good afternoon happy monday and welcome to capital account i am lauren lyster here in washington d.c. now the european union summit solution friday markets work cited for a day but now it's back to reality and it doesn't look like a good one moody's reiterate ratings of the eurozone are still at risk sarkozy says the loss of a aaa rating for france wouldn't be insurmountable people in latvia lined up to take their money out of banks and the o.e.c.d. warns industrialized governments are expected to borrow more than ten trillion dollars this year and may struggle to do so at the mercy of the markets animals

fear it. just when you think you can't get any worse. and speaking of bank runs it is the anniversary of the one that started in the u.s. in one thousand thirty credited with bringing down the banking system so what could stop that from happening today while people talk about jobs the deficit the president's plans is this silent threat they can bring down the economy we'll break it down for you and in a sign of the times no one has been immune to the real estate downturn the white house's value is slashed it's down three hundred fifty thousand bucks in the past thirty days we'll tell you about it let's get today's capital account.

friday markets we're excited about the eurozone summit solution for about a minute but today has realities sunk in that maybe this isn't an adequate resolution while markets are taking a beating and the organization for economic development warns borrowing by industrialized governments is on track to reach ten point four trillion dollars this year and it's forecast to go up next year to ten point five trillion dollars while markets may threaten the stability of governments that need to refinance their debt with their animal spirits so what does this mean for the euro the dollar gold not to mention the rest of us just trying to live earlier i spoke to peter schiff c.e.o. and chief global strategist of your a pacific capital here is our conversation. but let's just start with europe

because of course we saw them have this summit on friday there was kind of a brief breather where markets were excited but now it appears to be back to reality again today and the euro is down one point five percent against the dollar so do you agree that the deal failed and that therefore people are right to be leaving the euro and going to the dollar as much as i know you hate the dollar theater but i don't know that it's necessarily failed yet although if they were getting back to reality they wouldn't be buying the dollar they'd be buying gold of course gold is down today so i think people are still in denial but you know there's a mixed picture coming out of the eurozone i mean the negative part is that they are cutting interest rates they've now reduced rates back for more than a half percent to one percent i think that is a mistake they are they are providing more money for a bailout so i think is a mistake but on the bigger picture they are at least still at least maintaining a pretense of trying to restore fiscal sanity to the euro zone reason region

trying not to cultivate an even larger moral hazard in their they're trying to you know redo the eurozone with a more fiscally responsible framework they're trying to put teeth into the concept that individual members cannot have big budget deficits although the question is is the threat to put teeth a bit is it real or you know when push comes to shove will whatever these safeguards are will they be dropped at the first sign of trouble which is basically what they've already done i think europe should already have taken a much tougher stance with nations that have too much debt and forced governments to cut spending sooner i mean they're talking about doing that the future but i think they they should be doing it now and peter you know you said that that you still have questions there are questions that if this will be enforced there's still a lot of other questions too about if this really addresses the eurozone crisis and as you mentioned as a response we see gold down. today even though you say people are in denial but

does this show that during times of stratus people want something that they can settle accounts with and that's currency well you can settle you can certainly settle with gold gold is very liquid i think that people people are looking for the perception of a safe haven and somehow people incorrectly pursuit perceive the dollar to represent that safety but i think that this dip in gold is going to be a lot of buying that's going to come in i don't think that you're going to see a much more of the downside i think the smart money that that is nervous goes into gold eventually all the nervous money will go into gold when the people who are buying dollars wise up because you know the problems that they're having in europe are are they going to turn the eurozone into another united states because we have already set up a situation here where there is no fiscal discipline whatsoever so the worst thing that happens to the europe is that it becomes another america because we've all we've already gone down the wrong path we're going to have enormous deficits as far

as the eye can see they're going to be getting bigger and bigger and bigger and in fact we have a lot of individual states that are just as broke as many of these european sovereigns and you mentioned this smart money and where you think it should be going but i want to add bring our producer give me an f.n. because i know he has a question you want to ask about that peter so i don't disagree with you about gold i think gold is in a bull market i don't think it's anywhere near a bubble but you said gold to be settling gold and that's not true a derivative contracts debts are are denominated in dollars or euros or something i don't mean i don't mean directly settled where the counterparty will accept the gold but there always is a counter party who will i'm saying gold is one of the most liquid markets in the world and so you can easily turn gold into any currency you want so it's a lot less volatile and a lot of other assets but i've talking about yes if if you're in a transaction where the craft of the party. needs dollars to settle

a transaction yes you have to get dollars first but if you have gold getting dollars is very simple because you can sell your gold very quickly. ok just that going back to what you were talking about with debt deficit and debt and the problem there with the united states as well of course and europe you have the o.e.c.d. coming out warning that industrialized governments borrowed ten trillion dollars more than that actually this year it's expected to grow more in two thousand and twelve therefore these governments will continue to face the quote animal spirits markets as they threaten their ability to refinance but just looking bigger picture at this system you have bankrupt governments essentially that are trying to borrow from bankrupt banks that are bankrupt because they lent money to the same governments that want money from them and don't need those bankrupt governments to bail them out when they run into trouble so how does this even work it doesn't that's the point i mean what everybody was is for the federal governments to print money so they can print money and give it to the banks the banks could use the

money to buy up the bonds and nobody has to default but the problem there is the money loses value and so it doesn't matter that there's no default because you're not being paid back with anything of value that is the problem that is the flaw the fact that private parties whether their banks are private investors don't want to lend to governments is a good thing if governments are too highly indebted they shouldn't be able to borrow more money they've already committed their taxpayers their citizens to making payments they can't afford why should they go deeper into hock you know this is all they get the governments off the hook so they don't have to cut spending so they can keep on buying votes with government promises we need to allow the markets to do their job and to reign in all these excess government spending what we also need is for central bankers to do their job and stay out the central bankers not have to stop enabling governments to avoid spending cause because they my. ties all

the debt and that is the argument that they're having in europe right now we've already lost that argument in america the fed is already monetizing all the debt and so we've already lost americans have been sold down the river at least in europe you've got a chance that this might not happen now of course it's not a guarantee but it's a chance they get to confirm just a hair of this point home to you do you believe that this is a game to get the central banks to print money to give to the banks so that they can continue to grow at the expense of everyone else the rest will not just only grow so they don't lose money all the speculators all the bankers the finance seers they all want inflation and that's what they want and they they want to be able to invest money without losing it they want to be able to get all levered off make a bunch of profits so they can make big bonuses and they want the governments to keep it all going and make it all possible meanwhile these policies are undermining the real economy these finance ears. that are trading paper aren't creating any real wealth so there's no real productivity there's no jobs standard of living is

are going up because bankers are getting rich in fact because the banks are being propped up the economy is never going to really grow we're not going to produce the type of wealth that leads to rising living standards for the middle class to do that we need capitalism we need sound money we need sless government less regulation but we're not getting any all of that but then what does m.f. global say about the need for regulation and that is the question i asked peter and we continued our conversation we will have more with them but for now that was c.e.o. and chief level strategist for europe if it capital again peter schiff. all right it's time now for word of the day where we break down a financial term or concept for our very smart viewer just maybe not the financial

expert in the audience and today it is bank run and given that this happened in latvia over the weekend take a look latvian authorities monday said that a run on swedish banks in latvia was started by false rumors and destabilizing the country and that its police forces were investigating the matter now latvians if you didn't see this story withdrew large sums of cash from swedish bank machines reportedly after rumors that they were in trouble which circulated on social media like twitter oh the power of twitter that aside it is also the anniversary today of this headline from one nine hundred thirty let's take a look at the bank of us closes its doors state takes over affairs aid offered to depositors why did this happen because a bank run so what is a bank run exactly it is this a situation in which numerous bank customers twi or withdraw their bank deposits simultaneously and the bank's reserves are not sufficient to cover the withdrawals

so going back in history back to that date on december tenth one thousand nine hundred thirty a large crowd gathered in the bronx to take their money out of the bank of the united states now it is usually considered that a bank run that this bank run started the great depression and the new york times reported that it was started because of a false rumor now this bank failure was reminiscent of more that it occurred the run on the new york trust companies which sparked were sparked by this one the knickerbocker trust company and you see that it closed its doors. what happened in one thousand seven after a run on the bank and it along with the panic of one thousand seven was the prime excuse used for forming the federal reserve in nineteen thirteen now let's take a look more recently because in recent years we've seen the run on northern rock in the u.k. and of course washington mutual here in the u.s. where depositors ran on the bank causing it to close its doors and the government

to step in and ensure deposits now this is just retail banking that we're talking about but you also have runs these days on money market funds and investment banks that we've seen take a toll and bring down banks like bear stearns and lehman brothers now why is a bank run a problem so the big question right because banks by their very nature never have the money on deposit to meet all of their outstanding claims and liabilities that's how fractional reserve lending works you lend out more money than you have so if everyone comes to get their money at once or even a small fraction of people come to get their money all it was the banks suddenly becomes functionally insolvent very quickly and that is why a bank run is so detrimental. still out here on capital count do not go away in the market for a house if so we have the deal for you ok so maybe the white house isn't for sale but will tell you why you could be interested if it was and first your closing

market numbers. into only a military making it seems to do the work to bring justice or accountability. i have every right to know what my government should do if you want to know why i pay taxes. well i would characterize obama as a charismatic version of american exceptionalism.

a little. kooky. welcome back so in that debate between whether more or less regulations are needed to grow the economy is m.f. global a sign that tougher regulations are needed to keep firms from dipping into customer cash and we saw another g.o.p. debate over the weekend we've heard more from president obama but does either party have any idea how to really create jobs and grow this economy here's what peter schiff had to say. you mentioned the bailouts you mentioned too big to fail and so these banks are still able to take these risks and that sort of thing but what

about the case of global because that's a firm that wasn't too big to fail and they possibly dipped into customer money and order to avoid you know be illiquid and those final days before they went bankrupt so in a case like this is there not room for regulation to avoid the misuse of money like this i mean that that's customer money possibly well first of all the regulations already exist that make all that illegal so i don't know what new regulations the government could pass i mean are you going to pass a regulation is says you have to abide by the regulations that exist because you're already made your your regulators for fines or you give them the tools to better enforce them i think maybe corazon thought he was too big to fail maybe that was a problem maybe because he was so well connected in government that he figured he could do this to get away with it who knows maybe he was doing this and goldman sachs and never got caught i don't know but you know i don't think this is a good example i mean this is a pretty corrupt guy he's been in the senate he's been

a governor he's worked at goldman sachs look i've i think that these big for arms that have cozy relationships with the regulators i have no doubt that john corps i was pretty friendly with the people who are regulate the financial services industry so they probably give them a pass i mean i think that the problem with most of our regulators in finance whether it's the f.c.c. whether it's finra they spend all their time on the little firms like mine that you know that the big firms can get into all sorts of stuff that there is no regulation at all the markets would let him get away with because they faced a lot more competition from other firms but the problem is all these rules and regulations prevent smaller firms like mine from growing they prevent a lot of other firms from even ever getting started in the first place so you've got these huge too big to fail firms that are doing a lot of things that they probably wouldn't get away with in a free market meanwhile government rules and regulations are not going to. stop the bad behavior if anything they're going to make the bad behavior worse they're going

to encourage even more of it but i want to talk about if those regulations weren't there and people were just letting the free market do their thing letting firms do whatever they wanted how is bankruptcy and now for the deterrent to keep banks are firms from taking outsize risks but remember the free market wouldn't let banks do whatever they want because nobody would be dumb enough to put their money in a bank if the bank was just going to do whatever it wanted you know the reason that we put our money in the banks and don't care what the banks do is because the government guarantees the account so nobody cares in a free market people would care and so the banks would not be able to do whatever they want to cause they would have any deposits they would be able to borrow money from their creditors so the best regulation is an unfettered competitive free market and where you have you know the counter opposing forces of greed and fear and people are doing their due diligence but when the government comes in it creates this huge moral hazard because it draws a wedge between that and so nobody cares and you could you could put all these regulations on that you want i know sort of that customers at m.f.

global who have their money frozen despite all of these assurances you're talking about care but i don't want to belabor the point in my view i want to sort of thought the government had their back you know that to perception is any kind of account that you have the government guarantees it these days and that might be a good point as well i want to move on because i do want to touch upon the g.o.p. debate with you because obama is out doing his thing i know you've been very critical about the things he's out saying and at the same time you have the g.o.p. debating and the first question to them the big question for the last debate was what are you going to do about jobs and mitt romney is the only one that has numbers that he's given predictions about what unemployment will be under his plan and i want to tell you first show you why he thinks this plan will work play a little bit of that. having spent my life in the private sector i understand where jobs are created they're not created in government not created in washington they're created on main streets and streets all over america and to help make it so that he outlined his seven point plan including cutting regulations cutting taxes similar things that kind of all of the g.o.p.

most of them the candidates are pushing for so my question he says that it will create eleven point five million jobs in four years bringing down unemployment to six percent peter is he wrong to be making these kind of predictions i mean we see predictions come out of the white house the fad they're always wrong yeah i agree there's no way that he can know that it's going to be exactly eleven and a half million jobs i mean he is right in that we need to private sector to create jobs and we need the government to get out of the way but he shouldn't promise any particular number of jobs that will be created over any particular time frame what he needs to promise is relief from government if we have fewer regulations if the government spends less if we can reduce taxes then we're going to have a more vibrant economy and we're going to have more jobs but exactly how many more jobs there's no way that that mitt romney knows that but i think you know more important than what was going on at those debates which by the way i think ron paul won hands down i think he had his best debate. on saturday night but i

bothered by what the president said on television on c.b.s. on sixty minutes where he basically came out and said that he views his role as president to do what's best for the vast majority of americans but i don't think that you have evidence of doing things that are best for wall street and corporations so you and those are the vast majority of americans better when they quit their job that really high drama at a time he really got he's there he's there to protect the rights of the minorities from being oppressed by the majority he's the president of all americans he's not there just to pass things that benefit the majority but that benefit everybody he's supposed to ensure the blessings of liberty to all them. it's not just a was it vote for him. again major point peter i just really quickly we're almost out of time just one minute i just want to get this question in to keep this going because you mentioned the things that need to happen the role of the private sector being freed up to create jobs but do you think that anything will change and be freed up and there will be growth and jobs added if you don't deal with this huge

overhang of private and public sector debt that is becoming more and more expensive to pay so you're right we've got to deal with it you're right we're not dealing with it there's not going to be any real job growth i'm afraid that eventually the government might start hiring people but that's going to make us poor that's not going to make us richer because the government workers are going to produce anything we're going to have to create a lot of inflation to pay their salaries everyone's going to get poorer and even if you still have a job it's going to feel like you're the cloyd because you're not going to love by anything. that no one is really talking about that except you dear hear that from ron paul and actually peter schiff said he's on his way up to washington with the request of ron paul to educate congressional staffers on the business cycle so we will bring you any details we find that for now that was peter schiff c.e.o. of europe pacific capital.

now whether you think government is the problem or the solution when it comes to solving economic problems here is one story that will show you that hey the government is impacted too by the economic problems we face as a country in the united states i want to bring in our producer dimitri kovtun us as well as shannon dano to talk about that story along with a couple others because the white house isn't for sale but if you look at its property value it is declining just like the rest of real estate it's not immune to the downturn and zillow well first of all i should probably set this up a little better basically want to make the point that no one is immune to the tidal wave of the real estate downturn take a look. so

there goes there goes the white house now it's not being destroyed yet but below an online real estate market place now values it at two hundred sixty three million bucks which may sound like a lot but it is down three hundred fifty thousand dollars in the past thirty days dimitri i don't know i've been to the white house the upkeep isn't that great that thing was the really expensive to maintain i mean you know if he if if obama did take out an adjustable rate mortgage then he'd be in big trouble i mean even a small drop like that could possibly through the entire property of kilter you know so what we saw there in that video that wasn't exactly a correction that was kind of a crash if you like that in a small correction and if you go to just pull rates he's in big trouble here's the thing though two hundred sixty three million dollars even if the white house was

underwater the toll in the price tag for taxpayers would be so much less than the housing related bailout that the taxpayers had to foot with fannie mae and freddie mac. that's true that's actually that actually is true and nothing to say about the terms of those the banks get in ongoing subsidies and cheap loans and loan facilities and by the treasurer's yes it was a three hundred fifty thousand dollars decline the only thing that i think is interesting is that we hear so many stories and facts that washington d.c. is kind of more immune to dips in housing because of the government money because of the contractor money so i think it's interesting that even the white house is declining shannon why do you think that is. i think i mean if this is gone down in the past thirty days someone must not like the christmas decorations. there you go is it on target for those those tours or because the most tours because i'm like you know washington but you and should have been for a while right years ago on little get you hooked up dimitri because we have so many connection switching gears speaking of connections here is

a very well connected firm despite the fact that it is had several name changes as well as several horrible stories it would bring you you would think would bring it down and it's certainly taken a toll on its reputation before we look at the new name let's take a look at this company's original name. so blackwater and if that name escapes anybody then you've been living under a rock so then it was called z. and now it will be called academia this c.e.o. the new one said that it is going to try to be more boring come on how many name changes going to company go through before it just come on one of the business of murdering people and. basically spilling blood all over the world which is what blackwater has been doing and they're doing yeah i mean these guys are in the business of the hired guns they murder people in particular by murdering them remember in iraq they would stop at nothing to protect you know the people there

care about men just murdering iraq is no problem so i must present chosen blackwater dizzy and not the what was the name i get danny i could there could be me whatever the hell i mean so what i want to know is why do they still need to fool people the government is still going to give them contracts regardless of the name even when it was it was you know when we would go to hearings they wouldn't even though they were doing bad things they got the officials i would interview would not say that they were going to you know stop extending contracts to them which is just an interesting bit of irony we don't have time for this but just to give you a little insight into how payouts work the retiring c.e.o. of trans atlantic which got bought it was a part of a i will get fifteen million bucks for continuing dedication to the reinsurer basically just for retiring this is just a very cushy package to just have a smooth transition best job in the world. yeah like a return to the kind of money and when you think you just are retiring. i mean i definitely take that money they save their money and run baby it also pays and they

are ladies that's all we have time for today thanks so much for watching our show feel free to follow me on twitter at lauren lyster give us feedback at youtube dot com slash capital account and from everyone here have a great night and we will see you tomorrow. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought you knew you don't know i'm tom part of the pacific ocean.

thanks. well. science technology innovation all the latest developments from around russia we've got the huge earth covered.