all will be carry all. the way to the restaurant. just because they figured out to go wow well congratulations to both of you on your think that small business venture that was add more than ross harper balderas by my face dot com that's going to do it for now but before we go a quick update south korean and japanese officials have confirmed that the north korean rocket launch failed no word coming out of north korea itself quite gatt this is the country's second consecutive failure to get a satellite into orbit meanwhile the u.n. security council is expected to meet tomorrow to discuss a possible response to this launch for the latest on this story you can head over to our web site that addresses are to slash usa you can also check out our youtube page at youtube dot com slash our team america or follow me on twitter outlets wall for now have a great night. you

know sometimes you see a story and it seems so you think you understand it and then you glimpse something else here so you saw the part of it and realized everything you saw you don't. charge because of the. little. little the be. i am x. times or this is there is a report. the exorcism of blith masters is coming to one seventy eight month

street tonight at eight pm. reverend billy will be there well be there. will be there in spirit ha. ha. there were max i actually got a paper cut i think it's from the paper devil live master's. 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 what 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 fund do really with that boy you take

a country like greece you stick it on the fund do fork and you get put into the debt and then you serve it up to goldman sachs or j.p. morgan. all this debt fondue 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 points a 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 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 m.-x. 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 certainty and 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 bowl well you identify a 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 product 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 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 breaking the economy over the coals stealing billions 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 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 they european union currency a euro has that's right you can have an economy like this and somalia but shillings and i 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 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 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 the 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 organization these people don't need to be told to have faith in this currency too because we the central government we the central bank i ben bernanke he 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 welders 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 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 them a referendum on the e.u. fiscal treaty and property taxes and mandated by europe and the i.m.f. remember command and control as part of the country's bailout terms and with growing and sentiment the government could be dealt a humiliating defeat that could lock ireland outside of the european stability mechanism the e.u. 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 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 a 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 bond swap so it's revealed by the slog how venezuela's resume 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 accounts 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 yeah it was already up and like the memorandum of the document that they signed off on which i love the troika to socially undermine sovereignty and greece and now they're finding out they owe that 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 but the cops will dress up like anarchists and beat 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 consequence to defrauding somebody who you are doing a business with so in ireland we see 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 a 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 to posit. 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 stays over thank so much for being on the kaiser report thank you max away much more coming your way so stay right there.

used to day violence is once again flared up. these are the images the world has been seeing from the streets of chatter that. chunk of operation to rule the day. led. mission. critical three. three. three. three. three. three vote video for your media project free media don carty dot com. max foster welcome back to the kaiser report time to go to moscow to speak with

economics professor constantine good yeah who along with brian lucy as edited a new book what if ireland defaults 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 constantine what if ireland defaults you write an essay about the predictable upcoming default by only two weeks ago and make any insisted ireland would never default are you telling us that a politician has been caught. lawing not exactly this is the whole point of the debate the debate is about first of all what 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 in this apology 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 that or working and this is really a combination of private sector there such as the household banking sector which i assume going to the shoulders of the taxpayers by the government and then traditional government there so when i wake everybody up and 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 would pertain to the government once 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 c.b. and he's correct there as well so there is nothing really that he's lying about 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 debts 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 restarting growth recovery and you have been back onto the pre-crisis trajectory if you want right well the case to be made for defaulting on that. or to go back to the. the the irish times for example the average time around 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 arlen to default so since they

have a bigger vote than anybody in ireland we can't really expect that to happen correct you are completely correct with exceptional via my friend 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 good stocks players have assumed the liabilities of the large banks to foreign investors primarily the german french dutch breaks and there's a result of that irish star experience now on the hoof or the bank bets 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 and the writers have written a lot of the c.d.s. contracts and other words insurance against the bank and that and this is out of that they stand to lose if ireland defaults on the bank and that's themselves now as far as the troika goes since the rescue package has been put together over a year ago now i am actually lead the role of proposing

a structured and corporative default on the bank and beth i.m.f. has been on the side of the large stocks pair even before the largest 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 large brains blown holders 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 new structure and as it happened in greece are this entirely different scenario from the. yes and again with origins 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 solver and in other words government boards 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 we 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 undergone in the second package of restructuring but nonetheless for ideas from our point of view it is very clear that ireland can get out out of that side of the problem where are you problem is on the banks that and here i am half again as playing the irish side rather than the side of the itself it's a paradoxical situation in the sense you don't expect i.m.f. to adopt the soft approach and other authorities in terms of restructuring of the past and yet it does because i.m.f. clearly nautically reasonably understands the situation in ireland doesn't this and it is aware that in order for i.m.f. to be paid on its loans the wireless for the european union to be paid on some loans to arlen. authorities will have to restructure that's and as a result of that they will have to default on some of the banks that 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 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 a default on bank that 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 spain observer from outside of course to sort of go under the category of good cop bad cop a 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 higher mandate of the i and that i have 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. placing too much trust in this proxy for wall street which is the i.m.f. they're still paying the ngo irish that right constantino they're going to stop paying the billions the angle irises that been negotiated is that on the table is that going to happen well the repayment of their forms in other words a promissory notes or parity government has extended to the anglo irish 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 the payment is they still taken place they off that the month after month will 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 courtney between the i.m.f. and the rest of the troika is a bad cop good cop you are 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 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 on the likes of goldman sachs and the rest of them and at the same time will boot 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 the irish point of view that is exactly what should happen no matter how you spin it so the but the good cop in this case is actually closer to being 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 troy could be in the bad cop has on that side our government which is completely and squarely unwilling to use if you want a card of having a good cop on your side and play that against the c b r i will say i mean it could be a case a pain pond where we see all the time these stats 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 to 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 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 then the united states to criticize russia for example for its stance because of the parts of the former soviet union but 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 the 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 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 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 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 than the says. that was so violent that in russia the russian default 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 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 upfront that it had and therefore it put itself 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 is not a 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 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 and one russia was firmly on the growth path and there often it was also aid 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 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 then the current account started improving in russia russia didn't are very significant long lasting reforms the legacy of the. still is present and you can see that they. want to be all right concerts and go again thanks so much for the time thanks 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 or think i guess cause it's a good get if you want to send an e-mail please do so at kaiser report r t t v are

you in so much time this is nice guys are saying. he. is.