i'm laura mr.

today once again flared up. these are the images. from the streets of canada. giant corporations are today. i am as ties are this is the kaiser report the exorcism of blight masters is coming so one seventy eight monster it tonight at eight pm. reverend billy will be there well be there. will be there in spirit oh. yes 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 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 lot before the debt storm breaks analysts warn one think of it more as a debt fondue. well 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. 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 winds 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. pressure faith in the government the issues it wants to solve and so you have 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 certainty is 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 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 all well you identify a key word there is just trust and here the are the central banks i just listed

they think they can 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 author 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 right so social cohesion. begets trust which

begets a stable currency which is the basis of a stable economy in the u.s. you have social cohesion breaking down people see guys like jamie diamond lloyd blankfein kleptocratic lee raking the economy over the call stealing billions and no penalties whatsoever instead of trusting the currency in america their reaction now is to arm themselves or to get ready for the coming war 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 and picked 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 a euro has done so you can have an economy like this in somalia 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 of the ninety nine percent counterfeit to us dollars a counterfeit currency is backed by nothing they print trillions and trillions of it to cover the banking crimes trust is evaporating social cohesion. evaporating 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. 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 are the central government we the central bank i ben bernanke 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 euro zone 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 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 gaber 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 in the economy is collapsing so let's look at more europe. zone absence of trust tea party socialist why the left is leading 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. remember command and control as part of the country's bailout terms and with growing anti austerity sentiment the government could be dealt a simulating defeat that could lock ireland outside of the european stability mechanism the e.u. is permanent bailout fund so you see they're threatening our 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 that 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 an exclusive greek government robbed public institutions to complete ballance law so it's revealed by the slog our venezuela'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 use. syllabi funds and various large interest bearing account at the bank of greece were rated these included most of the state's 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 and like the memorandum the document that they signed off on which allowed 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 funds school thaws 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 all dressed up like anarchists and some citizens in 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 are doing a business where so in ireland we see people refused to pay their property fee because they say they know it will just go to these bond holders and you know the

unsecured bond holders 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 are reporting also that six of the country's universities say they faced the media 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 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 who say server thanks 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 so you think you understand it and then you glimpse something else and you hear or see some other part of it and realize that everything you thought you don't i'm sorry is a big. mission . could you take three. three. three. three. video for your media project.

max keiser welcome back to the kaiser report time to go to moscow and speak with the economics professor accosted teen girl who 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 come. constantine welcome to the kaiser report thank you mark delighted to be with you constantine what if arlen defaults you write an essay about the predictable upcoming default by arlen only two weeks ago at a canny insisted arlen 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 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 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 there are simply 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 the banking sector debts which i assume went to the shoulders of the taxpayers by the government and then traditional government debt so whenever they everybody they carry for example the prime minister of ireland when he speaks about the default in ireland and the 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 default and for example in disorderly fashion without the cooperation of the european union and the european partners and the e.c.b. and he's currently 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 a default on bank that ireland has tremendous amount of banking that we should have been assumed either directly by the exchequer or indirectly through guarantee also by the exchequer and that rate of that debt is currently called an irish economy back from restarting growth recovering and getting back onto their 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 the irish punch 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 doesn't make sense for the bankers who are controlling these countries the outside bankers the i.m.f. the world bank wall street banks 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 mid two thousand and seven when the first credit crunch started happening there are stark spares have assumed the liabilities of garbage banks to foreign investors primarily german french dutch banks and this result of that are just our experience now on the hoof or the bank debts that the large banks have accumulated because of you the rest of the eurozone also some of

the where the united states comes into the equation is that the united states on 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 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 i just garment insist on continued repayment of the bondholders banks bondholders 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 don't freely mean the restructuring as it happened in

greece are 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 a ride 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 we can be stabilized and drawn back through growth and through a combination of growth and the payments over a long period of time this is clearly not the case in greece even after they restructure and that it has on the ground in the second package of restructuring but nonetheless for ideas from large point of view it is very clear that ireland can get out out of that side of the debt problem where i just problem is is on the banks that and here i am i gonna play in the irish side rather than the side of the troika itself it's paradoxical situation in the sense you don't expect i.m.f. to adopt the softer approach other than other authorities in terms of restructuring

of the us and yet it does because i m f clearly logically reasonably understands the situation ireland there's a piece and it is aware that in order for i.m.f. to be paid on its loans to ireland for the european union to be paid on so loans to arlen. authorities will have to restructure paying debts 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 as well i cover in my chapter that very much in there is a debate between myself and the lecturer from the university coffee who is very informed and very good puts forward an argument that that is not going to be the case however we are very firmly in the camp that we will see a default on 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 jane observer from outside of course just sort of 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 debts paid off and yet they entire mandate of the i am that i.m.f. is to increase the debt load to roll up in greece to cure its eyes 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 am out there still paying the i know irish that right constantino they're going to stop paying the billions to ngo irises that negotiated is that on the table is that going to happen while the repayment of the angle i was born in other words a promissory notes about his government has extended to the and large 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 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 bankrupt it is non-systemic it's a very small bank by european standards it's very interesting which you mentioned they about the whole day caught in between the i.m.f. and the rest of the troika as a backup who come 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. underwriters in the united states on the likes of goldman sachs and the rest of them and at the same time will 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 better the good cop in this case is actually close it could be in right and being correct in the work he's trying to do that america is trying to do and the bad cop unfortunately again in irish case. has

only its side the sea be within the troy could be in the back up as on that 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 played against the e.c.b. all right well we'll see i mean it could be a case of paying tang 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 to the economy decline post defaults and then how soon did it recover well in the case of russia slightly different the situation was likely different the default was treated by the fact that the russian economy assumed those breakup of the soviet union all of the soviet union bed where 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 midnight in the 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 that legacy that we should inherited from the former soviet union and by the ninety six ninety ninety seven russia started enter into the orderly negotiations to restructure 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 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 and that but it also is different in the sense. it was so

violent that in russia the russia defaulted sovereign defaults are the hardest. if you want to dissolve their hardest to overcome because the sovereign default ruins the reputation of the sovereign and makes a certain that down the road the sovereign caliban finance day to day liquidity operations of its own budget with russia's response to it was was exemplary in many ways because what rational simultaneously entered this very fast correction phase on the budgetary side so it got deficits very rapidly it devalued very aggressively took the medicine upfront that it had to take and therefore it back onto the recovery pose 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 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 enough to set a very important 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 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. structural reforms which the legacy of which continues to date so by about two thousand and one russia was firmly on the growth path and there often it was also aided in the 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 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 on the current account to start improving in russia russia didn't are very significant long lasting reforms the legacy of the. still is

present and you can see they recently vibrant domestic economy all right concerts and go again thanks so much right time for being on the kaiser report thanks bob all right that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert are they my guess cause it's a good get if you want to send an email please just as a report r t t v are you until next time this is next guys are saying. the official on t.l.c. cation joy so called touch from the choose option. the faulty life. video on demand. keys in mind bold colors and omissions feeds now in the palm of

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