good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and here are your headlines for march second two thousand and twelve brushoff of the e.c.b. his latest liquidity injection are we still based in new euro zone crisis well let's follow the money ok two days after eight hundred banks left up to five hundred thirty billion euro from the european central banks three year l.t.r. zero deposits at the e.c.b. have shot up to a record seven hundred seventy seven billion euro more than a trillion dollars as banks choose to make a negative return on their money instead of engaging in this saga and carry trade is a sign that banks could be terrified of this. because you. are

the space. station right i'm talking about what could be lurking beneath the surface of euro zone banks' balance sheets and since we're on the subject of liquidity brazil has fired off another round of global currency wars and response to all that easy money brazil's stepping up intervention in the market and extending a tax on foreign borrowing to fight against developed nations that print print print now burning he continues to defend the fed's policies in response to its purported objectives. president with your employment rate elevated and usually subdued committee judges that screening a harley a comedy for monetary policy is consistent with promoting those objectives he can say all he wants the finance minister says brazil won't sit by passively while expansionary monetary policies continue and timothy geitner in

a wall street journal op ed today warns against financial crisis amnesia as he sees opposition to wall street reform but his geithner left people seem to have forgotten about his role in the crisis when two years ago people were calling for. him to resign we'll tell you what we think let's get to today's capitol hill. earlier this week we saw eight hundred european banks take the bait from the e.c.b. and the longer term refinancing operation this is better known as l.t.r. or even though it's a three year loans at one percent from the e.c.b. so banks borrowed a total of about five hundred thirty billion euro we've been talking about this

earlier this week now though we have reports that record amounts of money are being deposited overnight at the here is the chart of what it's been doing for a while you can see it's right there at the end that is the most recent number the overnight deposits were seven hundred seventy billion euro that is more than a trillion dollars and that's l.t.r. own money based on making a negative yield on it ok they're getting point two five percent on their money at the e.c.b. wall again those were one percent loans meanwhile spain it now anticipates its unemployment rate is going to hit twenty four percent at two thousand and twelve let's take a look at spain's unemployment those are the number of people unemployed but a major problem only growing and we see all of this have a really negative impact on what's going on in the euro zone it's really hard to discern how this is going to end up and what could should and should not be done so let's talk to mike norman about it he's chief economist at john thomas financial

and we are very happy to get his insights on all of these things thank you for being on the show mike. very good to be great so let's start with the l.t.r. oh because this second round that we saw of this operation right after that we see our record amount of money deposited at the e.c.b. what is up with these banks are they just hoping they're going to have an opportunity to make some more money down the line and some better investments so much so that they're willing to get this money at one percent and make just point two five percent on it. yeah it's bizarre really when you look at it i mean they're willing to take that negative yield but i think it speaks to the worry and concern . of the banking system in europe i mean nobody you know the interbank market is very cautious that indeed is probably the reason for these ongoing l.t.r. oses is this liquidity provision but then what happens as soon as the c.b.

provides liquidity the banks turn around and put it on deposit at the e.c.b. earning a negative yield i think it's in part just worrying concern over the solomon sea and the risk inherent in the euro zone banking system and also maybe it reflects the potential for a breakup at the periphery where they want to have their money in someplace safe at the e.c.b. or maybe in german bunds which actually i think yield lower than the e.c.b. as rape so it's just a very curious situation that we have now and underlying all this you have to remember we still have a solvent see issue the liquidity injections don't deal with the solvent see issue and as we see austerity play out economic growth contract further that degrades the asset quality and performance of these banks so the solvent see the insolvency i should say gets worse which

a down the road requires more liquidity injections right well that's a really interesting point that you bring up let's talk about the short term implications because right now there's a lot of concern that policymakers won't be able to prop up sovereigns and be that they won't be able to prop up with out on bond markets and so isn't their ad that's it interest in these banks there isn't it in their best interest at they have all of this exposure to the bonds of these countries that are just rats now are going to be endangered distressed doesn't it behoove them to stock up on all this easy money so that they're protecting themselves against that. well look the money is a loan i mean the eventually it has to be paid back it's a long term loan but it's a loan nonetheless i mean it would be much better if the banks would have increased equity but you can't do that in an economic environment where you see growth contract in their assets are deteriorating it's in the interest of the system the

euro system to have the e.c.b. step in there as it has been doing in an open ended unlimited basis the problem is they keep saying well we're not going to do this forever and every time they say that there is a real worry that the whole thing can come down like a house of cards but until now they've been functioning in that regard but look you can individual or an entity can stay insolvent for a very long period of time if it has that liquidity to meet its liabilities on a monthly or quarterly basis whatever but the whole thing pinned continue to get worse which will require larger and larger injections we saw this l t r o two right it's bigger than the first one and the next one when it comes along will be bigger than the second one right so what options do we really have don the banks i guess

is one or i guess government spending and admitting that they're not willing to have a free market but at the end of the day that's socialism so is there any way that we can return free and fair markets. well there is a need to have a real fiscal of already and it has to come from the currency issuing and city which itself is the e.c.b. which would require a change in the european constitution which would allow the e.c.b. to step in and essentially fund national governments at some level running deficits at some level to sustain demand and he can make activity until they're basically able to grow out of this problem but this is not the dog at the present time the dog is cut watch the economy is contract cut some more and repeat this is absolutely right einstein's definition of insanity yeah continue to do the same thing over and over again and expect

a different result so we're heading towards you know in the end unless you know we see a change politically we're heading towards a crash of the system i believe it's just a long drawn out process and every time we get to that precipice where it looks like we're about to go over the edge the e.c.b. does step in and kicks the can down the road a little bit further but mike let me ask you death with what you're proposing how does that create a free market. what do you mean by a free market well a free market you know wouldn't be where. the e.c.b. cutting interest rates and taking more control and all of these. people having more government all these countries getting more and the government's right. well i hate to break this to you lauren because i like you very much but any any economy which which is a currency issuing. independent economy which operates with

a central bank has interest rate setting ability indeed it's the monopoly setter of interest rates i mean that's how it's happens here in the united states that's how it happens in japan that's how it happens in the u.k. so i mean that is the essence of free economy that the government is the price setter of the money because it is also the issuer of the sovereign money so there's no getting around that i mean that is how it functions that's how it will continue to function i think what you're alluding to is to have an economy that's operating at near or close to full output and employment i don't think we're going to get there any time soon in europe with the austerity but something that allows you know individuals to earn enough income companies to earn enough profits to be current on their liabilities so that they can be their solvent and that the system continues on you know sort of self sustained i think that's what you're talking

about and that's all about growth right i mean you have to have policies that foster growth you can have policies that continue to drive this contraction because in the end look what's happening it's migrating all the way up the solvent see ladder it went from the most indebted countries then it goes up to the next indebted ones finally will ultimately get to germany and you know it gets to the very top of the ladder where everybody's broke and nobody has money that's where it's headed not going to get in yet you know i hear what you're saying but i think had we did all we've had central banks and what are good it has to start right it's got rain but let's move on because i want to get to this point advantage we got to have basically unity and you're right yes and eat it can be the economy and each of these countries have their own political systems and are going to have to figure out. a lot of internal domestic issues in order for that to happen so let's look at what's going on and we just have new news today that spain's unemployment rate they're expecting it to be twenty four percent and we see kind of this vicious

cycle that happens with austerity and then governments have to impose more austerity and that hurts growth and then unemployment but at the same time you need a sustainable economy out of that you need to create some kind of sustainable situation and not just have the government intervening with what becomes more more like socialist solutions. well look you know. you made a point earlier about we didn't have central banks at certain periods in the past and essentially under those sorts of monetary systems or the quantity of money was fixed and that's basically where we're going under the current system where none of these countries anymore issued their own currency so the quantity of money is fixed their liabilities far exceed the amount of money available to them right now and you're seeing the economies shrink to some new equilibrium level way below where they were before the problem is it's very very disruptive socially you see this

happening with the protests in the riots in the street you mentioned spain where i think youth unemployment is something like fifty percent you know this is what you're going to see until you reach that new equilibrium level and you know it's very disruptive to societies it's very disruptive to economies we're not there yet it's got to go further and you know just the process of moving that along. watching it from the outside objective lee it looks like you know it's a train wreck basically i have michael quickly we don't have a lot of time but i do you want to get to this brazil news because we're advocating for our intervention by thanto banks and pour out money supply to get fan did you do not get competitive devaluations a new secret deal coming out and saying hey in response to developed nations accommodative monetary policy we can't just have by we have to do something to the debt and get create a feedback loop that just continues. yeah and it's

a negative feedback loop because these these competitive devaluations lead to a decline in the standard of living broadly you know because everybody's doing it and you know what policymakers don't seem to understand is that exports are a cost and imports are a benefit when you export your real product your output to foreigners in exchange for some currency you know it is presently in today's world where most they sions are pretty comparable in terms of their competitiveness the only way you can do that is by suppressing wages and reducing the purchasing power of your currency which by definition lowers your standard of living so they're caught up in this race to the bottom and basically what brazil's president should say is hey this is great let's take the finished product from the united states we get wealthier we don't have to engage in is competitive devaluation but they don't see it like that

that's what's driving the whole process as well am i don't we have to get back to the whole issue of central banks and their policies in expanding and i find the first place that for another data for now i'm going to have to leave it there thanks so much mike that was my carmencita economist at john thomas financial and still ahead stay right here teddy geithner has an op ed in the wall street journal warning us against and knees out over the financial crisis we think that are maybe getting some things on his own we'll let you know what we think. we just put a picture of me when i was like nine years old on what you call the truth. i'm a contestant i am if you don't get a sense that i love rap and hip hop and treat. this kind of it yesterday. i'm very proud of the role with

al-jazeera as you play. the game. you know sometimes you see a story and the scene so you think you understand it and then a glimpse something else and you hear see some other part of it and realize that everything is ok. i'm charging the big picture. see. what drives the world the fear mongering used by politicians who makes decisions break through. who can you trust no one who is human deal with a global missionary zeal where we had a state controlled capitalism is called sackfuls when nobody dares to

ask why we do our t. question more. all right it's friday which means time for viewer feedback so i can respond to you now less than an e-mail to me about a segment you saw it was about bernanke you doing his job as wall street's benefactor talking about the fed being a private institution own by its member banks and lots was really surprised that i don't know if many people really know this fact i was really surprised about it and it makes the economic situation even more scary since well geithner and bernanke we're actually federal employees the whole system is really geared towards the biggest banks hank paulson and bernanke and the bailouts of two thousand and eight maybe i'm overly stupid about this but i think it would be a good story i consider myself to be up on

a lot of things political and economic but this i didn't know i mentioned it to a few people they were surprised to last we couldn't agree more it is a great story to work but i don't even take it should exist because you see it's not a government agency it's a private banking cartel and people don't realize that when a car child exists it has only one song ship and that is to promote the best interest of the members of the car charts. well you know you got to watch more capital account less that was an author of creature of jekyll island a book about the fed but obviously you're not alone because you heard what he said in that sound bite a lot of people don't know about this you know with jamie diamond on the fed's board of directors but i think that you and anyone else interested in this topic would love our interview with griffin and you can see it on our you tube channel all of our interviews are always there this was from our feb thirteenth show moving on now dimitri i noticed was talking with a viewer on you tube and i wanted to comment on what australian all the way said he

said cool show to dimitri any chance you can get ron paul on the show that would be awesome and i wanted to address this because we got this request from viewers all the time and the fact is we've reached out and try and not had success getting ron paul on the show so it's so many of our viewers want him reach out tell us office tell us campaign i don't know can hurt right let's see how it goes try and get him on the show and my tape he wrote half hour here he's the entire twenty four hour financial news cycle on fox c.m.d. c. and any other cable network i can think wow thanks mike this is just making me swoon into this were you said i really enjoy watching loose change seriously i have new respect to lauren and dimitri they have the guts to speak out loud about the facts and the truth i wish you both would get a raise. thank you for having that last bit but you know that this really does hit on something because the reason we all recall to say what we want to and the so critical of the banks and corporations and honest about what's really going on with

the evidence suggests is because we are not beholden to them we're not corporate media and this brings me to another issue i find it very laughable that people accuse us of kremlin propaganda the mere fact that we're not corporate media allows us to do honest coverage about corporations the establishment the banks and i cannot think of one bigger benefit to the issues that we cover here on this show in fact just to give you an example of some things that made. google juan one of our guest this week james good to less a lawyer who's defending m.f. global customers has been a very outspoken critic of j.p. morgan throughout the process and according to him at least one mainstream network told him they can't have him on any more because j.p. morgan threatened to pull its ads just food for thought according to him speaking up to us we talked with him about m.f. global and this week and p.s. . i'm canadian so i don't fully understand american law but i can learn lester make a citizens arrest of john corazon and use the overwhelming evidence and previous

precedent set by courts in the s. and l. scandals of the past. and i like it we're going to look into it maybe i can see if bill black who's been a guest could help me out with that one and one thousand nine hundred eight a west wrote us about yesterday's capital account we did a segment on alan greenspan we talked about his and rand influence and said another great show guest is entirely wrong about greenspan being a rand acolyte he was a free market capitalist and gold standard proponent many moons ago but he completely sold out as chair and you know we actually we made our point we question our guest about that we agree with your assessment of the rand greenspan situation but since we're on it we thought we leave you with this very bizarre anecdote about greenspan's old days when he was reportedly close with an rand and she basically went off the rails over a married man named brandon whom she had an affair with and excommunicated him from the group and that's how you writes about this in his book of topia and says this wouldn't be worth mentioning but for the whole area stacked that greenspan signed

that excommunication degree decree excuse me which read because nathaniel branden and barbara branden in a series of actions have betrayed fundamental principles of objectivism we condemn and repudiate these two persons irrevocably so leave you with that little note of greenspan's former excommunications and now it's our feed back for you this week. all right before we go let's talk about a few stories that caught our eye i want to bring dimitri kovtun as an end studio our producer and unfortunately he's going to have to pick up the slack for shannon donahoe because she is out but this is what is in my goodness

a morgan stanley managing director was arrested and charged with a hate crime for allegedly threatening and stabbing a taxi driver of middle eastern descent back in december over a cab fare dispute from the city to his multimillion dollar home in connecticut ok i have no words just watch this. but you know john you're so hungry what you're going to try to go so much. water. you drink. so we lost that. insider trading. just. i think he goes on to kill that man right dimitri yeah maybe that will go yes dad's into debt and american psycho which is what it seems like more and more people on wall street are turning out to actually be there was a study that one in ten people on wall street according to this article are psychopaths do we have exhibit a here i know we've talked about this this week but

this is the not a really great example i think if you're walking around with a pen my if you're a psycho but i have met a lot of these psycho bankers over my life there are a lot of these psychopaths working on wall street and it's not surprising that they would actually start you know actually was limbs have this this kind of thing with the user it's interesting to believe in the search i think there's a kind of special bond not familiar with it but there are special bond special financial products as in the muslim world so this guy was actually attacking the muslim by your own ideological like you should be paying me interested i owe a banker i'm going to work doing this and of you mary you should be paying me and they're right exactly that's the mentality yeah of the universe and all and just to remind everybody that study said they compared to one percent of the general population that is like zero pounds on wall street that number is one in ten which brings me to another former wall street guy now in the administration timothy geithner has an off that warning america against this when it comes to the

financial crisis this moment i mean you know it's different from the church and we're going to hold on with something just since we can't make. i'm talking about and he is making the case in this op ed for wall street reform and warning opponents against amnesia over the financial crisis but the big issue that stick out to me is this timothy geithner had amnesia because two years ago people were calling for his resignation in relation to some of the actions the new york bad to during the financial crisis when he was at the helm he obviously doesn't have any. i'm going to want to live here and say that tim geithner based on the evidence based on ron suskind book is the picture of them based on everything we've heard since. i was a crisis is a sleazeball and it sounds shocking to me real character assault there one hundred percent on a percent total sleazeball there's no way that he believes what he's saying in his

article is like my wife's reading the paper looks up at me and was worried about the financial regulation that's going to suggest that we got is not stupid he's actually really smart i've heard of the people i don't think you know bernanke me believe what he says timothy geithner is much smarter than that ok he's playing this game in a slick way and this is a a regular psychological tactic where you identify with the victim and say hey i agree with you guys i think we need with this last one we need a cause for which you this is what we do we can forgive the financial crisis no we haven't forgotten the financial crisis to me when you're a you know you were thing you're sure there were jamie and there stearns ok guy we're not recording you could figure it out well and i want to bring up a passage from his op ed that caught my eye really quickly if i could i think we have that quote are these reforms complex no more complex than the problems they are being designed to solve and it should be noted most of the length and complexity in the rules is the result of the carrot required to target safeguards where they're needed not when they would have

a damaging effect ok according to people that we've interviewed that have parsed the volcker rule and really focus on this like the people we interviewed from occupy the f.c.c. the reason those rules and regulations grew so much is directly because of the banks. lobbying for the thing they wanted in there so that is just b.s. it's actually ridiculous that sir why do you need all that what do you know about language you don't you're creating loopholes the more language in a legal document the more ambiguity that's a fact if you want to create a more ironclad agreement you keep it short because you keep the loopholes on the ambiguity out so yet all of them we have got are doing a bidding up the banks and the big guys doing what's best for americans and this has been genuine and let's just remember he came from the new york fed when you work at the new york fed you are wall street's you know what and that's what you need i mean on your board of directors you have jeremy mr crybaby jamie and your family all right we have to end my bad thank you so much for tuning in thanks so much for watching don't forget to follow me on twitter out lauren lyster give us

feedback on the show at you tube dot com slash capital account from everyone here thanks so much for watching have a great weekend and have a great night. wealthy british soil the sun it's time to explain the. market find out. why not what's really happening to the global economy with much stronger for a no holds barred look at the global financial headlines tune in to khans report. the official g.o.p. keisha giuliani so called time from the. lights on the

good. video on demand. smiling gold coast's. this is. speech now in the palm of your. question on the dot com touches that so much a commission called his wife unaccompanied children in voting for the future in two days' time russians will go to the polls to elect their next president what is the nature of russia's political system how is it changed.