our viewers will get a chance to listen to everything he had to say to us tomorrow on r t r and we will look forward to that certainly a good get for an interview our team correspondent on a coffee at char cannot in new york. and i'm going to do it for us for not want to thank you so much for watching once again i'm christine frizz out we'll be back here in a half hour. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else here sees some other part of it and realize that everything you thought you knew going into our blog is a big check. good

afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are headlights vary from one to two thousand and twelve is this get another sign too big to fail banks are taking outsized risks with better reeling insured money take a look. that's

right i'm talking about voldemort as the bad guy from harry potter because this is the newly public nickname of the reported j.p. morgan trader suspected of moving and rattling credit derivatives markets now on friday we told you about him is also known as the london whale so does this mellow prop trading and does it make the case for a strong volcker rule in full effect we'll talk about it and u.s. stocks fell today after the s. and p. closed out its worst week of two thousand and twelve last week now media reports are saying it's the reaction to a bad jobs report will back up we'll look at the big unemployment picture we'll speak to karl denninger of the market ticker and speaking of economic problems. there are only a few things to get the real the u.s. economic recovery that finally seems to be underway and one of the news the debt

crisis in europe. really that's just one of the things one of only of you those who are us politicians looking for a scapegoat or an excuse oh and the greeks are just the lazy freeloaders who caused the eurozone debt crisis right we have a reality check for the mainstream media let's get to today's capital account. so u.s. stocks fell today and people are crediting friday's lousy u.s. jobs report for that now it is hard to say exactly what moves markets you can't really attribute it to one thing or another in our view especially when you can have single traders like the so-called london whale making

a gigantic splash that rattles markets or as we talked about on friday when you can have firms manipulating them so what do the u.s. unemployment numbers really spell as far as the broader picture and what does the london whale or voldemort as he's also been spell in terms of the outsized big risk subsidized by the taxpayer that still is being taken on we also have you debt scams to pick apart here to talk about it all as karl denninger he's trader and author of leverage how cheap money will destroy the world we've certainly see it do a lot of damage but continue to be a huge problem nonetheless so first of all i mr denninger thanks for being on the show thank you very much for having me absolutely so let's talk about jobs i know these numbers came out on friday but there really wasn't a chance for everybody to react to them until today now this report was bad ok payrolls were way less than expected they were less than people's pessimistic views

including yours which was for one hundred twenty five thousand they came in at one hundred twenty thousand yet we see jobs numbers each month mr denninger they are a political football whether somebody wants to say this is a sign the economy is bad or this is a sign that things are improving we see it thrown around every month my question is stepping back do you see this is one bad jobs report or do you see this is symptomatic of a continued bad structural job situation. i look at it more towards the latter the report itself if you look at the household survey and use the unit just in numbers which is what i always run my series off really wasn't this terrible as what the v.t. appropriated as of course when they missed on the headline everybody did audit a futurist over mediately and stayed down today the problem is that the leader participation rate has not moved off the bottom in the last two years and that's the fundamental piece of the economy to past when crude's in order for the fiscal situation of the government and the economy as

a whole tree to recover and actually improve what a terrible basis we're not doing anything that will fix this because we still have too much debt over and the economy and that's why there are it's not taking place socially so that we don't have an actual recovery here so uses the debt overhang i want to get to that but i do want to point out what you're talking about which is the labor force participation rate which declined in march and that continues to be a trend so you think of this as kind of the biggest takeaway not happy a rolls number and i'm curious what are what are some of these other continued trends that we've seen like the average amount of time people are out of work which is nine months and youth unemployment which is twenty five percent how significant are these other aspects in terms of looking at what could be a structural unemployment problem. they'll feed into the same thing when when you get down to it the participation rate go earn the people who are working in only people who are working pay taxes and so if the government is going to have all of these big society safety programs people have to be working to pay taxes and if

they're not then the money's not there or to be able to sunday's things at best that's at the end of the day were a big problem is right now so long as lines mohamed el larry and the c.e.o. pimco is writing about the jobs numbers on friday saying you know during a recession people cut and so after that they had to do some hiring to catch up but now he's looking at this in terms of future employment how people are thinking about the future and that there's a lot of uncertainty so that's why companies even though they have cash they're not hiring people do you agree with that and you think it has to do it this bill uncertainty over what the government will do about investments you think the debt overhang is the biggest issue i think it's it's essentially all of the issues that we have right now we go the health care law which is increasing costs dramatically for businesses we don't know whether it's going to standard go down it's in the supreme court we have the effect with the yet the to commit is taking on business

people notice so we do either has to be paid or defaulted and if you pay it it means taxes are going to go up for a bad ecclesia you fall to that it means the stability of the entire economy and monetary system is called into question and neither of those use an informant which you want to make investments in training people you have a period of time before you get a payment you were to be painted back as it is a business owner so i don't see any reason to be hiring beyond which you absolutely boston at this point in time in being reflected in the employment dollars let me ask you this do you think that the country would be better off if as we've seen politicians have an inability to make decisions carry at any time their you know comes up with a debt ceiling or are something you know increase or something like that it's huge standoff do you think that the economy would be better served if politicians his name decisions even if they were what business and didn't want to have them make would that be better for the top situation because at least employers knew what they were dealing with. to some degree this this deficit spending has got to get

results and at the end of the day till the government goes there we're not going to get out of this always and that means at this point we have to stop growing forty three cents out of every dollar the government spends one way or another you either have to raise taxes or you have to cut services and there is there is no other way to do this and that's going to force an economic adjustment along was asked a crisis and the general level of economic activity and just to confirm you said you do not see a recovery this is not a recovery you know absolutely not you can't continue to drink you're so sober if you're drunk you will stop drinking we're still trying to very close also see great analogy you know his drinking a lot of the alcohol or kool-aid or whatever you want to call it is the banks they continue to with the cheap money from the fed my question everybody's looking at this j.p. morgan reported trader this london whale who is suspected to be rattling the credit to relatives market singlehandedly he works in this area j.p.

morgan excuse me that and that's the company reserves and it has people debating if this is an example of the outsized risk the banks continue to take subsidized by the taxpayer backed by federally insured using federally insured money rather and that's how you see it according to what i read on your blog can you explain kind of the how and why. yes initially the only fear way to allow people to speculate in markets is to do it with their own capital so you you have money of your own that you were in from working were you sold bonds or you sold stock or whatever you did then you should be able to speculate all you want of that but when you're a commercial bank in today's world it doesn't work that way you can speculate all you want with money to depositors who placed with you which is not supposed to be at risk and then when something goes wrong you go whine to the government say older is going to be armageddon takes in the streets if you don't bail us out and this is exactly what the banks did two thousand eat away with it so now we have the same situation come up and j.p. morgan is undoubtedly going to say old this is a g.

activity on behalf of something but i would like to see them actually crude but they're hedging some of the risk somewhere and identify what that risk is because we see this kind of movement back and forth all the time and when markets get distorted they have evidence snapping back very fine we're early and someone gets caught on the wrong side of that are you calling for more transparency of value or thing is information here. i don't believe that banks should be able to speculate with other people's money if they want to speculate if they want to be out there in the markets they should have to so pons he should have to sell stock and use that capital he should not be able to use depositors phones at all but should not be able to socially lend money they don't actually have i call it one dollar capital and that's that it leaves a solution to this problem so then do you what about the volcker rule because some people would obviously that would well there's a lot of loopholes in the regulation from what i understand already but it was supposed to make it so bad banks that are federally backed cannot that with

customer money they can gauge in proprietary trading for the firm's books essentially do you believe that this makes the case that that need to be promptly enacted a little girl isn't going where near enough you're far enough so the glass steagall doesn't go far enough because the banks figured out how to get around it too we used to have a law that said you could do you think you can't speculate in the markets at all you did it best bank if you had to use your own shareholders and on it was capital or you could be a commercial bank and you could speculate well the banks all know how to get around it now that kind of like trying to do questionable white and his screaming about that as well yeah and as far as plastic ally from what i understand people that ever they're working to have bring light to what's really enough regulation there are tons of loopholes that the banks can get around to still engaging in act and so i guess my question is what is the solution because at regulations don't fix the problems because they don't actually address them because banks lobby them what is

the solution to this you have to completely cut this off you can't do it halfway you have to meet it is a matter of federal law and disorder activity can take place and what the banks will say is well then we'll just take all our business will go to london or whatever and my response to that is if you want to play with george nitroglycerin please go do it in your house not in why do you say i'm going to london that's fine i don't care. well. jules was there yeah i guess it's only fair how far that would spread and how many people that would in fact is still up for debate of course but because of this bad bank behavior you're writing about this wells fargo case they came out that really is kind of just the latest example of this rampant mortgage abuse wearables pargo there was a ruling in this one case but what it found was that its representative that barbara was routinely misapplying payments on loans improperly charging fees refused to correct past errors even though they were already you know found to be

doing the wrong thing does this show that banks this bank in particular is not only on board with institutionalize that from their customers but also they just have no respect for the law period. i think what the what the court found was this was not only saluted incident but it was taking place essentially places where the bank loans a reader into a foreclosure it was to their advantage in each case that it was not in any way open the cost or. they slapped the bank with a huge punitive damage award and that should be clean doesn't dampen in american courts and we should do something really outrageous so the judge found that there was truly a racist conduct here and when we come back i want to ask about punitive damage of that size is the kind of punishment that will stop this behavior or if we need something to you talk about a lot on your blog which is prosecute sends a rat you know crimes that are are punished that will be back after

a break we'll have more with karl denninger author and traitor and still ahead do not go away the mainstream media sixty minutes did think he's on the eurozone debt crisis we have a few issues we have a reality check for them still ahead but first give me your closing market numbers . 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 thought

you knew you don't like time partly because of the. before the break we were talking about some of the outsize risks and abuse is that banks are taking and making exhibit a being j.p. morgan in the london whale trader exam exhibit b. being wells fargo and the latest ruling on their mortgage abuse is my question do these punishment that we've seen go far enough we talk a lot about prosecutions on the show i want to ask karl denninger if this latest punitive ruling which gave him no damages that we're pretty happy for wells fargo is an example of a punishment that goes far enough or no dice again he's trader and author of

leverage how cheap money will just break the world so carl before the break we were talking about this was a ruling which was as you said the disputed damages were significant i think was it three point one million i don't remember exactly what they were maybe it was because it was basically ten times the amount of the firm that had been sought for it which is starting to get into the category of that. and that's what you need to do if you're going to deter conduct because if you just make someone give back what he took on justly then it becomes a business decision because they can say well i can go up to space and you put your courtship. but if you make them give us this much now we it becomes more difficult because i have to get away with one of these things in order for it to make sense this is getting into the range where this starts to look like a detour so then and so they're not my question we talk a lot about and i know you've written about the fact that people need to be charged with crimes and prosecuted for things like fraud people need to be punished and

maybe these are my words and not yours but. is that still the case do you believe or if punitive damages if the dollars that they have to come up with are enough is that to begin to turn to stop some of these abuses that the banks make. well i'd prefer to see across the queue sions because there's nothing to change someone's opinion whooshed to pay a thing faster than the threat of going to prison but if the reality is that in a situation like this the decisions that were made to do this were probably diffuse i highly doubt there was one person etc and said i'm going to hose all of these mortgage holders instead what probably happened was that there was a systems you know decision that was made to program machines to do things in a certain way and you know twenty people looked at it all passed out and said ok fine you know whatever it so she'll get a circumstance like that so they're really good which workers to be the right section ok and that's a good point granted it is who is accountable for the things you see where in all

of these cases it's you know everybody throws at their hands and says i'm not responsible does it give you a little bit of perspective a for a backdrop up prado know if you saw this but a rogue trader in china who cheated investors that are on their way to losing ten million pounds in gold what was the sentence for them for her it was that well different approach i don't know if that's as far as we will go but it is a little bit of an interesting at that point i mean leave it there karl thanks so much for being on the show he's called i think you are there and trader. so last night sixty minutes happily europe's debt crisis and a few notes we would like to make

a reality check if you well let's see how they kicked it off. there are only a few things that could derail the u.s. economic recovery that finally seems to be underway and one of them is the debt crisis in europe along with the recession that is now sweeping across the continent . so first things first let me unwind about every assumption made and under fifty seconds to just begin to toss to this report so first only a few things that could derail the u.s. economic recovery how do you choose nasa public debt massive private debt high stagnant unemployment the unsustainability of the fee up money system artificially low interest rate zombie banks propped up by the government a government incapable of coming to an agreement on fiscal decisions i mean how do you choose which you could do rail the economic recovery exactly and how exactly do you decide this recovery is well underway as you just heard my last guest say he does not see this is a recovery and if it's well underway why are so many people still unemployed

leaving the workforce as we just saw in march why are interest rates being held artificially low at zero percent and why is everyone wondering if a bad jobs report means more money printing down the pipeline with the bad as burning he has hinted at recently and europe's debt crisis being one of the official deemed few things to derail the u.s. economic so-called recovery yes we agree that the eurozone crisis is huge massive ramifications there for the u.s. economy for sure but this sounds a little like a u.s. politicians talking point ok the ones that are trying to find a scapegoat to possibly avoid confronting the u.s. his own economic problems or pay the eurozone debt crisis has been kind of the number one thing that we've heard from treasury secretary timothy geithner he's used this line so as obama's top economic adviser alan krueger let me not nitpick the first fifteen seconds too much but let me just play you

a little bit about how greece's euro problem with characterized. in the past due to its account super drawn country simply printed more money or devalued its currency to accommodate the large lifestyle. the relaxed greve will tell it really was just hanging out on all those devalued currency ok if you print money in value your currency in the case of greece and the drachma you're just stealing wealth from within the country from the private sector and transferring it to the public sector ok bondholders are compensated because they get higher interest rates but everyone else in the private sector has less purchasing power and experiences price inflation that's not exactly a subsidy for those relaxed deadbeat greeks there it's actually hard working greeks subsidizing the work of lazy greats and it's all within greece i should note this is unlike in the u.s. where the fed prints money and the rest of the world subsidizes the u.s.

because the u.s. dollar is the global reserve currency ok when countries investors all over the world hold u.s. dollars these countries all dollar holders including of course the u.s. private sector or all subsidizing the u.s. public sector going it prints money just wanted to point that out so look i love sixty minutes i really really do and i do have to give them props for interviewing greek economists yun is very obvious who has been a guest on this show on more than one occasion but for a really over simplified version of the eurozone crisis that really too closely repeats what we see as establishment talking points this is a huge call of the reminiscent of the hackneyed old adage we've heard a million times don't believe everything you see on t.v. . especially don't believe everything you see on mainstream t.v. and that is a reality check. our

let's wrap it up with loose change shannon's out to me trees and i have to say i love your tie you're most of your time let's talk about this maybe that tie is enough to help you from needing to get into the kind of scam we're about to talk about so maybe you've heard local news reports in the u.s. where teachers get busted for trading sex for good grades here is an example according to the arrest warrants police say for better grades this fuel in exchange for sexual acts. sticking to the classroom a trio of business students at germany's university of mannheim have created a new company it's called be able it references the first letters of the german

word for library and according to the german newspaper der spiegel they have a business model that involves providing sex to female students so that they can get better grades according to the concept there's posters all over campus that say good grades through good sex female students who are stressed about classes in the mood to have some relief they contact the guys by email going to shows if all goes well it ends in sex this is ridiculous i really doubt they're going to get a huge demand or a lot of customers i think it makes perfect sense and i mean this is. the beginning with time we know that nothing alleviate stress better than orgasm and today in america everyone takes barbiturates and things like xanax to sort of pill popping he should be having more sex this is what god intended that's why that's what he gave out of these beginning he knew that i was under a lot of stress there's just this is just this is just a reverse ok this is a business model trying to capitalize on not all guys would lie which is to get

laid and college ok but the problem is any woman who is. alive and kickin has known for a long time that it is not difficult to find male counterparts to partake and so why would they need some business for them to email some guys and make that happen daughter that goes counter to a lot of the stuff that i hear from women because it is the they're searching for us in this country as a writer that's what it's like really all this knowledge rosie going to do retreat those that are here so maybe you know they've got bigger than the figured out of germany and they've got it in the senate like it will graze good sex nothing can. plaster it harder than a good strong orgasm lets people understand let's see how far this gets i predicted not very far let's move on because this is something that didn't get very far in the us once people figured out what was in it pink slime there was a huge huge outrage over it now the company has declared bankruptcy will now there's an outrage over another additive that the u.s. uses in its neat but this outrage is actually not in the u.s.

take a look thousands of tony's farmers can hear it outside the legislature in taipei recently held up signs warning of the teachers view was beef it contained a lead is enhanced drug. so ragtop of men is this additive and neat it's a chemical that supposed to help animals grow and taiwan is lifted a ban on beef imports that contain residues of that it's been a hotly debated in taiwan it's closely tied to the resumption of trade talks with the u s in lifting this ban so this is a chemical that the u.s. is ok with so were twenty seven countries but one hundred outlawed the european union and china there are a few others too so i think this is really interesting because the united states is one of those places where i am appalled by what is allowed to be in food and here is the global ramifications of it where you have people protesting in another country saying we don't want your inadvertant really just casting eli lilly

manufacturing chemicals on them are totally gruesome i think it's a standard around i remember there was a case of the u.s. would no longer be the newscasters economy because they're like you can't just posing as employees or observing the vietnam war that's a one hundred catfish but now the u.s. is pushing your b.s. and publishing with it and they want to export the world so i want to we're going to push the little one live circle for a movie can help us so we have the poise and beauty are yet and we're out of time but if this is that this is this is poison it's not because of war it's poison because of going to work on purpose yeah so that's actually that's all we have time for thanks so much for watching our show don't forget to follow me on twitter out lauren lyster give us feedback at youtube dot com slash capital account for everyone here thank you so much for watching come back tomorrow and have a great night.

we'll see british scientists. sometimes. want. why not kendall why no one should really happening to the global economy with much cause or bra no holds barred look of the global financial headlines tune into kinds a report on r t.