what. russia today has an extremely confrontational stance when it comes to us. sometimes you see a story and it seems so you think you understand it and then even something else you hear or see some other part of it and realize that everything you thought you knew you don't i'm sorry plug the big picture.

news today violence is once again flared up. these are the images from seeing from the streets of canada asked. corporations to.

good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and here are your headlines for tuesday march sixth two thousand and twelve we will keep all options including military action on the table to prevent them from of a nuclear weapon that's what secretary of defense leon panetta said about iran to america's pro israel lobby apac at the meeting today swiss money manager and gloom boom doom report publisher mark garver meanwhile is not waiting he says he thinks it's inevitable sooner or later the u.s. or israel will strike iran and he's offering his formula for some financial safety i'll tell you what it is and talk about it and super tuesday has voters heading to the polls in republican primaries as the presidential election campaign season gains more and more steam now the auto bailouts have driven some of the debate

recently with romney's race and motor city home state michigan and with attack ads like this one targeting obama and g.m. . the problem that in america you could make it in any business as long as you have on limited financial resources and the backing of the united states government now you've heard the horse race partisan analysis forget that we want to look at what may really be behind criticism of the auto bailouts from people who with the same time supported bailouts for the banks and more trouble brews as eurostar reports that yes the eurozone did shrink point three percent as estimated in the fourth quarter from the third and as greece tries to get investors on board with their debt swap deal by the thursday night deadline and that's an adviser a blogger mish will explain to us why italy greece portugal and spain are going to need a lot more money and germany in the netherlands will end up footing the bill as this goes on let's get today's capital account.

trouble continues in your own land now the euro zone decline point three percent in the fourth quarter from the third quarter gross that says and the greek government is trying to get a bond swap deal with private creditors done by the thursday deadline now my personal favorite quote about why bondholders had except the write off comes from greece's finance minister who said in an interview this is the best offer because this is the only one the only existing offer i guess the goods the only one that does make it the best by default now meanwhile a detailed seventy three page report is circulating that our guest and that we also do have been bisecting it's called the netherlands and the euro and it shows that

the netherlands would benefit by doing this to the euro zone. i just do it. because the break you're breaking up with me it's not you of course it's me you need i just like you and. yeah good bye to the euro is what this essentially is saying now you don't hear too much about the netherlands in the euro zone but the report explains how and why the netherlands and germany will end up footing the bill for italy greece portugal and spain which it says are going to need a lot more dough going forward down here to talk about all of this is mike said locke investment adviser for six pacific capital management and author of the very popular blog global economic analysis he is been writing about this and now we get all of his insights straight from him so first of all this thanks for being on the show pleasure to be back on the show again your barrackers was one of the beautiful b.c. and it turns our home and there you have right there not living here yet but they will be and i will how do you want to celebrate when they are in full bloom let's

talk about something slightly more bleak then cherry blossoms let's talk about the euro zone because this report that i know you've been looking at it's actually a dutch freedom party they commissioned if this is the smallest of the three parties in the government coalition it's part of the government very hostile to the monetary union wants netherlands to leave the euro zone so first questions everyone focuses on maybe someone exit in the euro zone from the periphery we all be surprised and hey there is a nation from the course and psion are i want to take my ball and go home should we surprised by this at all and i talked about it i think last october michael pettis said china financial markets actually said that the best possible scenario and i happen to agree with them would be for the know the ones for germany to exit leave the rest of the eurozone to the new students and one. certainly if you look at the perspective from germany and the netherlands they would be able to go back to

a credible currency if they left right now if. we see. greece leaving spain leaves what are their currencies going to look like. they're going to fall they're going to fall down all the debt what banks are holding them well of course the german banks are holding that the french banks are holding their u.k. banks are holding that so i think you get more bang for the book actually having germany in the netherlands only then you do by doing this in piecemeal fashion of course unfortunately the way they're going about this was lauren is you know they're heading on this piecemeal fashion and they're trying to stop it and it. doesn't make any sense they've thrown two to three hundred billion euros trying to prevent greece from weaving when it was a forty billion problem two years ago another blaming greece all these doomsday reports are out there saying you know all these sinners scenarios are going to have

been you know. and they're blaming it or that it's all going to cast groups yeah and we've seen that continue and continue and i want to get more into with a bailout scenarios could continue to look like going forward but i also want to get into some of the juicy details of this report that show how the eurozone got it a situation how surplus and peripheral nations got in a situation in the first place it doesn't look like it was also in a sense to us and as i want to bring up one of these charts from the report the current account balance from one thousand nine hundred eight which was before the euro exchange rate was locked in to two thousand and seven and what you can essentially see there is that this was a net positive change for germany and the netherlands they've done better since joining the euro and it was negative for a whole bunch of other countries belgium france italy ireland spain greece even some of those countries and there had surpluses and then they went to deficit so you got countries that have benefited from the euro and those that certainly have not missed how did that happen and did the euro have something to do it well your

had everything to do with. it for multiple reasons you have an interest rate policy that's right. called it one size fits germany but the reality is in retrospect i think it's one size fits and on. certainly they twisted the e.c.v. twisted interest very policy at every possible you know way for the benefit of germany and france not for the benefit of greece so that you know that's that's one aspect of it but the second aspect of it just didn't make any sense at all we've talked about this before us nothing new here the. currency unions without fiscal you simply don't work there's never been one in history that's work this one is not going to be any different and the best solution right now is actually just to accept that back yeah you know tell you we're going to push for this fiscal union that doesn't seem to be happening i want to get to that pena said though about one size fits germany with the interest rate because we have a great chart from this report to showing the sort term interest rate that they

differ in the different nations i want to bring that up because essentially what they say is that the real rates were higher for germans than for greeks so explain how this is a direct result of the monetary union creating artificially higher propensity towards savings for germans and the dutch that incentivizing the borrowing and the spending in the periphery and this has to do a lot with fiscal policies in these nations as well you look at the retirement age in germany versus say the retirement age in greece or the retirement age in spain you you look at the public sector of greece of spain or portugal compare that to the public sector and all the public unions to get fiscal policies that did not mesh along comes the eurozone lowering the interest rate across the board you know at a time when really spain needed a higher interest rate greece needed a higher interest rate so what you had it is. unsound borrowing in greece and you

had unsound investment in spain and in ireland. well we had all these property bubbles portugal and italy meanwhile are just you know clotting along this is not done them any good it hasn't done him in the arm but in aggregate it's done harm to everyone i mean and it's going to bust apart the throwing more money at these problems simply cannot fix these fundamental flaws of interest rates fundamental flaws in fiscal policies they're trying to do it now but they're doing it in a way that's going to force more austerity on greece and cannot possibly work more us directly on portugal cannot possibly work and we're seeing resistance right now from spain saying essentially too to the m you screw you really are simply not going to do what you say we're not going to reduce our budgets to four point four

percent as we agreed to and learn what is the year you know what are they going to do they were going to buy in spain if these policies if these agreements work they wouldn't work already germany was one of the biggest finally it was actually when the euro zone was put together all these fiscal policies that it's now imposing on every other country it can't work interest yeah i mean i completely hear what you're saying and they are trying to paper over it with a lot of pain in that countries at this point some are taking that for a good reason why they shouldn't but i want to get back to what you said about the interest rates and the effect of that because i just want to follow up and and ask and what ways was the. periphery subsidizing this third class nations what in what way were they being the exports being subsidized by the surplus nations i don't know if i would look at their work you know you can make a case you can blame germany or you can blame greece and what we have here is both

sides blaming each other since they're both right they're both guilty they both knowingly entered this. this arrangement knowing what would happen you know greece is saying oh you know we don't want to. or germany saying we don't want to be greece and then you know ok why aren't you going on that morning that you know. yeah exactly i'll agree but i'm more card i want to go on my part they kind of get to that and see what you think about it because it's dutch and german and that foreign asked that there's another interesting line in it basically attempts to show the loss that dutch and german citizens have book since entry into the euro as a result of their speculative investment in peripheral debt that prime paper is this another example of the effects of what you don't want to call subsidies but i guess what i'm calling subsidies oh subsidy is a good word. but you just have to look at this from from two points of view it's not that greece is in charlie wrong here and certainly germany is right me look at

this book policies in greece look at the public union sector and the productivity increase the only way this can be fixed in germany yes indeed right on this is you have to protect those public unions you have to go after them you have to restructure these pension plans you have to do something about the specific promises that haven't been possible you met by the way the united states is going to soon be in the same situation here it is already we can talk about that at another time yeah but you know so you know all of these imbalances but these were known in advance by both countries you know it's not like you know germany can look back and say oh my god you know we didn't see it coming well if you didn't see it coming and you were stupid. then you were a lot that's very hard yeah yeah so let's talk about some of those bailouts that you say are just not going to solve the problem because i want to look at total debt because a lot of people talk about the sovereign debt but you have to look at private debt

too and kind of to see the whole picture this chart final one i want to have any type of that's i promise. it shows corporate debt versus cash flow in all of these countries and it shows just basically how high corporate debt is for france spain and portugal so many cars on line to bail out the big corporations and banks in those countries and could those. being on the public balance sheet doesn't realize losses if you look at the policies and presidential candidate homeland is proposing you get one might suspect that they're going to balance this on the backs of the wealthy. in spain they've got different ideas you know other countries they want to do it by euro bonds and get everyone out of debt so you've got all of these various proposals floating around sarkozy's got his own ideas and then yes there's no agreement anywhere or on any of these things none of them can

possibly be approved because that's what's going to take germany is not going to improve euro bonds. certainly france might go it alone and do this financial transaction tax that they're trying to do there's various proponents. germany that actually want to do that but that doesn't mean one certainly doesn't and the u.k. doesn't. cause quite a stir back in december so after these elections let's just see what we're not in for a disaster i think and it's probably going to when the french election i think of merkel coalition is going to bust apart there's this new p.v. party not new but although there are a minor. party and the netherlands they are actually part of that coalition is the only thing holding together is what's going on a lot of political prediction there are new to me and i like that you know there's

a huge gap between concept and reality i want to keep talking about this because while we're on balance i want to get to the u.s. as we see those bailouts become part of the conversation in super tuesday and that bad presidential kind of debates we're going to get a great quickly but we will be back with more with mike said loch ness the stick around. the fact and still ahead watson remember watson he was the computer robot typing that beat the champion to jeopardy guess who is hiring him for it wall street will tell you what we think the first your closing market number is. wealthy british soil isn't the time to buy.

the market. find out what's really happening to the global economy with much stronger or no holds barred look at the global financial headlines to come is a report. you know sometimes you see a story and it seems so you think you understand it and then he lives something else and you hear see some other part of it and realize that everything you thought you knew you don't know i'm charming welcome to the big picture. the first.

welcome back to capital account let's switch gears and talk about the u.s. let's talk about the u.s. and iran because we've seen plenty of saber rattling from the mainstream media of course here's just one example of a comment line where c.n.n. looks like they are asserting that iran has nukes which is completely misleading and defense secretary leon panetta said that a pat said to apac earlier today i played a sound bite at the top of the show that military action is the last alternative when all else fails but as he said make no mistake the u.s. will act if it has to when it comes to iran let's talk about the financial headwinds though today we've been discussing some of them in europe with my investment advisor for sake of pacific capital management and author of the popular blog global economic analysis but i want to ask him one of his friends as saying about how to deal with iran because mish marc farber swiss money manager and our

producer to me she says he's a friend of yours he reportedly says that he believes iran and israel will end up sooner or later in war that war with iran whether the u.s. strikes or israel strikes he says it's just a matter of time so. i think surely he's talking about some saved in his formula is twenty five percent equities twenty five percent gold twenty five percent real estate or real estate equities twenty five percent cash i want to play his reasoning and then get your your thoughts on this. there was not a that i am a private capital that would have would have been available for a managed bankruptcy absent government help i mean. it's very clear to me and i said it wasn't so clear to me at the time but it's very clear to me in hindsight that the auto bailout was one of the best things that have happened to this economy . and this that was obviously not mark potter talking about we did flying a lot more activity is not iraq that is why i got to talking about the auto bailout

but what mark potter did say in an interview with a third of his three equities that perform better than sovereign bonds and again i tell you that formula for gold and ladies cash and real estate what do you think about that do you agree or disagree mark certainly is a friend of mine and if you read his book tomorrow's gold i strongly encourage everyone to do so there's a link on my blog to that book i don't get anything out of it maybe ten cents from amazon. or something and someone buys the book i really need to read that book it's not about gold it's actually about investing and how you look at how your approach markets and what value is as far as form but i happen to agree with them as well i think and it does appear that we're heading here for war as horror is as far as the storm you know i don't necessarily know or know that war is going to be good correct what do you say i mean it has in the past i think other times it might not it certainly it might spook the financial markets i would propose something

a little bit more conservative i don't see that i would certainly would propose real estate i don't think it's bottom of the united states and certainly you know if you're living in canada or australia or china or even the u.k. there's a huge huge property bubble is there real estate. but i would not say tie yourself down to real estate maybe you need to move at some point you don't want to be tied down to real estate this forever twenty five percent gold i think that's right in the market my own personal belief is somewhere between ten and thirty ok let's call the. in the middle of the. for those who want a little bit extra twenty five percent is certainly not a bad way to go and as for the rest i would just you know wait for better times i did a blog post on there earlier today saying you know there's there was a lot of merit just recognizing that there is very little value when we were very little value in real estate has very little value in equities there's very little bit how you can junk bonds so you know what's wrong with just having a high percentage of cash i mean that would be my answer back from mark and i bet

he would disagree too strong with that point of view actually i don't know putting words in his mouth it very interesting point so and before we go and since we did play that sound bite of warren buffett talking about the auto bailouts he essentially ended up you know believing that they were a good thing and we've seen this really resurface in the debate during this presidential race and it's super tuesday today so fitting thing to talk about my question for you though because we hear people in the horse race dissect whether they're bad or good and usually it's either in hammering the republicans or hammering obama in this presidential race what i'm curious about is i wonder why someone like mitt romney supported tarp supported the bailout for the banks but was opposed to the bailout of the auto industry and what i'm wondering is if this is representative maybe thoughts on wall street with people that benefit the big banks and believe that they should be subsidized or their wrists to be socialized but then you know that way they can go by the losses of everybody else and everybody

else to go bankrupt so they can go capitalize on it. you're reading too much into it. they support what's politically expedient you know look at his various health care you know crowing to president obama this is the way it used to be done then all of a sudden the republicans attacked obama's phone plan so mitt romney had to backtrack essentially on his own plan saying oh i differed in this respect or that respect they're really deferred. plans were in any meaningful way actually it was a little bit of exaggeration on my part so you know they do these things santorum is doing the same thing you look at you know in person really with a you know consistent background you're consistent both in terms of what he's saying is ron paul or you know why does ron paul not get any media attention it's because the media is you know in favor of more wars or favor more bailouts they're in favor of inflation you know. so the media has no vested interest and we pulling

someone we get a sense we give him attention here michel and i'm glad you got about that we're going to talk about it later in the show that's all we have time for right now though it's always nice to talk to you thanks again i'll have you back when the cherry blossoms are blooming so we can talk about that thanks so much that was nice that ok. all right before we go let's bring in utica finessing here to talk about some of the stories that we do not want to miss talking about and c.n.n. will be back tomorrow so still having her insight to you but do you remember i.b.m. computer i think made his name winning jeopardy he major champions let's look back

. political entities for two hundred. coverage almost upset this man's perfect two thousand and eight olympics losing to him by one hundredth of a second thoughts and who is michael phelps yes so he won and that certain well because soon watson will be advising wall street on breasts portfolios and clients citigroup the third largest u.s. lender is watson's first financial services clients now some of the reasons watson is valuable the computer can understand two hundred million pages in three seconds i don't know how that's even possible but when you think of that well i think there's a lot here to learn because i think we've been what is going on we've learned well i think look in all honesty i think that the terminator movies they came during the military buildup of the regular ministration there was a lot of concern about computers and what they would do as far as war and acknowledge are concerned and so a lot of the focus has been on that but i think what the real concern should be the

whole sky their concern concern should be these machines becoming too big to fail and then basically waging war on the united states through the financial markets you can start seeing these guys a lot of riveted by do hostile takeovers of companies so i mean this is this is a real danger of he's a real threat yes a much bigger threat then the military those who do banking of those so complex and these machines you're merging i mean. you know nothing could be more debate you know you know i think i might disagree with you because first that was my thought not exactly with this but i was thinking you know this is concerning this is kind of like a high frequency trading now going into assessing risk and regulations and then i got to thinking this computer has all of these things that are valuable that maybe you know an analyst would have looking at documents and reading and analyzing on the modeling and all those sorts of things we ran with this guess what it doesn't have that is a very human instinct that we have seen wreak havoc in wall street and that is very

i. i don't know you're going to that i like that so basically we're better off the machine is the machine is the old car polluting it doesn't it doesn't have the lust for power and this and i like that now and i when i like it when i'm going on ok the harvard business review found it people who are prone to guilt tend to work harder and perform better than people who are not guilt prone i guess a little like this. so obviously guilty people got a confessional but i also according to this research they do quite well in the workplace based on this standard psychological test that with administered it measures the tendency to feel guilt and it found that people that were guilty did a lot better were viewed as better leaders heard of workers i buy it you want to think i think it's one of the extremes of bipolar distribution so the people that are really guilty do well but the people that do the best of the social problems

because those guys don't give a crap at all you don't care so they don't care if they do anything really bad and that's a lovely climb the corporate ladder which is why i think in banking you've got a you've got a group of soldiers at the bottom you're guilty and then you've got the so if you press the top you know i actually kind of agree with you on that by modal distribution because i'm a really healthy person a really hard worker i'm not a sociopath and i've seen them do well that's it that's all we have time for leave you with that thanks so much for tuning in don't forget to follow me on twitter at lauren lyster give us feedback at youtube dot com slash capital account and for every month from everyone here on the show thanks so much for watching have a good night. but. you're so sure we can join so long called touch from the only choose option.