one of the the b. took on ratings agencies in a speech today advocating more scrutiny and he assigned them this power craze reaching it down the road being booked on the markets functioning in the wider economy. but do they really well take a look at how the u.s. has performed since its credit downgrade and the laundry list of others that have defied the ratings agencies calls and with the libya mission over nato is turning to a new front providing a new revenue stream to feed the coffers of u.s. military contractors meanwhile a german corporation brings on the former us the nato commander of the afghan war to try to expand efforts to fill its coffers with the u.s. government contracts will dissect the art of war profiteering but now let's get to today's capital account.

happy monday and what can i tell you thousands of government workers reportedly are striking against austerity in italy today and portugal gets the next installment of its bailout loan from the i.m.f. and exchange for good behavior on budget austerity of course meanwhile mario draghi is quoted front page of the financial times warning about the eurozone break up downplaying expectations about the role and warning that struggling euro zone countries would face greater economic pain if they left the eurozone but how much would they and could these countries actually use their debt as a weapon against the technocrats and euro zone politicians meanwhile druggy today also warned that the e.c.b. is preparing for a downgrade of the bailout fund and of france's aaa credit rating but we want to

take a look at how much stock we can put into the ratings agencies called in the first place here to help us with all of this is investment advisor with pacific capital his better known to the blogosphere and to people who know him as mish and we're really glad to have you on the show today it's nice to see you let's get started with this whole euro zone solution because i want to look at how it's coming because drug gave this speech today and everyone said pretty much the only optimistic thing that came out of it was he said ok this fiscal compact is a good thing he downplayed expectations for the e.c.b. but now as far as this fiscal solution we have the i.m.f. bailout which they can't come up with the money that they said they were going to the u.k. said that they're out of it and italy cash strapped italy is part of it so does this kind of show that maybe this euro zone solution is coming apart at the seams. well that's been going a part of the same as ever since they launched a new keep going around doing something that i call ring around the rosie here

where they keep proposing the same solutions over and over and over and here's where the i.m.f. and we had the best we had various bailout agreements now we've got this very cosy agreement that imposes austerity the problem is these austerity movements are going to make matters worse look at the unemployment rate in spain twenty two point eight percent you've got an unemployment rate in greece of eighteen point three percent we've got unemployment rate high and rising in italy and we're going to impose austerity measures you know we need work rule changes we need structural changes within the e.u. the tariff policies the agricultural policies the tax policies everything is horrendous but the solution is to turn everything into your own of the zone which is a socialist state with with funding and germany's essentially said no to that and they keep having to come back and say no no no i'm they thought i was there they have to

say no to euro bonds before these european ministers give up on it you know i think i think a lot of times met i think we're going to see them keep saying it but my question because you mentioned the austerity and of course we see protests on the streets of italy we see the impact of this austerity and portugal even though they got their next tranche of the bailout from the i.m.f. you showed an article on your blog where you talked about what some of the leaders of the socialist party were saying which is hey this debt is an atomic bomb that we can use in the face of the french and germans to fight them and that's the debt do you think that there's any legitimacy to the threat of default and using the debt as kind of this act of war for for indebted nations of course it's a genuine threat how can you think anything but i've commented on my blog several times that eventually some politician in europe is going to stand up and say you know we're not. we're going to bail out of this union we're going to declare null and void all of these us thirty measures we're going to declare this debt no one

void it's going to happen it's happening in greece right now and it's just a matter of time i think i can even fathom here what's going on in greece with with interest rates of short term interest rates of over three hundred percent yet you keep giving more bailout money to greece essentially so the greece can turn right around in fact german and french banks it's a blast the scheme what else can you possibly call up well then here's my question to you in what situation do you think there is any that we would see the ethiopians step in and monetize this debt because that's what the banks really want to do that is certainly not with the best for them and that's certainly what france wants them to do that's what italy wants and it's what greece and spain wants them to do whatever that is not what austria wants to do is know what germany wants it is not what the netherlands wants to do then lend it is at risk of rejecting this entire

proposal here right now on an eighty five percent rule the curse of the merkel is here grima between search and an chancellor merkel was wasn't oh if things don't have to be unanimous anymore it's going to be by consent degree of eighty five percent spent on is rejecting not this thing is splintering apart in many many different ways take a look at the elections going on right now in france it's a two state is election i think serco zs going to be ousted hollande which is who is likely going to win the next presidency of france he's come for it out and say they're going to rework this treaty so we are talking about reworking this treaty lauren before inside so you don't think we can bank on this treaty collaterally that's very clear that you don't even think their code is going to be any. i just call them sir cozy because we've been met melding these names so much sarkozy

excuse me but i want to talk about draggy because since he started downplaying expectations of monetizing the debt we've seen gold fall i'm curious what you think gold is telling us well what we've seen right now is temporary gold is falling for several reasons first the united states came out and did not do q e three that people expected in europe in spite of all of these various attempts by the e.u. officials to get germany to agree to print they've said no no no the market firmly set ok germany is not going to print eusebius not going to bail him out the money is not coming from the i.m.f. . we're going to have this forced austerity and deflation in europe meanwhile if the united states doesn't print and china has done nothing but try to in the property bubble over there so we're actually seeing relatively tight monetary

stances here in the united states in europe in china versus what the expectation was going into some of these summits versus expectation but not versus maybe kind of the lowest bar that you could compare it to because some would say that they've really done a lot. i'm sure you might be one of them but you know there are so much more i want to get into because i want to talk about the ratings agencies but we are out of time right now and i also want to get to you on trade so if you could just stick there for one minute i want to explain something to our viewers and then we'll get right back with you that was that investment advisor mike said lot better known as mish. 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 but just maybe not a financial expert and today given our conversation it's very fitting because it is

and p. which stands for securities market program you'll see it there and to see how people are talking about it now let's take a look at an article in the financial times where central great bank president mario draghi is quoted as saying we have not discussed a precise and narrow for the s. and p. as i often said the s. and p. is neither eternal nor infinite so what exactly is this neither eternal nor infinite s.n.p. well we put together this definition from the european central bank's documents and it is this it's essentially a bond buying program that was formally established on may fourteenth two thousand and ten by the european central bank the official purpose of the program is to address the malfunctioning of securities markets and restore an appropriate monetary policy transmission mechanism ok what does that mean because that one actually sounds like gibberish and we do some very generous oriented definitions here ok let me break it down basically malfunctioning of securities markets is just

another way of saying really bad bond auctions and starting with greece and having moved all the way to italy we've seen that investors are no longer willing to buy the bonds of a highly indebted member states without receiving higher yields in return now this is driven up borrowing costs and what is it done it's forced the e.c.b. to step in and buy bonds in much the way as the federal reserve has done with q.e. one and q.e. two and order to keep these countries from defaulting here you can see it i want to show you how it how it looks on. this graph because day to day you can see the e.c.b. is buying of bonds for the s. and p. with that at that proportion but then if you look at this black line this is the cumulative amount that the e.c.b. has taken on the purchases and that's over two hundred billion euros so now there are questions too as to whether or not this is even constitutional because article

one twenty five of the lisbon treaty explicitly states that the e.u. shall not be liable or assume the commitments of central governments ok so that seems pretty straightforward right they're not supposed to do it well except the e.c.b. claims that pursuant to another article article one twenty two countries like italy and spain are encountering quote exceptional occurrences beyond its control and therefore the e.c.b. is within its rights to buy their debt well i don't know if italian government racking up a huge credit card bill was out of its control but it definitely wouldn't be the first time we've seen governments and central banks get around the law to do as they please as to who this benefit well if you're watching this show you probably already know the answer to that when there is a hint if you need it and now you know what the s. and p. is still ahead don't go away the united states is in a trades bout with china over chicken feet literally full of broader phrases you

are much more is growing among nations will fill you when the first your closing market numbers. just put a picture of me when i was like nine years old on the job with true. i confess i am a total get of i love rap and hip hop is pretty good. but it was kind of a bit yesterday. i'm very proud of the year has played. oh oh oh

oh. oh oh. you know sometimes you see a story and it seems so you think you understand it and then something else you hear sees some other part of it and realize everything is ok. i'm sorry welcome to the big picture the subtle. what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one. is imbued with a global mission origi where we had a state controlled capitalism is called sasha's when nobody dares to ask why we do our t. question more.

the so. welcome back ok the u.s. and china are literally in a spat over chicken feet and it's what you think it's actually chicken feet for years the u.s. consider them excess parts but in china it turns out they were popular snack so the u.s. began shipping what was essentially worthless chicken feet to china well then china began imposing duties on those chicken parts the u.s. didn't like it struck back over the last revenue stream and is asking the world trade organization to enter the now we see this trade and currency is constantly seeming to be an issue between the u.s. and china but the bigger picture reportedly countries couldn't agree about global trade at a world trade organization meeting that wrapped up over the weekend now there's a lot going on and at best minute visor with sick of pacific capital might shed

lock mitch has a really interesting take on some of this trade stuff so i want to talk to him about it so michelle want to bring you back into the conversation but first i didn't get to the ratings agencies with you before the break and i do want to talk about that because we heard president of the e.c.b. mario draghi today coming out saying that the e.c.b. is preparing in case france gets downgraded preparing that then other countries will be downgraded also saying you know hey maybe we're giving these ratings agencies too much weight maybe they need more scrutiny more regulation my question to you as do investors care what the ratings agencies say anymore not anymore you know the rating agencies have blown it they've been thoroughly discredited i mean some of the big ones maybe some of the independent guys like you can jones maybe investors care what they say but essentially the big three have just been ignored here recently when there are some people came around the united states it was really a nonevent in fact i said in advance that it would be a nonevent on my blog but my gosh the problem with the rating agencies is not that

they need more control the problem with the rating agencies is there they were government sponsored by the sec it was the f.c.c. back in the then annoying to the big three the rating agency. used to work on a model whereby they got paid on the basis of how accurate their credit ratings are yes c.c. came in and said oh my gosh everything must must be rated here now so this is so these agencies go in instead of paying on the basis of how much debt they were rated so when you get paid on the basis of how much debt you're rated well you get to rate more debt and you have more people shoving debt to you during when your lucy gives you with the ratings so and out of the negative chair is quantity over quality i want to just show our audience our viewers what you're talking about with how the u.s. has performed since it was downgraded because bloomberg came out with the numbers and government bonds have returned for four point four percent the dollar has gained eight point six percent and i'll just throw in there the s. and p.

has rallied one point seven percent so you can see that clearly it did not have the impact that some thought when the s. and p. downgraded the united states add to it of course a laundry list of other wrong calls up to the two thousand a crisis you saw them overvaluing over rating really bad bonds in the mortgage crisis and so you have all these examples that really is the only thing that the credit rating agencies are good at is getting it wrong you know pretty much so however i mean you know they're coming out there are taking some steps here the right direction and the amazing thing is no one likes it you know they're finally saying some things that make sense actually i do think the united states debt should be downgraded in great britain should be done great as well but more importantly just because of the structure in the u.c. being the way that it is because each country doesn't have its own sovereign debt they're restricted as to what they can do and how they can get out of these financial crisis is that there isn't this absolutely france needs to be downgraded probably not just one last but certainly much bill two notches and of course greece

is on the verge of default here there's not much room that it worth to even be done great but portugal is going to be downgraded i think portugal and greece are going . leave the eurozone sooner rather than later these various austerity measures are going to blow up and their countries are just going to have enough they're going to see no c'mon we're not paying you back so it sounds like the takeaway here is not that these countries these sovereigns are worthy of having their ratings downgrade and it's just that it's kind of this boy who cried wolf and on the on now with the ratings agencies so so you can't read it but i want to switch gears from the ratings agencies to trade because they go so well together but i'm just i'm so intrigued by your post that you wrote about trade because we hear this back and forth between the u.s. and china retaliate retaliate and we saw it with the tires in the cars we have the chicken feet that i just brought up you hear politicians talking about currency and trade wars all the time it seems for maybe political reasons but your take on

tariffs is that they are always a disaster it's like putting a tariff on the sun can you explain what you mean. certainly it is like in putting a tariff on the sun you know they're attempting by the wrong mechanism by the way that there is a right to recognize them and that mechanism is gold. but by which we can. force reasonable trade agreements with people if you look at the gold standard. nixon took the us off the gold window and before that and it was because of france demanding payment in terms of gold so the u.s. ran a trade deficit same with france and france started taking all the u.s. gold as a result of that well that imposes some constraints were next and took us off the gold window all of that went out the window debts went soaring not just in the united states but in europe in china in france everywhere in the u.k. and now we're seeing the room occasions of these policies so. now they're

attempting to say ok well let's put some chere tariffs on china as if underwear manufacturing or car manufacturing or shirt manufacturing or whatever it's going to come. united states it's not it's going to go to that next country probably vietnam that's trying to is actually losing trade to vietnam right now because vietnam is able to undercut china on some of these things but if the proper way to look at trade in the first place is it's really in between it's really in between between individuals i want to buy a shirt i buy it from someone who's want to sell me that shirt for the price if a person is willing to sell me a shirt for a price that is too cheap well it's you know he thinks he's getting a good deal out of it i think i'm getting a good deal out of it the alternative which they're trying to do is going to collapse trade we've already tried this we tried this in the great depression we put on the smoot hawley tariff global trade collapsed and we're at the risk of

global trade collapsing again and not a good thing if that happens that's to production we just have a few seconds left i can give you about thirty seconds but i thought it was interesting we often hear people you know with the view that maybe regulations are burning them on a national level but you point out how they're burdensome on an international level with this twenty million pound garlic tax bill adair are the w t o's regulations kind of internationally burdensome oh absolutely and they're particularly bad on countries like the u.k. we've got this view pays a subsidy to the e.u. every year and that subsidy essentially goes to french farmers who can overprice for their goods we have all kinds of mis regulations and then going to something you said about market smell functioning i really want to return to that for one second i want you i can only a few seconds but that's no mill function bureaucrats mill function that work in this mess because of manipulations by the fed by the e.c.b.

and by bureaucrats that's why we're in this mess we need to correct our selves from the strains of these politicians and bureaucrats it's the brain markets and the answer to this not more regulations out with the technocrats they umesh that we're going to leave it at that thank you so much for being on the show was really a pleasure and that was investment advisor mike said locke better known as mitt. all right before we go on to bring our producer dimitri kofi in if as well as shannon donahoe in the control room to talk about some things that we weren't able to get to with all of the big news today on europe and some of the other stories

that we covered this is really an interesting new revenue stream so the conflict in libya is over of course the nato mission that is so what is nato to do now well enter preparations for a new threat for a cyber war it's why president obama has made cyber war defense a top national priority and why as we first reported in november some people are already saying that the next big war is less likely to begin with a bang than a blocker. well nato made it a priority as well at their summit in lisbon last november this was a new addition to their kind of mission statement and now starting today data will collect bids from some of the world's top defense companies that is lockheed martin northrop grumman or some that were cited to expand the alliance's cyber security abilities now the article pointed out wall street journal that forty two million dollars is the contract ok valued at less than the price of one jet fighter but hey

more lucrative contract will be sure to follow so is it just you know and one mission q one other for the military industrial complex world the nations that are part of nato you know in the military as they get together with these these contractors with these military companies if you drink to decide you know what are we going to work under reagan invade next and what weapons there were nearly three former you know roughing up if you dream i'm going to have your out who they're going to go to war with hey if there's no one on the roster we need a new threads i really think it's as if there's nobody on the roster who we put on the roster and how we maximize the amount of what we get no big contracts so we can build weapons and bomb people so we can make more money and bomb more people and they're going to risk involved because in that case they should you know loans the new government and put them in that and so i will present the broad a good business model it's a fantastic but it's not a liberty good business model you know this is despite the fact that european countries have cut their military budgets hey still all this money for contracts and cybersecurity shannon do you feel that cyber security is really this threat or do you feel it's been made and into one to generate. revenue. i mean it's the next

i mean isn't that like the next the thrust of countries it's got to go through a computer and they would have you think because you don't actually need to invade the country then right because you can generate this false sense of the need to build revenue we don't have to build anything you could just create cyber drones and all of these decisions are made for a happy hour like to be. a new day when people make the best decisions but i want to flip this around because. you know from military to contractor is a move that we're seeing where i just have to throw the send with you know general stanley mcchrystal who was the u.s. nato commander of afghanistan now siemens has hired him to their board of directors to oversee their federal procurement area because they want to ramp up their government u.s. government contracts where they want to have more guns maybe it's more the german company bringing on the crystal i don't know if you guys have any any take on that

revolving door i mean it's the same thing is what i'm talking about i mean that's exactly what i mean these guys there's no there's no there's not even a revolving door it's like a platform they just hang out and they are all on the same it's only the revolving around that is they're ok all right we're also going to do a better job than people that have been in the military i don't know but speaking of lucrative. contracts some of them big athletes need to compete for them even to see the olympics in two thousand and twelve here's a little clue. i mean you know all the opportunity of a lifetime looking for a sponsor for the first jamaican bobsled team. up. you know what this is such a bummer almost out of time but basically those jamaican bobsled team members in a movie racked up cash and now there's actually a top british sprinter who raised his own money sponsorship three a.b.a.

to go to the olympics we're going to leave it at that go google the story has brought a time thank you so much for tuning in and you can follow me on twitter at lauren lyster give us feedback a you tube dot com slash capital account but for now from everyone here at capital account thank you so much for watching and have a good many. publishers that so much time in which of course you wanted to hear what you believe the phoenix rising from the ashes newt gingrich again shows himself to be a major figure in american politics does he represent the republican party. download the official t. up location your own phone the i pod touch from the top story. one child's life on the go. video on demand. gold

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knew you don't know i'm tom harvey welcome to the big picture. one tunisian man's act of defiance against economic injustice sparked a revolution in the arab world now one year after one is changed and how will that change a fact in u.s. foreign policy i'll take a closer look straight ahead. and on the moon may be over but their determination to change the u.s. financial system forges on today occupy wall street marks.