good afternoon and happy friday welcome to capital account i'm laurin leicester in washington d.c. and another day another euro zone headline good signs bad signs the headlines may change but the economic picture remains the same as for europe's closest economic partner the u.s. with financial problems of its own well president obama is making deals with asian countries at a summit in hawaii that say it all meanwhile the u.s. continues to be dragged down by the housing market the government has poured billions of dollars into mortgage giants fannie and freddie since two thousand and eight is taking them over now another federal agency involved in backing mortgages

is in trouble and could need a bailout would this be a better solution. all of our guests deciding and taking on wall street washington may not be doing that so this matador you see i'm is behind me you'll see more of a he's taken the bull by the horns let's get to capital account. so the eurozone crisis the debt crisis is apparently schizo chronic or at least the markets and the headlines in response are schizophrenia take a look at this first i want to show you the front page of today's financial times

which says if we have the ability to zoom in on that those markets undermine euro zone rescue bid let's look at headlines from a little later today all right let's bring up bloomberg stocks rise and. because of italy vote so now stocks are rising because of the eurozone crisis and let's go to another one later from the financial times today said markets rally as euro zone debt fears ease ok so in a few hours apparently the entire situation changes so let's put this schizophrenia aside and the obsession with what every investor or traders move means and figure out what's really going on and we have just the guy to help us do that michael pinto president of patch of portfolio strategies says he's got it right on europe so let's hear what you have to say michael it's nice to see you. oh. ok just do just real briefly so you can do your what if you got it right what.

you're involved. in the. ok arsonist eurozone crisis metastasize. i don't want to seem like i don't want to kind of person let's. say you know not on my goal but i want to you know you glasses think you know. ok let's move on from that i don't know how to respond to that but i appreciate that very nice we're throwing off here let's go back to those bond yields you were talking about you said they they would rise they've definitely risen let's talk about italy because now people are suddenly calmed by the fact that they have gone down below that seven percent threshold there's rumor that it's because the e.c.b. it stepped in first of all do you think that that rumor is accurate of course. as friends you carry so much like paulson care. which as you remember was supposed to rescue. and remember if you can.

also use it because it's all the commons it's not hard it was insolvent nations this is no europe it was about. the united states so when you consider all these you going to fire and they fired the housing market hasn't done anything and yes. you want you want to. yeah fannie and freddie are still sucking billions and billions of dollars that are really again dealt with and still unlimited paid for in the u.s. treasury until two thousand and twelve and it back to europe though so you're saying that basically italy is no better off today than it was a few days ago when it's yields were above seven percent. well here here's my problem i've got plenty problems but here's my problem with the euro zone so italy has two trillion euros in debt their debt that she is one hundred twenty percent

they are one of them so you know when you are in the dead of a nation you like to be able to believe that you can get if you get the heat at some time in the future well the market in europe started in greece and now it's went to italy starting to spain france working for the party to say i'm not going to get repaid my principal and hence i'm a loser a much higher interest rate a much higher priority on my part so interest rates went from almost three and a half percent a year ago just seven had were sent in one year so little italy and greece probably greece to yours over one hundred percent they're telling you that they're not going to get paid back their principle not me tell you it's the bond market so look here is how the universe of the wall street is not all this makes me

want to go down there i think i was free actually i could buy the rich more. here's the kicker here's the instant stupidity of wall street and bull's eyes it led so the central bank prints money massive amounts hundreds of billions of euros and trying to get the best they are doing that no one knows they are about and so you will sort of come down on the other forty seven after six and then at the head but let me ask you this when you find one you want while a real after tax return which means you factor into inflation how could you create money in creative solution and bring us down forever can't happen can't abear i don't know us yields are going down for a level that's another situation i want to get into that i want to get into by actually because we're seen and. heavily affected by what's going on in italy but i want to look back a little bit further i want to bring up a chart for our viewers if we could because i want to show how you can see that

drop in french yields in summer of two thousand and ten and that's when there was a lot of turmoil in greece and great deals were spiking and everybody was running to french bonds now you see in response to italy french bonds are spiking now this is something that michael meehan our producer dimitri who you know you're talking about today and i want to bring to me terry into the conversation because i know he wants to ask you a question about this so if you're in three fire away oh my god you're gone so my question is the exactly what we saw was in the french bond market we saw yields drop preceeding the also a bailout in greece which was an indication that people were seeking safety in french bonds along with german bonds and perhaps u.s. treasuries but this time around we're not seeing that we're seeing the opposite reaction and to me the concern there is that people no longer view france as france as part of the core and of course opposed to bail out the periphery of through the surf and these bailouts that rely on this artificial aaa rating how how how.

what sort of threat do you see for france and for the core of europe and the eurozone how quickly do you see that possibly developing as a form of contagion from italy to friends while you write as i claim to be your crisis was metastasizing the ireland italy now the only two countries that have some of the work in germany you know they're good as a percentage of these clothes. so it's not they don't have any and there's a limit to how much they can. the millions and they are not able to find or probably. the only way you can do that these through this. the monsoon season. storms through completely and you create a solution but. it's

a matter of physics or. hard when you create a solution so price. revolt the crisis in german well there you have it so you think germany is the next place we could start to see bond yields spike as this continues to go on michael there's so much more i want to get to with you so all that but hold that thought we're going to come back but first i want to actually explain to our audience what it means to monetize bonds like you just mentioned and i want to talk to you more about all of this just after a short break that's michael pentode and we'll be back with him in a minute. all right happy friday it's time now for word of the day which is where i break

down a financial term or concept for a very smart viewer but maybe not the financial expert in the crowd so where's the word of the day and we want to buy or you i'm going to give away a word of the day there's a word now everybody knows we just want to you walk on set and that's what we. were just kids school that's what i enjoy every day so you're ok with that that's probably all right because i know some of our audience is ok with out of the group ok fred i. think stars rose the word of the day is monetize and i understand why you need to know it aside from the fact that my guest has talked about it look no further than the european central bank's version of quantitative easing or bond buying under a program to ask and p. let's look at what their head says the s. and p. currently has just under two hundred. billion euro. in total vonda holdings does anyone really think germany will allow the monetization fund to increase by one hundred and fifty percent before merkel says something well we're going to leave

that up in the air and not answer that but we can look at what it means to monetize the signal of the definition it is to convert into money to convert from securities into currency that can be used to purchase goods and services now remember securities are just debt in the form of bonds and monetizing them is turning that into money and central banks do this by printing money and using this to buy government debt so let's return to quantitative easing but this time by the federal reserve and let's take a look at their balance sheet so take a look at that since two thousand and eight you can see this huge expansion on the right what is that that represents the amount of debt that is put on its balance sheet that that that it has a monetized so let's bring up our little paper shredder so i can show you this in action so what happens is in the case of q.e. which is a type of monetization the government sells bonds and it sells its bonds its debt

to this central bank and what happens. look at that it turns into money so the bank takes those bonds buys them it prints new money it creates that money out of thin air turning the government debt into money look at the financial alchemy i think we all started it quite well and now you know what monetization is. and stick around right now top look out don't go away because we'll take a look at the u.s. economy could the federal housing authority be headed for a bailout and as far as jobs are new jobs created quite literally temporary but first here closing stock numbers.

go to the counseling countered by more or less for.

let's not forget that we have an apartheid regime right now. i think. want to well. we never got that says they're going to keep you safe get ready because their freedom.

welcome back so we talked about the eurozone crisis but what about this situation for the u.s. at home while u.s. housing still appears to be in tatters which is showing up on the books of more federal agencies that have stepped in to back it up and wouldn't you know may end up needing bailouts now obviously the u.s. has already poured billions of dollars into fannie mae and freddie mac. since taking them over in two thousand and eight and the us treasury i want to remind you as promised them on limited aid until the end of two thousand and twelve basically a blank check well now a new study has come out showing that the federal housing authority totally different agency which backs a third of all new mortgages is facing losses of fifty billion dollars in the coming years and could end up needing a bailout they guarantee

a trillion dollars in loans just to give you some perspective now meanwhile as for the jobs market the gains that we're seeing are looking very literally temporary we're going to talk about this i want to bring michael back into the conversation again he's president of. strategies so mike i just kind of went over what's going on with f.h.a. of course the billions of dollars that have poured into fannie and freddie the housing market which is still a problem i want to ask you if quite literally this video shows the solution. thank you thank. you thank you thank you thank you so they have you destroy their houses so you decrease the supply and you put out more pressure on the prices and at the same time you create jobs and demolition as a present really i mean. this is it's a team effort michael by what you say that i came up with it means to me that ok so

let me just make one. so here's here's an example of why. much so we had a housing bubble which was in general silly ones that people who you know was this taken out and gave them back so here's an example. heuer is a program where the government will insure the words and these mortgages require how much percent down three and a half percent they are ok so. one of their. courses and they come from taxpayers as always that's not our only interest your solution to the housing market i know you get one part of it you would increase the supply and verses were roses but i never figured it was falling out and he will actually it was. always that us and he says it's a band and even one case is very obviously he's that he was talking about so if

those are things that are destroying those assets and years the balance sheets down to zero and that these are counterfeiting on the part of government there's still a balance sheet there obviously there's a completely vicious cycle and the other part that you didn't address was those workers that are going to have jobs from the demolition i think a good deal. we're going to. but i want them to be. the one that actually increase the living standards of americans. in houses. solution to war sixty percent six you don't think i sure don't but let's talk about what is viable because right now manpower it's a staffing firm they do recruiting outsourcing all of that they came out saying that companies don't want to hire permanent employees they want to hire temp

workers because it's too expensive to go through needing to cut costs and layoff permanent workers that whole thing it's just easier to hire temp workers and then fire tempers and we see that in the b.l.s. report in october the trying to professional employment was because the temporary jobs that were there were added so i mean that's not a great job creation and i dare not. to see. one of the. one. i don't want this. in you know. of labor but. something that is. ok but what is the problem here that is the problem that it's just too expensive to hire and fire permanent workers that that's what companies are worried about i mean you just started a company is that a huge barrier that keeps you from hiring workers. i'll tell you one thing if i have to use a. huge supply of health care and i have to go through all of that he use

oh obama's health care program and try to understand and try to stay out of trouble with the regulators on. the higher. it goes with the castle with another grace of god. on my head so it's too expensive. it serves better services and her ecology to figure out how to stay out of trouble with that show and do that and all of the implications of this new regulatory body and then just the other people understand it and then when you were standing ten people were right i want to respond to that so then is this why this same staffing company said that china is becoming one of the highest yield markets in the world for them outside of temporary service. well you know what i mean we have

to address the real problem the real problem. is that we have too much that the public and private sector level and you're going to all of these other imaginations try to program you should still in the economy we need to do better on the public and private sector level if we're able to do that once we represent a rebound once we. clear the balance sheet of the government and the consumer then we'll be able to rehire then we'll be able to have a worthwhile recovery and we do that we're not going to have a sustained recovery and that's pretty bleak that's going to take a very long time to do three hundred percent debt to g.d.p. with the private debt at the high and the u.s. and of course hundred seventy three percent of my funds are out of time i got to go but i appreciate everything we have been able to get you in our america today had a great weekend that was michael sent out he's president of pencil portfolio strategies.

all right we've talked about the bleak housing situation the bleak job situation the bleak european situation so we want to give you a happy friday so let's end on some slightly less bleak and more off beat financial subjects so here to help me do that is to me a trick of us our producer and c.n.n. donna our other brilliant producer in the control room is multitasking today and we know that the income inequality has been increasing in this country and that the rich are getting richer and we've in the last couple days looked at some of the things that they could possibly spend money on some of the things that guides are hawking but this is one that just really blows my mind as to why so

a chinese researcher is promising us. panda tea which is thirty four thousand five hundred dollars per pound it's made by fertilizing tea plants with only the excrement. so why in the world is the most expensive at all involved with x. from this is funny. story a couple weeks back about how this guy in ireland was trying to live his crop on fire he was on yeah i was going to turn into gold and now we're seeing people turning the crap into t.v. but this one works this alchemy works people are actually i guess going to pay what does this mean i what i think is interesting is that we're looking at the we're heading into a period where researchers are completely across the board right from the rising this is the private sector saying we're going to find an innovative way to produce these commodities to use our we're going to use craft gold we're going to use crack

i'm going to take. time we're going to find a way. where you think that. we . can. come on that's so brilliant about this i mean this is real incredible innovation of our effort and just a little fun fact are you guys that rivals the most expensive coffee ever which is basically nothing but again the beans from the asian. somewhere cat sitting on the subject of toilet humor that's probably a little inappropriate for t.v. but we're going to do it anyway here is another thing that is fueling a motorcycle it has the toilet seat for a seat and it's developed by a japanese toilet maker and this runs on eco friendly bio gas produced from this

sewage we actually have a clip. of what we did. t.t.t. . so again crap is the solution to economic problems with gas prices going very uncertain with everything is going that's going on in the middle east the persian gulf it has been with us talking more bombs to the persian gulf to counter iran there you go don't worry about oil prices just power your ride again with sal coming of crap remember we have. we wrap it up the show and she actually said it would be the solution to the world's energy problems and i'm correct except it's like. who coming out of japan and the japanese or history or are culturally attached to prove their there's kind of called ok have a whole thing of obsession in their culture with it's actually true the very innovative talking for let's move things chant and get anything on this. if you

know what. it's like. just actually i think there's got to be some sort of. public right but that's a good that's a good point how does this work with decency laws all i know is that only the japanese could make it look at this school and you can use less oil driving like on the airplane you're flush while you're on the runway. i don't know but moving on to something slightly more appropriate leslie devolved into a complete crap party and take a look at this because i say i don't know if you have a i guess we don't but we know that people are complaining that washington won't take on wall street so a matador went out and took a bull by the horns and nary a c.m. he this was a occupy wall street activist reportedly and there were clowns there were poles and

i was just the best way to take the bull by the horns this are small you know what he's doing here he got out of the car. and he has this cable news telling the bull which is going to really waltz through the bankers are going to get it come here isn't it because the police are so immense and they're so they're so incapable that they can go on the rest might as well made a matter of do for and you know what we don't have to listen to our description i can play this clip real quickly. ok. you know we didn't want to decry you that artful reel in action exhibition of that and we'll leave you out that happy friday can that's all we have time for with our show thanks so much for watching please feel free between now and monday when you see it again to follow me on twitter at lauren lyster and give us feedback on the

show please that you tube dot com slash capital account i'm more on the story from everyone here until next time have a great. culture is that so much i was reading because you know you have a real pleasure and still is trying to make is the one hundred those massive economic future you can which will shift as we change is the china take on if we don't.

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