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the latest in science and technology. the future of coverage. hi i'm max kaiser welcome to the kaiser report special in the same. straus business in the us a great people i feel it's important to do that for you. or to people. yeah that's for a spring is to use your words there's never well max this whole suicide banking crazy insane banking model is spreading to the entire world everybody is actually like a crazy banker headline reads south korean staged bomb blast to cash

in on stocks and this guy obviously learned from hank paulson he was the best that this the whole story this south korean man staged two minor bomb attacks with homemade explosives and soul last week in an attempt to cash in on stock investments by affecting market sentiment police said they said quote he invested fifty million won or forty six thousand dollars this month and said he believed bomb explosions will send stock markets palling giving the concerns of terrorism after osama bin laden's death well this is a huge issue this man has stumbled upon something very important markets are over leveraged markets are reflective of hundreds of trillions of dollars in leverage so yes a small thirty or forty thousand dollar bomb can cause markets to crash because

they're so highly leveraged buy the professional page fund managers five hundred thousand dollars on nine eleven was a multi-trillion dollar collapse forty five thousand dollar investment there could cause a multi-billion dollar. plus there's not really this problem so much as the problem of the markets themselves they're all over leverage because of the fraud in the. world where is robert zoellick there is robert zoellick and the dollar transcona having a meeting at the world bank. i'm not made. yet. there's another quote from the policeman on the situation which is important to it to address because he doesn't take it as seriously people don't take these flash crashes and hank paulson holden the american population hostage we see no intention of political terror here and policeman says the suspect was just trying to affect

market sentiment again let me emphasize that due to the propaganda they have successfully delineated between financial terror and political terror this is been commingled into one global financial terrorist dominated global economy there is no political terror anymore there's no ideology going on political parties there are no religions there are no country boundaries there's only the market leverage and events to make the prices go where you want them to go this guy is the hank paulson of the retail side he is you know basically you know the equivalent of hank paulson going into a liquor store not going over but he's the same mindset from the same over there sprung from the same domenic strauss kahn tarth seaman who. well so here it's not political terror it's just affecting market sentiment so let's look at the head politician of the world see if this is political terror or just

affecting market segment let's look at those head politicians headline reads obama says u.s. default may unravel global finances. so is this obama doing the same thing so he's trying to get the republicans or will scare the population into convincing republican politicians to vote for an increase in the debt ceiling not that it matters apparently that you even increase it technically right both blue and red balloons together would get the right color for obama to listen to you could create the obama version of this yeah if you don't raise it clear to the school over you have made poor made slaves there ok then go far enough obama is a financial terrorist just like dumb extra just like no no no the south korean police might say he's just trying to affect market sentiment and spits not terror great sense of it not prices they don't even understand that sentiment drives

prices well so now you have you know the president of the united states going in front of the people via face the nation program on c.b.s. and telling him you better out the entire financial system is going to unravel unless you give us more debt well look at this headline r b z urges gold back zim dollar so this is the reserve bank of zimbabwe and their chief doctor getting go know who's advocating for a gold backed zimbabwe dollar gideon gono yes well he made quite the stir when he introduced the one hundred trillion dollars i'm bob way note it was right for inflation now they're the first into gold back r.c. and here's the thing according to game theory which of course drives to global economy in this highly leveraged cock the world if one country goes to the gold standard there's going to be a lot of money actually going into that currency it will force other countries to go into gold standard both go i remember once talk to go no started printing badly

before the hyperinflation that led to the hundred chileans of bubbly dollars on the central bank of zimbabwe's website they actually cited the u.s. fed policy and bank of england policy of quote. state of easing that they said they were doing the same thing well their currency has now collapse and now they're saying ok well everybody's going to abandon the us dollar because we know because we copy them and look what happened to us so now we're going to he says quote zimbabwe is sitting on trillions worth of gold reserves and it is time we start thinking outside the box for our survival and prosperity it's going to work i totally recommend going to the voters i've been hoping that some country in fact does exactly this i thought china or india or brazil would be the first country to have the first mover advantage in this case first mover advantage is going to be huge because once you get to that gold standard people look around of currencies or like work and i get a natural resource based currency older zimbabwe dollar and then and this is going

to bring huge amounts of capital into zimbabwe in the make i'm an international global player well ok and then some could look at zimbabwe and think ok they've had a hyperinflationary collapse there around by maniacs but then look at who else holds the u.s. dollar who's the biggest bond fund trader in the world max guys are. well they're in this next headline bullish on cognac yogurt and gold so fortune magazine interview equities proly oh manager and good frayne and she said quote the largest position in the fund is gold which we think is a very good form of protection against what could go wrong we were encouraged by the fact that a lot of central banks especially in asia are big buyers we think that's an underlying trend that's very favorable for gold that's right although grocers name phone owner of pimco. due to the way that that fund this charter that created that fund he's not allowed actually own precious metals but he's a believer in inflation if a hyperinflation so you would naturally think he'd be

a buyer of gold so here is one of those satellite phones actually buying gold so now the circle has been complete pimco is pimping gold as he should be in this environment where the bond market will get creamed well there are also as gold and silver have corrected over the last two or three weeks and they've had big declines silver up to thirty percent there's been all sorts of shouting and screaming especially in the b.b.c. saying it was a bubble it's burst it's popped so what do these sort of people who do you trust for example the largest bond fund trader in the world or the b.b.c. trust the actual people who are dealing with money day to day not the lackeys of the b.b.c. who are an extension of the corrupt governments and after the hutton affair of course the b.b.c. lost all objectivity and in the pocket of those nasty number ten downing street operate well and this goes on to the other things so gold as i said fell back here

is the headline gold coin sales reaching one year high signal no end to rally in history so this is from bloomberg another big financial news service the u.s. mint sold eighty five thousand ounces of american eagle coins since may first as the standard and poor's g.s.c. i index of twenty four raw materials fell nine point nine percent the last time sales reached that level fully on rose twenty one percent in the next year freedom is on sale as i explained on the show many times stated arab or in particular with the price of silver when it got to the prize of j.p. morgan stock price that there would be a huge turbulence because j.p. morgan is going to spend that price because they've used their own stock to collateralized against naked silver short sells just like enron use its own stock to try to keep the walls of the door and then eventually collapse as a. well j.p. morgan stock will collapse to zero at some point so when it got to that price of j.p. morgan stock in the mid forty's then you had j.p.

morgan pull in a lot of favors with the bed of the treasury and the global banking system in the various sisters of deceit led by diamond jim and they you know stage an attack on sober as they've done before but they can only talk of so much because what they've done is they've radicalized more silver buyers the silver liberation army has been radicalized by more of these attacks and so you've got a much wider base developing which will translate into a much higher amplitude and eventual target of five hundred dollars on sticking to it's not just the u.s. mint that's all the record amount rand refinery which sells krugerrands which means krugerrands they also had record month also u.b.s. had a record month in selling gold so but this is that big theme that we've said to focus on for two thousand and seven that's the collapse of the us empire which is the collapse of the dollar and you'll see that that there's no getting around it and the final headline max this shows you without any doubt just like this pimco story

that the dollar is ready to collapse and gold therefore will be the new currency j.p. morgan's hunt for afghan cold oh so to be worth what your team of bankers starts to tap the country's vast mineral riches with help from the pentagon. so j.p. morgan capital markets are in afghanistan backed by the pentagon and they believe that afghanistan represents a gigantic untapped opportunity one of the last great natural resource front here is and they reckon it has hundreds of billions of dollars worth of gold and they're in there to acquire that they don't want to pay thirty five dollars an ounce or so over fifteen hundred dollars an ounce for gold they want to pay nothing they want to free they want to have that u.s. taxpayer financed the pentagon to go into afghanistan murder about. people destroy the civilization and kill the culture and steal all the resources that was a strategy in iraq with oil that's the strategy of the pentagon slash j.p.

morgan slash goldman sachs around the world these two fused together now how somebody can argue that this isn't some you know bastardization of fascism you know explain to me how this isn't fascism when you've got the banks of the pentagon fused together and the pentagon has bombs the country and the bank steals all the precious metals how is that how is that a sustainable foreign policy and how is are not going to lead to a social unrest and on cut. to me listen this is goes in with the collapse of the dollar is all and the collapse of the empire the fact of the us is the empire the article states this wealth all these natural resources in afghanistan has lain there mainly undisturbed for thousands of years as armies have persians greeks mongols britons russians and now americans trapped above invaders have dreamed of exploiting it since the time of alexander the great but no one has yet succeeded in a large scale and i reckon the us won't succeed either us or the empires go to die

before we go let me do my impression of scott when he arrives first first night in a prison cell surrounded by a bunch of hardened criminals. well buddy gotta learn some new tricks all right that's going to do it safely herbert thanks so much think you max when we come back what's more coming your way so don't go away. you didn't start a sudden it's a long story of destroying the living under which. there are still. something now here and they get done like that it's just that if you took every

fisherman out of the water and you knew something about that water and protecting the habitat the fisheries it's going to collapse nature's steps making way for the faux augusta. museum in the city the solar system obviously a lot of your must be well lost income must be road systems number that's true. and you have billions of dollars oil and gas station. real baby drill. one needs from there two plus two so someone my blood pressure will consider potential areas for development in south atlantic and the gulf of mexico. and. please.

yes. thanks. to a. i was.

plug a bag of the kaiser porritt time now to go to boston to speak with energy analyst gregory mcdonald of gregor not gonna gregor welcome back to the kaiser report good to see you max it's great to be. on your blog you write paper versus real exit from normal ecological economics and probably ballistic regimes in one chart wow you got all that in one chart the chart is the thirty year treasury bond versus the c.r.p. the commodity research bureau index tells about it tells us a couple of things first let's just note since two thousand and two the u.s. dollar as expressed uther in dollar terms were just in terms of u.s. treasury bonds has lost about sixty five percent of its purchasing power against a broad basket of commodities and i just find that with this latest ramp up over the last two years and will by commodity prices in the global financial community

there's a real reluctance to own up to the fact to face up to the fact that paper currency is losing its purchasing power against natural resources so i do think is it starting off point it's worth just pointing out empirically that the u.s. long bond is lost sixty five percent of its purchasing power against the natural resources which are all the things that we used to live every day sentence what here since two thousand to. the sixty five percent loss of purchasing power against resources the stuff that you buy with that paper money for and the big d x y the actual dollar index that people look at that has not depreciated sixty five percent since two thousand and two so it's so i think what also what you're saying here is that there's a bit of a complete disconnect in terms of comprehend. on the part of those who follow

markets and follow economics that they look at these technical indicators like a dollar trade weighted index but they missed the big picture here that sixty five percent of purchasing power of the dollar has been smashed says two thousand and two and i take it the trend is not good either you know it's not and i don't understand why so many in the financial community regard these types of comparisons as as arcane i mean as anyone who's retired or you know knows we all use our financial assets a bench really to command services labor resources energy food and so what the financial community has clever clearly been able to do is to talk about g.d.p. in nominal terms talk about corporate earnings and nominal terms talk about the rebound since the financial crisis lows of two thousand and eight in nominal terms but to avoid talking about these figures in real terms what does the s. and p.

five hundred buy you know what does u.s. g.d.p. by you know what do those corporate earnings by you know they buy you a lot less of just about everything you need to run a business or to live in retirement so you know this is a a reality that sort of you know behind the front page and of course we're starting to see professional professional money management for certain is you the first few professional money managers like the university of texas pine gold we've got journey grantham in g.m.o. in boston talking about the problem of scarce resources we're starting to see the first few escapees from the world have nominal and they're starting to face up so the world of real oh another factor in this of. the percentage of income that people spend on food and energy now in the developing world that number is quite high they make very little money. and

a huge amount of it is spent on food and energy like fifty sixty percent in some cases in the united states and in other developed countries up until recently that number was almost negligible so due to the growth of the fianna currency period after the one nine hundred seventy one and the ill and the income that was derived from the bond market and the stock market and the artificially inflated housing market this component of the household income was ignored but now it's coming back with a vengeance at what point does it do we start to see parity between the developed world and the developing world or the entire world is going to be paying a lot more for food and energy on a parapet sube basis to use a fancy banking term well i love that question just a couple of things here if we look at the united states in aggregate though the drag on rising food and energy costs doesn't look catastrophic yet but if you look

at the for the first three quintiles of americans in other words those sixty percent of of income of of income wagers earners in the united states you're actually seeing enormous stress among those first three quintiles of wage earners in the united states and when you get down to the first quintile new lower quintile you know certain americans are almost struggling against food and energy costs the with the way many other people are developing and all over the world not just in the developed world but in the in the in the developing world now the larger issue is the fact that as we move through this world we're we've got we're posting you know nominal prices but everyone's living in a real crisis you know we see certain asset classes absolutely collapsing for example a u.s. house and u.s. housing got its first blow from the fact that it had been. well into

a bubble but now it's really suffering from the far with food and energy costs housing can't really recover in those conditions and so housing looks like it's probably one of the prime victims of peak oil and the fact that higher energy costs are basically reducing the real living costs of everything in the system are let's roll back for a second and talk about the three fifth's quintile cell just to put that end to a layman's term you're talking about sixty percent of the population is coming in to the point of contact with stress in the terms the rising price of food and energy and the bottom twenty percent the lowest quintile is actually now you could say on par with a lot of the developing world who is struggling on a day to day basis almost of handsome mouth existence and this is draining in the i states social strata which seems like it's completely ignored by the political

class nobody running for president for example addresses the fact that the economy is producing a permanent underclass of people who because as you point out due to the constraints in the energy industry constraining future growth these people will be in the lowest twenty percent in perpetuity because there's no way to climb out of that permanent underclass given the restraints on growth. strains in oil correct is absolutely correct in fact we've seen the price of oil globally basically leave a whole tranche of people both in the especially in the developed world behind the price of oil is now of course at one hundred dollars a barrel it's basically left behind the poor of the of the o.e.c.d. of europe of the united states these are people that may never really be able to afford or would care and you're right there is i almost call this emerging america it's almost like emerging market america. where

a certain portion of our society is unable to feed themselves their own able to afford gasoline we caught an extraordinary number of people we're we're going to probably hit fifty million people include stamps next that's in a country of six hundred of three hundred million people and you know supposedly the wealthiest nation on earth if you million people who are not able to people selves i want to talk about volatility for a second because this is something that i think is completely under the radar as the energy constraints start zero kick in and as countries start to actually hoard their own energy from saudi arabia and other countries that are oil rich they're saying we want to hold onto our energy we don't want to export as much as we used to because there's not that much around this is increasing the volatility in paper assets and we see huge volatility in the currency market talk about that relationship place what we have come to understand is that the steadiness and the

consistency and the liability of industrial growth is really the driver of what allows paper assets to hold and maintain their value when you're floating paper assets which is either promissory notes of zero maturity like cash or or some other promise which is maybe a ten year bond those paper assets are very sickly promising to the holder of those assets that there will be future industrial growth that will occur at a profit and the profit will be used to pay the coupons and to pay that paper a setback and what we've seen is once we ran into the energy limits ok and i mentioned you know nineteenth century scientists namely big who talked about limits within natural systems once we ran into the energy limit then paper us it's not only began to falter but now they become unstable they become wild but the forex markets are wild the foreign sovereign on. markets are wild and unstable and

i see very dim prospects that any walder of a chain your u.s. treasury bond or a fifteen or a thirty euros first reborn will be repaid in any sort of dollars or any sort of paper capital that will allow them to go out and purchase the food and energy that they need you know which is this is supposedly their savings and so at one time max paper assets were a secure place to store your capital they are no longer they do still have a group of rent seeking credit tours in the banking industry who know that this volatility is real and they know the causes of the volatility but their answer is to put on a volatility spread on the volatility index they'll buy the put and the call simultaneously and they'll pay for the spread and they'll let this whole market and ecology collapse knowing that the volatility itself will generate returns for of

them and this predatory class is really. in charge of not only milking the system necessary capital but to what extent are they actually adding to the volatility gregor mcdonald well you've heard the expression i b g y b g which is be gone you'll be gone you'll be gone and that's sort of the credo of the short term. you know close will buccaneering. trading capitalist who's not interested in externalities in the system is not interested in future risks basically just wants to play current volatility in bank short term profits and of course you know this is sort of the tragedy of our system we really do need to have the political complex and the financial complex working more in concert to address longer term issues if we were addressed longer term energy issues climate issues environ. issues it would bring down volatility but since we're not

interesting those were hansing the volatility we're almost enhancing the volatility just by the fact that we've refused to do with these large long term pressures that we need to face all right great only tunnel thanks so much for being once again on the cause the report creature be with you max and good afternoon all right that's going to do it for this edition of the kaiser report with me max kaiser and stacey however i would like my guest gregory macdonald of gregor dot you ass if you want to send me an email please do so it kaiser reported r t t v dot ru until next time this is nice guys are saying by all.