others will say that they're too small. yeah we kind of say the pentagon and the nobel peace prize winning president are still draining our pockets for war two thousand and thirteen planned six hundred sixteen billion dollar defense budget is a huge bill on top of the us is fifteen trillion dollar debt we'll take a look at the lousy economics behind war and why thinking of all the trillions may be obscuring just how bad the nation's finances actually are plus this is what's happened in the past when the lawmakers asked ben bernanke to help in this case small businesses. we don't banks we don't have any capacity to evaluate a small business. why not why wouldn't congress consider if you think that the banking system is not working why wouldn't congress consider its own provision would you do it no you do it while they're at it again federal reserve chairman ben bernanke he is now pushing congress to help housing bernanke he wants the broke

home proper offers fannie and freddie owned by the u.s. taxpayer to provide cheaper mortgages to more of the same taxpayers makes sense we think maybe bernanke he has his hands full just propping up the big banks let's get to today's capital account. as i said europe is really a sore that will not heal government medicine yeah not helping so much so let's see what's been going on lately france had a not so hot bond auction the country may not be looking so aaa after all spain is warning its banks to set aside fifty billion more euros to guard against bad loans greece needs dough as some of its citizens are forced to search through dumpsters

literally for bread and you see it right there now the country faces the risk of default in march unless it gets a new bailout deal also investors drove appeals on hungary's debt they came close to ten percent italian ten year bond yields jumped back above that key seven percent level and trading in shares of unicredit the bank you see right there it's italy's largest bank by assets well they were suspended again today the second in a row when the share price fell to their lowest level since the bank was created also the euro hit a sixteen month low against the dollar so to help us sort through all of this noise someone has been watching it closely from this side of the pond all along founder of credit write downs edward harrison edward it's nice to have you in studio happy new year and have a new year to you i think the last time we spoke was in november and we were probably talking about the euro zone crisis haven't gone away we're still talking about the eurozone crisis but it is a new year and you you know your former. your former diplomat you speak six

languages you have this much more unique international perspective that we look for from you so tell us what you see in store for two thousand and twelve with europe assume more of the soon is what we saw before basically all of the same parties that we saw before have the exact same positions they did in a sustainable solution over the longer term really what you need is you need the banks to be weak and to write down the debts that are unsustainable to countries like greece and potentially poor to. no ireland and spain and you need these countries to basically come out and say look you know we need to take give you guys a haircut. and you need the c b in the interim to say we're going to backstop those countries that are not going to get a haircut and so that's what you need to have none of those things around none of them are happening and i've been reading some of your posts even right now about

what's kind of behind this new product launch credit write downs pro which went live today congratulation on q. and a you have been writing that you know what you're sick of the e.c.b. should do this government shouldn't do that this is what needs to happen or should happen that you're sick of ideology that you're more concerned with what is reality road and how do you avoid being a turkey exactly so how do you avoid being a turkey with europe that's the question and the answer is that you have to prepare for the downside risk what i think is going to happen is the e.c.b. is going to say look the what i would said is probably true when these yields go up we have to step in there in some way but will they really stop and that's the question and you need to be able to guard against that risk because if they don't then the risk is very much the downside for the banks for sovereign debt and all around in terms of equities in europe so europe is sort of a bifurcated situation either you know they muddle through and they can actually

perform because you know p. e. ratios in europe are a good margin lower than they are in the u.s. but if things don't work out things could fall apart very quickly and you're talking about if the scenario that should play out doesn't then you're a turkey because there's a lot of downside so it really does seem sticking to that. policymakers are really going to act unless something really seminal happens at least that's view that we you know subscribe to so if you're of that view when are we really going to see the fireworks and what form is it going to be. the fireworks are going to be when it's the end of the lawn for spain or italy the question is when it's definitely readily right seven percent. you know yield and austerity together and you know no growth unemployment all those things coming together and then finally you know you get a political decision that says we can't go on anymore the whole thing is collapsing

either you step in the c b or we stop the austerity or whatever it may be i think that's when it's going to happen you know and you have probably less will be sometime in this year that we'll find out whether the u.c.b. is going to really do the complete one hundred percent backstop or whether or not they're going to depression and sue because that's what would happen if they didn't do so not a great default. greek default is possible but now i don't know that that money i don't think it's going to be that seminal moment i think you could they could for nest greece because greece is small enough greece you know three percent of the g.d.p. of the e.u. so that's not a large enough to cause a seismic change but then there is the issue of banks which we know is a huge deal because many some would say are sometimes they are insolvent and there is the credit default swap risk all of the counter party risk and we see unicredit they've had their suspending or their trading in their share suspended the second day in a row this is an elisa largest bank by assets are any banks in your crosshairs in

terms of they could potentially cause serious problems sure unicredit you have companies like b.m.p. perry in spain there aren't any that are in the hot seat yet because the two largest ones the. b.c.s. . and forgetting the third or they actually have done fairly well compared to their competitors but you know the large french banks the large italian banks and the german lead. banks are all in big trouble particularly the italian the french banks they have lots of counter party risk and i talian and french banks that's our sovereign that's italy and spain they really have your eyes on it let's look at i know you're not a currency expert per se but you follow europe closely and i'm sure you have your eyes on it and today we saw that the euro is trading at a dollar twenty eight which is lower than it really actually through the first time since september two thousand and ten this has happened big question are americans

going to be vacationing on them all because this summer for less money than they did last year that's the exact same problem that we had in terms of thinking about equities as well because if the u.c.b. does what it is it has to do in order to keep the ball rolling that's going to be negative for the euro because basically what happened last year was the e.c.b. things came to a head in italy they said ok well you know what we'll give three your money to european banks for nothing. some of italian debt as well the reaction to the market so that is exactly what we see in the one twenty two the to the dollar but the euro started. ten years ago at one seventeen treated as low as eighty three says so you go a lot further on the other hand if the c.b. doesn't step in the the you could see sort of a run euro with other parties getting kicked trading up so you have so edward should i be planning my vacation or not i think. is that you should but you should

also take a risk against the potential that doesn't ferret out ok i want to continue this conversation after the break i want to talk about the u.s. but first you touched on a kind of one area this i want to explain something to our audience and word of the day. 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 the financial expert not that edward harrison so our word of the day today is deposit facility because it ties in with what we're talking about with europe and why is important well here is c m d c talking about it just earlier they wrote that banks deposited four hundred forty three billion euros or five hundred sixty seven

billion dollars in the central bank's overnight deposit facility this is down only marginally from the record four hundred fifty three billion euros deposited the previous day so speaking of the previous day we did touch on this yesterday on our show when we were talking to james turk too so what exactly is this well this is a place where qualifying financial institutions can make overnight cash deposits for a risk free but extremely low rate of interest ok this interest rate represents the key rate set by the e.c.b. which currently stands at point two five percent so this is basically where banks park their cash it is the bank account for european banks and the interest they receive on that money directly influences interest rates across the euro zone more broadly to now let's take a look at a chart put together by zero hedge using numbers from the e.c.b. that showed deposit facility usage at the central bank over the past year wow look at how it has gone what is important to note from this graph is that those latest

numbers right here represent record highs for euro zone banks and ok why is this important while every euro that banks are parking at the e.c.b. is a euro that is not being lent out now consider this the e.c. be already went through the trouble of. abiding european banks with cheap money ok three year financing through the l.t.r. which is something we'll get into another day now this is supposed to encourage banks to buy solver in debt now the fact that these same banks are now taking this money and parking it right back at the e.c.b. is somewhat alarming ok the entire point of the e.c.b. these latest round of funding was to give european banks the opportunity to offload over valued assets as collateral to the e.c.b. for cheap euro's the thinking went if banks to borrow on the cheap from the central bank then they could use that money to buy a higher yielding attalia and spanish debt making a huge profit off this thread now unfortunately as we've outlined this how that

exactly worked and the reason may be that european banks some of those that we talked about are so highly leveraged that they rather hold on to that cash to fund existing asset holdings and guard against future write downs so keep your eye on that deposit facility because it tells you a lot and still ahead here on capital of count we're going to tell you a lot president obama announced a new defense strategy today for an era of pentagon budget cuts but are the savings really that substantial if it was your household budget you probably wouldn't think so we'll break it down to you in those numbers and every person will be with us to talk about it but first your closing market numbers.

just put a picture of me when i was like nine years old on to tell the truth. i am a total get of i love driving hip hop music and pretty. he was kind of the guest today. i'm very proud of the without you she has played. the odds. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else some other part of it and realize that everything is ok. i'm charging welcomes a big picture of. 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 who is you who with a global missionary zeal where we had a state controlled capitalism is called sasha's when nobody dares to ask we do our t. question more. so as to the u.s. u.s. president barack obama today announced plans for defense cuts cuts that you know as he said earlier in the show some say are too big some will say are too small but let's break it down in a way you can really see because the pentagon is looking at cutting four hundred

eighty nine billion dollars over ten years to see what that looks like first let's look at the big picture of those actual numbers so u.s. tax revenue two point three trillion federal spending about three point six trillion u.s. deficit is one point three trillion the national debt fifteen trillion plan defense cuts over ten years four hundred eighty nine billion per year that's about forty billion now i'm not saying that's what's planned but if you break it down for our purposes well use that figure ok trillions hundreds of billions i mean we know what the picture looks like from there but let's look at at it a little bit of a different way let's look at the perspective of what this would look like for a household budget we're going to lop off some of those zeros at the end ok so annual faneuil annual family income would then be twenty three thousand dollars money a family spent the would be thirty six thousand new debt on the credit card would be thirteen thousand that outstanding balance would be one hundred fifty one thousand total defense budget cuts over ten years that are supposed to be

a big deal would be forty eight hundred dollars so per year it's four hundred eighty nine bucks ok if you're a family that was one hundred fifty one thousand dollars in debt i don't know how excited you be about saving four hundred eighty nine dollars i wouldn't be would you be at work edward wouldn't either and speaking of financial mess the fed is asking congress to use fannie and freddie ok they're owned by taxpayers to help more of those same taxpayers get cheap loans to help housing how that makes sense i don't know but credit write downs found founder edward harrison is back to tell me so edward let's start with the defense issue because i mean another number to look at the economics of war the kabul press crunched the numbers a while back. looking at how much it cost to kill a nato soldier and that cost was fifty thousand dollars how much it cost for a nato soldier to kill a member of the taliban was fixed oh i got this wrong ok it went out with fifty

million dollars to kill a taliban soldier so fifty thousand dollars versus fifty million dollars and they looked at the u.s. pentagon budget they looked at the taliban revenue which the brookings institution had along with the death toll so just stepping back if we were to quantify how much of a drag us defense spending has been on u.s. quality of life is there any way to quantify that. and you know in terms of u.s. defense it's not either or. are you meaning that you can't you don't have to have both you don't have to go out offensively expand and have wars in order to defend at home you could do one or the other you could do both we're doing both you could actually have better quality of life and you could have a higher defense at home if you were to cut back on what's happening abroad and you know this is basically asymmetric war the taliban and al qaida in their fighters they know that because the united states is

a high tech army they can get the united states to spend lots of money and you know having some sort of response to what they're doing and so it creates an asymmetry the actually it doesn't work in our food they are we see in the numbers i wish there was some way to really quantify what it meant this defense spending for quality of life i'm sure it would you know that rather more americans how much we're spending switching gears though speaking of spending and the fed is trying to tell congress sent him a paper saying that they were thinking congress could help with housing and they gave them some ideas using fannie and freddie which the taxpayer own to get cheaper loans to those same taxpayers interestingly speaking the fed on your blog you. actually posted an article talking about how credit card a.p.r. are in the eighteen percent which are record highs while the fed funds rate is at close to zero percent what are we going to see borrowing for americans be at that

same level instead of preferential treatment keeping going to the banks once the banks. aren't completely bankrupt we will see those rates go and actually i don't know if that will ever reality because you know it's the gift that keeps on giving you know the nineteen point nine nine percent a.p.r. is the one that's really where it is that's where the money maker is for the banks in the fees and in the credit cards so those rates really they're not going to come down and as we've seen there have just gotten you know fannie and freddie on the other hand they're basically a huge slush fund the great thing for the government is they can say look you know we can run everything through fannie and freddie we could actually bail out the banks by allowing fannie and freddie to buy up all these mortgage backed securities issue more you know basically take over the market it's the sense of what the fed did in two thousand in two thousand and nine when they took over the entire interbank lending market fannie and freddie have now pretty much taken over the

entire mortgage backed securities market because the banks just aren't there to be able to do that and they can run a massive loss as a result of that which is. a direct bill for the banking sector well gee that's not shocking and speaking of you know it seems like the world is really drowning and there are only so many lifeboats and like the example you just gave it seems like the fed has chosen to bail out its friends on wall street ok that's where they're that's where they're giving life rafts to so ok even if congress does something with fannie and freddie there is not going to be some correction in housing you know all these americans are going to get a life raft so it's necessary to be talking about i mean the sort of a trickle down effect what they're saying is look you know the. at the center we were the we do with banks the banks are the next and then from the will spread it out so once these banks get on their feet again then they'll spread it out in some way shape or form obviously that could take five or ten years but you know that's

how we're going to do we're not going to the american people directly because that would be interventionism with the fed anyway you know that's that's a fiscal responsibility we want congress to do yeah but i mean i don't even know how much that would help even if congress did giving out the extent of housing but also a.t.p. numbers came out higher than expectations some people are excited about it but again isn't this just ok the economy bob that head up for a second but are going to go right back to drowning aren't we drowning unemployment . you know the question is how is two thousand and twelve going to play out and i think the fiscal side is going to have a lot to do with that because we're sort of at the positive things happening in terms of the weekly unemployment numbers some of the a.t.p. numbers in terms of the jobless numbers the jobs numbers every month housing you know is a big part of that but if suddenly you start cutting money in the budget then suddenly you're sucking money out of the economy at the same time so the potential

is there. china brazil india europe are all slowing down the united states a slowdown as well and for none of those things that have a positive well i test the policy is all about get up there congress which hasn't happened more quickly real quickly i got to run but i'm going to give you ten seconds just tell us how we can get your new product go to credit write downs dot com and words. hit that button we have two things you can go either with the newsletter for i think the intro or for one nineteen you can get our forum which is going to be all about stocks bonds you name it stocks bonds predictions all of his brilliant wisdom propped up in one product thank you so much for bringing it to our show. that was edward harrison founder of credit write downs thanks a lot. everything's

falling apart my papers are falling i'm just getting ok so we've talked about europe we have talked about the u.s. let's stick to this i want to bring in our producer dimitri kofi anna as well shannon donahoe in the control room for us and a loose financial change so everyone is reading the tea leaves on the upcoming presidential elections so let's take a look at some taro cards we're going to a little bit of a different route instead with mexico's grand wizard or warlock himself. tony sees more economic trouble a bunch of natural disasters across the world but the big political headline is that the popularity of president barack obama will fall so precipitously this year that there is no way in hell he will be reelected as u.s. president. they're predicting obama won't be real he won't obama won't be reelected

but why does this great wizard think there's he says because the republicans have all the money in the united states so they're put a lot of pressure on him to make mistakes i don't know how to read that but if we could bring up a chart to show how much money president obama has at it his disposal as far as campaign contributions do we have all we don't have it but it basically shows that obama kind of changed the whole picture as far as campaign contributions from past elections with the amount of money he raised and not kind of wanting is public matching funds surpassing that to raise tons of money so is this guy wrong well you know what i think this guy may be missing is he hasn't been watching our show probably because it isn't about the president futures market so he doesn't know how this whole new market for presidential derivatives and the record that it is could play into the amount of money that's available because now you have the base money that was used for elections on import and we could leverage on top of that all right so you have all sorts of congress out there floating around pushing around prices so i don't care if obama's got

a billion dollars so we're trillions now ok but along those lines he could be right because you could argue that wall street would be more supportive of a republican would be more involved in this presidential futures market and backing one and therefore would have the upper hand as a result of their money in defeating obama what if one point to the democrats have been the biggest buddies of wall street right rubin was under reagan i mean under reagan under clinton so was summers summers back under obama gardner so you have at the same token i believe that they're contributing more heavily to mitt romney this time around as they are yeah last time it was obama because i think everybody believed obama was going to win and they had i believe i have i think i'm i'm just trying to really challenge you here but i really. you think i'll go check my facts right after the show that mitt romney is garnering more of that support this time around well they got someone they can they can program have both those i don't know what do you think and please don't say like it's going to be. just good i'm going to literally walk off the stage you're going to have a meltdown on camera this is not good that one might be amusing though so right

santorum. you just got there she was going to say what i was sure of oh ok whatever moving on we brought you this story a while back remember the massachusetts fisherman who caught an eight hundred eighty one pound tuna but the feds took it he caught it the wrong way as it turns out well it seems japan does just the opposite look at this. we don't have much time to talk about this but that two recently caught with five hundred ninety three pounds auctioned off first seven hundred and thirty five thousand dollars now the two know that the massachusetts fisherman inadvertently caught it was sold for just under five grand today you know the good financial joke i just thought of it was caught in what in the liquidity. oh the japanese in order to trap the budget i mean is there a line out last year but they at least cashed in on it in the united states would

just want to they're getting on with gated and you wouldn't get the money for it will leave you with that because we're out of time that's it for our show thanks so much for tuning in follow me on twitter at four in leicester give us feedback at youtube dot com slash capital account and have a good night from everyone here will you know. download the official t. obligation to go on so long called touch from the top story. life on the go. video on demand. smile you will become. an omission street now with the palm of your. question on the dot com wealthy british soil the sun. time to rise.

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so yes our military will be the leader but the world must know. the united states is going to maintain our military superiority. going on the defense president obama is putting the bloated u.s. military budget on the chopping block and shifting the overall defense strategy so why won't the u.s. give up some of its weapons of mass proportion. and as if that wasn't enough looks like the u.s. is gearing up for a large troop buildup and they have all ships have their battles directed toward israel and their guns pointed toward iran preparing for something big so is war inevitable at this point.