of millions of dollars of people's money deserves the pope's praise because reporters up next a nazi. 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 on i'm looking over a three point six billion euro clover that i overlooked 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 stacy herbert yes max is the luck of the irish speaking the irish are 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 two 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'd think they would match up but of course in this world of economics we live in all the benefits accrued all the same crux and all the a sturdy has to be borne 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 their various derivatives that they write so i looked it up online sacrosanct means regarded as too important or valuable to be interfered with immune from criticism or violation and treated as if holy yeah well that's the trick isn't it the the bankers have become the new clergy in this globalized financial lived world so while 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 the 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 it 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 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 while simultaneously cutting the very funds you would need to grow your economy so they're not going to pay this debt going forward because they're cutting the very source of future g.d.p. growth this is the very definition of insanity played out brilliantly here at the kokomo mix festival 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 and 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've talked about one where they found this three point six billion. but over in the us we have this headline and client funds said to be located at j.p. morgan yes they miraculously found those missing funds and 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 by for masters on the phone as you know where the billion dollars is where they actually found two point two billion dollars say said well it's the immaculate deception doesn't it with life masters is basically the new virgin birth of derivatives that are created without actual any any financial and some a nation it's merely a child born from the lawyers of

a credit the full. life master of the virgin mary i see this also made it to the headlines here head of m.f. global resigned in wake of baker filing i'm sure the game of huge golden parachute as a thank you for destroying that particular forum this is a chorus line 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 heaven skies i believe the pope is going to beautiful him will be safe very soon beautiful beautiful i was going to the beauty parlor to be 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. so you're going 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 same 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 see he's going to it's this charity he's going to give back to the community still tribute 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 the 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 going. to go.

he's picking sides and i think everyone needs to pick a side of this growing conflict between the top one percent and everyone else and you take a risk i mean this is we're bringing risk back to capitalism and the risk of being impaled but he's also pointing out that we should be beautifying angelo mozilo he's the 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 by 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 of mine the curtain things get bigger and. this basilica he of course was caught red handed falsifying documents and committing forgery of course documents and giving loans to muskrats who are living in tree stumps half a million at a time and calling that a legitimate loan made and getting huge fees as a result and then when that when 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 christopher dodd included you know 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

laughing his. who are some of the other martyrs though of the subprime crisis dick fuld the martyr well dick. i'm so i'm sure considers himself to be a martyr he still doesn't understand yet our jim jimmy cayne over there paris stern is a marvel of this horrible. to 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 at the concept of transubstantiation piercing applying that to the subprime mortgage market and by recent euro ties and. it is essentially

dog poop and having movies give it a aaa rating credit it becomes godlike exactly 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 you're at the kill cannot mix festival you talked about where you would see the fraud happen and it happens via the i.p.o. market groupon has value 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 the group on 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 restarting 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 dollar ponzi scheme but when it was taken public of course the first day pop is critical and this is engineer by offering a very few number of shares and that all in the after market the banks who underwrite this offering are buying in the aftermarket which is technically illegal but it's something called laddering 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 it short because all the stocks held by the underwriters and what you do with that pop 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 to pay them off they use it to take care of any errors and there are accounts which 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 courage because of course in washington most lobbyist insider trading is legal and they use it to help their campaign to deregulate markets so they can further perpetuate their fraud and embezzlement of the markets and the american and global citizens through outright manipulation of 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 the subprime crime is that almost all of the financial media was saying openly that this is the policies he was don't invest in this but it's still a pop thirty percent roi 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 stacy thanks 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. i max kaiser this is a kaiser a part i meant to kill can omics festival and kilkenny ireland and we're about to speak with constantine he is the ad junk lecturer in finance for trinity college dublin and hold

a number of other senior research positions or 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 the kaiser really works and to be here all right let's talk about this i know irish d.l. is this is the really the talk of the conference so far so give us more background on this and some of the numbers and what's going forward while the background is related anglo irish bank at the miser's the destruction of the bank and conservative banking system around the world is probably the most reckless lead to the we had in the advanced economies during the cause of the latest boom which predate the current crisis it was the bank which was known as the parking lot bank because that's the amount of time with took them to approve multimedia and you were along by the time the sales person leaves the client the loan would be approved by the time the sales person gets into the car i only just got in here how did all of a risk you know measures get abandoned how did that what was their technique there

how do they simply not be able to apply any risk analysis whatsoever well like the rest of the banks they didn't have to do much of that is can also because the funds and was very cheap so as a result of it whatever you lose in the markets you can make back in terms of the margins in terms of the appreciation on the asa base which is a typical classical if you want us a bubble so in some ways if you think about it not just think a large bank that was just more extreme case but the entire banking. in europe and in the united states operated like kind of like a fire and it was hosing out who were in the cheap liquidity and then spreading that is a 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 that that cheap 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 self-fulfilling prophecy as long as i kept making these cheap loans the asset

prices had to go up and 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 or if you want to pressure which is building up in the system itself by creation of those artificial us it's official if you want increases in valuations. if you want to mispricing of liabilities risks and the maturity risks and other risks within the system all of that was diverted by the regulatory system into if you want kind of concentrated allocation of the into one particular class of assets in the case of the united states that was the class of for example to deal with the instruments in the case of the case of ireland it was the class of assets which related to the property development and property investment and things like that so the risk was growing on the books on the balance sheets of the banks and it was unchecked and done priced 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 insolvent governments and we knew that greece was insolvent for a decade plus without even without discovering what we have learned since then about the deeper rates of insolvency such as the goldman sachs deals that they have done to parts of the some parts of the debt as well but even the part from that we knew that it was the need to look at the current account greece has not been. and in the last twenty years for more than just one year probably out there with our them by the way in the last ten years has only been sold for one year in terms of the current account surplus and this is what was going on the governments will continue to use in the banking system to from the markets through the most through the banks as well and this is all to with the cartridge the banks to accumulate the liabilities of the state on their assets so that. was a rise of unprocessed with compounded by the fact that the school is policed into if you want the books of capital it was through this if there is no reason at the same time as the 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 of our factors 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 context of what we call blocks in the bounds very much extreme events at the tail of the probabilities are they force all the risk into extreme events that statistically can't happen and they price everything else as if there is not going to be an extreme event which keeps capital cheap which keeps out surprising rises in the regular financial system around the

world is that in effect will play in the russian roulette and after every round we will lose in the bullets into the barrel so sooner or later we've had the entire bar loaded that was no pro the probability of blowing your brains out in this current environment was hundred percent by the end of the game and this is exactly what well this is important to note that the chances of this capacity. happing one hundred percent absolutely true the difficulty of course that is different from know when exposed after the fact that the will. to happen the hundred percent probability and no one at the time because the game was so big and the game was moving so fast that the banks like banks were moving very fast up the ranks remember that back in two thousand and six if i believe correctly the devas summit in switzerland the globe the world economic forum summit actually voted as the best bank in the world and all of that was pretty good sold on 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 derivative bets on the global market at 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 explain this a little bit because people are sense i mention this all the time and people are confused by this they're used to a credit card a sixteen percent or seventeen percent i say no these big banks are cost capital is less than zero explain that well in many cases it depends on the time in the right now they're facing less than zero cost is because they get in subsidized capital injections from the government and they can go and use this capital injections to if you want from the central banks the cheaper rates so as a result with we can take. right now that is banks in the last three months have received a sizable injection of capital in form of the government. and government bonds what they did with those bonds is that they took those government bonds put them on the

balance sheets then the went to the people to the purchase window at the e.c.b. they put them as a collateral. 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. largest banks . more than three billion worth of the government of ireland and this is all to with the government bonds government bonds went up in price the government turned around and immediately started presenting that as the case of stability that it's all this is a work in that there is in this common hand the decline of the bonds in the whole ponzi scheme continues to roll in over both in terms of that if you factor in the government that its claims to be and the banks pretending 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 healthy isn't this a form of propaganda of course it is

a propaganda now people absolutely propaganda with political propaganda with scapegoating ethnic groups or religious groups and propaganda in terms of jingoism and and patriotism but this is a different form of propaganda it's a financial propaganda where if the government and the banks colluding together can create the illusion of a 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 sturdy measures right european governments through these systems of corporatism that have existed here for decades this is the governance mode in europe of the economic policy and politics as well as government by consensus of interest groups and how they were chosen different fascism because people say fascism 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 dimension

or national as they mention the european corporatism today doesn't have the nationalists that mention it is more benign but economically from a comic point of view the system of organizations exactly 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 the groups which are trying to come back 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. for years. the entire economic pie even though despite the fact that the majority of them actually contribute very little to that economic pie most of the economy is driven outside of the table and it is decided outside of the table it's decided by the exporters is decided by multinational corporations is 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 me which on the right is really what defines the sovereignty because we don't have army wars thank god you know we don't have physical over the borders the only conflicts we have a competitiveness conference and the competitiveness in the end is determined by things like infrastructure institutional infrastructure human capital that exists in the country the productive capacity of the economy in the toilet 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 kind of d.n.a.

that is the country itself and they say that the euro project was brought on to stop wars in europe but the now what the euro and the institutions have 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. facilitated a new kind of all. there is this week was very much a clear point whereby the european political project has. pulled 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 component the so-called euro zone the common currency component which is really a 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 that it became democratic as we have seen this week and europe at large europe with large is very beneficent and very productive institution if you want because it is an institution of free trade for him ability 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 economist today saying that the economy is outside of the euro zone are saying exactly that what we do not need is more integration which is artificially grafted on to the foundations which are so shaky democratically that the country cannot hold a referendum on something so fundamentally important such as its economic sovereignty as we have seen in greece. that's all the time we have thanks so much for being on the kaiser report any time all right now is going to do it for this edition of the kaiser report from. ireland i want to thank my guest you can find him on the web it should be easy because he's a rock star of economics so next time mr backscatter saying.

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