top stories from our teacher night if syrian president vows to keep what he calls terrorists as washington dismisses a military attack other countries that were drawing from syria of violence has claimed i was just. as president obama makes a move for peaceful foreign policy several war hungry politicians stick to their guns calling for military action against iran this is senator john mccain also fueled the fire by calling for strikes against syria. i'm glad to know putin says the forty five million vote see what in the election is all the proof he needs for an independent group of russian observers claimed the poll was floored the league of voters reported cases of ballot stuffing and other violations princes it won't

take the allegations to court have had no impact on the news headlines in half an hour's time but next is off to washington for some economic insight from tonight's capital account. good afternoon and welcome to capital account i'm more in lister here in washington d.c. and here are your headlines for tuesday march sixth two thousand and twelve we will keep all options should including military action on the table to prevent them from the t.v. 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 potter 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 can make it in any business as long as you have unlimited 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 michelle explain to us why italy greece portugal and spain are getting

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 euro a land now the euro zone to climb point three percent in the fourth quarter from the third quarter euro stat 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 should accept 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 yeah i guess if it's 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 have to have been dissecting it's called the netherlands and the euro and it shows that the netherlands would benefit by doing this to the euro zone. just. the great you're putting up with me so you of course it's neat just like you would . yeah they go by to the euro is like this essentially as saying now you don't hear too much about the netherlands in the euro zone saga but the report explains how and why the netherlands and germany will end up footing the bill for italy portugal and spain which 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 sic a 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 miss thanks for being on the show. back on the show again

you're back from switzerland and d.c. and the jurors are going there you're right they're 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 the first question is everyone focuses on maybe someone exit in the euro zone from the periphery could we all be surprised and hey there is a nation from the course and our i want to take my ball and go home should we surprised this at all in fact i talked about it i think last october michael pettis said that china financial markets actually said that the best possible scenario and i happen to agree with them would be for the no other ones for germany to exit

leave the rest of the eurozone to the new stance that 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 were after right now if. we see. greece leading portfolio spain leaves what are their currencies going to look like. they're going to default they're going to focus on all the debt what banks are holding that 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 and the netherlands leave then you do by doing this in piecemeal fashion of course unfortunately the way they're going about this was lower than it is you know that 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 and trying to prevent greece from leaving when it was

a forty billion problem two years ago and now they're blaming greece all these doomsday reports are out there saying you know all these scenarios are going to have been you know. and they're blaming it or that it's all going to cast you know in groups yeah and we've seen that continue and continue and i want to get more into what the 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 into the situation house there plus temperature all nations got to that situation in the first place it doesn't look like it was also in a sense to us next 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 then there had surpluses and then they went to deficit so

you've got countries that have benefited from the euro and those that certainly have not this how did that happen and did the euro have something to do with it well you're had everything to do with. it for multiple reasons you have an interest rate policy that's right. the old one size fits germany but in reality in retrospect i think it's one size fits none. certainly they twisted the e.c.v. twisted interest very policy at every possible you know way for the benefit of germany and france and offer the benefit of greece so you know that's that's one aspect of it but the second aspect of it it just doesn'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 were this one's not going to be any different and the best solution right now is actually just to accept that back yeah. 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 start from this report to showing this sort term interest rate that they differ in the different nations that want to bring that up because i sense only what they said is that the real rates were higher for germans than for greek so explain how this is the direct result of the monetary union creating artificially higher propensity toward savings for germans and the dutch but instead i think the borrowing and the spending in the periphery since this is 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 retirement age in spain you look at the public sector of greece of spain or portugal compare that to the public sector and all the public unions seem to get fiscal policies that did not match 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 heard it is. unsound borrowing in greece and you had unsound investment in spain and in ireland. where we had all these property goals portugal and italy meanwhile are just you know clotting along this is not done him any good hasn't done him any arm good 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 it cannot possibly work more austerity 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 agree to. learn what is the year you know what they can 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 leaders actually when the euro zone was put together all these fiscal policies that it's now imposing on every other country and canada are interesting yeah i mean i completely hear what you're saying and they are trying to paper over it with a lot of pain in their countries at this point some are taking rates for a good reason why they shouldn't but i want to get back to what you said about the interest rates and yet that of that because i just want to follow up and and ask in what ways was the. periphery subsidizing the surplus nations well in what way were they being the exports being subsidized at the temple i think and i don't

know if i would look at it there when you don't you can make a case you can blame germany or you can blame greece and what we have here is gold sides blaming each other since they're both right they're both guilty they both knowingly entered this the. 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 bail out greece and then you know ok why aren't you going in that morning you're going to vote on it yeah grammys exactly alegria one more card i want to talk about my part they kind of get to that and see what you think about it because it's dutch and german and that four and a half that's another interesting line and it basically attempts to show the loss that dutch and german citizens have books and entry into the euro as a result of their speculative investment and peripheral. crime paper is this another example of the effects of what you don't want to call subsidies but i guess what i'm calling. both subsidies a good word. but you just have to look at this from from two points of view you

know it's not that greece is in charlie wrong here and certainly germany is right i mean look at the fiscal policies in greece look union sector and productivity in greece the only way this can be fixed in germany is indeed right on this issue after attack those public unions you have to go after them you have to restructure these pension plans you have to do something about these fiscal promises that haven't been it cannot possibly 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 but you know so you know all of these imbalances but these were known in advance by both countries you know it's 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 look that's very hard yeah yeah so let's talk about some of those bailout 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 ceiling kind of to see the whole picture this chart final one i want to have any type of that's i promise. so corporate debt versus cash flow in all of these countries and it shows basically how high corporate debt is for france spain and portugal so miss that on the line to bail out the big corporations and banks in those countries and could those and being on the public balance sheet doesn't realize losses if you look at the policies the. presidential candidate homeland is proposing you get one my suspected they're going to balance this on the backs of the wealthy. in spain they've got different ideas in other countries they want to do it by euro bonds and get everyone all out of debt he's got all of these

various proposals floating around sort of code got his own ideas and then you know there's no agreement anywhere learn on any of these things none of them can possibly be approved because that's what's going to take germany's not going to approve euro bonds. certainly france might go it alone and do this financial transaction tax that they're trying to do there's various proponents in germany that actually want to do that but another one doesn't finland certainly doesn't the u.k. doesn't and cause quite a stir back in in december so after these elections let's just see what we're heading for disaster i think so i understand we're going to when the french election i think the merkel coalition is going to bust apart there there's this new p.v. party not new but although there are a minor minority policy already and the netherlands there are actually vital part

of that coalition is the only ok thing altogether is doing something a lot of political protection there for a new candidate and i like that you know there's a huge gap between concept in reality i want to keep talking about this because while we're on balance i want to get to the last as we see the bailout become part of the conversation in super tuesday and the presidential kind of debates we're getting there right quickly but we will be back with more with mike said locksmiths that stick around. and still ahead watson remember watson he was the computer robot typing that champions in jeopardy well guess who is hiring him for it wall street will tell you what we paid the first year closing market numbers. cultures the same ocean going to huge music history current on the mark was it

a case of the leg of the dog this is how some would characterize the current drumbeat for war against iran as the center of this campaign is the american. the for. the long. 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 they 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 block mission investment advisor for sake of pacific capital management and author of the popular blog global economic analysis but i want to ask you one of his friends is saying about how to deal with iran because mesh mark farber swiss money manager and our producer dmitri 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. essentially 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 dime of private capital that would have would have been available for a managed bankruptcy absent government help i mean. it's very clear to me in hindsight it wasn't so clear to me at the time but it's very clear to me in hindsight what the auto bailout was one of the best things that have happened to this economy. and missed that was obviously not mark potter talking about what he did flying a lot. right now as our budget talking about the auto bailout but what mark potter did say in that interview with a third of his three equities that perform better than sovereign bonds and again i think i told you that formula for gold and what he's 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 really need to read that book it's

not about gold it's actually about investing and how you look at how you approach markets and what value is as far as form but i happen to agree with them as well i think it does appear that we're heading here for war as for its stars and stormy 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 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. and there's a huge huge property bubble is there real estate you know i would 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 that's for having twenty five percent gold i think that's right in the market my own personal belief is somewhere between ten and thirty ok what's called. and the moon. 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 say you know wait for better times i did a blog post earlier today saying you know there's there's a lot of merit just recognizing there's very little value anywhere it's very little value in real estate has very little value in equities there is 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 wouldn't 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 as since we didn't play that sound bite of warren buffett talking about the auto bailout see essentially ended up you know believing that they were a good thing and we've seen this really resurface and the debate during this presidential race and it's super tuesday today so fitting thing to talk about my question for you guys because we hear people in the horse race dissect whether they're bad or good and usually it's either in hammering the republicans are

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 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 sensitized for their risks 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 going to budge and do 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 needs to be done then all of a sudden the republicans tackle bombers flown plan so mitt romney had to backtrack essentially on his own plan saying oh i differed in this respect or that respect he really deferred all the point. oh in any meaningful way actually it was

a little bit of exaggeration on my part so you know they do these things santorum has doing the same thing you look 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 and 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 or bailouts they're in favor of inflation you know. so you media's go vested interest and we calling someone we get a sense we give him attention here michel and i'm glad you brought about this we're going to talk about it later in this so that's all we have time for for right now though it's always nice to talk to you thanks for being on to have you back when the cherry blossoms are blooming so we can talk about that thanks so much that was my.

all right before we go let's bring in the trick of being us and here to talk about some of the stories that we do not want to miss talking about. back tomorrow so still having her insight than you but do you remember i.b.m. computer he made his name winning jeopardy he major champions let's look back. olympic oddities for two hundred. con beach almost upset this man's perfect two thousand to go lympics losing to him by one hundredth of a second watson 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 citi group 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 what do you think of it well i think there's a lot here to learn because i think we've been what is going we've learned from what i think look you know honestly i think that remember the terminator movies they came during the military buildup of the writing of this tradition there was a lot of concern about computers and what they would do as far as war of the college is 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 love the riveted bombs do hostile takeovers of companies so i mean this is you know this is a real danger of my peers a real threat yes a much bigger threat then the military industrial complex the banking industrial complex and these machines you're merging i mean. you know nothing could be more

than that you know you know i think i might disagree with you because at first that was might not exactly with this kind of stuff 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 all of that 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 and modeling and all those sorts of things and arenas guess what it does that have it is a very human instinct that we have seen great have it in wall street and that is very well. i didn't know you're going to that i like that so those who are better over the machine is a machine to be cold calculating it doesn't it doesn't have the lust for power interesting i like that and i when i like it ok the harvard business review found that 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 go to confessional but also according to this research they do quite well in the workplace based on this standard psychological test that with administered it measure the tendency to feel guilt and found that people that were guilty get a lot better were viewed as better leaders harder workers i buy it now you want to think i think it's one of those extremes a bipolar distribution so the people that are really guilty do well but the people who do the best are the social problems because those guys don't give a crap at all if you don't care so they don't care if they do anything really bad and that's a love the climb the corporate ladder which is why i think of banking you've got a you've got a group of soldiers the bottom are guilty and then you've got the social that's the problem you know i actually kind of agree with you on that by modal distribution because i'm really guilty person a really hard worker i'm not a sociopath 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.