thanks for joining me karen tara on t.v. these are headlines the first ceasefire in over a year of violence between syrian forces on armed rebels comes into force following a u.n. deadline meanwhile russia says the security council put a troop sending an observer mission to syria as soon as friday. around president says no pressure will make his country give up its rights to nuclear energy the statement comes ahead of this weekend's talks on the issue with major world powers

in turkey. and as the world marks the fifty first anniversary of the first manned space flight and russian scientists are unveil ambitious plans to set foot permanently on the moon. now max kaiser and co stacy tell you what's more trustworthy a dollar bill or a gun that's the kaiser report coming up next. i am extra eyes are this is the car's a record the exorcism of blights masters is coming to one seventy eight st tonight it is eight pm. reverend billy will be there well be there. will be there in spirit ha.

there were max i actually got a papercut i think it's from the paper devil life master. but i'm very much looking forward to that tonight but let's move on some of the today's 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 lobby for the debt storm breaks analysts warn but i think of it more as a debt fondu. you take a country like greece you stick it on the fondue fork and you get put into the dead and then you serve it up to goldman sachs or j.p. morgan. all this just fondue 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 wines that capital economics widespread hopes that the e.c.b. would use the might of its theoretically unlimited balance sheet to fire 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 of faith in the government the 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 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 that's right the main component in any economy is trust and the shelling out of trust so that in somalia what you're saying here has a stable economy based on a stable currency whereas in the us 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 all what you identify keyword 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 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 tax 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 but 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 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 implied within the clan system even the forgeries have more faith in backing them then what the european union currency the euro that's what you could have an economy like this and sonali with feelings 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 silver and other means of barter but for the most part is ninety nine percent counterfeit to u.s. dollars a counterfeit currency is backed by nothing they print zillions of trillions of it to cover the banking crimes trust is evaporating social cohesion. evaporating and somalia is putting america to shame and 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 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 m.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 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 you know 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 that 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 the neighbors 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. 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 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 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 interest seen 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 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. so it's revealed by this log out of venice a lowe's 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 you. the fonz and various large interest bearing account at the bank of greece were raided these included most of the state's regional hospital budgets and 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 bondholders without getting permission from the bank account owners well yeah it was already like the memorandum in the document that they signed off on which the troika to socially undermine sovereignty in greece and now they're finding out they owe the the fine print it gives them access to all this these retirement funds hospital funds 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 that the cops all dressed up like anarchists and beats them citizens and syntagma square and say oh we've got an 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 bond holders they know the unsecured bond holder anglo-irish here you're seeing evidence of that they 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 reduce their assets to zero and emergency meeting of university reactors on tuesday heard that only thirty three million euros remained of one hundred twenty million euros that's seventeen greek universities have 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 move. over thank 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. you think you understand it and then something else you hear or see some other part of it and realize that everything is ok. i'm tired of the big picture. max keiser welcome back to the kaiser report time to go to moscow and speak with

the economics professor constantine. along with brian lucy as edited a new book what if ireland defaults a collected 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 and they can he insisted ireland would never default are you telling us that a politician has been caught. knowing not exactly this is the whole point of the debate the debate is about first the world what default 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 over around the world writing about different experiences different countries in the

midst of politics 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 irish situation and the problem is that in the case of ireland the real problem is what we called that overhang and this is really a combination of private sector there such as the household banking sector that switches hume on 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 would pertain to the government wants and that is there 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

his onus 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 that we should have been assumed either directly by the exchequer or indirectly through guaranteed also by the exchequer and that rate of that that is currently called an irish economy back from restarting growth recovering and getting back onto the pre-crisis trajectory if you want to write well they came to be made for defaulting on the. or are to go back to the. the the irish punch for example the average crowned 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.m.f. the world bank. last week banks they don't want to default sense they have

a bigger vote than 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 seven mid two thousand and seven when the first credit crunch started happening there are stocks players have assumed the liabilities of the irish banks to foreign investors primarily german french dutch banks and as a result of the paris taxpayer is now on the hook for the bank bets that the various banks have accumulated visibly the rest of the eurozone also some of the with 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 i was insurance against the bank in that and as a result 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 lead the role of proposing

a structured and corporative default on the bank and that 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 them 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. one called this 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 them freely mean the restructuring as it happened in greece are this entirely different scenario from the. again irish authorities are very quick to point that out and they are correct in pointing that out in the sense that greece needed to write down and sovereign that in other words government bonds in irish case the government that itself is probably sustainable is 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 irish from argentina to view it is very clear that ireland can get out out of that side of the debt problem where i just problem is is in the banks that and here i am out again as play in 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 softer approach other than other thor it is in terms of restructuring of the us and the other does because i m f clearly nautically reasonably understands the situation ireland doesn't face 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 have to default on some of the banks that's and this is

really also part of our group as well i cover in my chapter that larry march and there is a debate between myself and a lecturer from the university college cork shamus coffee who is very informed and very good points for 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 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 seen observer from outside of course just 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 and resa 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 i know irish that right constantino they're going to stop paying the billions anglo-irish has that been negotiated is that on the table is that going to happen well the repayment of the angle orders bourne's in other words the promissory notes about his government has extended to that and large 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 still taken place they are today mark after months we continue to increase the bond holders in that institution despite the fact that it's completely bankrupt it is non-systemic it's a very small bank by european standards it's very interesting what you mentioned they about the whole they caught me 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.

is very clearly taken the position which would ease the burden on the c.d.s. underwriters in the united states on 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 that onto the shoulders of the european central bank fortunately from the 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 close and could be in 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 c.b. within the troy could be in the bad cup as on that side our government which is completely and squarely unwilling to use if you want the card of having the good cop on your side and play that against the e.c.b. all right well 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 but constantine 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 but the default was triggered by the fact that the russian economy i assume was break out of the soviet union all of the soviet union that were very key in all of the time in western europe and then 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 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 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 wee pressure growing from legacy that we should inherited from the former soviet union and by the ninety six ninety nine to seven russia started entering into the orderly negotiations to structure the 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 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 that 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 reputation of the sovereign and makes certain that down the road the sovereign caliban finance they could pay liquidity operations of 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 up front that it had to pay and therefore it put itself back onto the recovery was the fall within the span of about say six months it was back on the road to recovery and so the most painful phase of the thought was these kind of four to five maybe six months immediately after the default in addition to europe it didn't stop there even though a set of very important 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 denied and known to be 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 and one russia was firmly on the growth path and there off the it was also a to the net growth path by the increase in prices of commodities which were the primary exports of russia but everybody in the west thinks of the sume that it is the oil and gas prices which have rescued rush 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 didn't arc very significant long lasting reforms the legacy of the. it was present and you can see today in the piece of the bible and domestic economy all right constantine go again thanks so much for out of time thanks for being on the kaiser report thanks when 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 cause a team go together if you want to send an email please do so at kaiser report at r t t v dot argue until next time this is nice guys are saying by.

the way.