that is they may not g.m. but they did on the on the wall street where the bailout well that's certainly one mainstream take on them thank goodness there's an entire world of alternative financial media to tell you what's missing from that conversation you just heard. and the u.s. anti-piracy bills change all that we've seen the protests from silicon valley today will break down why the financial blogosphere is going to war over a never ending witch hunt in the words of one blogger and we all remember the u.s. debt ceiling debate where the nation came this close to default well we're not hearing it now even though u.s. president barack obama is moving to raise the debt ceiling by a more than a trillion bucks again that's because of a deal lawmakers reached the last time around but hey guess what that didn't stop congress from rejecting the debt ceiling increase again but for what we'll discuss let's get to today's capital account.

all right so in the race for the white house texas governor rick perry has announced he'll drop out of it he's going to endorse newt gingrich so naturally a lot of the u.s. media is focused on what this means for the republican field on who could be elected u.s. president in two thousand and twelve but here is one area where it most likely won't matter at all who is president and where you if you're a u.s. voter literally have no say either but nonetheless it affects you it affects me it affects people all over the world i'm talking about the actions of the federal reserve and its control over monetary policy if you're watching this show i don't have to tell you twice now the central bank's decisions do not. not have to be

approved by the president or by congress it is independent yet it is more than tripled the money supply largely through quantitative easing since the financial crisis pumping up the banking system creating zombie banks you can see how a base money the money supply has increased right there the feds also lower interest rates to zero so wall street can speculate with cheap cash for free and borrow on the cheap to cover losses on assets mark to make believe that savers like you and me can barely make a dime and may be looking to do more talking about the fed at its next meeting even though it's run out of bullets according to people like mohamed el area and the c.e.o. of pimco the largest bond fund in the world at least that's what he's what he told me when i talked to him and interviewed him on friday and as a side note i do want to say the reason i say most likely it won't matter who is u.s. president when it comes to the fed is because there is one hitch we know wrong paul wants to abolish the fed entirely so that's a wild card there but here to tell us what the cost of all this money printing has

been investment advisor first pick up pacific capital mike shad locke is here he's better known as mish he also writes a very popular blog global economic trend analysis is going to break it all down for us miche nice to see you thanks for being on the show it always a pleasure to be on the show right back atcha so let's talk about this because the fed has tripled the size of its balance sheet in the last three years trying to stimulate the economy which you can see i want to show our viewers again has expanded the base money supply my question to you why hasn't this translated in to the massive price inflation even hyper inflation that we've heard a lot of people warning back we heard back in two thousand and nine a lot. a lot of people have a misguided. when the fed prints money that is going to be lent and then redeposited and lawyers and law and over again people have this sort of view of that this morning is going to be learned in times over cards. as has economic

professor steve steve keen in australia that's really not the way the system works banks lend when as long as they're not terrible purveyor impaired provided they've got credit worthy borrowers that want to borrow we're seeing a situation right now we're banks are impaired they don't learn of course they're they're hiding they're still hiding a lot of losses primarily in real estate on the books we've got. and what business is want to expand in this environment here i don't see any reason we've got unemployment the five it's much higher than stated actually you unemployment would be close to seventeen percent if you added up all the people that wanted a job and didn't have to have a job you've got a lot of distortion in the markets you've got china slowing you god a situation in europe that's quite literally blowing out europe is heading into a major major recession and regardless of what people think that is going to impact

the united states so if you're us business why do you want to expand in this environment so they're not doing it now bernanke is pushing on a string yet and keynesian afternoon i don't i don't see it that way but that's that's what the keynesians would say that he's pushing on a string so all this money is just not making it into the real economy they've expanded things balance sheet by one point two trillion since the start of the recession and one point six trillion of that is sitting on deposit at the federal reserve making point two five percent interest ok so you got into so much right there that i want to dive further into the excess reserves here at all of this but first just kind of break down because there's a difference between inflation and i were talking about price inflation things like food and computer chips or the government's key measure that c.p.i. which came out today is basically i'm changed month to month and inflation in the broader money supply can you just kind of distinguish that. some of our viewers may

know that distinction but some may not and it's important our conversation so could you explain why that matters there's actually three distinctions we need to make your first we need before we can discuss inflation and how much it is we have to agree on what it is and there's not a lot of agreement out there most people think inflation in terms of prices i think of inflation in terms of expansion of money supply and credit and most people believe that credit out and more importantly that those the few that do think about credit don't think about credit mark to market so that you know the banks have all these loans on the books are they going to be paid back you know and i know they're not and that's why they're not lending but unless the banks are lending then businesses are expanding no one's hiring you you have these real estate slumps you have asset bubbles lums and that's what we're in and that's what i mean you know by deflation if someone says ok well prices are going up you know gasoline is going up but so that's another measure the gasoline could be going up because of oil because

of inflation in china and certainly money supply and credit is expanding at a rapid rate in china that is indeed impacting a lot of global commodities like copper and then you know there's there's the third view that says oh my god you know this is the hyperinflation if you were looking you know how much money you know the fed is troubled as you say you know monetary base in a very short time and they're expecting this big calamity to happen but warren total credit market in the united states is fifty it's close to fifty five trillion dollars so on a relative basis what is there one point eight trillion going to do especially when one point six trillion of it is sitting parked at the fed that this is not in a divorce one of the fed's policies that you know wrecked havoc with the money supply they created a prob. bubble union and we're in the aftermath of that and they're trying to do

the same thing they did that created the property bubble in the first place i don't agree with that but there's no way you can go from here to hyperinflation and i want to get more into the people making a hyperinflation argument but i want to apply some of what you're saying to your at because you mentioned the crisis it's something we talk about a lot and despite the e.c.b. the efforts to get money out into the economy through things like the s. and p. and l t r o which we've talked about on this show i want to show our viewers what's happened to the money supply in italy and it shows if we can bring that a drop i'll be up in a second but i want you to tell us what this is telling us and what similarities there are to the u.s. this is actually quite shocking to see this money supply ambrose evans pritchard of the telegraph came out and said you know this is an indication that the easy b. is pushing italy into deflation you know maybe that's debatable maybe not but certainly spain is in deflation right excuse me in

a depression right now spain has entered depression greece is in a depression portugal is in a depression and i think a strong case can be made that italy is actually heading there i did it post a few actually right before christmas talking about the plunge in christmas sales i got an update from the person who actually lives in europe. who is from italy so there were the numbers just came out today that a shocking twenty percent decline in after christmas sales and usually now in contras united states over in europe especially in italy these after sales of vents are as big as the christmas sales so you know imagine what would happen here if there was a twenty percent plunge in the united states and christmas sales that's what we're talking about here in italy we have austerity measures out the ying yang being imposed on top of that and not only these austerity measures worst of all tax increases taxes increases in spain. it increases in italy tax increases in greece

in tax increases in france and on top of that france and germany are pushing for a tax on financial transactions that's going to dry up with quitting and for the actual transactions if they do that europe is heading into an absolute stunning disaster headed for a stunning disaster and you've outlined a lot of reasons why but back to kind of tying this into the monetary policy and into the fed for the u.s. and the inflation argument despite the fact that you're not seeing the fed's behavior saying that what they're doing is not going to create zero to hyper inflation because of the amount of money at stake despite that we still hear a lot of these kind of arguments in the mainstream media to get a lot of play and the alternative media to absolutely let me play some. and if we destroy our currency which is what the obama point of my do we have hyperinflation it's not going to matter how much money we have because we're not going to buy anything with the stock market on this day and this is their own leasing

inflationary hole because at because they don't know what else to do and they're making mistakes all right so miss why do you think these kind of arguments have gotten so much play compared to the debt deflation argument that you and people like steve king who you mentioned is a friend of the show also make. because they're sexy arguments people like to hear these doom and gloom things they like to spread them around you know oh are you going to go look at all this stuff that's going to happen here you know look at this look at this. it also ties into the you know gold transaction ties into some of the things that ron paul is saying ron paul is very popular and certainly a big big fan of ron paul i want in the fed i want to stop all these distortions certainly i would agree with peter schiff that this stuff is very distortionary we don't want to do it this is one of the things fractional reserve lending coupled with greenspan probing of money supply in the wake of the two thousand. and two two

thousand and three recession is what created the property bubble and they're back in the same old tricks you know so we need to put an end to what right but that doesn't necessarily cause i've heard flourish and guess what they're all missing is the total credit market the us that's the argument that shift mis looks at this stuff in terms of money supply alone and says my gosh look at what's happening and i say look at the credit markets look at what's happening and we can see who is argument's been right to date now so you know whether or not that's always going to be the case but the reason why i like cuckold is central bankers throughout the world are doing this which is the other side of the place an argument that no one seems to mention the money supply and credit is soaring in china looking for inflation going to china in the weird thing is these people screaming hyper inflation a lot of them are big big china balls i think europe is going to crash because they're on it they were in more unsustainable path than the united states all right

measure i want to stop you right there because we actually have to go to break quickly i want to keep it there because i want to get in a couple more questions on this issue of federal reserve policy i also want to talk so but so hang on right there and we will have more with mike said lot after this break. and still ahead it's back the u.s. house of representatives is putting some rain on the debt ceiling for a guest the same parade from last summer i'll give you our three cents but first here closing market numbers. we'll be in business. people calling like you said for free and sarah like since. it's. and we're

still reporting from the land where as you can hear behind me loud explosions. were burning garage right i mean it's like a derivative of pepper it's a food product essentially. sports stronger than anything you buy off. thousands of storms and stronger than any one of the harbor you're.

welcome back so we saw blackouts yesterday online sites like google and wikipedia unless you didn't go online there's just no way you get to miss those they're protesting sopa and pipa the stop online piracy act to protect ip act anti-piracy bills that are working their way through congress critics say these are efforts to censor the internet now we know that you know the tech sector those protests were heard millions signed google's petition calling congress some lawmakers change their positions but the financial blogosphere has been. targeted well at least here

is one depiction of what could happen and artist made a headline so blacks out zero hedge thousands forced to experience c n b c now mitt has been speaking out against soap on his financial blog and he also used to work on tech so he's going to tell us what the impact could be so mike said like i want to bring back into the conversation again he's adviser at sic pacific capital and mitch before we get to so because this is really interesting stuff i want to just circle back around to the fed to ask one question about these excess reserves i want to bring dimitri is going to jump in here to make your thing as our producer a minute or so i want to i want to say one more thing about we're talking about before regarding base money printing the fed printed a lot of money and they use that money to buy a lot of assets which is why its portfolio expanded by over three times and we saw base money expand by that much but that money didn't actually get into the economy i want to see if we can bring up actually a graph we have of loan growth relative to base money it's up there so our viewers

can see that loan growth has collapsed collapse relative to the basement of the federal reserve is creating because banks aren't loaning that money out as we saw in europe the old hero the s. and p. program banks be getting money but that money is going right back to the deposit facility in the e.c.b. in the fed is going right back to the fed and they're getting interest on excess reserves a small amount of interest is still better than what they're they're willing to go up by taking risks my question is what can the fed do at this point hypothetically if you really want to inflate would have to go out and really buy indices i mean what could it do theoretically if it wanted to inflate this economy. i don't think the fed can i think it's in fact even admitted it was surprising actually but you know bernanke you had a realization moment i think it was last october when he when he came flat out and he said somebody you know we're at the end of what the fed can do and he was and so you what you're seeing now is the fed getting into congressional terror. tory

even though the fed got very very upset when congress started cresting what the fed was going to do so i guess the rules of the game are one way here in favor of the fed of course but so you're saying you don't burn out you saying things like well you know we need to get deficit spending under control but not right now course no one ever wants to do anything right now so i think we are at the limits of fed policy certainly they could try some very very risky thanks for i don't think they will you know because risky things can blow up and people have talked about you know the fed having a a negative interest rate to force banks to lend but i don't think that would work i think that might push them into a situation where if they did start lending or the losses would be enormous i don't think the fed will do that i think it would be very very destabilizing so i think all the people that said well the feds really in control here if the fed was in

control here we would have had this credit collapse in two thousand and two thousand and nine and you think that that really control here banks would be lending so they're not and i don't think i very much they will do anything on that string analogy comes back it sounds like you think that a ball that's next let's switch gears to so bad that because your financial blogger you also used to work in tact but as it pertains to your blog what do you think the impact of this bill could be will they always start these things out small and innocuous laurie you know then then they go on from here i mean you know who the patriot act for example was supposed to be temporary you know every president wants it now because it gives them more control over things in europe we've seen governments actually take over the internet impose fines i can what country that was very maybe. for anyone visiting a prohibited site you've got rules and regulations in these piracy. x.

this is the government or someone can come down and enforce it provider to take a website down you know imagine the allegations against zero hedge or me or calculated risk or max kaiser or someone you know when someone says oh you know use a two sentences of copyrighted material should have been done you should have done that so we're going to take you down who are they going to target in these instances we're going to target all the people that are saying our government things are going to be talking or targeting all the people like me that are standing out in favor of free speech they're going to target the people the letter that support ron paul you know there is the danger in these things you start down the slippery slopes of taking away freedoms well. you know you can't ensure freedom by taking it away that's really the bottom line yeah really great point we'll have to see what happens with this whole campaign but we cannot imagine a world without blogs like yours that mesh so you know ok talking about this we appreciate you being on the show and your insight as mike said locke his investment

advisor for a second pacific capital. right before we go we have gone over debt deflation and inflation and guess what other issue is back ok first i want to introduce or bring in you guys now and dimitri kovtun as our producer to talk about this and also shannon donahoe are the producer hold down the fort in the control room maybe january i guess what issue is back great thing the debt ceiling by another one point two trillion bucks so why haven't we heard this again. i want to speak about the ongoing and increasingly urgent efforts to avoid default and reduce. right. he was

saying you know basically they were reaching default there was the huge debt debate we saw a while back the country was this close to defaulting but back then there was a bipartisan deal struck in august it was stacked on purpose in president obama's favor so that he could get through another passage of raising the debt ceiling even so in a symbolic vote wednesday the house chose to reject the one point two trillion dollars raise to the federal debt ceiling even though this doesn't matter what does this mean for you to me to me would you care about this oh sure publicans are a bunch of bozos and hogs so. the national debt under reagan exploded under bush and now you know a bomb is a disaster as well for different reasons but. they're the ones supposedly fiscally conservative so they just want to. pretend like it's only because obama's in office now they're like oh we care about that i didn't give a crap about it before when reagan or bush went off it absolutely i mean the debt

ceiling was raised ten times in ten years under all different administrations republican and democrat i just think that it's so absurd that this charade still goes on even when it doesn't matter just so people can go back to their districts and say oh we're tough on the deficit when really no one's doing anything actually about the deficit because people don't want to work right so politicians especially the washroom was really nice and cozy they get a nice little paycheck from government they get a picture from the obvious so they don't want to work they don't actually do anything that makes sense to me i'm not surprised charades is what it's all about parties b.s. and n.p.r. and give you a free money in a month or you give me a job afterwards when i can go work in or out of the country or affirm when i'm out of office shannon. it's all about the record for one thing brantley run for president one day. before and. certainly hope i certainly have not as many members of the houses voted for this are thinking of running for president as there are a lot continuing around. the let's stick to this because you will never guess who

is bailing out the washington monument let's take a look. at the billionaire in philanthropy david rubenstein has graciously donated seven and a half a million dollars to help repair the washington landmark i mean is that just pathetic so the washington monument got a little during that earthquake we had in washington which was so not a big deal coming from california where people ducking covering this is absurd nonetheless it's getting a bailout from a billionaire it's he's the co-founder of the d.c. based carlyle group and a global asset management firm reportedly worth two point seven billion come on isn't there a better use of his money can you put that toward something that if in fact people's lives why does he respect this guy think it's pathetic that the government can't find the money the few million dollars to fix the washington monument but think about one hundred eighty billion dollars to give a r g the passover to your

bank and goldman sachs j.p. morgan and whatever credit suisse and other banks i'm sure that you know the government could spend the money if they actually cared but they don't actually think that's what's really pathetic they would rather literally the symbols of washington of this country crumble rather than have any bank crumble because i think i think for them they're like you know we need to find more than just to find a real life metaphor to describe just how much they're screwing up the country through the nation's capital you know what not only is washington crumbling metaphorically speaking it's actually literally crumbling so why have we literally crumbling i think that they just want to just want to kind of stamp a message home as a time don't expect much guys were nations monuments are crumbling shannon while the government actually is spending money to fix the washington monument has just providing the rest how much of the government spending i don't know the exact numbers but it's the private sector participation of fix the washing on the republic private. or is it to me to say definitively narrowed down europe with the

banks and then these three i mean this is absurd this the bench are willing to participate in a haircut a private haircut but a private guys willing to fix the government is how backwards and screwed up this country is and in general the governments and private sector observers are you bring my thank you show and you stand the point home for me then to make that connection just really quickly do we had a story where someone died and donated their money to the government to help pay down the debt which is a better private donation that or this guy just because i was a sucker because he died he could not manage with the money where he basically said i'm going to write a check to the ferry to the to the to the tooth fairy and they're going to magically pay them a good don't explain this guy can see where his money goes mobile labor and order that's all we have time for we'll leave it there that's all we have time for in our show thanks so much for watching feel free to follow me on twitter at lauren lyster give us feedback at youtube dot com slash capital account and get ready next week i

am heading to davos i'm going to be your eyes and ears at the world economic forum with all of the richest most powerful people in the world as our producer will be filling in here we have really amazing interviews lined up so get excited until next time i'm laurin leicester have a great night. this is. all and see which. present. makes you a reality. what is. the story of.

shaman of siberia. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear sees some other part of it and realize that everything you thought you knew you don't know i'm sorry welcome to the big picture. of the world with true science technology innovation all the latest developments from around russia we've got the future covered wealthy british style sun it's time to rise on.

market why not. come to. find out what's really happening to the global economy with mike stronger for a no holds barred look at the global financial headlines tune into cars a report on our. every corner is a close circuit camera watch you point you to so now we don't only have a lot on the ground we have them from the. one if by land it too if by air when it comes to us wars it looks like all's fair that's right and drones are being used to target and monitor american fit a sense so we where the big brother is probably watching it. from the g.o.p. debates to the stoep of bill and more it seems the mainstream media plays touch and go a little too often when it comes to tough questions but one man isn't afraid to speak his mind while rick sanchez.