welcome back you're with our t. here's a look at the top stories a moment of truth for syria the last deadline passes for the regime and rebels to lay down their arms as moscow accuses some foreign state of countering the u.n. peace deal. predatory payday loan scalpel british banks back into the spotlight with critics up in arms over crippling interest rates and allegedly deceptive marketing tricks. and aiming high a russian scientists plan a foothold on the moon by stepping

a permanent base within the next decade before turning their gaze to mars. the families here in our team next next kaiser co-host stacy tell you what's more trustworthy a dollar bill or a gun at the kaiser report next in our teeth. ties or this is the cuz the report and the exorcism of life masters is coming so one seventy eight st so night eight pm. reverend billy will be there be there. will be there in spirit. i. think there were max i actually got a papercut i think it's from the paper devil glaive master devil out she's.

very much looking forward to that tonight but let's move on some of the to these headlines here because we've just left behind europe and there's a debt storm behind us max europe may be heading back into debt storm a flood of easy money courtesy of the european central bank may for a calm start to two thousand and twelve but a poor spanish bond sale last week signals it may have only been a long before the debt storm breaks analysts warn one think of it more as a debt fund do you really want that well you take a country like greece and you stick it on the fork and you dip it into the debt and then you serve it up to goldman sachs or j.p. morgan to look oh this is great now spain is being thrown into the debt fondu well this debt fondue has a shelf and it's called the central bankers and apparently they're however not bringing stability and magic recovery to the markets according to jonathan moines

at capital economics widespread hopes that the e.c.b. would use the might of its theoretically on limited balance sheet to fire a so-called silver bullet into the heart of the broader euro zone crisis by buying up or somehow guaranteeing large portions of the italian spanish debt have all but evaporated so let's look at somewhere where they're actually able to maintain stability in their currency so mali is mighty shilling hard to kill a currency issued in the name of a central bank that no longer exist use of a paper currency is normally taken to be. pression have faith in the government that issues it want to solve and see if the issuer is in doubt anyone holding its nose will quickly try to trade them in for dollars jewelry or failing that some commodity with enduring value when the ruble collapse in one thousand nine hundred eight some factory workers in russia were paid in pickles why then are somali shillings issued in the name of a government that ceased to exist long ago and backed up by no reserves of any kind

still in use now max one of the reasons they give this is in the economist is that the supply of shillings has remained fairly fixed rival warlords issued their own shillings for a while and there are a fair number of fakes in circulation but the lack of an official printing press able to expand the money supply has given the pre-one thousand nine hundred two shilling a certain cachet well that's right the then main component in any economy is trust and the showing has enough trust so that in somalia what you're saying here has a stable economy based on a stable currency whereas in the u.s. or the bank of japan or the u.k. it's completely unstable because the currency is incredibly volatile because people don't trust these governments central planners at all well you identify a key word there is just trust and here the are the central banks i just listed they think they could command and control they can force you to trust when there is

no trust in the system why would you trust any derivative products from j.p. morgan to goldman sachs why would you trust any of these debts that there are any of them are paid payable why would you trust to ever work and pay your taxes again when as we see in ireland when people are refusing to pay their taxes it's just being transferred directly to a small group of bankers now the congress article brings up this issue of trust and says the shilling has a further source of strength since each party to a transaction is likely to be able to place the other within somalia a system of kinship the shilling is underpinned by a strong social glue. paper currencies always need tacit consent from their users that they will exchange bills for actual stuff but in somalia this pack is a rather stronger individual who flouts the system risks jeopardizing trust and both himself and his clan right so social cohesion. begets trust which

begets a stable currency which is the basis of a stable economy in the us you have social cohesion breaking down people see guys like jamie diamond lloyd blankfein kleptocratic lee raking the economy over the coals stealing billions no penalties whatsoever instead of trusting the currency in america their reaction now is to arm themselves and to get ready for the coming war but they don't trust the currency so they're out there buying guns on mass this is another interesting thing here max there are forgeries but many accept the risk of holding a few fakes as a cost of doing business shillings are often handed over in dongles of one hundred notes by this alchemy in imitation of a thing which is already having notional value turns out to be worth something so even forgeries in somalia because of the trust implied within the clan system even the forgeries have more faith in backing them then what they european union

currency the euro that's what you could have an economy like this and somalia would shellings that have a small percentage of the currency fake counterfeit currency and it gets all kind of baked into the cake and it's not really a big problem to contrast that with the united states where it's almost all forgery it's almost all counterfeits ninety nine percent counterfeit and then there's a very small percentage of businesses done using gold silver and other means of barter but for the most part ninety nine percent counterfeit the u.s. dollars a counterfeit currency is backed by nothing they print shillings and trillions of it to cover the banking crimes trust as evaporating social cohesion. about writing and somalia is putting america to shame and the other thing actually you can apply this to look at the american intellectual property rights this term so here's a group of people without any command and control government no central government for twenty years max no central bank for twenty years and here they're able to say we'll accept some forgeries because it's the cost of doing business and by this

alchemy in imitation of a thing which is already have a notional value turns out to be worth something so you can apply that to the whole intellectual property market that's right you have a central planning central command and control problem in the economy with the fed that's blocking free market and competition and the n.p.a. a motion picture association of america and the recording industry association of america is acting like a centralized command and control intellectual property central bank which is destroying competition or trying to anyway in that industry as well so here you have in somalia it's spontaneous it's a spontaneous organization these people don't need to be told to have faith in this currency too because we have a central government with a central bank i ben bernanke tell you that that is not money and gold is not money that only the u.s. dollar is currency here is a spontaneous organization without any of the need for that so what does that say

about the whole eurozone or the whole american economy well they trust their fellow somali they have a community trust because there's a justice right there is well there's justice and there's also a legacy there's a history there's a family there's a clam they contrast that against the united states were baber is shooting dead neighbors so there's no trust people don't trust their neighbor anymore they don't trust the government they don't trust a neighbor they don't trust themselves anymore so there's almost no trust at any level for this reason the dollar is weakening and the economy is collapsing so let's look at more europe. zone absence of trust tea party socialists why the left is getting a tax revolt in ireland so only forty nine percent of households pay the one hundred euro household charge that was due on march thirty first and it's due to become a property tax and twenty thirteen and some are now mocking the protestors tea party socialist it is the socialist leading this resistance to paying this new fee

but the timing couldn't be worse for the government ireland is facing i'm a referendum on a new fiscal treaty and the property taxes been mandated by europe and the i.m.f. remember command and control as part of the country's bailout terms and with growing anti austerity sentiment the government could be dealt a humiliating defeat that could lock ireland outside of the european stability mechanism the permanent bailout fund so you see they're threatening irish people saying you're going to be locked out of the european stability mechanism which is a permanent bailout fund so how is that stability to be a permanent bailout fund for a certain class of people well it's not but we know from history that there's no country on earth it easier to get interest seen in rivalry than in ireland and the british have done it successfully and the international bankers are doing it successfully get these two irish people to go to war with each other and we're going to steal them to sovereignty while they're playing with each other so let's

move on to another situation where here the irish people are refusing to participate in a permanent bailout fund so let's look at where a permanent bailout fund is applied and who actually gains from an exclusive greek government robbed public institutions to complete bonce law so it's revealed by the slog venezuela's regime secretly removed seventy percent of major hospital utility and university bank account funds to pay volatile dollars shortly before midnight on march eighth the eve of greece's private sector involvement completion on friday march ninth on average seventy percent of public you. telethons and various large interest bearing account at the bank of greece were raided these included most of the states regional hospital budgets very soon averse cities and it is alleged at least one utility company the greek government used this money in order to purchase government bonds from various bond holders without getting permission from the bank account owners well you know it's all wrapped up in like

a memorandum the document that they signed off on what i love the troika to socially undermine sovereignty and greece and now they're finding out they owe the the fine print it gives them access to all this these retirement funds hospital phone school funds all we lost all of that as well and of course the recourse at this point is not there there's nothing they can do but the cops will dress up like anarchists and beat some citizens in syntagma square and say oh we've got a emergency in our hands as passed some more measures that still the money from folks yes but max let's bring it back to this issue of trust because this is what we've been talking about from the beginning of the show so somalia has trust in their system because there is justice and there is a consequence to defrauding somebody who you are doing business with so in ireland we see that people refused to pay their property fee because they say they know it will just go to these bond holders they know the unsecured bond holder anglo-irish

here you're seeing evidence of that their money is being stolen because taxes went to the universities they went to the hospitals they went to the utility companies those funds are sitting there to pay for these services and in fact that money is not being used for the services they're reporting also that six of the country's universities say they face immediate closure after the recent bond swap reduce their assets to zero and emergency meeting of university rectors on tuesday heard that only thirty three million euros remained of one hundred twenty million euros seventeen greek universities had deposit. with the bank of greece for their operating expenses well you know the more i hear the more i want to move to somalia let's let's move. over thank so much for being on the kaiser report thank you max don't go away much more coming your way so stay right there.

you know sometimes you see a story and it seems. you think you understand it and then something else you hear or see some other part of it and realize that everything is all. part of the big picture. max keiser welcome back to the kaiser report time to go to moscow and speak with economics professor constantine. long with brian lucy as edited a new book what if ireland the faults

a collective set of essays about the irish debt crisis available for download at amazon constantine welcome to the kaiser report thank you marc delighted to be with you. what if ireland defaults you write an essay about the predictable upcoming default by ireland only two weeks ago and they can he insisted ireland would never default are you telling us that a politician has been caught. lying not exactly this is the whole point of the debate the debate is about first of all what the fourth looks like we have many definitions and different types of defaults pretty much everybody in the book is by the way coauthored by about twenty one people together their academic researchers there are some politicians political thinkers as well as journalists from all around the world writing about different experiences different countries municipalities states in the united states have gone through in order to restructure their debts in other words the experience of default historically we also have

a set of chapters about the irish situation and the problem is that in the case of ireland the real problem is what we call debt overhang and this is really a combination of private sector that such as the household bacon sector debts which i assume to the shoulders of the taxpayers by the government and then traditional government debt so when i say everybody or they carry for example this t. shirt prime minister of ireland when he speaks about the default in ireland and undesirability of such an outcome he is correct he is mentioned in the default as pertain to the government wants and that is there would be a sovereign default he also mentioned the implausibility and the low likelihood of default in for example in disorderly fashion without incorporation of the european union and the european partners and the e.c.b. and he's correct there as well so there is nothing really that he is lying about he is almost about that and he is correct and that's consensus in the book as well the really the default itself that we talk about there is the default on bank that's

ireland has tremendous amount of banking that we have been assumed either directly by the exchequer or indirectly through a guarantee also by the exchequer and that rate of that that is currently called an irish economy back from restart and growth recovery and he hadn't back onto the pre-crisis trajectory if you want to write well the case to be made for defaulting on the. or to go back to the. the irish times for example the average pound they all make sense it makes sense in greece to make sense in other european countries but the what makes sense for the local population is doesn't make sense for the bankers who are controlling these countries the outside bankers the i know after world bank wall street banks they don't want ireland to default so since they have a bigger vote then anybody in ireland we can't really expect that to happen correct you are completely correct with exceptional vironment and i will clarify that very

briefly as well if you look at what happened in ireland during the crisis since about two thousand and seventy two thousand and seven when the first credit crunch started happening there are stocks players have assumed the liabilities of the large banks to foreign investors primarily the german french dutch banks and as a result of that is now on the hoof or the bank bets that the various banks have accumulated these are the the rest of the eurozone also some of the where the united states comes into that equation is that the united states and the writers have written a lot of the c.d.s. contracts and the words insurance against the bank and that this is out of that they stand to lose if ireland defaults on the bacon that's themselves now as far as the troika goes since the rescue package has been put together over a year ago now i.m.f. actually played the role of proposing a structured and corporative default on the bank and beth i.m.f. has been on the side of the stock spare even before the large government came along

and joined that side in fact i.m.f. back in november twentieth ben has been saying that they cannot understand why the european union and the e.c.b. and artist garment insist on continued repayment of the bondholders of the orders because these banks are bust and there has to be some sort of the burden sharing now both i.m.f. and the rest of the troika the i'm feeling mean the restructuring as it happened in greece are in this entirely different scenario from going. again irish authorities are very quick to point that out and they're correct in pointing that out in the sense that greece needed to write down and sober and in other words government boards in irish case the government that itself is probably sustainable it's getting dangerously close to the barrier beyond which it is no longer sustainable it certainly is beyond the barrier where it exerts the drag on economic growth in the future but nonetheless it is still sustainable in the sense that it can be stabilized and drawn back through growth and through a combination of growth and repayments over a long period of time this is clearly not the case in greece even after the

restructuring that it has undergone in the second package of restructuring but nonetheless for ideas from marge point of view it is very clear that ireland can get out of that side of the debt problem where irish problem is is on the banks that and here i am half again as playing the irish side rather than the side of the troika it's all it's a paradoxical situation in the sense you don't expect i.m.f. to adopt the soft approach other than other authorities in terms of restructuring of the pats and yet it does because i m f clearly nautically reasonably understands the situation in ireland as a piece and it is aware that in order for i.m.f. to be repaid on its loans to ireland for the european union to be paid on so long story. authorities will have to restructure bank that's and as a result of that they will help them default on some of the banks that's and this is really also part of our book as well i cover in my chapter that very much in there is a debate between myself and the lecturer from the university seamus coffee who's very informed and very good put forward an argument that that is not going to be

the case i however with very firmly in the camp that we will see a default on the bank that sooner or later and the sooner it will happen the better it will be all the i.m.f. of course is funded primarily from the united states primarily from wall street and you know saying observer from outside of course this would go under the category of good cop bad cop scenario we see from american. t.v. shows so they i.m.f. comes in as the so-called good cop with the idea that they're on the irish side and they want to see that paid off and yet they entire mandate of the i and that i.m.f. is to increase the debt load to roll up and reset carrots eyes and look good in my eyes their own existence by increasing debt so i would warn against. placer too much trust in this proxy for who wall street which is the i.m.f.

they're still paying the i'm all irish that right constantino they're going to stop paying the billions angle irises that been negotiated is that on the table is that going to happen well the repayment of that you are born in other words a promissory notes authority government has extended to the anglo irish bank which is a completely bust insolvent bank which is in the process of being wound up over the period over the next ten years plus that repayment is still taken place they off the day month after month we continue to repay the bondholders in that institution despite the fact that it's completely a baker it is non-systemic it's very small bank by european standards it's very interesting which you mentioned they about the whole they caught in between i.m.f. and the rest of the troika is a bad cop good cop you're one hundred percent correct in a sense that both the good cop and the bad cop have exactly the same objectives however they have the different parts to achieving that objective and i'm f. it's very clearly taken the position which would ease the burden on the c.d.'s on the writers in the united states and the likes of goldman sachs and the rest of

them and at the same time bill burton of the restructuring of the anglo irish and other insolvent banking institutions in ireland that's onto the shoulders of the european central bank fortunately from irish point of view that is exactly what should happen no matter how you spin it so the better the good cop in this case is actually closer to being right and being correct in what he's trying to do that i met was trying to do and the bad cop unfortunately again in irish case. has only its side the sea be within the throw it could be in the back up has on its side our government which is completely and squarely unwilling to use if you want the card of having a good cop on your side and play that against the c b r i well i will say i mean it could be a case of pain tang where we see all the time these stats are shuttled back and forth with no progress being made at all because again you're in moscow so let's talk about the lessons for ireland from the russian default start by comparing how big russia steps were before the fall out what happened to the bondholders in

russia's defaults and how far did the economy declines post default and then how soon did it recover in the case of russia slightly different the situation was likely different the default was treated by the fact that the russian economy assumed was break out of the soviet union all of the soviet union bed where very key in all of the time in western europe and then the united states to criticize russia for example for its stance because i mean the parts of the former soviet union we keep forgetting the fact that russia did assume all of the debts of the former soviet republics and it had serviced those that for a very long period of time in the midnight in ninety's these debt burden became really unbearable because the russian economy was contracting at the same time as the ruble was declined in the value so there was a wee pressure growing from that legacy that we should inherited from the former soviet union and by the ninety six ninety ninety seven russia started entering the

who ordered a new corsi a chance to restructure that asian crisis at the same time the currency crisis in the southeast asia has triggered significant pressure on the russian ruble and trigger that also at the same time significant fiscal pressures on the russia as well so as a result of that russia was forced to default it's entirely different situation from ireland in the sense that russia inherited somebody else's that ireland has inherited its own bank and but it also is different in the sense. it was so over and that in russia the russians before the sovereign defaults are the hardest. if you want to dissolve their hardest to overcome because the sovereign default rules the regulation of the sovereign and make such certain that down the road the sovereign caliban finance they could pay liquidity operations on its own budget with russia's response was was exemplary in many ways because what russia did it simultaneously entered this very fast rapid correction phase on the budgetary side so it cut deficits very rapidly it devalued very aggressively it took the medicine

upfront that it had to take and therefore it put itself back onto the recovery was the fall within the span of about say six months it was back on their own pretty carbery and so the most painful phase of the default was these kind of four to five maybe six months immediately after the default in addition to europe it didn't stop there in the. very important deep structural reforms both on the budgetary side on taxation side it introduced later within the bout a year and a half after the default itself it introduced entirely new tax code for personal income taxation which became benign and on the big benign and also recognize the reality that. the russian government would not be able to finance excessive government expenditure to supply services to its population and therefore we should not charge for that as well it was a circle structural reforms which the legacy of which continues today so by about two thousand one russia was firmly on the growth path and there often it was also

aided in that growth path by the increase in prices of commodities which were the primary exports of russia but everybody in the west thinks of assumes that it is the oil and gas prices which have rescued russia out of the default that is not exactly correct before the oil and gas prices started forming up before the bowels of payments started improving on the current account to start improving in russia russia didn't are very significant long lasting reforms the legacy of the. it was present and you can see today in the recently bible and domestic economy all right constant again thanks so much for out of time thanks for being on the kaiser report thanks well it's all right that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert or think i guess constitution good give if you want to send me an email please just kaiser report at r t t v are you until next time this is nice guys are saying by. the way.

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