a very warm welcome to you this is r.t. live from moscow recapping our top story nato continues its bombardment in support of the libyan uprising people in opposition held benghazi cry out against alleged atrocities committed by rebel forces meanwhile cracks emerge in the coalition's strategy in libya with countries that backed the intervention and now casting doubt over the mission. president obama confirms his decision to withdraw all ground

troops currently deployed in afghanistan one that will be pulled out by next summer people in the war torn country fear that american soldiers will not mean less bombings off their home intensified u.s. drone attacks. and the president going to be at it launches are teasing new documentary channel right here at the headquarters in moscow. to bring the best of russia's culture and history to a global audience broadcasting in english. but up next to reality our financial guru max kaiser and his co-host states you heard what i think about financial terrorism debt and how to prevent world economies from going under the cost of course it's right now.

max kaiser this is the kaiser report we are back from athens where we were able to stand up do it all sort of tear gas from provocative jurors what's a provocative or that's a car dressed up like an anarchist hastings. what's happening max in fact i believe there i am f. age and stress that has anarchists and they are tear gas canisters and c.d.'s written alongside collateralize just roll up on a tear gas canister that is financial terrorism i think it's called credit default swaps all right i'll go with that there are so many different names for these derivatives these days and actually the big topic of the day is all the debt circulating around the economy but first i want to show you this little image because we return from greece bearing gifts and this is artwork colonel pop and dry oh the people love me those who are causing all the trouble are terrorists the people hate them you know they're outside of the parliament building and screaming

. brought up old brawls all the people embrace the hate of parliamentarians they hate george papa draco's i notice you're showing in the palm of your handling of the palm of my hand this is for you george. little george as they call him so well the i.m.f. is in the news and you are speaking to the crowds in st thomas square constitution square and you told them that after greece would come to us lo and behold and our first headline i.m.f. downgrades us after raping and pillaging much of the world the i.m.f. bankers come home to smash and grab what they can from america i was in constitution square speaking to hundreds of folks gathered the day after the big tear gas best of all and i told them point blank in my own self-interest the people of greece need to stand up to financial terrorism because greece goes down our goes down portugal's goes down spain goes down and they're going to come to the us the us is going down by the same financial terror so please people of greece don't lead

public jails and those nincompoops in your country steal all of your wealth well remember as this article describes the i.m.f. the international monetary fund. they are the global lender they're a lender so they're pushing debt that's the product they push on to people so in fact they're warning the u.s. that a gross domestic product will grow in in the nick two point five percent this year and two point seven percent in two thousand and twelve of course those numbers are fake yet anyway that's right the g.d.p. numbers are cooked they're fake you can't get growth by increasing the debt you could fake it for decades for every dollar in debt they created a dollar g.d.p. after world war two that has been going downhill ever since now takes six seven eight dollars of debt to create one dollars of g.d.p. but at some point it becomes like blood transfusions you could say technically the

patient has a pulse but that's completely due to the transfusion of the blood you're not really alive there on the table there's blood circulating but the patient is in fact dead but here's the i.m.f. warning america that they've got to get their debt situation in under control and remember only a few years ago two thousand and six two thousand and seven the i.m.f. was bankrupt itself and they were out of business so. stop right there let's digress a bit about the sign of situation they are completely bankrupt that's why they go into a country like greece they take greece is that they use that as collateral to borrow money from other corrupt bankers to take over greece but what the i.m.f. is doing now is pulling a hate paulson on a global scale but these guys are just a construct an artificial construct out of nowhere they are hold up the world economy and and act like we owe them money and people pay them and it seems to work

because who are they who are these people just go away that's what you have to tell them because right now they're saying the problem why they're threatening the u.s. is because the the political drama going on where the republicans are refusing to raise the debt ceiling and they have to do this by august or early on. i guess and the i.m.f. warns you cannot afford to have a world economy where these important decisions are postponed because you're really playing with fire well there we go again putting a gun to people said saying make a decision quick give us your money or your life it's a stick up because you just keep saying this over and over again claiming this is the emergency give us all your money at some point you actually have to step in with some blood to slay sions some kind of government functionality you've got to actually have a functioning economy you just can't have bandits at the i.m.f. constantly holding people up and saying we were killing dollars little bit actually they're not even actually demanding any real wealth what they are demanding the american people do is they're not saying you guys need to do something to sort out

your g.d.p. growth to build real wages and real wealth and real productivity they're saying increase your debt ceiling that's what we want you to do and if you do that then we will no longer downgrade you said all they want is more debt onto the american population it's a topsy turvy alice in wonderland through the looking glass cocked a nightmare or the i.m.f. was saying the path to economic glory is by increasing your debt ceiling. well ok so the i.m.f. is now threatening us politicians but let's look at what the u.s. consumer stroke citizen what their position is and how u.s. consumers menace the world and that's actually from here i don't have a picture of the headline to turn to because stephen roach and that's in the financial times and it's on line hey you know talking about zombies and people dead getting a blood transfusion a debt that's the same thing with these consumers isn't it their design because

zoomers is the walking dead or shopping but they're dead they're dead shopping well this is where he says the global economy is being hobbled by a new generation of zombies the economic walking dead the u.s. consumer is in the early stages of an unprecedented retrenchment deal. bridging has barely begun however he says the u.s. consumer is only down to one hundred fifteen percent of personal income is now debt down from one thirty but it needs to get down to historical averages of seventy five percent of debt to personal income they've got to continue to deal leverage which means that their continued to save which means they have got to stop shopping but what do you see there you see the zombie shopping at wal-mart must buy a dog food must buy plastic from china but he points out that the fed and the u.s. government are actually causing those zombies they're keeping the zombies alive they keep on trying to put electrodes into the zombies and make them go take on

more debt just like i mouth is doing to the u.s. government now in this saying raise your debt ceiling this is what the fed and the u.s. government are doing to the consumer stephen roach contends here they're just trying to force them to go shopping by keeping a low rates and trying to encourage them to get back into the housing market you know they're offering all sorts of incentives to go into the housing market shouldn't still calla process during wheels of all new general motors cars when you turn on the ignition to get a huge jolt of electricity and it gets two hundred miles an hour to the nearest shop and you start spending beyond your means wildly with the u.s. economy actually you know what they should also do at the same time is have george bush's words come on and say go shopping standing on the rubble after nine eleven but judge and shoppers don't look behind me at the parlor of rubble to go back to the store or put their credit cards or risk well so i have these final three headlines regarding the housing market and as i said the u.s. fed and the government are trying to force the american consumers to take on more

mortgages that and the i.m.f. is trying to force them to force those consumers to take on more mortgage debt housing crisis worse than great depression seven shocking facts about the u.s. housing market well number one is the low has announced that the average price of a home in the u.s. is about the. percent lower than it was a year ago and that it continues to fall about one percent per month look the house price of two ation is not going to get any better as long as incomes cheer your raving i just saw an interesting statistic that one percent of americans own the same wealth as the bottom ninety percent of americans and income in america is collapsing because remember the global banks are isn't doing the i.m.f. they want income levels in china in america to be about the same which would equal about two thousand dollars a year so marriage has got a long way to go in terms of income parity which means the house prices are set to

crash even case shiller index says house prices will crash another twenty five percent and i guarantee if ever they do crash another twenty five percent ok shiller will come out again and say. another twenty five percent well as you brought up income i'll go to the next headline on this because this involves income as well and its relation to housing prices when the economy becomes a financial circus based on debt fueled acrobatics lessons from the great depression part thirty four tracking housing values from one thousand nine hundred to two thousand and eleven and this is not the housing bubble and he looks at house prices going back to one nine hundred forty all the way up to two thousand there was a direct link between house prices and us income but then from two thousand to two thousand and eleven the first time household incomes fell over a decade since the great depression we saw the largest housing bubble ever and then he shows this g.d.p. per capita in the u.s. and that is in the blue and then you see the median household income in red and you

see from two thousand as well g.d.p. per capita in the u.s. grew straight up income went down. so americans were earning less and less every year as the housing bubble took off to him. historic proportions you've never seen anything like this at all in the united states that's right the debt levels increased as income went down yet at the top of the cycle the banks swooped in they took all the equity out that they had extracted using derivatives they left the consumer with all the debt. then barack obama was elected president and he came into office and the first thing you did was he matched the wealth confiscation of the creditors by giving them twenty trillion dollars more in bailout money so they doubled their evil legal bets and put the consumer into twice the income impairment by now having hundreds of trillions of dollars worth of debt hanging over their head and you mention circus days you know over and you can't

have a circus without a contortionist and this is what ben bernanke he does when he gets on t.v. he's trying to convince people that the economy it's actually not sure if it is the users contortion are a language does the. lumiere my. i don't care what mike says about ok well max finally and reading on the airplane back here from athens i did read speaking of barack obama and his policies towards america and zombies is is biggest campaign contributions come from exelon nuclear energy firm and there are serious questions about why america is not warning its citizens about the nuclear fallout happening along the upper northwest coast going to go to the west coast as are getting fried well they have called hot particles which are radioactive little particles of success human strong cmin plutonium going falling into their lungs or

turning the services in the hot pockets because a lot of those things are put on micro way that will go in as microwave and his own people well as a population already zombie fied from toxic debt and on top of them you're putting radioactive waste this is like a genuine situation where you could see real lives on bees and relocked cancer zombies in the pacific northwest was like washington oregon kurt cobain's already dead so there's someone who knows you may see him again soon he may be coming back beautiful all right so sarah thank so much for being on the kaiser report thank you right don't go away much more. coming away to stay right there. you believe in something in. the future.

i welcome back to the kaiser report all right this is a treat we've got the non-economist non-economist steve king welcome back to the kaiser report good x.x. i say are non-economist because of course you're known for your classic text debugging economics which you pretty much tear apart all the assumptions that people have been using to guide them through the let's say post war era and i would say that if you're a stock you'd be trading at all time highs because what you've been saying is all these classical models don't work and they have to take a different approach to kind of get a handle on understanding the forces that are shaping the economy and let's talk about

a basket case in the world today greece and i should also mention that you're a professor of economics at the university of western sydney and you're an expert on debt deflation so clearly and grace that's a test case example walk us through what's happening well the whole greece is an unfortunate instance of what's happening on the whole the whole always see the economy and the real cause of this is being a huge debt gobble which is being driven by the financial sector that is knows it can only make money by creating did it but it has to find a wife persuading to go and get into more debt than we actually want to take on using. knowledge is a bit like going to a dentist and dennis wants to take out more teeth because the military can take of the more money max and you only got one tooth it actually needs to be removed you know but he's persuasion would have military three moved will be six. so you fulfill them all truth removal and that's what's happened globalise we have private and we should ever have had and that's what's driving the entire crossers now greece i don't know enough about greece to say that greece went through the same

debt bubble as america or england or australia or canada or portugal or spain etc etc but they certainly had one of the great debt because a lot of them what to do when hiding in a situation to get them into the and you see the old goldman sachs so we have a process called the too much debt what's the solution is put forward by the kinds of inventions thinkers cut wages it wasn't high wages that caused the process ok we're going to get to the second on this debt mode keeping this in mind now of course one of the big pushers of the debt most let's say is keynes keynesian thinking but it wasn't it was came to the thing that you can go into debt during this low times but during the good times you try to pay down that debt well it's actually kinds kind of talking about public that is really what's happened with private ok and i think what you get in reverse is that when you when you look at the financial system we're in it's a system driven by privately created it and this also which was they feel creates

credit money but you also have a government system which can create government did and in the process creates theater money so there's two sources of money flowing into the economy neoclassical economists the dollars that are pillory indeed banking economics mistakenly believe that the government system controls the private bit like a having you know a centrally controlled system making sure that all the cars move at the right speed on a freeway in fact what you've got is rather more like you got a whole bunch out of control cars being driven by out in the center on too many dozens of stimulants and the government's coming along in an ambulance. the wreckage so private created credit drives the economy government money comes along and what tends to happen is when is a private crosses the way that it's manifest is the right of growth of it slows down and if all the growth of the economy slows down so the government comes in and spins are running a deficit and balances that out now if you had a well functioning economy then you'd have you know private debt bouncing along

like this and government didn't bouncing in the opposite direction and in my first modeling miscues financial instability hypothesis that's precisely what i had happening what i didn't cover in daytona paper though i did cover it all they wanted two thousand wells that they can be a situation with rather than the product at doing this new government at their own net you could profit it doing this and so for the government to balance it it's going to be doing the same thing in the opposite direction and that's what you have what people now call the mean scheme i meant when some much profit it's been taken on that the only way out of it is to take on neverending amounts of public debt as well so we go down that route you know you've got the pandas head project that stabilizes perhaps the thought of a little public at the continues rausing trying to balance the deflationary effect of reducing private the real solution to say hey gause we shouldn't have had this product in the first place if you want to solve the process somehow abolish or reduce the real burden of the private bit and ironically the best way to do it and kinds made

a similar cause than it was not quite as frankly as all make it now is to increase wages. increase wages ok let's get back increased wages now this goes against a lot of the so-called wisdom out there so by increasing wages you're actually helping to solve a problem you will then cause inflation which have been a ages ago made is pretty good at that if you have a process it's quite simple that we haven't had a but it's printing press that's right up the helicopter been nickname from and print the money and that will cause inflation and everything will be solved well he printed money faster than anybody has ever printed government on the planet in two thousand and eight and two thousand. literally more than doubling the level of dice money in america and what you had was a when you went to the cross as inflation americans running about thought percent it filled them honest true so we had the fleischmann and been literally more than doubled by some money and inflation went from modest to cluster and then started hitting down again so with an enormous injection of money giving it to the banks almost nothing in inflation some inflation was called but not enough to the value

of the debt and fix the whole process up if you really want to cause inflation and therefore reduce the effective burden of that pit the way to do it is to increase wages because they in terms of what no choice but to increase their prices work is about no choice but to spin because cost of going up you actually get effective inflation that way didn't henry ford figure that out he raised the wages of his workers so they could buy a car yeah yeah and again like the result the large part of the new deal was given decent wages to work as so when you cut the wages it looks like a sensible this is the whole inability to think in the feedback sense that the actual economy operates in if you cut wages you will they will have a deflationary impact on the economy when it's already in a day fleishman so by driving the process little down we increase the value in norman in real time so the outstanding debt making across is worse what you have to do is reduce the value of that and the easiest way is to reverse the trend of the last forty years which has been trimmed for forty wages both in real terms of the

proportion of g.d.p. so you cause a bit you put the wages up not to actually get them much larger a share of g.d.p. because you expecting inflation to come along and eroded but by writing the the inflation eroding with value of the dead you'll drive down the bank a share and that's the section that should be reduced why do people who rely on a way to force subsistence don't seem to be arguing this case and then america for example is the wage earner is out there demanding higher wages yeah because we don't see a complex systems that cause the good ever. real economic behavior and we tend to think about things in a household fashion and this is actually when a classical economics has been marvelously useful to people who want to screw up the economy and a big tree really wants to do that but that's the impact of the theory because what it tries to get you to believe is that what applause for use an individual can be extrapolated to the social level so if you're in a household and you're running a deficit you've got to cut back the spending which mean the kids can buy the

nintendo games anyway you know that's makes sense a household balancing budget you've got to do that because you face what i can call a budget constraint. and that works if you're at your individual level but you would extract related to the national level that's not how the national economy functions we have banks which give a soft budget constraint so if you actually run out if you actually want more spending in the economy you borrow money from the banks and that change and it stimulates our because i'm at a spot of backward right and they borrow money from the banks on the household level means putting your house up as collateral so you put your house up as collateral you borrow money you've got the a.t.m. created inflation that in that way what we're saying is that. if you step away and just look at the wage earner divorced from the household and house yeah you get a much clearer picture of the problem and the solution well you what you see is that you would you talking about there is a positive feedback system because the process daughter was all this extra debt

being taken out to buy houses and that means that house process was some because they were people who take a mood it to buy a house across houses so you get a spiral pushing it up and that's bad bit that's a sort of that we shouldn't allow in the system in the way to remain stagnant right of main statically got to remaining static debt going up compared to incomes because everybody thinks they're making a profit by buying a house using leverage and rewriting the leverage of the house across increases the really the only people who make money on a house of rising in value over time real estate agents and banks even now with the crash in housing and the obvious wealth. confiscation of banks manipulating the system people are still not arguing for higher wages i know because they're not thinking about what actually caused the problem so easy to look at the moment you imagine this whole process is called by government study government did it we didn't have a government interest process in two thousand and seven the government debt in america and rules in the world came along afterwards to patch up what actually went wrong with the system if you want an analogy it's a bit like having

a person who struck their own arm off and then you put a tool on a coyote and that's when it has now blamed for the fact that the on fell off grace because there's a huge disconnect now then all this vilification didn't quite honest in the us for example unions which are there to hopefully support some kind of wage growth below fide as antibusiness anti-growth the real anti-growth of the bankers the bankers have given the money for speculation and not for investment they don't even finance investment anymore particularly they city and fun is working capital that's why therms issued a finance make elation if they find it speculation and we're convinced that that's good that's not so when they get in trouble then they seek bail out and they get risky but they get austerity measures pushed down to the wage earners and let me ask you professor here's an idea if i'm representing wades ers. what about the idea because typically wage earners will ask for a wage increase is tied to g.d.p. g.d.p. is another one of these economic statistics that you point out in your work

debunking economics one and the sequel coming out i believe this fall economics is gone thing you can nominate part two which is the available soon but professor if i came to you in your class i said well would it be an interesting idea if what they cops and firemen and teachers negotiated wage increases not tied to g.d.p. growth but tied to money supply growth. that's an interesting one i hadn't thought of what i get i got a great honestly get a grade on that that's a good idea that would this is so that would stop me in my tracks in my class you say because their money supply growth is how bankers pay themselves and yeah yeah they get paid by the how much fear money they inject into the system of they get a fee based on that the mean i can see here is what i actually back far no that's what you want him back and non-trained on saying in england which caused the depression in the beginning of the twentieth not that we're not in twenty years then was that the two you see in negotiated

a cost of living adjustment so they actually got cost of living changes not not manageable if you're talking about how if what the government is got up on the gold standard which caused a massive devaluation and wages had to fall by twenty percent and the cost of progression at the beginning of the twenty would not in twenty years in england so i can back far on your show you have all you know in the bank in your head. have you say i have a two pronged attack now we've kind run out of time so i want you to tell us the final thoughts on the global debt crisis based on what is being prescribed by governments of the i.m.f. little can do you look stand across even further austerity is not what europe made see if it's the private system is not producing the credit which it won't do in this level of debt and the government's got to come in and produce money supply to keep growth going over rather than austerity you need prosperity from the public sector which means i said why wage rises you've got to reduce the defrauded get booed and anything that doesn't do that is not going to work all right steve king thanks again for being on the cars report thank you and that's going to do it for this on the kaiser report me max geyser and stacy everett and i thank my guests

steve king author of the soon to be released debunking economics part two if you want to send me an email please at kaiser report at r t t v dot are you into like sign this is nice guys are saying bye you know. home. from. them.