markets trying to. find out what's really happening to the global economy with my cars or the no holds barred look at the global financial headlines tune in to cause a report. within twenty four hours a day this is our life here in moscow top stories now this hour a day of silence campaigning and political ads are cleared from the russian airwaves as voters shake off their apathy and prepare for what's expected to be the highest presidential election turnout in decades. yet another suicide bombing strikes in syria the latest in a chain of attacks against government supporters as the syrian national council far from home in turkey to fuel the fire. plus u.s. president barack obama is caught between those for and against a military strike on iran's nuclear sites just as he prepares to face the mighty

israeli lobby. with a recap of those stories in a half an hour from now the meantime we cross over to washington d.c. the capital account with lower enlisted for the latest on politics and the economy . 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 fresh off of the e.c.b. these latest liquidity injection are we still facing a euro zone baking 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.v. have shot up to a record seven hundred seventy seven billion euro more than a trillion dollars as things to use to make a negative return on their money instead of engaging in the saugor and carry trade

is a sign that banks could be terrified of this. because you. are those things i know you know special 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 up another round in global currency wars in 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 bernanke he continues to defend the fed's policies in response to its purported objectives. president with your employment rate elevated and usually subdued the committee judges just screening of highly accommodative stance for monetary policy is consistent with promoting objectives he can say all he wants the finance minister says brazil won't sit by passively while expansionary monetary

policies continue and timothy geithner in a wall street journal op ed today warns against financial crisis amnesia as he sees opposition to wall street reform that is geithner lucky people seem to have forgotten about is 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 capital account. 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 o 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 e.c.b. here is the chart of what it's been doing for a while you can see it spikes 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 if that's l.t.r. own money banks are 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 happy 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 was 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 e.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 worry and 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 may be in german bunds which actually i think yield lower than the e.c.b. is rate 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 down the road requires more liquidity injections rate well that's a really interesting point 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 the view that they won't be able to prop up a sovereign bond market and so isn't their ad that's it interest in these banks there isn't it in their best interest that they have all of this exposure to the bonds at these countries that are at distress now are gonna be in major distress does anybody move them to stock up on all of this easy money so that they're protecting themselves against that. well look the money is a loan right 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 bases 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 an 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 can 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 yeah 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 bank i guess is

one or i guess government coming at it getting that they're not willing to have a free bond market but it ended a day that's socialism so is there any way that we can return to free and fair markets. well there is a need to have a real fiscal of the 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 economic 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 why it's the economy's 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 mike let me ask you that what you're proposing how does that create a free market well what do you mean by a free market well a free market you know wouldn't be when. the e.c.b. threating interest rate 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 but any any economy which which is a currency issuing an 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 near or close to full output and employment i would 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 there solvent. 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 solomon sea 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 let me get in your you know i know you're saying but i think time we can always has and hold banks and some would argue that it's just the right price discovery but let's move on because i want to get to that point and if we don't have basically unity and europe yes and eat you can be take on each of these countries have our 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 news today that spain's unemployment rate they're expecting it to be twenty four percent and we see kind of this whole 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 and 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 of 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 and 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 leigh it looks like you know it's a train wreck basically i have micro quickly we can have a lot of time but i do want to get to this brazil news because when i'm advocating for our intervention by think of banks and or money if i could expand it you do not get competitive devaluations any secret deal coming out and saying hey in response to developed nations accommodative monetary policy we can't just get by we have to do something to get them to create a feedback loop that has continued. 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 and 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 its competitive devaluation but they don't see it like that

that's what's driving the whole process as well and i guess we have to get back to the whole issue of central banks and their policies and expanding and i find the first place after another data point 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 kitty geithner has an op ed in the wall street journal morning on again and knees out over the financial crisis we think that there maybe aren't getting some things on his own we'll let you know what we think. 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 that everything you saw you don't. charge is that it's.

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 an auburn and he doing his job as wall street's benefactor talking about the fed being a private institution own by its member banks and less 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 wall geithner and bernanke we're actually federal employees the whole system is really geared towards the biggest banks ally 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 did know i mentioned it to a few people they were surprised to last we couldn't agree more it is a great story just look i don't even think 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 cartel the exists it has only one sanction and that is to promote the best interest of the members of the cartel. well you know you got to watch more capital account less that was an author of creature of jekyll island a book about the bad 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 february thirteenth show moving on now dimitri i know this 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 dimitry any chance you can get ron paul on the show that will be awesome and i want to address this because we get this request from viewers all the time and the fact is we've reached out and tried and not had success getting ron paul on the show so if 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 let's try and get him on the show and might be wrote happy hour here b.c. entire twenty four hour financial news cycle on c m d c and any other cable network i can think of wow thanks mike this is making me swoon adding to this is that i really enjoy watching loose change seriously i have new respect to lauren and mitri 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 adding that last bit but you know that this really does hit

on something because the reason we are able to say what we want to and be so critical of the banks and corporations and honest about what's really going on or what the evidence suggests is because we are not be holden to them we're not corporate media and this brings me to the other issue i find it very laughable that people accuse us of kremlin propaganda the mere fact that we're not. 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 to us a lawyer who's defending on the 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 have him on a new more because j.p. morgan threatened to pull its ads just rupert according to him speaking up which will as we talk with him about m.f. global and john corazon this week and p.s. said i'm canadian so i don't fully understand american law but i can learn the

story of a citizens arrest of drunk or zine and use the overwhelming evidence and previous precedent set by courts in the s. and l. scandals of the past i like it 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 without one and one thousand nine hundred eighty a west wrote us about yesterday's capital account we did a segment on alan greenspan we talked about his and rand influence and this viewer said another great show the guess 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 you know we actually we made that point you questioned our guest about that we agree with your assessment of the rand greenspan situation but since we're on it we thought we'd 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 writes about this in his book of topia and says this wouldn't be worth

mentioning but for the hilarious fact that greenspan signed that excommunication degree decree excuse me which read because nathaniel granted and barbara branden in a series of actions have betrayed fundamental principles of objectivism we condemn in repudiate these two persons irrevocably so leave you with that little note of greenspan's former excommunications and now it's our if you vote 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 us in 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 them. what you that you're you're still hungry but you're going to try a little so much. water. you drink. so we lost that. insider trading. just. i think he goes on to kill that man right in the tree that maybe thought it was the best of them to death in 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

we have exhibit a here i know we've talked about this this week but this is the another really great example i think if you're walking around with a pen my fair psycho but i have met a lot of these psycho bankers over my lifetime there are a lot of these psychopaths working on wall street and it's not surprising that they would actually start you know actually muslims have this this kind of thing with user a centrist they don't believe in this as i think there's a kind of special bond not familiar with it put their special bond special financial practices in the muslim world so this guy was actually attacking the muslim was he wrote an ideological. interest our banker i'm going to work on this and of you me there you should be paying me and they're right exactly some of yeah right out of the universe and well and just to remind everybody doubts that he said they compared to one percent of the general population that is psychopaths on wall street that number is one in ten which brings me to another former wall street guy now in the administration but he got or has an op ed morning america

against this when it comes to the financial crisis this woman i mean. it's different from the short term and i know all about myself just since my injury i can't make. i'm talking about amnesia he is making a 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 because timothy geithner had amnesia because two years ago people were calling for his resignation in relation to some of the actions the new york fed took during the financial crisis when he was at the helm he obviously doesn't have amnesia. i'm going to go on a limb here and say that tim geithner based on the evidence based on our own systems book has a picture of him based on everything we've heard since. i was surprised this is a sleazeball and dishonest shocking to me real character assault there one hundred

percent total sleazeball there's no way that you believe the same in his article is like i was reading the paper looks up at me and was worried about the financial regulation that's got there just about him that is not stupid he's actually really smart i've heard other people i don't think you don't believe he says timothy geithner is much smarter than that ok he's playing this game in a slick way and this is a regular psychological practice where you identify with the victim it's a hey you guys i think we need with this last what we need the process will go as you can this is what we do we can forgive the pleasure crisis no we haven't forgotten the financial crisis i mean when you are you know you were think you were there were jamie and bear stearns ok guy we're not retarded yet you 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 of the rules is the result of the care 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 have really focused on this like the people we interviewed from occupy the f.e.c. the reason those rules and regulations grew so much is directly because of the banks. lobbying for the things they wanted in there so that is just the. it's absolutely ridiculous that certain why do you need all that why do you know about language you don't you're creating loopholes the more language in a legal document the more i bid you adieu that's aside if you want to create a more ironclad a green you keep it short because you keep the loopholes on them to do it out so yet again we have got are doing the bidding of the banks and the big guys doing what's best for americans in this disingenuous and let's remember he came from new york when you work at the new york said you are wall street's you know what and that's what you need to man on your board of directors here jane mr crybaby jamie

you have a stream all right we have to end with that thank you so much for tuning in thanks so much for watching don't forget to follow me on twitter at lawrence lister give us feedback on the show at youtube dot com slash capital account from everyone here thanks so much for watching have a great weekend and have a great night.