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 this 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 talking 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 match up but of course in this world of economics we live in all the benefits accrue to all the same products and all the hysteria 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 it 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 much 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 u.s. we have this headline client funds said to be located at j.p. morgan yes they miraculously found those missing funds and j.p. morgan. 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 blights masters on the phone as you must know where that 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 in some a nation it's merely a child born from the lawyers of a credit the full. life masters the virgin mary i see this also made it to the

headlines here head of m.f. global resigned in wake of bankruptcy 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 oh yes i believe the pope is going to beautiful him in the state very soon beautiful beautiful eye he's 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. to have his old new do he's going to have no you know make up make over he's going to beautified he do same same course 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. 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. one of the everybody.

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 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 muskrat 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 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 christopher dodd included they were congress people and senators who received special interest rates on loans from mozilla oh that's right he made fraudulent loans made because illions of dollars and gave it to politicians to help them reelect them selves and he's off their sunning himself laughing his. who are some of the other martyrs the subprime crisis with dick fuld martyr well

dick. i'm so i'm sure considers himself to be a martyr he still doesn't understand yet 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 concert the transubstantiation saying 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 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 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 group on as 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 dollar ponzi scheme but when it was taken public of course the first day pop is critical and this is engineers 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 stock sell 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 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 courage because of course in washington most lobbyist insider trading 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 of fraud and welcome group on the biggest fraud of the week yeah the 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 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.

sure is that so much. of a real. risk without any eurozone leaders and national governments continue to be at loggerheads on how to rescue a currency. discovery. communicate with the wind. and become free. nature can give you. guys or this is the kaiser report i'm at the coke anomic found. 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 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 the kaiser it's ok to be here all right let's talk about this i know irish deal this is the really the talk of a conference so far so give us more background on this and some of the numbers and what's going forward while the background is really the anglo irish bank put them out as the destruction of the conservative banking system around the world is probably the most reckless lender the we have in the advanced economies during the latest boom which predated 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 multi-million you're 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 oh let me just cut in here how did all of

a risk you know measures get abandoned how did that what was their technique there how did they simply not be able to apply any risk analysis was like the rest of the banks they didn't have to do much of that is can also because the funding was very cheap sources alter with whatever you lose in the markets you can make back in terms of the margins in terms of the appreciation on the base which is a typical classical if you want a bubble so in some ways if you think about it not just think a large bank there were just more extreme case but the entire banking system in europe and in the united states operated like kind of like a fire and it was hosing out who were in out 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 cheap money goes out there to feed speculation in real estate and that real estate is used as collateral to perpetuate more loan. 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 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 want increases in acid 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 east into one particular class of assets in the case of the united states that was the class of for example to deal with two instruments in the case of the case of ireland it was the class of assets which are 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 and on price but

it was also diverted what 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 hide parts of the parts of the debt as well but even the parts from that we knew that it was the 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 it are them by the way in the last ten years on the been solvent for one year in terms of the current account surplus and this is what was going on the governments were continuously using the bacon system to borrow from the markets through them through the banks as well and there's a result with they encourage the banks to accumulate the liabilities of the state on their assets so that is not only. was a. and was an prized but it also got compounded by the fact that the school is

policed into if you want the books of capital it was treated this is the reason that the same time as the ok it's 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 make trix 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 is a 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 regulatory slush financial system around the world is that in effect will play in the russian roulette they have their own google loads and new bullets into the barrel so sooner or later we've had the entire bar loaded there 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 catastrophe happening were one hundred percent oh absolutely true the difficulty of course that is different from knowing expos stuff to the fact that the will. to help in this one 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. 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 their 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 because they're used to a credit card at 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're getting subsidized capital injections from the government and they can go and use these capital injections too if you want from the central banks at cheaper rates so as a result with. right now 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 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 bought more than three billion worth of the government bonds 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 that's all this is that there was a common. decline in the bonds in the hope continues to roll in over both in terms of the reputational knock on effect on the government that its claims to be and the . banks pretending that they healthy and the government in return pretending that the banks are healthy because that helps them to pretend that they are themselves

healthy isn't this a form of propaganda of course it is propaganda now people absolutely associate 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 us steady measures right european governments through these systems of corporatism that have existed here for decades this is the governance mode in europe over the economic policy and politics as well corporatism governance by consensus of interest groups and how they were chosen different than 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 dimensions or nationalize them and the european corporatism today doesn't have the nationalists that mention it is more benign but economically from a konami point of view the system of organization is 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 party even though despite the fact that the majority of them actually contribute very little to that economic pie most of their eyes economy is driven outside of the table and it is decided outside of that

they've decided by the exporters is decided by multinational corporations it's 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 court to be which on the right side is really what defines the sovereignty because we don't have army we don't know how boards think 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 to productive capacity of the economy and that's the the productivity of that the call to me that is precisely what we talk about the economic independence here the village to influence those dimensions those

components of economic you know if you want to be and that is the country itself 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. board 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 very sick 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 anti 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 the economy is outside of the euro zone are saying exactly that what we do not need is more integration which is artificially grafted onto the foundations which is so shaky democratically that the country cannot hold a referendum on something so fundamentally important such as 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 kilkenny 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.

pressure switches on the longest underwater gas pipeline in the world to pump fuel direct to germany and beyond making european energy supplies more secure. the un atomic watchdogs report alleging iran's running a nuclear weapons program has been published by the new york times earlier leaking of the i.a.e.a. documents contents and its timing sparked criticism from moscow russia says the report made tensions while the us was preparing new sanctions against her. and controversial italian prime minister silvio berlusconi promises to step down but only after the parliament approves the country's budget for next year and a crucial economic reforms to grapple with the spiraling crisis. as storm clouds gather over around we ask why a new war could be on its way it's all in the latest edition of the unknown a show from our washington studios.