good afternoon good evening for me and welcome to capital account i'm laura lister here in davos switzerland to bring you the latest and greatest or where i can get to and who i can talk to at the world economic forum also in unrelated news i found out they doing a size is joining our team will have won both the first years to meet rico seen it all down the board in washington. thanks loren and back and watch them last night was the president's annual state of the union address and although there might have been a lot of good rhetoric was the substance. and that's why i'm sending this congress a plan that gives everyone sponsible homeowner the chance to save about three thousand dollars a year on their mortgage by refinancing at historically low rates no more red tape no one around from the brains. who the program really benefits the average american which cost of living has been rising for the financial industry by helping to roll

over more debt onto an already bloated government balance sheet and speaking of bloated balance sheets the f o m c concludes today's meeting this morning and you know what they say about the buck stops with the president what's often forgotten is where that buck starts and it starts quite literally at the federal reserve. the committee decided to keep the target range for the federal funds rate at zero to one fourth percent and currently have just a preset economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least until late two thousand and fourteen. operation twist continues and so to the financial repression of zero percent interest rates at least i'm told twenty fourteen but how low will the bond market need to submit to the whims of policymakers and the fed's policy is just moving us from zombie banks to his zombie economy let's get today's capital count.

angela merkel kicked off davos today by taking on the bond market and promising more europe as a solution to our problems and what we've heard public concerns over the ills of current capitalism don't you worry that was found just the man to defend it here to tell us about this and other palace intrigue from that snowy hamlet atop the swiss mountains is our own lauren lyster. so lauren look i do mean bundled up there is a cold. yeah it's called all right i think this no it wintery resort all right so i don't want to waste your time lauren i heard the news a genocide will be broadcasting on the same network as us what do you think of as you think the let him down in davos there with you and cover some of the facts in the snow. as the million dollar question right or maybe the billion dollar question

so that's exciting new is that julian assange is joining r t that's very exciting i mean he's been such a prominent whistleblower and made such a big impact it'll be really exciting to see what you'll do in a show and an exciting extension of r t what i think is kind of shocking is the mainstream media reception that i've been seeing i've been looking at the headlines here about a song engine kremlin t.v. and kind of that spin on things i just think that that's so weird that the press wouldn't be more focused on what does that say that a song or a whistleblower who's committed to telling the truth is able to do so on r t it just doesn't seem to go with this and they've taken and along those lines when you ask if they will welcome him at davos or if they will grant him many interviews i think that the answer to both i would venture to say i don't know if they would credit him but i don't think that many people would talk to him because i'm having a hard time getting interviews and i haven't blown the whistle on the establishment the same way that he has well. there's

a bull market in dissent so they walk amongst the rest of us as max keiser is that exactly right or so i don't want to start with you on the official agenda what are you hearing i know germany's angela merkel gave her opening remarks i presume the eurozone as all the top of the agenda. yeah but whether they like it or not the eurozone of course is on the top of the agenda because it's on top of everybody's mind and whether or not that is the theme of the conference this year which it's obviously not i think the fact that merkel made the opening remarks shows the significance of this to everyone that's attending here sixteen hundred some business leaders who are probably very concerned maybe possibly because of their investments and what's going on in the euro zone what i thought was interesting about her speech is that she's not really promising no more there's been so many demands from probably many in that audience for bigger bailouts more money pledged and she basically said i can't give you that what i'm going to give you is the promise of more stability the promise of more integration as a solution because i promise you. more than that in the bond market which in say

the bond market and the markets attacked us we wouldn't be able to deliver and we would just have an open wound so here you kind of see even though she's not going after the bond market you can see that this is really kind of the she's at war with or has been through out of the bond market the bond markets been hibernating for decades so i want to. there's a debate going on in the future of capitalism what exactly are you hearing about this. well dmitri obviously the irony we don't need to point out of a bunch of capital is talking about the future of capitalism and if it's outdated what i did think was really interesting was that it of course found a very fitting defender and brian moynihan the c.e.o. of bank of america there were some tough comments about capitalism or some concerns about capitalism from people like david rubenstein the c.e.o. and founder of the private equity group the carlyle group who we know because we've talked about that investment he made the washington monument to fix the cracks but

he was criticizing capitalism some others were too and brian moynihan was saying ok hey policymakers don't go too far though you know banks really have reined it in and you know western capitalism is all about boom and bust that's part of the deal when come on that's not the only deal dimitri you and i talk about every day on this show and i just heard yesterday in that great interview you did with addison wiggin him saying we're in year three of what he predicts is seven to ten years of people being worried just about the return of capital not the return on capital and how difficult that's making things and that is the consequence of this consequence of this credit bust and i don't hear him talking about that so you know there's the debate on capitalism that's been had there plenty people have but i want to ask brian moynihan more about that i did approach him for an interview i did i was able to grab him but his handler quickly was like no way well people always want to weigh up on the way of his credit for socialism that's that's that's your social law and before you go out officially in our herd you tweeted oh so kind of got a picture of you climbing out of

a. an occupy eglu this is like one of your tricks for getting getting getting interviews like what are the tricks of the trade over there you care a lot of cinema. i don't think that it was going to help me get interviews with morning hanoi or any other people that turned me down in there but i do have news for you because you say people want socialism on the way down and i think that people think that is what this occupy movement capsulated and i want to tell you what discussion i had with the occupy protester out there at the igloos who in fact is an american ex-pat dimitri guess what his concern was one that he's really been studying debt currency the problem with the fact that debt has to be created in order to issue money i said hey you said a lot like an austrian he said you know i've been listening to a lot of they've been coming through zurich where he lives quite frequently so i think about something important because we talk about really what the ideas are in the occupy movement and you know it's not a giant massive call for socialism he probably watched the show lauren just wanted to impress or didn't tell you that's why he said oscar is a code word. so i went out right we got to go we are

a lot about we got to go lauren saw it stay warm and that was lauren lyster host of capital. so earlier i spoke with peter schiff c.e.o. of europe pacific capital about the fed's latest rate decision some of the president's economic proposals during his state of the union address and what all this means for the broader economy take a listen. well it's a bad decision and you know it shows that president obama when he gave his state of the union address he said that we can't go back to the same policies that created the housing bubble the finance. crisis well we never we never discontinued those

policies we had a financial crisis in part because the federal reserve kept interest rates too low and they're making the same state now interest rates are much too low and now the fed is saying they're going to stay low through pretty much the end of two thousand and fourteen this is massive inflation that the fed is going to create or to try to artificially prop up the housing market prop up government spending a phony economy all of this is going to come back to bite us it's going to lead to a bigger disaster than the two thousand and eight financial crisis are well i want to talk about that because when people talk about inflation there's obviously the consumers recognize inflation when they go to buy everyday goods but there's also the inflation of the broader monetary aggregates and we actually have a chart of average monetary base increases from it's up right there and it actually shows a spike in the monetary base we've shown variations of that graph before in the show and you see it also in the in the fed's portfolio it expanded over three times

since the crisis but we haven't seen that same level of inflation in the broader aggregates of the word in the broader money supply what's your take on that because that's kind of what we saw in japan right the japanese central bank tried to inflate the economy but it really just created zombie banks that were living off life support and they succeeded in preventing a healthy deflation which would have been beneficial for the japanese economy we're not going to be quite so fortunate we're in much worse shape than japan was when their central bank embark on this foolish policy and their government but inflation is that increase in the money supply when americans feel the effect of inflation when they go to the supermarket or the gas station that's what happens as a result of inflation prices are going up and prices are going up for american consumers unfortunately they're going to go up a lot faster in the years ahead i mean this is the consequence of the fed trying to inflate the housing market to try to prop up housing prices it's not working but

what is happening is the price of everything else is going up instead but quickly things that americans have to buy on a daily basis of food and energy. well and it's not just the housing market everything's being propped up but there's something else though that we saw the fed i wouldn't describe this as quantitative easing in the same way that we saw previous q one in q two maybe it's whatever you want to call it but the treasury market has been really resilient and surprised a lot of people has it surprised you at all in the way that it's behave because the fed did stop that large scale action asset purchase program that it was doing for the first two years after all doesn't it you know people doing stupid things doesn't really surprise me anymore because it's been going on for so long i mean i saw it in the internet stocks i saw it in the housing market and you now see it in the government bond market but of course a lot of this is manipulation central banks around the world including the federal reserve are buying all these bonds and a lot of the u.s. banks because of the regulations are basically being forced to buy these bonds so

there is a lot of phony demand for treasuries that's out there but eventually like all bubbles it's going to burst treasury prices are going to plug interest rates are going to skyrocket i mean it's a huge disaster that is waiting in the wings and if you watch the president say the union address you would have no idea you know it's kind of the equivalent of the captain of the titanic sounding the all clear from the bridge even after they've hit the iceberg i mean we're headed for a real financial disaster yet he's talking politics as if this is business as usual and i want to get to the president but is there something that's counterintuitive there though that that does support the treasury market in the short term before rates will eventually rise because banks let's say they have no really good place to put their money especially with what the fed is doing twisting the curve which also doesn't make sense to me right because they're traditionally banks make money by borrowing short and lending long so isn't there if they potentially see a recession or depression coming along don't they want to try to remain liquid for

the foreseeable future before they have to you know their feet their loot what they think they're liquid and in fact they are borrowing short and lending long they're borrowing short for the fed and lending a lot of the treasury but you know this spread there is. pretty narrow and the risk is enormous for the banks when interest rates eventually rise which is another reason why the fed is committed to keeping rates so low for so log because it knows the minute it pulls a rug out from under the banks they were going to fail again so it but in order to keep interest rates this low the fed has to create a lot of inflation they have to print up a lot of money to buy these long term low yielding assets that nobody in their right mind would buy you know if they understand the fundamentals. still had i consider my discussion with peter on the fed the state of the union as well as a recent claim by columnist paul krugman that we may be headed ever so slowly through his recovery but first through closing market numbers.

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 everything you thought you knew you don't know i'm target market was a big picture. welcome

back in this second part of my interview with peter i asked him how he sees the american economy recovering even with the fed stepping away given that we've been on life support for so long. so what do you see as the endgame here on the strategy for the federal reserve because normally if we compare this we've heard a lot of comparisons one is that the economy went to in effect of li intensive care after the two thousand and financial crisis and if you're in i.c.u. as a patient the eventually go to the doctors to get you out of i.c.u. and they get you home but the way that the fed is approaching this it just kind of seems like if this is perpetual zero interest rate policy is for the indefinite future is essentially like being on a drip or for an indefinite period of time how do you think the fed is going to eventually try to take their hands off and can they even think it is actually worse as why we're in intensive care and what the fed is doing is simply guaranteeing

that the disease that is afflicting us is going to kill us zero percent interest rates prevents the only thing that might cure us we need higher interest rates we need to allow the economy to restructure and rebalance we need more savings we need lower real estate prices we need to have a solid financial system we need to balance the books we need less government spending we need to get rid of these trade that says we need some surpluses we need some production none of this is going to happen with zero percent interest rates all we're going to get is more speculation more debt more consumption more air in the bubble which means a lot more air comes out what it bursts you know if you think that europe is going through a problem right now you ain't seen nothing yet i mean europe is the warm up america is the main event we are we are the real sovereign debt crisis currency crisis is going to develop and it is going to be enormous because of what the government has been doing it was going to happen anyway because of the mistakes that the

government made in the past but because they continue to compound those mistakes of the president it's going to be that much worse when it happens all right so i agree with you regarding interest rates this has to happen eventually there's no way you can run an economy off of and for and credit forever but every time that was part of the great moderation right every time we had a recession the fed would meet it with easing. and that was the the idea the idea is you could smooth out the business cycle and that's created a mountain of debt over a prolonged period of time and the amount of that has also contributed in real terms to structural changes in the economy and those changes manufacturing jobs are going else can't just come back overnight so what kind of depression are we really looking at here and at the end the day if the fed eventually whether it takes hands off or not eventually there's going to have to be readjustment but are we so far down that road that the government is eventually going to step in in a much more forceful way and we're not going to turn to a free market economy i mean is that pretty much gone interview well we haven't had a free market economy in a long time and we keep getting less and less free as the government continues to

up the ante on its intervention in the problem is the more the government gets involved in the economy the more they screw it up and the more they screw it up the more they get involved to try to solve the problems that they blame on the free market but are actually a consequence of a lack of a free market a direct by product of government policy and government intervention but in answer to your question we're going to have an inflationary depression i think that's the worst call it it's going to be worse than what we had during that i'd seen thirty's and every day the government only ensures that that depression is going to be that much deeper and last that much longer and unfortunately everything that the government is likely to do as a depression unfolds is going to exacerbate it and lengthen it i mean so we're not even close to having an understanding in washington of what's causing the problem and until we understand that we're never going to solve it we have to understand that to cure the stimulus that the politicians always reese for is the reason we're

so sick and the more they stimulate the economy the sicker it's going to get so going back to my point though so we're really sick right and we were really sick during the great depression and one of the outcomes was that was more government and eventually there was world war two is there any way that we're going to be able to avoid some sort of this going for money can i. a crisis to a political crisis well i hope so i mean first of all we're a lot sicker than we were in the one nine hundred thirty s. and unfortunately the cure is is this is is no are in sight as far as being able to adopt that we know what the cure is this just that we can't get the politicians to allow the economy to swallow it but as far as the politics i mean we're going to go through something very traumatic as a nation and it is a you know a climate where real tyranny can can flourish i mean look what happened in in germany in a y. our republic in the aftermath of that hyperinflation we ended up with the nazi party coming to power i mean so when you have the type of environment that we're

going to have i think you're going to have civil unrest i think people are going to be rioting because things are going to get bad and this country and the more the government gets involved with stimulus and i think ultimately we could have price controls because the government is now denying that there's any inflation even as they go on creating it creating it but eventually gas prices will be so high food prices of lee so high that there will be a lot of calls to do something about it and rather than turning off the printing presses and raising interest rates i think they're going to look to control prices and ash is going to create shortages and compound these problems and it will be a very very dangerous environment for several liberties and who knows you know the government's going to get bigger and bigger and looking to consolidate its power maybe silence the voices of people who are pointing out the problems that i've already got it all set up now with the with terrorists you know they've got a lot of power now because the war on terror well they can describe or classify anyone they want as a terrorist and i'll throw him in jail lock away the key. people who are trying to

point out what the government is doing wrong on a monetary basis or as a physical basis i mean who knows they could be cat characterized as terrorists people who are using the black markets people who are buying food or energy illegally might be considered terrorist who knows but there is a lot of risk out there i hope it doesn't play out that way i hope. we could learn a lesson from this and and understand that it is the government that is cause these problems and look look at all the support that ron paul enjoys among younger americans they're hearing the message they understand that it's the government that it's the federal reserve and so if we can spread that message that understanding that we can have another renaissance a revolution of freedom and liberty that maybe we can use the crisis to our advantage to roll back government and to reintegrate our roots so there is also the opportunity that we can that we can make a positive situation come from this but you know that we don't know yet i mean history is inclosed that we stop the wait and see how it plays out. because some of

that hopeful but. speaking of government and and government's role we have the state of the union last night and i heard a lot of the same sort of things we've heard before obama talked about mortgage refinancing you talk about student loans one of the things i find really interesting is every time we have our standard of living has deteriorated over the course of many years and one of the reasons for that is that prices have gone out of whack with people's incomes and wages and every time we have price increases it seems that the financial sector in conjunction the government want to come in and provide cheaper loans in order to enable people to buy and spend things that are out of out of reach and instead of letting price adjustment just it creates that accumulation now one of obama's latest plans is this this mortgage refinancing what is your take on that because it looks to me like all they're really doing is giving you know lower rates to people that already can't afford their mortgage not allowing price to rip to adjust and at the same time taking the liability and moving out of the government balance sheet away from private institutions yet this

is more of a bailout we're taking underwater mortgages out of the private sector and dumping these risky loans on the public sector meanwhile we're allowing individuals to refinance them at a lower rate of interest so those who pay are going to pay less and that means when the people who default the fault the taxpayer. the losses to the taxpayers are that much greater because of the fact that the performing mortgages are paying less so this is the wrong thing to do this is more of the very policies that obama says we shouldn't go back to he's expanding them and you know the irony of you know when you talk about the student loans the president was for more student loans more aid in the subsidies for education and then he chastised universities for charging too much for college tuition why does you think they can do that they do that because of all the government aid if obama wants colleges to lower their tuitions stop subsidizing the students stop giving students money to pay the inflated prices as

a lot of those were subsidized in college and guaranteeing loans obama could scream all the laws but the colleges are going to keep on raising prices if you stop subsidizing the students he won't have to beg colleges to raise to cut their tuitions don't have no choice don't have to do it right i have another question for you this sort of ties into things because a president is not expected to understand economics but there seems to be this popular impression that mainline economists these professional ph the economists know what's best for the economy and when they say jump the politicians say how high paul krugman was i with an article recently talked about a report that came out citing how the u.s. is not in such bad shape because it's decreased its debt relative it's through its g.d.p. which is an argument one of many that you hear about a lot and well the one thing the thing i want to point out though is that i think the whole thing about g.d.p. is misleading because g.d.p. is its gross domestic product its activity in the economy it just shows that more stuff is happening but it doesn't necessarily mean that more good stuff is

happening we had g.d.p. growth during the housing boom because people were building houses and they were taking out that and that would and that was growing and g.d.p. was growing and people were saying great we're in a recovery but all of that all of what was billed ended up being a liability and not an asset so how does that how does that make sense to you the whole thing. about debt to g.d.p. and that being what's important well well first of all i don't know what numbers paul krugman is looking at because even though the g.d.p. is growing the debt is growing faster as a percentage. that was c.e.o. and chief global strategist of euro pacific capital peter schiff unfortunately we have to end it there but there's a lot more from my interview with peter including his outlook for gold that will be posting on to our capital account you tube channel tomorrow so be on the lookout for that. and that's our show thanks for tuning in feel free to call me at covering delta and as always the lovely laura lister who is in davos lauren lyster and give us feedback at our show our channel and you can have a workout i'm going to get from everyone here in capital account of

a good night. one

year down the line in egypt is celebrating the beginning of the revolution that ousted president mubarak tens of thousands of people are now on top where but frustration over the slow pace of change has cast a cloud over the party atmosphere meanwhile the army has partially lifted an insurance emergency law that's been in place since night from eighty one. the state of the union president obama pledges to fix the economy and create millions of new jobs in a speech widely seen as the start of his reelection campaign critics of his address say his agenda leaves the white house open to accusations of double standards and

his upbeat tone doesn't reflect reality. and julian assange exposed some of the world's darkest secrets and now he's going to get others to spill the beans this time on the air the wiki leaks founder prepares to launch his own interview show and it's coming to you right here on our t.v. . now we have to washington where obama's state of the union address and dabbles are at the center of attention stations for the show coming up next on our. welcome to the lone show where we get the real headlines with none of the mercy we're going live to washington d.c. now tonight we're going to speak jane about the obama's state of the union address last night there were a lot of big promises a lot of fingers pointed at congress and.