true but it's not because of the conflict in syria i think that's a good really good point there's a whole lot of different elements going on here a lot of layers to pick peel back and of course that is difficult for western countries to really understand exactly what's going on when they talk about getting involved militarily or not middle east analyst op ed fati we do appreciate you joining us and giving your insight here. all right and that's going to do it for us for this hour for more on the stories we covered go to youtube dot com slash r.t. america thanks for watching will be back in thirty minutes. it's a. good

afternoon and welcome to capital accounts i'm lauren lyster here in washington d.c. these your headlines for a full second two thousand and twelve the f. and pete five hundred is reportedly beating gold by the most in more than a decade is this a sign of growing investor confidence in corporate profits or belief in an economic recovery an appetite for more risk who cares what is the reality that's what we asked where exactly is this so-called recovery coming from and with so much debt the prospect of more monetary debasement and stagnant unemployment where are we really had it and what role might gold play in the future we'll discuss plus bloomberg reports the biggest bond traders the worst over for u.s.

treasuries after the most tumultuous quarter since two thousand and ten. why is that is that because people expect more q we less q we q e with a twist no q we cheer and without thank you i mean oh no i don't you know our goal we'll talk about what it means and on that note alan greenspan has come to the defense of federal reserve chairman ben bernanke against criticism from republican presidential hopefuls so do central bankers protect their own and why should they escape personal scrutiny right scrutiny over how they do their jobs in the first place let's get to today's capital account. you are the headlines of stock market performance is being attributed to some

optimism about an economic recovery and appetite for risk and traders are looking at a continued bull market and u.s. treasuries so we're talking about confidence about sentiment but what is the reality of the facts and figures of the u.s. economy and the debt situation because the new us national debt is that fifteen point six trillion dollars according to the most recent numbers we've seen that's higher than u.s. g.d.p. you can see there how it skyrocketed since one nine hundred forty and look most of that has been accumulated in the last twenty years only seven percent of that accumulated before ronald reagan was president you can see how the rest is divided up there now if we stay on the path we've been going the national debt will reach twenty trillion dollars by two thousand and fifteen and according to jim quinn of burning platform on a post if interest rates normalize to the same level they were in two thousand and seven which was five percent annual interest expense would be

a trillion dollars or forty five percent of current tax revenue and if you want something more official the c.b. you know says the debt will reach twenty one point seven trillion by twenty twenty two now according to u.s. census data the share of the population that is working has fallen to its lowest level since women started entering the workforce in large numbers three decades ago you can see there it's forty five point four percent of americans that have jobs jobs continue to be an issue and if you don't have jobs you don't have a stable economy in you don't have a stable currency and then there's the unfunded liabilities including medicare medicaid social security they exceed sixty trillion dollars according to some estimates are sixty of those book ball field dollars tax you see there and others such as laurence kotlikoff a boston university professor who was also a senior economist in the reagan administration he puts that number much higher at more than two hundred trillion dollars or. two hundred of those football fields when you factor in things like defense now should we be worried about our future

our monetary system after running out of those we think so so here to walk us through some possible scenarios is john butler he's founder of and for a capital and author of this book the golden revolution how to prepare for the coming global gold standard now i should also mention he was an interest rate for x. and commodities strategist a managing director at deutsche bank as well as lehman brothers so we're really lucky to have him today and i have a copy of his book hot off the presses or at least on my mailbox today i just received it so thank you so much for being on the show first of all my pleasure laura now we've seen a tremendous bull run in gold over the last twenty years or twelve years excuse me it's caused some people to say hey this is a bubble you obviously don't think so you don't think it's a bubble in fact you think that there's going to be an end game where gold plays a role as money again is is a transition back into a monetary metal that will be used to back global currencies now our audience is

already familiar with that we have had guests on like jim rickards author of currency wars who has talked about a gold standard now you go even further than jim rickards in your book could you explain how so. well yes indeed i mean jim rickards book is an excellent survey of the mess we're in to some extent and interesting historical parallels to the mess we're in and it is very instructive in that regard however i think you can go one step farther if you if you look at history and you consider the dynamics of international politics contemporary geopolitical rivalries and monetary arrangements what you find when you apply a game theory type analysis is that a return to some form of gold standard is simply in the temple at this point and i know that may seem a bold prediction but really it's not the fact is that the global alan backed the yacht dollar reserve standard has so destabilized the global financial system and

the bed which stands behind back has lost so much credibility that there's simply no other way to restore a sufficient degree of trust or credibility at this point other than a return to gold if the u.s. doesn't do it voluntarily other countries are going to force the issue with the assistance of financial markets i am i want to get to some of those scenarios but just to kind of really hammer this point hunger thing that some kind of return to a gold standard in a navigable light of game theory tell us that in your view. well the thing about game theory is it's very instructive with respect to how smaller less powerful less obvious players in again can nevertheless at the margin impact the way the bigger players play the game they live in give you a simple example let's say a small country like south korea decides it's not comfortable with the dollar as a store of value and as such the central bank begins diversifying its dollar

reserves into wealth for example maybe some yen maybe some chinese you want maybe some euro's who knows what and of course maybe gold will now wait a minute if south korea is accumulating fewer dollars and someone else has to accumulate more or less not forget the u.s. runs by far the world's largest current account deficit lies that outside u.s. dollars needs to be accumulated well ok so south korea has changed policy but someone else now has to change policy may not accept more dollars or they who must change policy in a different way i.e. also in favor of divest you know those dollars and well the same way a small domino can topple into a larger domino eventually into the largest dominoes there are the same way this can work here with south korea doesn't spill over into other asian economies asian economies in general can seek to divest their dollar reserves and the for you know

the pressure grows on the biggest economies in the world to do the same and at that point the librium collapses and you end up hurting the dollar standard to replace it with something else well then i want to talk to you about a couple of the things that we already think happening we've seen purchases of gold by central banks thirty in two thousand and eleven to four hundred thirty nine tons for some context that's that's it was seventy seven times the previous year i mean that is quite a town and some of the country's leading the way china rose twenty percent over the prior year to seven hundred seventy metric tons birthplace of india buying nine hundred thirty three metric tons so do you think that we're already thing some of these shifts or are they preparing to possibly have some kind of a gold backed currency if they needed to or wanted to. well there is certainly lots of contingency planning going on behind the scenes i mean it's so obvious how screwed up the current financial system is globally it's obvious that u.s.

policymakers are not yet willing to make the tough choices necessary to sort it out voluntarily someone else is going to force the issue and history suggests that the first actors in this sort of destabilized again miri scenario but first actors have the advantage purchases of gold by central banks are a form of gold in writing on the wall and there are other forms of writing on the wall to which the mainstream economics academic certain group which influences the central banks in the policymakers they may not be focused on it because they are just so focused on the crisis guiding of one guy or fighting of one crisis to the next yeah well guess what those serial crises are themselves brought on by this unbacked and you've got all the reserve standard which is so far past its sell by date it's things. to think and maybe to go better smelling that most recently i'm curious we just had a break summit brazil russia india china south africa it's an economic alliance and

they discussed and signed deals to land in their local currencies to encourage trade in their local currencies they criticize their policies have advanced nations that have flooded liquidity into the global economy much of which has gone into their countries they criticize these kind of policies how significant do you see the moves that they're making now. it's hugely significant i devote two chapters in my book specifically addressed to the brits are doing lorsch leave behind the scenes to try and prepare for what they probably do regard this as the in evitable monetary regime change which is coming they know that they are stronger together than apart and aren't they an interesting group russia is a traditional cold war is at work and in many of the united states china and the us how obvious rivalries and yet india in the us really cozied up

a lot in recent years in brazil and the us have had generally good relations for the long time that's an interesting group that group may represent the tipping point where the unintended consequences of unsustainable u.s. economic policies not in the interests of other countries create a new coalition which finds a way to cooperate and help move the world back towards a more multipolar global monetary regime which historically has always been backed by gold and it's really interesting and another thing that factors in here is inflation i want to talk about the role of inflation and encouraging any of these kinds of scenarios you know a popular justification for the run up and gold prices that we've seen is that the federal reserve monetary money money printing is diluting the value of the dollar and so people are going into gold and that if this dilution of the dollar and the purchasing power that will result in hyperinflation however that view seems to

misrepresent how inflation works and today's monetary system a little bit because the majority of money is created not through central bank my printing but through the banking system through traditional means like fractional reserve lending also through the shadow banking system things like re hypothecation so can you talk to me a little bit about what role inflation plays knowledge this and how you're even measuring inflation how we can do that. it was easy to get trapped into a never ending semantic debate about what inflation is and it comes down to the hairsplitting of which monetary aggregate would one like to focus on which appears to have a better relationship to economic stability or instability and i think it's easier to step back from those semantics and their hair plating and to really recognize what inflation is in more general terms consumer price inflation really that is inflation passed that's the result of inflation that has already occurred everyone

agrees it's some form of money supply growth that also leads to some form of consumer price inflation but it's the money supply growth itself which characterizes inflation presence but what money supply what aggregate well we can debate that forever but it's some form of money isn't like growth but alternately money and the stability there of is a confidence game and if you want to instill confidence you need to focus on inflation future what's past is past financial markets don't care they care about inflation future and historically inflation future is driven and government deficits and debts policies that are unsustainable clearly unsustainable are an inflation future and that's where policymakers need to concern themselves about this idea that they can run up the siege deficits and debts and not some day perhaps soon incur the wrath of panic and markets is just wrong history is very

clear on that it's a really interesting point inflation future based on debt and deficits when we get back i want to talk about what role that confidence game plays in hyperinflation over history we will be back after a break with john butler author and founder of amp for a capital. and still ahead it has been a rough couple of weeks for goldman sachs bursting with the public resignation of the banker a new york times talker greg smith now an alleged possible connection to child sex trafficking we'll give you our three cents on the wall street giants p.r. issues but first our closing market numbers. we just put a picture of the need when i was like nine years old i like to tell the truth.

i'm a contestant i am a total get over friends that i love driving because he is a planned trip. he was kind of it but yesterday. i'm very proud of the role that i just you just played. you know sometimes you see a story and it seems so you think you understand it and then you doing something else here so you saw the part of it and realized everything you thought you knew you don't i'm sorry welcome to the big picture.

what drives the world the fear mongering used by politicians who makes decisions to break through that sort of way who can you trust no one who is you know maybe you with a global missionary see where are we heading. state controlled capitals and school sections when nobody dares to ask we do r t question more. welcome back before the break we were talking about why my guest thinks a return to a gold standard by someone in the world is inevitable based on game theory and he was talking about something that plays into this obviously is inflation and the measure of future emplacement he says can be seen in debts and deficits now it's

a really interesting concept and i want to talk more about it he is john butler author of this book that i have here the golden revolution is also founder of and for a capital and before the break we were talking about future inflation and that being based on debts and deficits now so my question to you is why and then what is the u.s. as death and deficit say about our future inflation. well the reason why is because when a government runs chronic deficits and builds up a huge accumulated debt we all sniffly that debt becomes unserviceable a corporation simply goes bankrupt but a government does not in the same way it will obviously seek to raise tax revenue or do what it can to try and service that colossal debt but historically inflating your way out of unserviceable debt burdens is far more common than taxing your way out and in fact some economists think that beyond a certain point taxing your way out it is simply impossible just kill off your economy so think about it if you if you do end up in

a situation where you are unserviceable guess where the pressure will then fall it will fall on the central bank to accommodate that huge. debt burden with inflationary monetary policy and so in the way that you have the burden from the fiscal authority i.e. the government to the central bank well guess what when that cross at this finally happens that then what was inflation future becomes inflation present but once you've reached that point you might already have lost confidence in the currency you might already have undergone a tremendous financial crisis because of the perspective financial markets have looking into the future or that you are running risks and that the risks were simply not acceptable well and that's really interesting because my producer was telling me that you guys were discussing hyperinflation and you were saying that it's actually not necessarily correlated with this kind of inflationary monetary

policy you're talking about that historically it's about deficits budget deficits trade deficits and what you talked about competence deficits when people no longer believe and have faith and that currency can you talk about that. well absolutely and i'm not the only one who ever i mean nobel prize winner thomas sargent wrote a very provocative paper a couple of decades ago where he pointed out fairly clearly a very good data set that if you look at history growth in monetary aggregates is a poor predictor of severe inflation and hyper inflation i don't get me wrong i mean it is a sort of. tore but the better predictor is very large government deficits and accumulated debt burdens that is alternately the better predictor of bats and me is the clear evidence that it's the confidence game in the future it really matters when you're considering whether or not a currency is going to simply be derated in the investment community in

a way that people will only hold it as this as a source of liquidity rather than as a store of value ok and i hate to say this but i mean that the obviously being the global reserve currency the preeminent global reserve currency absolutely positively needs to retain that store of value quality or the current global monetary regime will collapse and you know i want to talk about the dollar in a minute i just want to follow up to ask about japan because to pan has the highest some of the highest public debt that we see in the world two hundred forty percent public debt to g.d.p. why not hyperinflation there. well chapin is an odd case because historically when you get a very large investment bubbles that terms of us and better followed up their raptor with going to various unpredictable forms of government market intervention generally speaking a lot of foreign capital is involved in the process it's involved in fueling the

bubble in the first place and it's involved in financing the unproductive government policies that come in there after in response to that is the exception japan has financed their bubble they have financed there is a policy response to the bust with their own money they owe it to themselves now that doesn't mean it's not a i mean that doesn't mean it's not a problem i don't want to say that japan's off the hook here but the fact is is that when a government finances itself using its own domestic private sector savings it's still a misallocation of resources i don't mix skews it took us mean the imbalances so created can be resolved domestically in the same way they were created domestically and that currency doesn't need necessarily to be part of the adjustment process mathematically that simply the way it is whereas in the us or other countries

running the lord's humility out justice it since we're foreign capital has been an essential ingredient to look bubble or to the fiscal and monetary response to a bubble that's where the currency complete is part of the end game ok great part of the endgame and there's also that issue of the u.s. military backing at propping up relate the us dollar that we're going to save that for another day though i really appreciate you being on the show really interesting that was john butler author and founder of amp for a capital. live . all right let's wrap it up with some loose change up that's imagery and shannon to stay on the topic of central banks for now because former fed chairman alan

greenspan is coming out and defending the current chairman ben bernanke against attacks made by a republican presidential candidate if you haven't seen him take a look. to the republicans or kind of villain newt gingrich has said i think he's done the most dangerous we can keep you offer side to someone of my. former candidate rick perry even suggested that the fed might be treasonous and then you have to do with that in texas we were trying to implement this is actually i think. greenspan told the financial times anyone has the right to criticize federal reserve policy but it is wholly inappropriate and destructive to engage in ad hominem attacks why why their central bankers it's ben bernanke in making these decisions with his governors why can't you attack the person it's because mr bubbles is you know has had to deal with his own fair share of criticism so he

understands why he also wants to maintain respect for the office because you come from that also bernie's legacy is part of parcel of greenspan's legacy because greenspan was there when the big mess happened and bernanke you was predisposed out of course but you know recursion is the biggest thing about video clip because when you are used to using the capital punishment in the united states when you would engage in counterfeiting and i think that is instrumental you know rick perry would bring back capital for counterfeiting then maybe we could actually get these bankers under control they would suffer with money instead we just suffer from capital punishment and a form of central banker policy i really like that so we're basically. going to get away yeah i like exactly were the victims of cattle punishment you know one thing i want to add maybe this is a tip for tat because we did hear ben bernanke and part of his p.r. spree that he's been going on saying that. fed didn't cause the housing bubble but those policies in the two thousands of artificially low interest rates did not

cause it well gee who was at the helm then disagree yeah sure on the bubble and what to say about mr bubbles and the hero ben bernanke i think because greenspan has come under so much pressure from his strange big brother to hear. we're not buying it we're all in agreement here so let's move on because it's been a rough couple of weeks for goldman sachs needless to say here is another p.r. fiasco to add to the list so it turns out goldman sachs had a thirty million dollar stake in village voice media which has come under fire for its back page dot com website now in an op ed in the new york times over the weekend columnist nicholas kristoff says this site is the biggest forum for trafficking of underage girls in the u.s. so indirectly now goldman sachs was linked to the child sex trafficking allegation so what happened then. however the relationship

goldman was in years into selling his state. goldman just like we're out we're done we can handle another p.r. scandal right but i can't help themselves because they're so corrupt. they're so perverse in their very nature their culture is so malignant they really can't help it was no amount of p.r. could actually help and that's why the best p.r. was going fine just shut up and he just stopped talking because he knew that if everything he said was going to be corruptible corrupting it was at its core corrupt so we know going to trust now being accused of being right is pimping out women it's just it's the nature of the business we should be surprise you know i actually in this case i don't really think it's fair do you think that craigslist is in essence you can rant and horrible who. starts to your question craigslist you think list is corrupt and horrible and all of those things that you're saying about goldman sachs i don't know maybe ok well you're not helping i don't know them are

going to go read of the week are ok. i'm saying in this case craigslist was you know accused of having these ads that were very lucrative but that were allowing prostitution and sex trafficking ended up getting rid of that business a lot of those ads went to this back page dot com which is part of village voice which goldman sachs own fifteen percent i believe in i'm sorry i don't really think that it's fair to say that the bank was responsible for knowing about that and i. don't really mobile my searches is used in the business of making money you would think are endless knew where that really was coming from every single. couple seconds here i think bad things come and three yes and i'm waiting for the next p.r. scandal all right we'll wait till the next shoot for the next shoe to drop until then that's all we have time that's it thank you so much for tuning and oh and don't forget to follow me on twitter at lauren lyster. and give us feedback on the

show it you tube dot com slash capital account to get you through until tomorrow at this time where we have another show but until then from everyone here thank you for watching and have a great. guitar sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you hear or see some other part of it and realize everything you thought you knew you don't know i'm sorry welcome to the big picture. down to your official antti how to change your body from the i pod touch from the i choose ups to. lunch all she life on the go.