welcome back here with a minor of the top stories syria still reeling from escalating outbreaks of violence as its blight spreads to new york where u.n. security council members seem unlikely to reach consensus on the younger us. occupy d.c. protesters dig their heels in as they wait for a police crackdown after the deadline to leave their camps said by city authorities passes. plus a bittersweet victory for the euro twenty five e.u. nations signed up for stricter debt rules while the czech republic joins the u.k. in rejecting the much hyped proposal. next we have the latest report and today our team's financial pundit next guys are reveals his uncompromising take on the

pillars of the global economy. max ties are this is the kaiser report. in the news. news. that's right from barry ritholtz the word of the day zombie debt or a zombie debtor is a noun and indebted consumer who is only able to pay the debt interest each month rather 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 anything that touches the consumer now if you look at the bankers of course they're involved in a very interesting situation in that they never pay interest on phantom debts they

loan into existence phantom debts that are on collateralized that they themselves only understand the configuration there of but they never have to pay interest i were they 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 warren most layer of 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

quantity. if 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 federal deficit well you're right if there were not this is on be better effect you would have a creation of interest income which would form the basis of the capitalism something called happy tall. without the capital all there is no capital allows ism is the give them the hood disease of the the capitalism 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 rub noses with some of the locals or

most other 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 dropped 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 a bank. to lend it to each other or thus creating the basis of an inflationary scenario that would create the jobs and the growth that some people say is their objective but clearly 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 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 they lower rates but the benefits accrue ninety nine point nine percent of the lenders the financial establishment on wall street very low 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 elu quiddity 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 that in fact the intent is not for no money to go to the zombies

because those are. zombies 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 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 they assume seven percent return on investments which interest rates of four 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 as it's called there's a technical term for financial repression so former chief economist from 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 shriek 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 marching 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 goes. to the you know the truth never met paul volcker well you know but i do you suppose no excellent question 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 war were zero zero interest rates in this magic called quantitative easing yes well the paul volcker example is a good example they had the inflation they 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 that volcker position the head of that economy raising rates increases competition because it 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 giving people what savings the 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 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 economists sixty four percent strongly agreed that you can't predict markets where americans overall fifty four percent agreed that you can't. addict

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 well 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 and cannot predict but 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 con amiss 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 out. comes 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 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 mack. and we'll be while our shirts match. it's not a tick the go i am much more coming away stay right there.

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 that everything you thought you knew you don't. charge was a big. welcome back to the kaiser reports i'm not a go to london as big of that manner leyland. management med welcome back to the

kaiser report thank you my. i'm wearing a special silwood so i just you know actually live now that silver is well over twenty percent of the air and twenty twelve and it's in backwardation so first tell us what is backwardation what backwardation is the opposite of can tango normally in the precious metals market you'll find that the future is show you effectively the trading higher in sport rather than lower backwardation if it can be shows that there is. extreme tightness in the silver market at the mo with seeing the sport contract trade daily just a smidgen higher than the front munch 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 overall counterparty risk and of course what happened with m.f.

global was an extreme counterparty 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 i think this is being a major change ok i sell 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 they prices go up they were raising margin acquirements and trying to get people out of this market but at the same time m.f. global and j.p. morgan stole people's accounts money right out of their account so all of that work for nothing because now people are dumping their rig 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 prize so-called backwardation and this trend is clear indication of the silverball market is well in place and. and going

much higher i would imagine then yeah absolutely and bear in mind as well we have the the second element of this which is the fact that eric sprott is back in the market for three hundred million dollars whether physical of course when he announced his first purchase of physical in think it was october of twenty ten the price is around the sort of eighteen dollars twenty dollars level and when you consider when you think about a market this extreme physical tightness like silva does and someone comes in in dumond's delivery of physical and saw it was no surprise to see that as a major catalyst to the run up to a new fifty dollars took place every period of about six months and i think it's very interesting that we've got backwardation and sprawl back buying in size and bear in mind that this three hundred million is only one fifth of the overall shelf offerings so yeah i see it as a profoundly bullish confluence of events at the moment and i have high hopes for

this year all right now no well known derivatives expert janet to have a call the recently suggested both in writing and in a televised interview that there was clear manipulation and gold and silver this manipulation she said was most evident during the options expiration months so this is that now 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 manipulation clusters around the option expert in months i think it is becoming more accepted people when i when i discuss it people don't. look at me as a crazy person they met 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 because you were saying about option a story i think there's some truth in that but i think that the mitigation of gold so was said blowing in the obvious next sort of

trip iron you had on the floor if you want able to see. what was going on it's very very clear and bear in 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. 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 s. different was them they were selling real physical in some pocket 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 commentate 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 nations 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 that you know this is a major change and i see this needing to. you know one of the better phrased. fever and twenty twelve i think this is emerging now i think the f.o. comments and the way the market has reacted to those comments most most importantly

because they're being all the comment the last twelve months or so the market has chosen to ignore all 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 tonnes a 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 confirm 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. or some of our good declares financial martial law keeps germany and other european goal in new york won't let it go and and part of this emerging currency war your

thoughts well if the chrissy remains in power you know the way it is at the moment who knows i suppose the possibility they could try that. the german bombing on. the retail side of the german people you know sort of going of the top of their government in the way they govern the behaving in a buying physical inside themselves over role the biggest 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 of people that the people go out there and effectively get ahead of the curve and stop buying 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 stop this 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 moves 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 not paying dividends and think that's interesting but if they're also being told told by the same manner. 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 perform so badly for a long time but i think personally the fact that the banks making the big projections you know the higher prices whether or not you or i you know want to pick a particular line the signs as to where we're going you know going higher but i think what's more important is what the banks is 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 the market well 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 number that you said of two percent would include. all different forms of gold and silver

instruments so no i think it's lower than that and i think it has the scope to go much higher picking a number i wouldn't do that and bear in mind that we are the situation now where paper currencies across the across the planet are racing shell the low and so i think what we're seeing is a paradigm shift rather than just an asset allocation you know shuffle from one to ten we think a whole paradigm shift about what money is the way the world moving is such a big change that i think picking a number in let's say a linear way like that is you know i wouldn't i wouldn't wish to do that all right fair enough and then and a limited run of time thanks so much for being on the kaiser report a pleasure resort all right now going to do it for this edition of the kaiser report with me max kaiser and stacy herbert are they my guest ned nader leyland of setting out asset management if you ought to send me an e-mail please do so at kaiser report at r t t v dot ru until next time acknowledge or saying bio.

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