welcome back this is our live from moscow here's a recap of all our top stories moscow ushers in a new era of energy security for western europe as a lot mark more stream pipeline begins on feeling russia about strings in germany and beyond. russia issues and other stern warning against a western attack on iran as president dmitri medvedev says it could spell catastrophe for the middle east meanwhile the u.s. public watchdog is about to release a report on terror oncet incorrect inference that. italian prime minister has won a crucial budget froze those losses majority support in the parliament as experts

fear the country is on its way to becoming the next victim of europe's financial crisis. and up next here on r.g.p. it's the kaiser report you stay with us for that. i max kaiser this is the kaiser report i'm here in ireland kilkenny ireland there's a new song in ireland it goes like this i'm looking over a three point six billion euro clover but i want to look before you know it's the new president and the new minister of finance people have discovered a three point six billion euro hole in the accounting budget that they didn't see before such is the way things are going here in ireland herbert yes max is the luck of the irish speaking the irish going to be the irish times here three point eight billion euros in cuts and tax increases coming in budget

michael noonan the finance minister says e.u. i.m.f. bailout condition sacro sanct well you would think that they would match up you know i just talk about a three point six billion dollar magical leprechaun like find by the new president and this three point eight billion dollar requirement of cuts you think they would not show up but of course in this world of economics we live in all the benefits accrued all the same products and all the hysteria free born by the general population the word that i'm looking at here max is sacrosanct because it's a word that we see over and over when it applies to any bankers' bonuses or their contracts or they're very stimulative that they write so i looked it up sacrosanct regarded as too important or valuable to be interfered with immune from criticism or violation and treated as if only yeah well that's the trick isn't it the the bankers have become the new clergy in this globalized financial

world so all the vatican is suffering catastrophic moral collapse here in ireland with ireland canceling and closing their embassies in the vatican. at the same time they're giving birth to a new papacy of investment bankers who believe they walk on water and go unchallenged through the land of bestowing their indulgences for a small fee of course well of course in ireland it would be now the fed the treasury and the holy troika the fed the treasury and the holy troika i like that so we're going to look at one of the elements of this budget is that they're making it a seven hundred fifty million euro cut from the top of all investment account for the nation but at the same time this week they paid off seven hundred fifty million euro in unsecured anglo-irish bonds write the word

unsecured i think needs to be highlighted there and that means that the issuer is taking a risk fully in the knowledge that there is a strong possibility they won't get paid back this is what own secured means so the fact that the irish government is deciding to pay this loan anyway shows you the the what i would have to call stockholm syndrome they fall in love with their captors haven't they and they believe that they will just give you all money even though you don't in any way legally there's any real statute that would require us to give you this money we're going to give it to you anyway all simultaneously cutting the very phones you would need to grow your economy so we're not going to pay this debt going forward because we're cutting the very source of future g.d.p. growth this is the very definition of insanity played out brilliantly here i think took a moment for us of all we're hearing all about how this is all being done from a whole panel of economists who are going into great detail as to why the sudden emergence of a fiscal and monetary papacy is destroying europe in place of the vatican that's

now been completely discredited so we move from the fed the treasury and the holy bond holders to the miracles that are actually being created we talked about one where they found this three point six billion. but over in the u.s. we have this headline m.f. client funds said to be located at j.p. morgan yes they miraculously found those missing funds in j.p. morgan. the guess whether it's. fishes and loaves feeding the masses or turning water into wine you can always rely on jamie diamond to come up with the goods and a miraculous discovery of seven hundred fifty million dollars that was hiding under the desk somewhere i know i put that billion dollars there somewhere so i want to get life masters on the phone as you both don't know where that billion dollars is where they actually found two point two billion dollars they said well it's a matter of the option doesn't it with life masters is basically the new virgin birth of derivatives that are created without actual any any financial in some

a nation it's merely a child being born from the lawyers of a credit to full. life masters the virgin mary i see this also made it to the headlines here head of global resigns in wake of baker filing i'm sure the game of huge golden parachute as a thank you for destroying our particular for this is a core zine former head of goldman sachs one of the twelve apostles of the new apocalypse i'm sure he's gone to a better place in the banking haven't skies oh yes i believe the pope is going to be to fire him in the state of course very soon beautiful beautiful i he's going to the beauty parlor to be beautified by the pope the thing about the vatican they've got it they need to rebrand themselves because all the old terminology nobody can get it to get behind anymore. to have his old new do he's going to have a no you don't make up make over he's going to beautified you need to think the

same core scene. well. i like how the guy commits a crime again another sacrosanct element of the futures market is of course that you don't comingle funds he broke that and for that he says he will not seek his twelve million dollar severance that is sacrosanct in the contract he's not going to seek it he's going to it's this charity he's going to give back to the community . to be this to the occupy wall street movement where these guys are saying well we won't take the bonuses because they realize that the next step after that is a pitchfork up the shrink string as we say on this show well speaking of occupy wall street we're going to move over to some of the martyrs of this financial new financial trinity this holy troika we have now and this is a little clip from mayor bloomberg of new york and he was asked what he thought of the occupy wall street protesters. saying. we.

are friends of. course everybody should go through. these pings i mean i think everyone needs to pick a side of this growing conflict between the top one percent and everyone else and take a risk i mean this is we're bringing risk back to capitalism it's the risk of being impaled but he's also pointing out that we should be beautifying angelo mozilo he's a martyr of the subprime crisis because look the guy was forced to leave with only a two hundred eighty five million dollar payout and after being brutally repressed by the government that he was forced to give all of these loans to all these poor schmucks out there and all he received was two hundred eighty five million payout what do you think of this man ok so you're talking about the former head of countrywide countrywide of course was bought up merrill lynch i suppose which got

bought up by bank of america which will be soon bought up by j.p. morgan and the problem is. big to fail but don't look under the curtain things get bigger and. this missoula character he of course was caught red handed falsifying documents and committing forgery of course documents and giving loans to muskrat who are living in tree stumps half a million at a time in calling that a legitimate loan made and getting huge fees as a result and then when that one boss they got a huge payout from the government of course that's run by crony friends. who are occupying all the regulatory authorities sure they were the friends of angelo mozilo where the famous like christopher dodd included they were congress people and senators who received special interest rates on loans from mozilla so that's right he made fraudulent loans made because illions of dollars and gave it to

politicians to help them reelect him selves and he's off there sunning himself lapping his. who are some of the other martyrs the prime crisis cold martyr well dick full of it and so i'm sure considers himself to be a martyr he still doesn't understand yet or jim jimmy cayne over there parents turn to the martyr of this horrible. put it in biblical terms there was a flood of credibility that came and destroyed the miracle workers as they were turning essentially what you could call dog poop into securitized mortgage backed securities traded amongst the major banks around the world it's called transubstantiation. that's exactly right stacy herbert transubstantiation is exactly the term this is in other words the eucharist it's not a figment of the bone and blood of christ this is the actual bone and blood of christ during the eucharist because of the transubstantiation so you're saying

applying that to the subprime mortgage market and by recent characterizing. it is essentially dog poop and having movies give it a aaa rating credit it becomes godlike actually it becomes worth something it delivers you to the american dream it was often called that was heaven was the american dream yeah before america went bankrupt they had this idea speaking of transubstantiation i have another headline here and you mentioned this in your first evening here at the kill comics festival you talked about where you would see the fraud how ben and it happens by of the i.p.o. market groupon values soars on first day of trading controversial coupon seller now worth nearly eighteen billion dollars the shares popped thirty percent on the first day tell us about it was there would be this huge i think i said thirty to forty percent pop on the first day and sure enough this is exactly what happened this is first of all groupon is a ponzi scheme all their original customers are canceling out because they don't

make any money off taking advantage of a group on offer which are discounts to the point of we were losing massive amounts of money so all the original customers are not responding up so they need new suckers to come in to groupon that's the very definition of a ponzi scheme so now this is an eighteen billion dollars ponzi scheme but when it was taken public of course the first day pop is critical and this is engineered by offering a very few number of shares and then all in the after market the banks to underwrite this offering are buying in the aftermarket which is technically illegal but it's something called ladder and they do it anyway so laddering of i.p.o.'s means that you can engineer a price appreciation there's very little stock in the float you can't sell short because all the stock sold by the underwriters and what you do with that part of course is you pay off all the litigants in your lawsuits so all the law people are suing the underwriters maybe it's goldman sachs or j.p. morgan anyone who's got a lawsuit pending they use the i.p.o. stock as payment as hush money and pay them off they use it to take care of any

errors and their error count which is they've accumulated by doing illicit illegal deals over the years and they. churn that a few times and they use it basically a currency to favor political corey because of course in washington a most lobbyist insider trading is it is legal and they use it to help their campaign to deregulate market so they can further perpetuate their fraud and embezzlement of the markets and the american and global citizens through outright manipulation and fraud and welcome group on the biggest fraud of the week yeah that's the interesting thing about this is that unlike a lot of the last wave of crime banking crime like the subprime crime is that almost all of the financial media was saying openly that this is the policies don't invest in this but still a prop thirty percent cry it just goes to show you that the the business of america fraud on wall street is still alive and kicking and despite all the macroeconomic events that are plaguing the rest of the world well thank you thank so much for

being once again on the kaiser report thank you max don't go away much more coming your way so stay right there. discovery. communicate with. nature can give you. a. pretty free. free. free. free. free.

free. for your media. free card. max factor this is the kaiser report america kill konami festival in kilkenny ireland and we're about to speak with constantine he is the adjunct lecturer in finance of trinity college dublin and holds a number of other senior research positions of international companies and organizers he was also mentioned in today's irish times as one of the new breed of economic rock stars constantine welcome to you guys are really where it's going to be here all right let's talk about this i know irish this is the really the talk of the conference so far so give us some more background on this and some of the numbers and what's going forward well the background is related anglo irish bank capital might as they just struction of the proper bank and conservative banking system around the world is probably the most reckless ledger we had in advanced

economies during the the latest boom which predates the current crisis it was the bank which was known as the parking lot bank because that's the amount of time we took them to approve multimedia and you were alone by the time the sales person leaves the client the loan will be approved by the time the sales person gets into the car i only just got in here how did all the risk you know measures get abandoned how did that what was their technique or how did they simply not be able to apply any risk analysis whatsoever like the rest of the banks they didn't have to do much of it is going also because of the community funds and was very cheap so as result with whatever you lose in the markets you can make back in terms of the margins in terms of the appreciation on that as a base which is a typical classical if you want us a bubble so in some ways if you think about it not just think raj bank they were just more extreme case but the entire banking system in europe and in the united states or britain play kind of like a fire engine it was hosing out who were in all the cheap liquidity and then spread

into the very kind of you know indiscriminate way across the economy in the hope that some loans will pay. back and some loans will go up ok that money goes out there to feed speculation in real estate and that real estate is used as collateral to perpetuate more loans so this is the way the ecosystem if you will of how things got completely out of hand because it became a sort of feeling prophecy as long as i kept making these people loans the asset prices had to go up and sell such time as you had a classic blow off exactly on the blow off was also a precondition by the fact that there was systems regulatory systems and supervisors systems both in europe and in particular in ireland but also in the united states which have diverted the efforts if you want to pressure which is building up in the system itself by creation of those artificial assets if you will if you want increases in valuations and also the if you want price and of liabilities risks and the maturities and other risks and within the system all of that was the version of by the regulatory system into if you want kind of

concentrated allocation of the east into one particular. sense in the case of the united states that was the class of for example that he would have been students in the case of the case of ireland it was the class of assets we should related to the property development and property investment and things like that so not only the risk was growing on the books on the balance sheets of the banks and it was unchecked on the price but it was also diverted which we see in greece today right now in part is an outcome of the poor regulatory environment for the global banking system which has treated the government bonds of and sold them governments and we knew that greece was insolvent for a decade plus without even without discovering with we have learned since then about the deeper rates of unsold and see such as the goldman sachs deals that they have done to hide parts of the system parts of the that as well but even apart from that we knew that it was the then sold until you need to look at the current account greece has not been solvent in the last twenty years for more than just one year probably out of our them by the way in the last ten years there's only been sold for one year in terms of the current account surplus and this is what was

going on the governments were continues to use in the bacon system. from the markets through the most through the banks as well and this is ultimately encourage the banks to accumulate the liabilities of the state owned us inside so these can not only guns was rising and was on price but the also got come by the fact that the school was released into if you want the books of capital it was treated this is the reason that the same time as the schools right ok sounds to me as if you could buy insurance on a car accidents let's say of say it's a formula one high speed car race and you're buying insurance on a driver but you're dividing up that insurance into the racing around the track approaching the wall getting closer to the wall and then actually crashing into the wall and then pricing each one of these differently and then saying the actual crash into the wall itself or the actual crash happens this in fact we're not even

going to count in the overall matrix of risk and about a factor is going to ignore that bit and we're going to trade the other bits approaching the crash separately exactly that's exactly what was happening in the intent of the context of what we call blocks blocks more of the bounds very much extreme events at the tail of the probability so they foresaw the risk into extreme events but i don't think it's a statistically can't happen let's throw in a price everything else as if there's not going to be an extreme event which keeps capital cheap which keeps out surprising rises up in the regulatory slash financial system around the world is that in effect we were playing russian roulette and if they have it around we will lose and you bullets into the barrel so sooner or later we had the entire viral load that was no pro the probability of blowing your brains out in this current environment was one hundred percent by the end of the gate and this is exactly what well this is important to note that the the chances of this catastrophe happening were one hundred percent oh absolutely true the difficulty of course is different from exposed after the fact that the will we have to help in

the hundred percent probability and no one at the time because the game. it was so big and the game was moving so fast that the banks like a large banks were moving very fast up the ranks remember that back in two thousand and six if i believe correctly the summit in switzerland the globe the world economic forum summit actually voted then the largest bank as the best thing in the world and all of that was pretty good and sold on one line of the profitability ok when you say they're moving up the ranks you're talking about they're moving up the ranks in terms of their ability to lay off these bad the record of bets on the global market exchange rates and derivative rates and rates of exchange that are feeding into their bottom line because their cost of capital is essentially negative isn't it that's right they first of all explain this a little bit because people are sense i mention this all the time and people are confused by this because there are a few there are used a credit card at sixteen percent or seventeen percent i say no these big banks across capital is less than zero explain that well in many cases it depends on the

timing right now they're facing less than zero cost is because they're getting subsidised capital injections from the governments and they can go and use these capital injections too if you want borel from the central banks at cheaper rates so as a result of it we can take our just big consideration right now that is big in the last three months have received a sizeable injection of capital in form of the government that is their notes and government bonds what they did with those boards is that they took those government bonds they put them on the balance sheet then the went to the people and they were purchased with the cd they put them as a collateral from e.c.b. at one point five percent interest rate and then bought more government bonds in the markets so as a result of that in august september right after it was done on july thirtieth when the injection of capital went into the banks in august september the irish banks largest banks both more than three billion worth of the government of ireland and this is all to with god and government bonds government bonds went up in price the

government turned around and immediately started presenting that as the case of the bill is a sham that this bold. it's a work in that there isn't this garment handy and gold little decline of the bones in the whole ponzi scheme continues to roll in over both in terms of that if you want to check on the government that its claims to be and the banks pretend that they're healthy and the government in return pretending that the banks are healthy because that helps them to pretend that they're themselves helping isn't this a form of propaganda of course it isn't so it applies propaganda now people absolutely still say propaganda with political propaganda with scapegoating ethnic groups or religious groups and propaganda and terms of jingoism and and patriotism but this is a different form of propaganda it's a financial propaganda where if the government in the banks colluding together can create the illusion of i'm up trend that then they can come out and say that things are getting quote unquote better but at the same time forcing through more draconian us steady measures right european governments through the systems of

corporatism that have existed here for decades this is the government's move in europe of the economic policy and politics as well corporations and governments by consensus of interest groups and how they were chosen different fascism because people say fascism class the connection between i would be controversial here and you know i always said that that is basically there is no difference until you come to the point of the differentiation of national they mention on national news they mention the european corporatism so they doesn't have the nationals they mention it is more benign but economically from a konami point of view the system of organizations is that they don't do the same ireland has been the rule for the last twenty years by social partnership social partnership includes government on one side of the table. on the other side of the table there are trade unions social people or what we called in other words environmental groups trying to combine poverty and some of them actually have noble if you want objects as well and then on the other side there is

a big organisation which unites all large businesses in this country called beck and they see it for years and the entire economic body even though despite the fact that the majority of them actually contribute very little to that economic plight is most of their eyes according to is driven outside of the people and it is decided outside of the people it's decided by the exporters and is decided by multinational corporations and decided by foreign investors who are never at the table i mean my drive into town from the airport on talk radio they were saying openly that while there is a level of acceptance with this term that ireland has lost their financial independence and they're speaking about it in those terms as if well you know as you know we've lost our financial independence isn't that the same thing as losing your independence it is exactly the same thing because in today's terms the economy and the financial structure of the corner which on the right is really what defines the solvency because we don't have army we don't know how wars thank god you know

we don't have physical conflicts over the borders the only conflicts we have a competitor in this conference and the competitiveness in the end is determined by things like infrastructure institutional infrastructure human capital that exists in the country and productive capacity of the economy in the politics the productivity of the economy that is precisely what we talk about the economic independence here their ability to influence those dimensions those components of economic you know if you want to be and that is the country itself and they say that the euro project was brought on to stop wars in europe but they're now with the euro and the institutions i've come with this crisis and the i.m.f. and others coming in for foreign creditors etc there is in fact a war going on that is outward facilitated a new kind of all. there is this week was very much clear part point whereby the european political project has food. from the democratic project we should be very careful by the way when we're talking about europe europe has two components today

it has a very steep component the so-called euro zone the common currency component which is really a mistake very deeply seated mistake because it was never based on the premise of the democratic institutions of checks and balances and as a result of the anti democratic as we have seen this week and europe at large at large is very beneficent and very productive institution if you want because it is an institution of free trade agreement military of people free mobility of capital this is exactly what we want this is exactly what we need we need more of it and all of the call them they are saying that the economy is outside of the euro zone i say exactly that what we do not need is more integration which is artificially grafted onto the foundations which are so shaky democratically that the country cannot hold a referendum on something so fundamentally important such as loss of its economic sort of the as we have seen in greece because i think area that's all the time we have thanks so much for being on the kaiser report all right i'm going to do it for this edition of the kaiser report from kill going omics and kilkenny ireland i want

to thank my guest carter thinker again you can find him on the web it should be easy because he's a rock star of economics so next time if the rakyat are saying. well . bring you the latest in science and technology from the ground. we've got the future covered. i'm. open.