the international envoy to syria says there's still time for the u.n. peace plan to work despite the looming deadline while the russian foreign minister urges kofi anon to more actively pressure of the opposition towards a cease fire. the british prime minister and his japanese counterpart agreed to expound collaboration on defense equipment and it will many see as mirroring washington's recent drive to boost its military presence in the asia pacific region . of russia and poland remember the victims of the tragic plane crash near somalia that killed the polish president and most of the country's political elite two

years ago. next up it's our regular financial check up with lauren lyster and her capital account program still with us. good afternoon and welcome to capital account i'm lauren lester here in washington d.c. is your headlights very prominent two thousand and twelve is this get another sign too big to fail banks are taking outsized risks with better really insured money take a look. that's right i'm talking about voldemort as an invalid 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 he's also known as the london whale so does this smell

of prop trading and does it make the case for a wrong vocal role in full effect we'll talk about it and u.s. stocks fell today after the s. and p. close 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 a 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 the u.s. economic recovery that finally seems to be underway and one of them is the debt crisis in europe. really and that's just one of the things one of many of you those who are u.s. 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 dug 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 is 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 a one hundred twenty five thousand they came in at one hundred twenty thousand now 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 at numbers which is what i always run my series off really wasn't this terrible as what the media portrayed it as of course when they missed on the headline everybody who can audit the futurist over immediately and stay down today is the problem is that the labor participation rate has not moved off the bottom in the last two years and that's the fundamental piece of the economy that has to improve in order for the fiscal situation of the government and the economy as a whole tree to recover and actually improve on it durable basis we're not doing anything that will six this because we still have too much debt over and the economy and that's why there are it's not taking place so until we solve that we don't have an actual recovery here so you say is the debt overhang i want to get it out 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 that payrolls

number and i'm curious what are what about 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. it will feed into the same thing when when you get down to it the purpose of evasion read go to people who are working in only people who are working and so if the government is going to have all of these big society safety net 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 and that's that's at the end of the day were a big problem is right now oh along those lines of mohamed el area and a c.e.o. 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 just 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 had to do with this bill and certainty over what the government will do about the death as you think the debt overhang is the biggest issue i think it's it's essentially all of the issues that we get right now we hear the health care law which is increasing costs traumatically for businesses we don't know whether it's going to stand down it's in the supreme court so we have the de facto with the debt that the government is taking on this is people go to some point to either has to be paid or to sault it and if you pay it means taxes are going to go up dramatically and if you default then it means that the stability of the entire economy and monetary system is called into question and neither of those is an informant which you want to make to the best that's in training people that you have a period of time before you get a payment you know to be paying it back as it is a business owner so i don't see any reason to be hiring beyond which you absolutely

must at this point in time in being reflected in the employment numbers 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 this huge standoff and do you think that the economy would be better served if politicians just maybe deficient even if they were what businesses didn't want to have them make without being better for the job situation because it leaves employers knew what they were dealing with. to some degree but this this deficit spending problem has got to get resold and at the end of the day until the government goes there we're not going to get a ways and that means at this point we have to stop borrowing forty three cents out of every dollar the government spends one way or another you either have to british taxes or you have to cut services and there is there is no other way to do business and that's going to force an economic adjustment along with asset prices integer

a little bit of a and just to confirm he said you do not fear 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 must stop drinking and we're still trying to carry herself so it's a great analogy you know he's drinking a lot of the alcohol or kool-aid or whatever you want to call it is the bank 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 derivatives market singlehandedly he works in this area of 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 rests that 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 actually the only fair wage willo people speculate in markets

is to do with their own capital so if 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 strike lead all you want but when europe commercial bank in today's world it doesn't work that way you can speculate all you want with money that tossers who plays with you which is not supposed to be at risk and then when something goes wrong you go whine to the government say oh there's going to be armageddon intakes in the streets if you don't bail us out and this is exactly what the banks did two thousand and eight got away with it so now we have the same situation come up and j.p. morgan is undoubtedly going to say all this is hedging 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 a habit of snapping back very violently and someone gets caught on the wrong side of things are you calling for more transparency of value or thing is the solution

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 sell ponds he should have to sell stock and use debt capital he should not be able to use to toss response at all should not be able to socially lend money to it or actually have i call it one dollar capital and that's that it really was a solution to this problem so then do you what about the volcker rule because some people with obviously that would well there's a lot of loopholes and regulation from what i understand already but it was supposed to make it so that big banks that are federally backed cannot that with customer money they can gauge in proprietary trading for the firms but the sensually do you believe that this makes the case that that need to be promptly enacted a little rule 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 couldn't be a pain. in the markets at all you did at best

a bank and you had to use your own shareholders and or you could be a commercial bank and you could speculate well the banks found out how to get around it know the rules kind of like trying to do qwest egalite and they're screaming about that as well yeah and as far as glass steagall lie from i understand people that have that are working to kind of bring light to what's really in us regulation there are tons of loopholes that the banks may get around to telling cage in this action so i guess my question is what is the solution because if 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 make it is a matter of federal law the disordered activity can take place and what the banks will say is well then we'll just take all purposes so we'll go to london or whatever and my response to that is if you want to play with chores at night for glycerin please go do it in your house not in mine tell you they can go to london that's fine i don't care. well. pleased with their

yeah i guess it's only fair how far that would spread and how many people that would in fact is still at her debate of course but speaking 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 where wells fargo there was a ruling in this one case but what it found was that its representative that 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's from their customers but also they just have no respect for the law period. i think what the courts found was this was not only saluted incident but it was taking place in a socially pieces where the bank loans the reader into full foreclosure it was to

their advantage in each case that it was not in any way open to cost or were. they slapped the bank with a huge punitive damage award and that should happen in american courts unless you do something really outrageous so the judge should have 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 prosecutions erath 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 .

well. science technology innovation all the developments from around russia we've got the future covered. before the break we were talking about some of the outsides risks and abuse is that banks are taking and making exhibit a being j.p.

morgan in the london whale trader exam exhibit b. b. wells fargo and the latest ruling on their mortgage abuses 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 destroy the world so carl before the break we were talking about this was a ruling which was as you said the punitive damages were significant i think with that 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 suffered which is starting to get into the. teens and that's what you need to do if you're going to deter conduct because you just make someone. look unjustly then it becomes a business decision because they can say well i can go rob to speak if i get caught

. but if you make them get. this much now becomes more difficult because i have to get away with one of these things in order for it to make sense. is getting into the range where distorts to look like a detour and so that's 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 a big have to turn to stop some of these abuses that the banks make. well i prefer to see prosecutions because there's nothing to change someone's opinion with bad thing faster than the threat of going to prison but he the reality is that in a situation like this the decisions that were made to do this will probably diffuse i highly doubt it was one person etc and so i'm going to close all of these mortgage holders instead what probably happened was that there was

a systems decision that was made to program machines to do things in a certain way and you know twenty people would get it all passed on and said ok fine you know whatever and so do you she'll get a circumstance like that so there really damage workers to the right section and that's a good point you bring it safe and who is accountable for the things you see where in all of these cases it's you know everybody throws up our hands and says i'm not responsible to think of you a little bit of perspective before iraq wrap up prado if you saw this but a rogue trader in china who cheated and asked her is that on the way to losing ten million pounds in gold what was the sentence for them for her there with that well different approach i don't i thought as far as we will go but it is a little bit of an interesting add that a point i'm leave it there carl thanks so much for being on the show a product you author and trader.

so last night sixty minutes tackled europe's debt crisis and or a few notes we would like make a reality check if he well let's see how they kick 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 massive public debt massive private debt high stagnant unemployment the unsustainability of the 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 every one 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 and pay the euro zone 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 is obama's top economic adviser alan krueger let me not to pick the first fifteen seconds too much but let me just play a little bit about how greece is you're a problem with characterized. in the past you responded to count super groom country simply british war money or devalued its currency to accommodate the large greek lifestyle. the relaxed greek lifestyle it really was just hanging out on all those devalued currency ok if you print money in devalue 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 experience is price inflation that's not exactly as those of you for those relaxed deadbeat greeks there it's actually hard working greeks subsidizing the work of raese greece and it's all within greece i should note this is unlike in the us 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 when 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 young is very fokus 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 column 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. just. let's wrap it up with loose change shannon's ality need 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 a knack to help you from needing to get into a kind of scam are about to talk about so maybe you for local news reports in the us where teachers get busted for trading sex for good grades here is an example

according to the arrest warrant police. offer better grades by. fuel 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 big love it references the first letters of the german word for a 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 up 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 i mean this is. the beginning

with time we know that nothing alleviate stress but an orgasm and today in america who want to explore bitches and things like xanax or the pill popping people should be having more cirqus this is what god intended that's why when he gave out of the 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 what all guys would lie which is to get laid in 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 . a lot of the stuff that i hear from women callers is the they're searching for answers in this country that's right here that's what it's like. to do retreat most of the year but you know they've got bigger than that figured out over in germany and in the senate like your good grades good sex nothing can. and harder than

a good strong orgasm. how far this gets i projected not very far let's move on because this is something that didn't get very far in the us what people figured out what was that it pink slime there was a huge huge outrage over it now the company has declared bankruptcy will now there is an outrage over another additive that the u.s. uses in its meat but this outrage is actually not in the u.s. take a look thousands of teles farmers can hear it outside the legislature in taipei you recently held up signs what do you think jer's of you is beef it contains a lead is it has a drop. so wrapped tocome in is this additive in need it's a chemical that supposed to help animals grow and taiwan has lifted a ban on beef imports that contain residues of it's been hotly debated in taiwan it's closely tied to the resumption of trade talks with you as in lifting this ban so this is a chemical that the u.s.

is ok with so we're twenty seven countries but one hundred outlawed the european union in 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 image or is it really just testing eli lilly manufacturing chemicals on them are the most interested or stand their ground i remember that was a case of the u.s. would love to view these cats as a cold because they're like you can't just poison was reportedly or a jury would be in on war so we're not going to catfish but now the u.s. is poisoning your beef and puts a lot of dilution with it and they want to export the worst the world so i want to produce two we're going to push to be one. really can help us so you know if you pores of beef here yet and we're out of time but it does is this is this is poison is not because of north korea's and because of her 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. keep

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