well past the hour here in moscow time for your r.t. headlines a moment of truce for syria the last cease fire deadline passes amid moscow's concerns the fragile peace may be breached by rebels stood up from the outside. predatory payday loans cut to pull british banks back into the spotlight with critics up in arms over crippling interest rates and allegedly deceptive marketing tricks. aiming high russian scientists plan

a foothold on the moon by establishing a permanent a lunar base within the next decade. before turning their attention to rocks. the country stay with us here and now it's time for the kaiser report. i am x. times or this is the kaiser report the exorcism of life masters is coming to one seventy eight man street tonight at eight pm. reverend billy will. be there. will be there in spirit ha. there were max i actually got a paper cut i think is from the paper devil life master. out she.

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 law well before the debt storm breaks analysts warn well i think of it more as a debt fondu really with that boy you take a country like greece you stick it on the fondue fork and he get put into the debt and then you serve it up to goldman sachs or j.p. morgan. all this to do is great now spain is being thrown into the debt fondue 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 going to

capital economics widespread hopes that the e.c.b. would use the might of it's 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 and 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. no faith in the government the issues it want to solve and see if the issuer is in doubt anyone holding its notes 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 nobody deserves 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 chilling 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 the certainty that the main component in any economy is trust and the shelling has left us 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 what you identify a key word there was 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 any of them are 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 economists 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 pact is a rather stronger individual who flouts the system risks jeopardizing trust in both himself and his clan 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 breaking the economy over the coals stealing billions and no penalties whatsoever instead of trusting the currency in america their reaction now is to arm themselves to get ready for the coming war but they don't trust the currency of the 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 thick bundles of one hundred notes by this alchemy in imitation of a thing which is already of notional value turns out to be worth something so even forgeries in somalia because of the trust in pride within the clan system even

the forgeries have more faith in backing them then what they european union currency a euro has you can have an economy like this and sonali with shillings 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 business that's done using gold solver and other means of barter but for the most part of ninety nine percent counterfeit the u.s. dollars a counterfeit currency is backed by nothing they print zillions and zillions of it to cover the banking crimes trust is about bringing social cohesion. about writing and somalia is putting america to shame the other thing actually you can apply this to look at the american intellectual property rights system 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 an imitation of a thing which is already of 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 m.p. a motion picture association of america and the recording industry association 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 this is spontaneous organisation these people don't need to be told to have faith in this currency too because we have a central government with the central bank i ben bernanke to tell you that that is not money that 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 yeah they have a community trust because there's a justice right there is walters 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 neighbor 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 any level and 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 socialist 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 them a referendum on the e.u. fiscal treaty and a property tax it's been mandated by europe and the i.m.f. member command and control as part of the country's bailout terms and with growing anti-us terribly sentiment the government could be dealt a humiliating defeat that could lock ireland outside of the european stability mechanism they use 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 easier to get interesting in rivalry than in ireland and the british have done it successfully and now 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 their own 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 them and screws of greek government robbed public institutions to complete. so it's revealed by the slog how venizelos regime secretly removed seventy percent of major hospital utility and university bank account funds to pay bondholders 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 use. ons and various large interest bearing accounts at the bank of greece were rated 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 yeah it was all wrapped up in like the memorandum of the document that they signed off on which the troika to socially undermine sovereignty in greece and now they're finding out they owe that the fine print gives them access to all this these retirement funds hospital fund school thaws all we've 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 just look like anarchists and beat some citizens and syntagma square and say oh we've got a emergency in our hands was passed some more measures that steal 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 a business with so in ireland we see the people refused to pay their property fee because they say they know it will just go to these bondholders they know the

unsecured bond holder anglo-irish here you're seeing evidence of that that the 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 the 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 reduced their assets to zero an emergency meeting of university rectors on tuesday heard that only thirty three million euros remained of one hundred twenty million euros that's seventeen greek universities had to process. 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 who say server thanks so much for being other guys report thank you max go away much more coming your way so stay right there.

you know sometimes you see a story and it seems so you think you understand it and then something else you hear or see some other part of it and realize everything you thought you don't. charge is a big. rock stars are welcome back to the kaiser report time to go to moscow to speak with economics professor cost curve along 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 max delighted to be with you. what if ireland defaults you write an essay about the predictable upcoming default by ireland only two weeks ago at mccann 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 default looks like we have maybe definitions and different types of defaults pretty much everybody in the book is by the way coauthored by about twenty one people together there archidamus researchers there are some politicians political thinkers as well as journalists from all around the world writing about different experiences different countries municipalities states and 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 situation and the problem is that in the case of ireland the real problem is what we call debt overworking and this is really a combination of private sector that such as the household banking sector that's which i assume going to the shoulders of the taxpayers by the government and then traditional government debt so when i say everybody 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 would pertain to the city government wants and that is that would be a sovereign default he also mentioned the implausibility and the low likelihood of defaulting for example in disorderly fashion without the cooperation 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 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 bets ireland has

tremendous amount of banking bets which have been assumed either directly by the exchequer or indirectly through guarantee also by the exchequer and that weight of that that is currently called an irish economy back from restarting growth recovery and you have him back onto the pre-crisis jeffrey if you want to write well they came to be made for defaulting on the dat or to go back to the. the the irish times for example the average pound they all make sense makes sense in greece makes 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.m.f. the world bank wall street cranks they don't want ireland to default sense they have a bigger vote than anybody in ireland we can't really expect that to happen correct

you're 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 seven me two thousand and seven when the first credit crunch started happening now irish taxpayers have assumed the liabilities of the large banks to foreign investors primarily german french dutch breaks and this is a result of that irish start spirit is now on the hook for the bank bets the irish banks have accumulated these i view the rest of the eurozone also some of the way 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 and this is out of that they stand to lose if ireland defaults on the bank and pass 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 lead the role of proposal and structured and corporative default on the bank and that i.m.f.

has been on the side of the irish taxpayer even before the irish government came along and joined that side in fact i.m.f. back in november twenty then has been saying that they cannot understand why the european union and the c b and garbage garment insist on continued repayment of the bondholders brains bone holders because these banks are bust and there has to be some sort of the burden sharing now both i.m.f. and the and the rest of the troika the i'm feeling mean the restructuring as it happened in greece are this entirely different scenario from going. again the 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 bonds in irish case the government that itself is probably sustainable it's getting bencher is a 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 and if you share 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 and greece even after the restructuring that it has on the ground in the second package of restructuring but nonetheless for ideas from marge point of view it is very clear that ireland can get out 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 itself it's a paradoxical situation in the sense you don't expect i.m.f. to adopt the soft approach which are then other authorities in terms of restructuring of the debts and he other does because i am have clearly nautically reasonably understands the situation in ireland there is 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 alone starland. authorities will have to restructure bank that's and as a result of that they will have to 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 in the basement in myself and a lecture from the university college course seamus coffee who is very informed and

very good puts forward an argument that that is not going to be the case i however very firmly in the camp that we will see the fall sooner or later and the sooner it will happen the better it will be while the i.m.f. of course is funded primarily from the united states primarily from australia and you know seen observer from outside of course 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 debts paid off and yet they entire mandate of the i and that i.m.f. is to increase the debt load to roll up in greece to characterize and legitimize their own existence by increasing debt so i would warn against. placer too much trust in this proxy for wall street which is the i.m.f.

they're still paying the angle irish that right constantino they're going to stop paying the billions to ngo irish has that been negotiated is that on the table is that going to happen well the repayment of their who are born in other words the promissory notes about a government has extended to the enlarged bank which is a completely bust insolvent bank which is of the process of being wound up over the period over the next ten years plus that repayment mistake still taken place they are to day month after month and continue to be preyed upon others in that institution despite the fact that it's completely bankrupt it is non-systemic it's very small bank by european standards it's very interesting what you mentioned they about the whole they caught in between the i.m.f. and the rest of the troika as a pair of car boot up you know one hundred percent correct in a sense that both the good cop and the bad cop have exactly the same objective however they have the different parts to achieve in that objective and i.m.f. is 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 will put the burden of the restructuring of the anglo-irish and other insolvent banking institutions in ireland it's on to 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 good cop in this case is actually clues that could be right and being correct in what he's trying to do that i'm f. is trying to do and the bad cop unfortunately again in our use case. has only its side the z.b. within the troika being the bad cop has on that side large government which is completely and squarely on greenland to use if you want the card of having a good cop on your side and played against the c b r i will say i mean it could be a case of paying pond where we see all the time these debts 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 fault what happened to the bondholders in russia's defaults and how far did the economy decline post defaults and then how soon did it recover in the case of russia slightly different the situation was slightly different the default was triggered by the fact that the russian economy assumed was a breakup of the soviet union all of the soviet union there were very key in all of the time in western europe and in the united states to criticize russia for example for its stance because of the parts of the former soviet union we keep forgetting the fact that russia did this you all of the debts of the former soviet republics and it had serviced those that for a very long period of time in the need not in ninety's this 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 tween pressure growing from legacy debt which you can heritage from the former soviet union and by the ninety six ninety nine to seven russia started entering

into the orderly negotiations 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 triggered also at the same time significant fiscal pressures in the in 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 in debt but it also is different in the sense. that was so over and that in russia the russians before the sovereign defaults are the hardest . if you want to resolve their hardest to overcome because the sovereign default rules the reputation of the sovereign and makes certain that down the road the sovereign caliban finance they could a liquidity operations of its own budget what 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 to get the medicine up front. and therefore it put itself back onto the recovery was difficult within the span of about say six months it was back on the road to recovery 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 it is not a set of very important deep structural reforms both on the budgetary side on taxation side it introduced later within about 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 it also recognized 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. 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 aid to the not growth path via the increase in prices of commodities which were the primary exports of russia but everybody in the west of the soon there 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 balance of payments started improving in the current account to start improving in russia russia and even our very significant long lasting reforms the legacy of the. he was present and you can see the bay in the increasingly vibrant domestic economy all right constantine go again thanks so much for out of time thanks for being on the kaiser report thanks well that's all right that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert i think i guess cause a team go together if you want to send an email please to kaiser report r t t v are you until next time mrs maxa guys are saying. the only.