next it's the kaiser's show and a hard hitting look at the world of finance stay with us for that. max kaiser stacy herbert this is the kaiser report let's talk about my oh tony a con general. do you know what that is we're going to find stacy ever exactly max i officially have a diagnosis for the fainting traders of wall street the same thing traders of wall street do continue you know the markets have been up and down up and down up and down while the over the last two weeks well it made me think of the fainting goats of tennessee domestic griese of goats in america which have a genetic disorder called my attorney a congenital which is when startled younger goats will stiffen and fall over

a soup see from this image here they just fall over and freeze for ten seconds pleading that they don't care but they get up and start walking again like normal like nothing happened but this is what we see in the markets still hot how do you apply the fainting goats of north carolina to what we see in the marketplace well i think it's a genetic disorder so i think we see inbreeding in the financial markets this is the first have imax wall street aristocracy got one point two trillion in fed's secret loans so as you know one of the consequences of aristocracy is often you see in britain so i thought this is what you're seeing is that the fed is breeding. a class of bankers who freeze and start on fall over because that it generates attention from their own or the central bank and they like the fall of sell button and stocks collapse and then they wake up with a quick buy everything back also i might add that the saw idea of in-breeding as

relates to wall street aristocracy that was gifted over a trillion die. dollars by the fed it also reminds me of the word to rivet is in the riveted our referential they refer to itself after generation upon generation of trading algorithms that have created this kind of inbred ogre like monster on wall street that only refers to itself and not the general economy or anything anyone is saying in washington. so let's turn to the story here so the wall street aristocracy fed chairman ben bernanke is unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as one point two trillion of public money and max this is the most important part of the sentence that goes on about the same amount u.s. homeowners currently zero on six point five million delinquent and foreclosed

mortgages write the numbers work out here banks made over a trillion dollars in loans that they knew could never be repaid because they were lending it to people who had no income no assets no job but they knew that they would be bailed out by the fed to that exact amount of money and let's be honest this isn't a one point two trillion dollar loan this is a one point two trillion dollar gift on wall street they call it a forgivable loan which is code for gift so the largest borrow was morgan stanley and they got as much as one hundred seven point three billion which was three times as much as the company's total profits over the previous decade these are the company's profits if there wasn't for the gifting from the fed to these banks their profits would be zero their stock valuations by the way are crashing their liabilities are skyrocketing that's why most people in the know will tell you that banks particularly in france right now and i'm thinking of society in general are

about to declare bankruptcy because they are beyond insolvent their insolvent times forty the other thing max is now when it comes to this matter of compensation by a lot of these bailed out banks they're saying it's the free market we have to allow the free market to reign because otherwise we become socialist marxist and blah blah blah but according to the bloomberg article even as the firms asserted in news releases or earnings calls that they had ample cash they drew. fed funding in secret avoiding the stigma of weakness so i ask you max where is the price discovery in there well you make an excellent point price discovery of course being at the heart of free market capitalism the nexus between supply and demand if it's all in secret and it's without bloomberg request for information for a freedom of information act requests we wouldn't even know about this one point two trillion dollar gift and i'm sure that there's a ten to twenty times more of the gifts behind the vest but there is no price

discovery there is price fixing that's what we're discovering here that we're discovering price fixing and we're not discovering price discovery and now if my math is correct you know in the u.k. the royalty there often sells himself to the public saying that the queen only cost sixty nine p. per taxpayer to keep the well household so the royal households in america however i figure that one point two trillion divided by three hundred million equals four thousand dollars per american so i think that's like four thousand pints of milk rather than one pint of milk at the queen cost well the point being that the average american is subsidizing wall street aristocracy and it's curious that they used the word aristocracy because it goes right back to the whole point of america to begin with was presumably to stage freedom a revolution of independence against aristocracy and here we are two hundred forty

years later back in the jaws of an entrenched aristocratic class that treats the entire economy as rent seeking trouble and did it should. that's a new art i've just invented another nearly oh just i'm from x. guys are on the show the other thing that is important or we've just been discussing recently how the population in the u.k. doesn't seem to mind so much the wholesale looting of the economy by the top but the looting by the bottom they go crazy and you see this. again in this story as well about the aristocracy in america the one point two trillion dollar peak on december fifth two thousand and eight the combined outstanding balance under the seven programs tallied by bloomberg was almost three times the size of the us federal budget deficit that year so again federal budget deficit huge story riling up the masses where where is it about the banks where do they why don't they care about it the debt ceiling debate going to washington for weeks compared to one

point two trillion dollars in looting and again yes the point you make is a good one you can. test a gay looters on the street in london and point to them as being morally reprehensible while at the same time being accommodating for the looting going on in the banking system in the city of london and i don't understand what this is such a stretch for david cameron and i see tony blair opened his pile hole last week and so on to demoralise now that he's good friends with the pope about what really should be done in a society that respects human rights while he is the guy who oversaw the transformation of the city of london into a looting economy not to mention the human rights abuses and genocide that blair committed in iraq well so you know tony blair was good friends with the guy with the farting camels the aaa what the forty camels of tripoli back on the show well

now blair is of course one of these fainting bankers of wall street so this also brings me to continue with this my own tonic markets theme i mean these guys have my attorney this is a stacy herbert original tonic markets theme. headline reads max bernanke he under pressure to calm markets so you know ben bernanke he is speaking at jackson hole tomorrow and he's under pressure to calm these markets remember i said these fainting goats they faint when they're startled so these these goats these banking goats are threatening to pass out again but i want to bring up one thing about these fainting goat according to the wikipedia older goethe learn to spread their legs or lean against something when startled and often they continue to run about in an awkward stiff legged shuffle so you don't need to faint if these bankers can just come up with an awkward stiff legged shuffle they

can still stay standing you know do the awkward stiff legged shuffle could be the dance craze of the season remember under gadhafi is the recent x. ray expatriation they have the. what was it called the jenkins. dance this is the awkward standing baker dance so if you see the words ben bernanke you leaning up against a wall with his goat like beard you know. q three q three q four q five. you know that he's trying to stop himself from fainting due to market my own tonia. yeah i imagine this is what we'll be seeing tomorrow in jackson hole ben bernanke leading up against the wall a whole bunch of younger bankers passed out on the ground startled like frozen that's a good time to round them all up and come up with a nice recipe for shish kabob. but want to secure some x. yes he's being asked to calm the markets because there's something like eight

trillion has been wiped off the global markets in the last two weeks in these why don't you. know well speaking of a bag of shells the u.k. population barely has that if you look at this headline u.k. household finances are worse than during the height of the recession again while these the fainting bankers of wall street are out there in jackson hole begging for money the actual population who is that out there banging on the drums asking people to lock up the little poor people while their household budgets are deteriorating at a faster rate than during the height of the recession in early two thousand and nine and according to an analysis of consumers' finances this was my message to the middle classes in britain who are. you know all upset about the young looters out there on the street you need to join them you need to talk to them you need to join them you know and understand what they're talking about there because your next financial apartheid only grows if there's nobody welling to shut down financial

apartheid so all of you middle class brit people take all that marmalade off your naked bodies put your clothes on go out in the street stop dogging and start talking and then finally with this whole you know a shift in wealth that's happening around the world as part of the financial collapse that's what it's really about india gold imports may reach oh record so as gold prices are soaring we find that the biggest buyers in the world indians they're increasing their consumption of gold purchases by india the world's biggest user surged sixty percent to two hundred sixty seven tons in the three months ended june thirtieth from one hundred sixty seven tons a year earlier investment demand max jumped seventy eight percent to one hundred eight point five tonnes won't because but the me somethin analysts confuse the soul in the gold buying phenomenon of course for years they buy it during the wedding season and they buy it as a gift store a value accent or

a so people assume that when the price of attire that this would be a deterrent to buying gold at these high prices but indians are not stupid they realize that all five currencies around the world are being debased they've already had the experience of buying gold they've already seen their gold double triple hitting new all time record against the root pay so there's an. installed customer base of gold buyers is a reason to think all it's going to triple again people say oh no there are going to blow up as to why that's like saying you know wow that first to the era when they go me so why i'm never going to do it again this is make any sense no. say sarah thanks so much rain on the guy's report thank you it's going to do it stay tuned we'll be right back with much more so stay there. another. twenty years ago or just country.

to the. janitor. where did it take to. plug in back to the kaiser report imax kaiser time now to go to massachusetts to talk with chris martenson chris lawrence and welcome back to the kaiser report thank you max good to be here all right chris lawrence and markets have been extremely volatile for the last two weeks is this the resumption of what we saw in

two thousand and eight or something new well it's both i think it's a lot like two thousand and eight we have critics for it's blowing out all over the place if we keep our eye on the ball remember this is a monetary crisis that it's harder we you know mostly witness this as a fiscal crisis or financial crisis so i'm looking at the financial sector you look at the b.k. x. or some of the indicators that are around maybe the insurance sector is and you're seeing a lot of distress there became ex-pro below the former lows in this rundown and so that's what we're seeing the stress i mean obviously when you have credit spreads blown out you know if you were huge debt crisis so those are the echoes of two thousand and eight what's different this time is gold gold and silver signaling that maybe this time i think people are understanding. this is a monetary crisis too it's not just some weakness in the financial sector all right chris lawrence and i saw an interesting statistic a couple of days ago that all of the market capitalizations of the something like the twenty eight biggest banks and continental europe the add them together they

still wouldn't equal all the market capitalization of one company apple computer i think that's certainly a lot about apple computer but more importantly it says a lot about the european banking system their market capitalization and these banks in the europe and in the u.s. same awfully thin when you look at the amount of debt they're carrying the bottom line here is that this is fundamentally a crisis of insolvency it always has been a crisis of insolvency the big banks are trying to treat it as a crisis with liquidity they're begging the e.c.b. the big federal reserve chose to give us liquidity you saw the federal reserve wonderful report came out and showed that the federal reserve supply over a trillion dollars of actual cash would quickly and even that wasn't sufficient to patch the hole in the ship it's really fundamentally insolvency situation that we're going to have to face up to i think that's where we're going in this next leg of this downturn and i'll get to that one point two trillion dollars gift from the fed in a second but i want to go back to what you just said talking about the interconnectivity or the the daisy chain aspect of these banks i'm thinking back to two thousand and

eight it was revealed that lehman brothers had their own little pet bank that they would hive their dad speak for each reporting quarter was needed this is part of what you could look up and find out the repo one zero five scandal they have this bank they were hiding debts and they were shuttling back and forth to avoid the regulatory scrutiny and to avoid the disclosure of all their debt it seemed to me that that particular scam of pick a book counting or debt shuttling is done on a huge global scale it didn't play into what you're saying how much of that is incidental home. much of that is more has more of a nefarious twist to it i think it's much more widespread then is commonly believed anybody who thinks the report one of five began and ended with lehman and we got that one bad apple out of the barrel really needs to have their head examined this is clearly common practice there's all kinds of accounting tricks and shenanigans

that can be done let's face it wall street can afford the best in the brightest and they are just outgunning it out manning. government regulators in every turn and that's not even including the revolving door where sometimes those very same perpetrators of these scams go through a revolving door into the regulatory apparatus would it be wrong to say that when people talk about the shadow banking system as gordon brown former prime minister bretton called it what percentage of the shadow banking system what accounts for this type of fraudulent that shuttling to avoid regulatory scrutiny would you guess on a percentage basis it's hard to say but here is one number i go by you know we look at the number of mortgages that are either delinquent or in default and it's over one in ten at this point in time so we look at the total size of the mortgage market we find it's over ten trillion dollars so rounding vigorously here we find that there's a trillion dollars in losses somewhere where are those if we go back to all of the

losses that have been reported so far through the putative folders of those same mortgages we don't find a trillion dollars missing anywhere we find a fraction of that and so without the ability to have real regulators come in and force this mark to market which we abandon by the way quite willing they don't only you know we band mark to market and allow them to do market fantasy and that's the world we live in and this is the important point our markets are really really driven by confidence that require confidence people investors have to have the sense that they know where they were hidden risks are people don't know where the risks are at this point and for good reason because every time we scratch under the surface we find another huge example of where things have been hidden ok so you can't hide there's a massive dollar multi-trillion. that's forever however the federal reserve bank under ben bernanke it's aims that their solution is to try to keep interest rates at zero percent for add her so that the liability and interest cost associated with these debts will never have to be paid there's a jackson hole meeting coming up he's being you know asked by the market

to do something in the face of all this calamity is number one can we deal anything number so am i right to say that this is their own percent interest rate policy as an attempt to keep the multi-trillion dollar debt burden permanently head in a closet somewhere it's certainly an attempt by the entire rescue such as it was starting in two thousand and eight to current really has to be called by its proper name which was the rescue the big bank balance sheet act of two thousand and eight i mean this is always been about repairing the balance sheets of the big financial institutions i've picked on big banks there but it's really the whole financial network oh which the shadow banking system is one part of it we've got pension funds we've got insurance funds we've got the entire fire sector finance insurance real estate the whole sector everything bernanke is going to do is to get credit flowing again because that was his diagnosis we had. too little credit flowing through the system and he's done everything we can to get that credit flowing again

and i think every step he's taken has been right if that was your diagnosis but from my diagnosis the patient was suffering from too much debt not too little credit and so what we have to do is recognize that those debts can't be paid back under current dollar terms and there is no possible way to dig out from this using crude production and somebody is going to have to eat those losses politicians step into the fray every step of the politicians with the exception of maybe iceland have so far come forward and said we want the taxpayers to eat those losses guess what people are starting to catch on and i have a story we look at europe a lot of theory unhappy people they are expressing themselves in the street saying this doesn't feel right and there's a good reason for that it's just. it's not correct but i think the central banks fundamentally fail to look at this problem in the right way ok imagine iceland so let's use iceland as an example of a policy of letting the banks fail come what may picking up the pieces thereafter

and moving forward and on the other extreme i guess you have to point to a country like japan that has supported their banking system now for twenty heirs through this zombie banking period i'm not realizing the losses eating up their entire country's savings and now going into a period of rapid decline so those are the two choices and first of all for those who argue that it would be impossible for america to have experienced icelandic repudiation of the debts and simply allow banks to fall the too big to fail banks what do you say to them and second of all are you saying basically that we're stuck and japan like a zombie economy well first of all we are absolutely getting ourselves stuck in a jet you zombie like economy and to those who would say listen these banks were too big to fail it would have been too disruptive you don't think about the deflationary impacts it would have happened this could have led to all kinds of things potentially uncontrolled you know hank paulson at the time back in two thousand and eight walking into congress mentioning things like martial law and

very scary things that everybody wanted to avoid at the same time we're having was too big to fail discussions we've had too little of the discussion around the idea of too big to save if something is just too large to save on everything we're doing in attempting to avoid too big to fail what we're doing is wasting time wasting resources showing trillions we're actually doing no good we're just disappearing into a black hole we're not getting any bridges out of the deal or energy infrastructure isn't being or all we have no new educational initiatives we don't have any investments back all we're doing is taking sunk cost that is wrecked debt what joseph don't recall creative destruction should have been happening isn't happening guess what it can't be hidden forever it's going to. come out in the meantime what we've done is on very unfortunately wasted a lot of time and a lot of resources attempting to sustain the unsustainable that's the way i look at it and i think the markets are starting to confirm that view and more people are coming around to that which means we may still have

a very destructive wave of financial instability in front of us that's actually what i am i think is most likely at this point in time and we have a fiscal situation which is deteriorated at the periphery and starting to deteriorate towards the center very visible in europe at this point in time but it's going to come to the u.s. eventually yeah man the really that to add insult to injury the u.s. on top of all this is spending trillions fighting tyrants overseas and doing nothing about fighting the tyrants on wall street now imagine this one point two trillion dollars that we talked about briefly this gift that was disclosed through the freedom of information act that bloomberg put forward and these secret loans that went to the banks and their individuals at these banks and the c.e.o.'s at these banks and this is really the emergence of what some are now calling an aristocracy in the u.s. is a public bad beginning to understand that they're living under the the the an aristocratic

monarch whole system again that they the whole revolutionary war for independence was basically now we've got a round trip back to feudalism i'd like to say yes but it's not clear to me that we really have cracked the one percent barrier in terms of awareness of what's really going on here not only do we operate with to recapture we have media capture all of this is very predictable effect of what happens when you do have high concentration moneyed interests that are allowed to own all sorts of things ranging from politicians to cable news stations to newspapers so i think a lot of people are starting to in my line of work i find more and more people who are voting with their feet as it were trying to find ways to protect their assets pull their assets out it was. that they see is fundamentally asymmetrical corrupt even one that favors one party over another that is that the advantage to party over everybody else and so we're starting to see that you look at retail money flows into mutual funds and i think that's telling part of the story look at the price of gold we're seeing

a story told again there are clues all over the place that people are fundamentally walking away from what they see as a rigged game and they're very unhappy about having to do that because we don't have any alternative currencies in the u.s. there isn't a border we can go across we're not like zimbabwe where we can use the u.s. dollar if we choose or we could hide our savings in rands or whatever the border currency happens to be the united states we're really captive over here and so this is the thing i'm experiencing most people asking the question how do i dodge what seems to be a very giant bullet that i can't control there's nothing i can do about it so you know here we are facing you know the prospect of q e three or you know some other big bailout or another series of bailouts and we don't even have any faith that when they announce it like look they told us without q.e. two that was nice but that was a fraction of the size of the secret bailout that was happening behind closed doors so people get the sense that yes there's huge amounts of money it's flowing all over the place but not to them it's going to the well connected and this is really

unfortunate dynamic because our markets again require confidence in order to stay in them who can have confidence in these markets watching volatility and seeing where the money is flowing not understanding where the risks really knowing in the art of hearts that there are balance sheet disasters just squirreled away it's intense it's very very profound period of instability where the goal of pitchforks i guess is the message crest learned some thanks so much for being on the kaiser report my pleasure and that's going to do it for this edition of the kaiser a part with me max kaiser and stacey however i thank my guests chris martin said if you want to send me an e-mail place to sell at kaiser report at r t t v are you until next time this is back guys are saying.

oh.

the cold war in the bahamas slated heavy fighting reported in tripoli as the hunt continues but kind o. could be. days in the polls coming on the back of the announcement today from prime minister berlusconi that it's least going to release a billion dollars of phrase in libyan assets we'll have the latest information on that story coming up the show and they. also western states hope would tough a function is against the syrian regime but just as bad as they are on the to footage used as evidence of the government climbed down the hall to verify. the search and recovery operation is underway in siberia for an unmanned space there resupply krom that will never reach the international space station. plus superstars trying to samuel eto arrives in russia to join north caucuses complementary much conoco record breaking paycheck.