in the news. max that's right from barry ritholtz the word of the day be debt or be deader is a noun and indebted consumer who is only able to pay the debt interest each month. the debts never go away they only pay the interest they're always in debt and this applies throughout the entire economy not just on credit card debts but mortgage debts such as the consumer now if you look at the bankers of course they're involved in a very interesting situation and they never pay interest on phantom debts they loan into existence phantom debts that are on collateralized that they themselves only understand they can figure ation there of but they never have to pay interest i were to get awarded john norma's fees so here you have the two pillars

of society zombie debtors who never escaped and clown bankers who never have to pay debt so the zombies and clunes yep wherever there is a zombie debt or you can be sure there's a zombie creditor and as zombie central banker feeding the mom the fed is starving economy of interest income so one most layer a former broker manufacturer and co-founder and distinguished research associate of the center for full employment and price stability says the fed is part of the problem rather than part of the answer this is why we have so many zombie debtors he said it would serve public purpose if the fed made it clear that in today's rate environment what's called quantitative easing in fact removes interest income from the private sector thereby functioning much like a tax and a source of what's called fiscal drag as it takes net dollars out of the economy as it reduces the. deficit well you're right if there were not this

design be better effect you would have a creation of interest income which would form the basis of the capitalism something called cappy tall. without the capital all there is no capital ows ism is the give them the hood disease of the the capitalism is that you should have taken that conversation today max the whole world would be devoid of the zombie banker is not i want to make a protest igloo in davos that looks like fun red noses with some of the locals or mostly then goes on to a second point he said this brings up my second criticism with regards to the interest income channel lowering rates in general in the first instance merely shifts interest income from say verse to borrowers but he then goes on to say that while income for savers drop by nearly the full amount of the rate cuts costs for

borrowers haven't fallen that much with the difference going to net interest margin of lenders thus you're enabling and feeding and empowering the zombie bankers and you know think of this where the capital is flowing through the economy it's a pipeline of capital if you will and the lower interest rates have the effect of the shutting down the pipeline of capital and causing deflation the central bankers are saying well we need lower interest rates to increase liquidity in the system that's patently false that shows that they have absolutely no idea how this economy works so unlike a chris whalen for example is a true banking analyst will tell you in order to get the cash flowing again you need to start to raise rates and incentivize banks to lend to each other are those creating the basis of an inflationary scenario that would create the jobs and the growth that some people say is their objective but clear. it is not but let's talk

about this point here max because you've often talked about raising rates and all the time you hear screeches of horror that this cannot possibly happen because when the fed cuts rates by five percent as it has done over the past two years we get point zero five percent taken off our interest rates that we have to pay for mortgages all the rest goes to the bankers all the rest is taken from savers and shifted to bankers so there is a vocal portion of the population who screeches and horror and pain and their voices get heard out over the people who are savers and who could possibly provide the capital from which capitalism can once again return to the american economy right in the current yours asymmetric and they lower rates but the benefits accrue ninety nine point nine percent to the lenders the financial strain on wall street very little of the benefits go toward people who are in the

consumer economy who are the basis of the economy toward lowering their rates so there is no no of no benefit on the consumer side on the banking side it stifles lending within banks and creates a illiquidity which is of course contributing to the deflation and then the central banks say we don't know why there is deflation because we keep shutting off the liquidity don't understand why the types of liquidity are drying up it shows a pattern of psychosis which i think most people now understand i think most people understand that in fact the intent is not for no money to go to the zombies because those are why would you ever want those peasant zombies to ever have any money again to pay off their debts you want them just eking eking eking out a lie a tiny tiny sort of subsistence level what you want those zombie shrieking. to

empower and to enable a vastly growing sector of the finance sector lloyd blankfein gets more powerful jamie diamond gets more powerful the banking sector gets more powerful exactly because of this squealing desperate zombie debtors look at all these pension accounts like cal pers for example the biggest in california one of the biggest in the world there's sume seven percent return on investments which assume interest rates of four or five or six percent interest rates for them because in less than one percent or close to zero their return last year was one percent and they're just being essential a discarded by this form of economic or financial pressure and as it's called there's a technical term for financial repression so former chief economist for morgan stanley asia was interviewed at davos along a similar theme as well stephen roach explains how the fed is pulling the wool over our eyes so we have a lot of squealing zombie debtors in america and the u.k. and other debt debtor nations australia canada anytime the notion that rates should

be raised they shrieked and it never happens well stephen roach talks to bloomberg and he talks about the fact that china is actually doing a lot better because they've introduced over a dozen margin requirement rate hikes and they've also raised rates so that real interest rates are actually in real terms positive and then he goes on to say this when he's asked whether or not this would be possible in a democracy in a democracy do those actions do there you know we truly never met paul volcker well you know but do you suppose you know excellent question tom i mean yours told us paul but we need we need a central banker who can really deliver. the goods and we've got central bankers right now who are i think trying to pull a warmer eyes was zero interest rates in this magic called quantitative easing yes well the paul volcker example is a. good example they had the inflation that came after nixon closed the gold window

and you had gold spiking in price and you had massive inflation stagflation and came in raise interest rates and set the stage for reagan reaganomics reagan just inherited everything the volcker position the head of that economy raising rates increases competition because of forces out the speculators who are merely parasitical in their behavior the bankers are just being parasites they want to lower rates higher rates would force those guys out and bring in entrepreneurs who are doing something other than just financial speculation it would be the best possible thing you could do for the u.s. and global economies to start raising interest rates forcing out the speculator parasites and giving people what savings a return on their investments the pensions and also the effect of raising real wages so let's go on to more of this magical thinking economists versus americans a new survey finds that just twenty three percent of americans say they trust u.s.

financial system that is that as low as the earliest months of the economic crisis and sixty two percent describe themselves as angry or very angry about the nation's economic situation the highest level since march of two thousand and nine now this is a study done by the university of chicago and northwestern university they also have a specific question they asked those they surveyed and they said predicting the stock market very few investors if any can consistently make accurate predictions about whether the price of an individual stock will rise or fall on a given day economist sixty four percent strongly agreed that you can't predict markets where americans overall fifty four percent agreed that you can't predict markets that means forty six percent of americans believe that you can magically perfect where markets will go and so max does that explain to you why they might be losing money to brokers them and bankers who. so there's two points there the first

point is one of the financial illiteracy now the fact is that rising interest rates would benefit consumers benefit the economy benefit wage earners benefit retirees benefit competition look at the comments underneath this video as it's playing on the internet right now read the comments below this video that you're watching right now look at all the comments from the financial illiterates who don't understand this basic financial concept and that is the part of the big problem the second problem is in terms of predicting stock market results and prices only broken markets are predictable markets that are functioning are unpredictable that's what makes markets a supplier of cheap capital are all the losers who can't predict outcomes provide cheap capital for their winners if it were predictable you'd have price fixing and then you'd have more of a state can purely black heavy hand of the state controlling the entire market that's not that's not the what the market's all about the sole moniker of

prediction markets is completely false that there is no such thing markets cannot predict that let's talk about beyond prediction markets the actual financial markets that we exist in live in today in our economy because this is bizarre that's what thirty six percent of a condom is believe you can predict outcomes and it is the maestro alan greenspan i think that helped brainwash the economy into believing that you can create outcomes with this magical wand and magical thinking but that's exactly what stephen king says indeed bunking economics is that the number one chief. ill conceived notion of economists is that you can predict economic outcomes or market outcomes and it's hard coded into the basic textbooks of economics that somehow economics is a science like chemistry where the outcome can be predicted that's false economics is like a social science where the. the outcome is completely unpredictable and the second

you understand that the second you understand why ben bernanke and his crew are complete charlatans by putting forward some other theory it's simply not true look at the track record over the past ten fifteen fifty one hundred years based on the central banking theory it's been a catastrophe so as ever thanks so much for being on the kaiser report thank you max. and won't be while our shirts match. it's a magical the go i am much more coming away stay right there. sure is that so much given to each musician on the mark with crude blockade and the turning off of the taps as the united states meet with jan sanction iran is also threatening to impose.

lose. too much brighter if you move. from plans to pressure in some.

don't come. to. pass or welcome back to the kaiser report time out to go to london to speak with that man or leyland. management that welcome back to the kaiser report thank you max them wearing a special silwood so i just you know actually now and then silver is well over twenty percent of the air and twenty twelve and it's in backwardation so first tell us what is backwardation backwardation is the opposite of can tango normally in the precious metals market you'll find in the futures show you effectively the trading higher in sport rather than lower backwardation effectively shows that there is a. stream tightness in the silver market at the moment we're seeing the sport contract trade daily it's just a smidgen higher than the front lunch month which is margin and this is very very

bullish and particularly in precious metals one wouldn't expect to see that and it does appear to be being created by the problems with m.f. global bear in mind precious metals investors and most sensitive investors and overall to counter policy risk and of course what happened with m.f. global was an extreme counter policy event and that leads many people to leave the futures market in the pressure is going to the spot market which is very bullish for twenty twelve and and i see this is being a major change. last year the powers that be the central planners of the central bankers who don't like precious metals because it makes them look stupid when the prices go up they were raising marginal klarman and trying to get people out of this market but at the same time m.f. global and j.p. morgan stole people's money right out of their account so all of that work for nothing because now people are. i'm playing there rick market j.p. morgan m.f.

global accounts of buying physical and this is causing the near term price to get higher than the out outward price so-called backwardation and this trend is clear indication of the silverball market is well in place and going much higher i would imagine men yeah absolutely and bear in mind as well we have the the second element of this which is the fact they're exposed to it back in the market for three hundred million dollars where the physical of course when he announced his first purchase of physical in think it was oktober of twenty ten the price was around the eighteen dollars twenty dollars level and when you consider when you think about the market this extreme physical tightness like silver does and someone comes in in their moans delivery of physical and saw it was no surprise to see that as a major catalyst for the run up to fifty dollars the place over a period of about six months i think it's very interesting that we've got

backwardation and brought back buying in saw it and bear in mind that this three hundred million is only one fifth of the overall chauffeuring so yeah i think it is profoundly bullish confluence of events at the moment and i have high hopes for this year all right now ned well known derivatives expert janet's have a call the recently suggested both in writing and in a televised interview that there was clear manipulation in gold and silver this manipulation she said was most evident during the options expiration months so this is that becoming mainstream that gold and silver are openly manipulated something we've talked about before do you think there's a growing awareness now that these prices are fake number one and what about this idea that the manipulation clusters around the option expert in months i think it is becoming more accepted people when i when i discussed it people don't. look at me as. a crazy person and then seven or eight years ago i think there's still

a degree of apathy if i'm honest about about the subject but reference what janet have a caller was saying about option a story i think there's some truth in that but i think that the medication called her was so blindingly obvious next to the trip over and you had on the floor if you want able to see what was going on it's very very clear and very mind that you know that that lawsuit that we discussed last time i came on is something that people should revisit and reread if they have any any sort of query about what may may or may not be going on the consolidated class action lawsuit about what j.p. morgan been accused of and i think because very clear that silver still is a much smaller market than gold and as a result you know that both are being manipulated but the footprint of the manipulative behavior is much more obvious in silver yes i think there's some truth about the auction experience and sun in the past that was an area where you would see sell off into options barry said the contract didn't expire in the money but of

course you know of late that that's been blown out the water i just think that the evidence overall is overwhelming and i would say to you that. you know what we've got is the london go pool that was around in the one nine hundred sixty different was them they were selling real physical hockett you know it still exists it's just a sort of tissues a version of the same thing that existed all along which is a managed retreat of physical metal against paper currencies and i think really you know it's it's now accepted by an increasing amount souls knowledgeable commentates this is going on i don't think it's hit the public yet because they you know the public is still learning about the true nature of money and what it used to be and what it will be again ok talking about the turn nature of money ben bernanke in his recent statement is talking about interest rates remaining at effectively zero through twenty fourteen and beyond so here you have a situation that you have a piece of paper that pays no interest that is subject to counterparty risk that is

confiscated openly by banks like m.f. global that the rest the world hates and is doing bilateral deals outside of the this piece of paper the us dollar and i'm talking about of course what's going on with china and russia. or you've got gold going on what do you what do you go for well i mean you know that gold is reverting to its traditional role as the world's reserve currency max it's very obvious in my mind i mean you think about the last hundred years they've been to global reserve currencies gold followed by the dollar and we're going back into gold again you know that's the way i see it and and i think probably the most telling thing of all is the eurozone by the germans are hand over fist in the physical market buying huge tonnage and i think it's extremely interesting that you've got the two worlds two credits a nation's you know china with the u.s. and germany with the euro zone if you want to put it like that and they're out

there and they're buying serious amounts and i think you know this is a major change and i see this needing to. you know folks are one of the better phrased. fever and twenty twelve i think this is emerging now i think the eff own theme comments and the way the market has reacted to those comments most most importantly because they're being all the comments the last twelve months which the market has chosen to ignore but i think this is all leading to. you know the reversion to the mean or whatever other way you want to put it which is gold is money gold is the world's reserve currency it always was and it's reverting to that status right now you mentioned germany and their gold possession they've got roughly three thousand tons is the second biggest gold position in the world second to the u.s. however sixty percent of that only on a sell at the new york fed and the spent confirmed at the bundesbank so in a currency war as some call it might be difficult to get back gold back and certainly countries like venezuela are aggressively repatriating their gold and

countries are talking about getting their gold back into their own countries is there are risks that the u.s. has some of our good declares financial martial law keeps germany and other european goal in new york won't let it go and part of this emerging currency war your thoughts well if the crissy remains in power. the way it is at the moment who knows i suppose it's a possibility they could try that. the german buying. the retail side of the german people who are sort of going of the top of their government in the way they govern the behaving in a buying physical inside themselves over a role the big if the most important thing i thought it's for him whether or not. the new york fed gold is either there it's hypothecated four hundred times over you know whether the germans will get it back or not i think that these things live in the world of political management as opposed to what's more important which is i've

said ever since i first came on and spoke to you which is that while masses the people that the people go out there and effectively get ahead of the curve and stop on physical themselves and i think they can dictate the political route here and i don't think that that necessarily will be the case of course the americans have lots of military hardware to back up a potential conversation about the other nations gold but i see that as a fairly extreme potential possibility or outcome all right let's do a little of forecasting last year you were talking about a two thousand dollars gold price and a lot of banks our raising their their targets for gold and they're now ready to get to that seventeen hundred twenty one hundred dollars per ounce level what are your thoughts for twenty two are thirteen do you still say two thousand in the cartoon or anywhere or do we go from there well i think it's just a linear progression would take you to two thousand i think that's a particularly big deal but the point you make about the banks is is in my opinion

extremely important i think this makes a huge difference something which always throughout through this bull market when i've been investing it's been a source of enormous frustration to me when analysts come in and they say in front of you and they say yeah we like this stock is our top five. meanwhile we think gold going down one hundred dollars over the next twelve months well of course no institutional money is going to go into the market when that happens so i think the fact that the banks are projecting higher gold prices not just five percent higher but substantially higher can lead to a major sea change in the way the market moos because ultimately the institutional generalist once the asset allocation i'm moving the money around you know they may well like the idea of a particular gold mining stock and they may see the fact they're now paying dividends and then that's interesting but if they're also being told told by the same island. but i think the price of sport is going low you're very unlikely to see any money come come in and i think that's an enormous reason why the money so to perform so badly for a long time but i think personally the fact that the banks making the big

projections you know the high prices whether or not you or i you know want to pick a particular line the sand is the way we're going you know i say it's going higher but i think what's more important is what the banks the saying and what that means potentially for twenty twelve ok last question in terms of these banks allocating money to to gold and silver as part of their asset allocation at the at the moment last than two percent of the global investable assets or in precious metals which is a very small fraction versus outside and i think seven days during the last major bull market when that number got up to ten percent and beyond are those numbers correct and you see that that those numbers expanding to that seven days level of ten percent or above which of course would mean hundreds of billions of dollars now looking at this market will first you know i don't think they are correct i think you know whether you want to bring in this just a banking system the system whatever whatever you want to relate it to the type of

gold investing that was going on back then is very different to the type of pressure that was the best thing you know and include silver in that as well that goes on now to be the leverage is much lower and i'm pretty sure that that number that you said of two percent would include. all different forms of gold silver instruments so no i think it's lower than that and i think it has to go much higher picking a number i would. bear in mind that we are the situation now where paper currency is across across the planet. and i think what we're seeing is a paradigm shift broader than just an i thought i'd like you know from one to ten we think a whole paradigm shift about what money is the way the world moving it's such a big change that i think that picking a number in. a way like that is you know i wouldn't i wouldn't wish that all right fair enough. time thanks so much for being on the kaiser report a pleasure as always and that's going to do it for this edition of the kaiser

report with me max kaiser and stacy herbert are they my guest the leyland asset management is going to send me an e-mail please just as a report that r t t v are you until next time x. guys are saying but. not to. the mysterious sounds of russian.

news today. these are the images seen from the streets of canada. this is also you the headline. is going to round damascus as rebels engage with government forces in the suburbs of the console and while the assad government welcomes a russian proposal to host most who based peace talks would be opposition which has given a mixed. news it could stop supplying or some of you states in response to sanctions

against its nuclear program which is currently undergoing to do an inspection. you need is how to grieve the permanent five hundred billion euro rescue fund for the eurozone and begin brussels also all but two of the twenty seven countries have agreed to close a fiscal union intended to me to try to brussels control of the budgets of member states deal with the euro crisis. and to have a hundred police response to anti cooper projects in kind of full get it back across that front take where british officers are also accused of excessive use of . the headlines at the back story take you beyond the. tiny village that hans to withstand the relentless start stories which mysteriously post appeared fifty years ago our special report attempts to solve.