it productivity grows at three percent per year
for every doesn't get higher it can get lower but it three percent it maxes out g.d.p. tends to average three percent per year why because of productivity growth and it doesn't matter if we have the internet or chips or technological advancements or the industrial revolution productivity does not get above three percent so that's a cap on the reality of macroeconomics what happens if inflation in interest rates get to a point that their pain against a debt that the calculation of which the interest can never be paid off we are there now we weren't in two thousand we weren't in two thousand and six seven and eight but we came close and therefore the fed had to start new programs that had never been done before and are not in their purview to do but nobody would say no because we were fighting our way out of a mess right so in other words the way to pay down the debt according to some folks
let's say supply side economics economists would be well we're going to encourage this growth at any expense and necessary because the resulting tax revenues are going to help us pay down the debt that never happened that was a canard that was false but you're saying that looking deeper into this now that the interest on the debt which is half a trillion dollars in the u.s. and growing. trillion dollar short right and if you just apply that to the hard math the hard reality of productivity cap which is three percent therefore once you establish that the interest on the debt forget about the debt rises the interest on that debt mathematically cannot be paid down you are entering into a currency crisis so yes or no yes ok so why is the dollar rallying because it's because the dollar is the. strongest among the weak and as long as it remains the
strongest among the weak it will keep going up as long as everybody else's interest rates productivity and growth are lower than ours the dollar will go up and it's going up very very quickly which causes other problems there are only four solutions to this problem. because it happens to be one of them in my opinion and i think in yours but that's not the most probable outcome the most probable outcome is we have to go back to a gold standard and we can talk about that as much detail in the short of time as we can there are two other alternatives one is you can grow your way out of it but that means you've got to grow at least three percent which we've finally just hit after ten years of trying to under the new administration and most people believe and i think rightfully so they can't last for very long so you can grow your way out of the problem as long as you get above three percent or above the inflation rate it now two percent it's going higher if the inflation rate catches up with
that growth rate that's the end of the party which then brings you to do next possible solution number four door number four default yes governments will have to say these pensions that iou government employees corporations will have to say that pensions that we owe you we can no longer what happened in august of one hundred seventy one to the u.s. government bond market based if that's exactly right and also the russian ruble awning of the gold window it happens every once in a while and it's very rare it must happen again if we don't go back to a gold standard almost immediately or hopefully a big current standard and that's why i am so intrigued by bit corn right so i'm going to get extensively into because i guess we'll take care of this over to a second segment. but before we do let's talk to a politically again with japan how of all the basket cases in the world to stand
out japan and italy. japan's got debt to g.d.p. of over three hundred percent. italy is part of that crumbling e.u. mass that we saw happen with grace and other countries or of those two which is the most likely to trigger the next leg of the financial crisis or is there another scenario that you see that is a more pressing. i don't know those are blacks one of them it's and i know that's a cop out but japan has the ability to keep this game going forever and the reason is because they went into recession's slash depressions slash real estate depression starting in one thousand nine hundred nine and they're still in them. and that was a hyper wave what happened in japan going for the twenty years preceding one thousand nine hundred nine and i got to cut you off there are going to pick it up in japan and the next segment but thanks for being on the cause report yeah all
right i love it saying so and i don't know what that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert like to thank our guest tyler janks of hyper away if you want to catch us on twitter it's kaiser report i like somebody else. i've been saying the numbers mean something they matter to us is over one trillion dollars and. more than ten points over time stamping this. eighty five percent of global will you long to the ultra rich eight point six percent market saw thirty percent was one of your own with four hundred to five hundred three per second per second and bitcoin rose to twenty thousand dollars. china is building a two point one billion dollar ai industrial park but don't let the numbers
overwhelm. the only numbers you need to remember is one one does not show you can afford to miss the one and only. if. nobody could see coming that false confessions would leave that profile in the small place the fall will converge. ted any interrogations out there what you'll see is threat promise threat promise threat lie a lie a lie the process of the interrogation is designed to put people in just that frame of mind make the most culpable make them want to get. and don't take no for an answer don't accept the denials she said therefore we cooperate say on the statement that i will be home by the next day there's
a culture of odd accountability and police officers know that they can engage in misconduct that has nothing to do with all their crime. when the law makers manufacture consent instinctively public will. when the ruling classes protect themselves. when the crime and merry go round to listen to the one percent. we can all middle of the room signals. from the real news is really.