one child's life on the. video on demand all keys money gold gold. and the registry now in the palm of your. call. good afternoon now welcome to capital account i'm lauren lyster here in washington d.c. is your headlines right thirteenth two thousand and twelve equities just a thought it was safe to get back in the water take a look. then we get ahead in those murky waters u.s. and european stock markets remained under pressure today some eurozone government bonds once again came under intense pressure from investors we ask if we're headed for a two thousand and eight style troubling situation only instead of sub prime mortgages

being the catalyst this time it's going to be sovereign debt on that note did you look at your calendar it's friday the thirteenth and we ask is the nightmare of risky pre-crisis banking practices continuing in the murky shark infested waters we're talking about today is the london whale still making a splash as insiders reported j.p. morgan has transformed his department into a proprietary trading operation and crude oil fell for the first time in a few days as china's economic growth slowed and saudi arabia's oil minister said there's no shortage of supply in the kingdom is determined as you lower prices now have lines have been focused on the day to day well what about the big picture of an exponential energy depletion we'll talk about that let's get to today's capital account.

now on this friday the thirteenth let's talk about some of the nightmares that seem to be repeating because whether it's market rallies as we've seen recently reversed or a drop in oil prices as we've seen today that's kind of capturing headlines why do we get this sneaking suspicion that none of the good news really seems to sustainable the same practices we saw before the financial crisis appear to continue and this is one of the things that's haunting us ok banks are supposed to be gearing up to end proprietary trading or speculating with federally insured customer money for their own books instead we see them not only lobbying to water down or postpone the volcker rule regulations but now we have more from the london wales department of j.p. morgan where according to bloomberg five former executives report jamie diamond has

transformed the bank's chief investment office over the past five years to a prop trading operation and we have debt crisis deja vu only instead of the subprime crisis we now have this sankaran crisis as an anthill of assets used to support a mountain of leverage is crumbling from of it and with energy prices up or down in response to geopolitical tensions with statements of short term responses to quell them is this the ball it's still a view that words is destined to face as population increases exponentially and resources decrease exponentially these are the big questions we want to try to tackle as best as we can the time we have with chris martenson who is our guest he is author of the crash course very popular lesson the unsustainable future of our economy and our g. and environment made using his very popular videos online to which illustrate the points he makes and we're so happy to have you on the show thanks for being here

welcome back to capital account lauren spierer pleasure well let's get started because it's ours to now i think that the subprime comparison to the sovereign debt crisis comparison which i actually saw on your blog is. ali interesting because both were built on leverage supported by collateral that has become really increasingly dubious i came to the point that it's no longer a was no longer being accepted i guess the question is what's really the common theme here because mortgages are obviously different and sovereign debt but they're exhibiting the same qualities absolutely one of the common themes here is that two thousand and eight was really in insolvency crisis that was persecuted with a liquidity crisis too great things came together to give us two thousand and eight the insolvency was we had all of these mortgages which were really fundamentally not worth the paper they were written on in many cases and then we had a liquidity crisis come along now fast forward were what three four years past that event and in europe what we're seeing now is a somewhat similar situation we have fundamentally insolvent entities now b. of greece or spain coming up or portugal next italy thought running into

a situation where despite massive injections of liquidity they've been able to absorb all of that and then maybe more as you mentioned today in the rising bond yields in spain this is just another measure of stress that says even with own president amounts of liquidity we're still seeing a capital insufficiency because at the root of this this was an insolvency crisis so then the question becomes do you think that we will see this sovereign debt crisis that freezes markets in the same way that we signed two thousand and. i really do you know the federal reserve is a little bit sitting on its hands right now what they're hoping for is is some sort of cast a spell if you will to get back in and ride to the rescue with some other big liquidity injections for now they're really standing pat i think the e.c.b. is down about what they can given the political tensions there so i'd not expect them personally any big liquidity injections until something perceptor tapes that what we do that well in my book that would be a nice ten twenty percent decline in equities would give the central reserve

central banks and the federal reserve the cover they need to go forward in put more liquidity in the markets ok interesting you mentioned equities and the drop in equities because that's exactly what i want to talk about we have seen over all of this year the stock market rise we've seen some deaths you know that on a day to day basis that are reported but overall it's been rising and gas that i've spoken to like mark fogger believe that this is where central bank liquidity has been ending up that that's what's been propping up the stock markets and if you look at when the fed has down here we each side that has appeared to prop up the stock market when you look at what the stock market has done during that or is there policies and when those then and i guess the question to you is how long can this continue well it's continued longer than i thought it could let's be clear about something that the stock market today is really become a liquidity gauge if there's plenty of liquidity it seems to rise it's been doing this without any retail participation wait let me reverse that negative retail participation it's been rising anyway why because there's massive amounts of

liquidity out there that have been put out by the federal reserve out into the system how do they do that they go out with operation twist they take one dated bonds off of somebody's balance sheet and equate cash out there in its stead and that cash has to go into something it's just not an acceptable situation for the cash to sort of park their on some bank balance sheet so it goes out in a lot of that finds its way out into the equity market so really what we're seeing now is on days when the fed hints even that they're going to open up a person create more liquidity the stock market rejoices in. it's a sugar fix but if this is unsustainable because you can't run the hopes and dreams of an entire world equity markets simply on the basis of whether we're going to have more magic money printed out of thin air central banks it's an unsustainable situation well and that brings me to my pricing about why you think we've seen a creases in stock markets you say it's a liquidity gaze i think it's a really interesting way to put it but as far as why people are putting cast there it's not because there's this euphoria about the way things are is it because

people are looking for somewhere to put their money and this is the best option that the least risky maybe well when you have interest rates driven down to zero percent when you're being asked to buy a ten year bond under two percent or a thirty year bond at just over three percent this is a good of course forced people out into riskier territory if you're a pension fund and down and some some sort of a large fund it has to have an actuarial return in order to meet its responsibilities you have to chase some sort of return if those returns aren't there and bonds what do you do you're out in the equity markets so what the federal reserve has really done is they've engineered a bit of a stampede over into equities what they've done though is they miss priced risk again people are chasing ever diminishing amounts of yield in just a desperate effort to increase you know get some sort of a yield back for what they need to do and this is again the mispricing of risk it's a really potentially tragic situation i know what the fed's been trying to do

they've been buying time and they've been hoping that somehow magically the world economy would sputter back to life but it hasn't done that i think because they're looking at the wrong thing this is an issue of printing more money we've got some other big structural issues out energy and looking at the world competitive landscape that are brand new scenarios for us to leave you with here and i want to get into energy later because i want to follow up with you we don't often get to see the issues that exponential energy to play said in the data headlined so i do want to get into that but i want to stick on this for one minute because i know in the past you've said that that assumption that stocks and bonds will always rise is something we're going to have to let go of my question to you is do you still believe that and what does that look like. well clearly we're out a decade of stocks not rising anymore bonds have been doing relatively better i think they're going to be second to this game of understanding what an end of global growth really means a lot of the value of stocks but even more so for bonds is big into the idea that

there will be future growth so we in aggregate value the total world bond market at if we knew for certain for the next ten years there wasn't going to be any appreciable real economic growth well it's worth a lot less in aggregate because we want both the principal and the interest components of of the outstanding debts to be repaid well that interest component that comes from explicitly from future growth and so if we could sit down today and have all of the world financial minds agree that we thought oh you know we're not going to have economic growth like we've known and loved it for the next ten years we would see a pretty stiff repricing over aggregate bond funds at this point time local mileage will vary but i'm talking in across the whole sphere and you're talking about the mispricing of risk and that the fed has really gotten in the way of pricing of risk along those lines when we're talking about red i want to ask about banking rest because we've seen this london whale capture a bunch of headlines then now more executives formerly with j.p. morgan have come out and said hey jamie diamond to this piece of the business

office where the london whale works reportedly and he turned what was a risk management business about hedging the bank's positions into a speculative proprietary trading operation now this is something that regulations are supposed to be trying to and at the big banks that to fail banks doesn't seem to be working with the volcker rule now we hear this my question is what does this tell you about the rest that banks are still taking and the due diligence being done you know one of the one of the things that's out there in the world is that some of the bankers because they are in the most money happen to be the smartest people on the planet and i hope two thousand and eight. disabused a so that notion and clearly when we saw these banks acquiring some of these a mortgage lender and mortgage insurers right at the peak tells us everything we need to know about about their accu minutes certain points and and listen you know this story about what cheapie morgan is up to is just should be interpreted as more

of the same they're getting back in they're probably getting in very deep i've read the details such as they are about what the london whale has acquired it's a very very big position it could turn against j.p. morgan in a startling fashion they've taken a bet they claim it's hedged but of course that was the same claim we had about the two thousand and eight subprime crisis all of those mortgage backed securities and collateralized debt obligations those were supposed to be hedging instruments turned out they were unhedged in many cases so i think this is just another example of a big bank taking a huge risk knowing that if they make good on that they'll make some really nice fat profits and if they fail at that well guess what they'll find somebody to pick that up maybe a taxpayer in some country maybe it's as they are in the united states probably the u.s. government will come to their aid we just have a minute before we go to break but when you're talking about the breasts that these big banks are making and these huge positions does it concern you that we've seen volume drop off and the stock market at some pits is that something we should be worried about her well that's always a concern and there are a number of things that we see a turning point to suggest that we're about to go into

a different structural sort of arrangement for stock market falling volume is one of them you really don't want to see tailing off right towards the top of a big run you'd like to see it increasing there tell you that you're going to keep going in that direction i at this point i'd say there's a slight chance of the stock market could go higher there's a much larger chance it could go a lot lower from this point in time the risks are just not symmetrical at this stage name when we get back we're going to get it right but i really want to talk about energy can't wait to get your thoughts on that it's all connected is the way as you all tied together for us that's chris martenson op there and energy to place and past us we'll have more with him after the break also still ahead the white house released a copy of the president's tax return for two thousand and eleven. looks like the buffett rule he'd been sampling would not have applied to him at least for last year coming up will clear up some confusion about his plans of tax millionaires more and buffett rolen it and your feedback but first your closing market numbers.

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welcome back let's talk about energy now because officially at least for people that believe the fed beige book earlier this week it found the economy is growing but boil prices and energy price concerns are weighing on the consumers and on business and we see a lot of coverage of the day to day issues and things that are believed to move prices sanctions on iran or who's making up for production saudi arabia's oil minister says they are and they're getting prices lower and whose economy isn't growing as much and may need less oil as we saw with concerns about china's decrease growth today you don't often see the headline oil prices rise on fear of resource depletion oil is running out ok it's something that people may care about we certainly do but it can't be priced in on a day to day basis the way that we think about it so since we can't look at the market as a barometer of this issue we're going to ask our guest is he follows it very closely chris martenson author of the crash course the unsustainable future of our

economy and an environment so mr maher now let's move to energy because as i said maybe we can't gauge the day to day concern about resource depletion so where do you think we are on this time line that i know you're concerned about we're very far along this time line i think you know the some evidence for this it can be found any time you take a guess nozzle from a pulp and put it in your gas tank and then note the crisis that go by on the little wheel over there it's we're really actually much further along in the story than is commonly and probably recognize we're not having an energy crisis this is a liquid fuels crisis and within petroleum it's not that we're running out of petroleum it's that the grades of petroleum that we really like the light sweet stuff the easy cheap stuff that comes out of the ground without involving shovels or. any of these big machines that stuff the easy stuff that's really running low and you know the new york times had this really incredible article where they tried to say that the united states is close to energy into. and it's when it comes to

oil and noted that if we did everything right by two thousand and twenty we might only be importing only thirty eight percent of our liquid daily needs and so in support of this they put this chart up and they showed the united states consumption flat through that period but they hold so show china's consumption asia's consumption in the rest of the developing world consumption which are just look like forty five degree rocket line ride straight up of this man growth and that's the real story here china's march imports were five point five million barrels per day was the third highest ever february before was an all time record china is just importing like crazy we heard that maybe there's concerns that china's economy is slowing down because it slipped to eight point one percent so that eight point four but still eight percent growth means that roughly every nine years china's economy is going to double that's what he eight point one percent means it's an incredible rate of growth so we're seeing extraordinary demand on the world stage you know the u.s. is experiencing the u.t.a.

see crude prices that maybe one hundred two today but we're still looking at around one hundred twenty on the world stage but a little bit of a rant concerns priced into that but for the most part saudi protestations notwithstanding what we're looking at here is a situation where supplies were the grades of crude we want are still very tight and this is at world oil prices of one hundred twenty a barrel if ever there was a market force that said get your oil out of the ground bring it to market but there it is. it's an incredible story so just to confirm you believe that a lot of what is reflected in the oil price is this oil price of oil depletion and not just speculation where are some of these more topical issues oh absolutely world oil supplies from existing conventional fields are depleting this is a known fact about three four million barrels per day per year we have to make that was production through new fines just to stand still in this overall production scheme so for whatever reason since two thousand and five. we've been in about

a five percent production band for crude oil and that's a very long span of time oil prices have gone up tremendously over that same time period for whatever sorts of reasons if you want to think of them as geo political or maybe market driven i'm looking at them is geologically driven that's the simplest explanation we have for the data that we've got currently that's really interesting as well were on commodities i want to talk to you about gold because i'm sure you saw this week the i.m.f. said look out the world is running out of state assets and one of them that they named is gold but my first since to you especially as we see more talk about quantitative easing in the likelihood that the united states that the fed could go for another round of that what role do you think manipulation in the gold market does and could play. i absolutely am a firm believer that if i was in the position of ben bernanke or people are working at the federal reserve or any central bank i would personally make it my job right they do share responsibility to make sure that the price of gold was signaling what

i wanted it to signal so what do we know about that the federal reserve and other central banks are controlling at this point that they openly admit to well the price of money the quantity of money sovereign bond auctions other asset markets they're stepping in and providing a backdoor liquidity efforts and to all sorts of companies ranging from you know private institutions in europe to the. south korean central bank all over the world and so there they have their fingers in literally every piece of this financial power by the idea to me that they would not be controlling or manipulating the price of gold has the most important parameter for how their one and only product or currency unit is behaving that's unthinkable to me so we know they've done in the past it's it's there's very good evidence that they're obviously very concerned about and working to control the price of gold today really quickly i just have thirty seconds but could that be a good thing for people who believe that gold is that asset that they want to hold

interest and safety long term absolutely there's all sorts of tailwind supporting a rising price of gold here just on a fundamental basis but if you like options in a good option has a really low strike price and a really extraordinary possible upside i like gold for its potential of what it might be revalued if we ever get into a world currency crisis that requires us to go back to a gold standard if you like the price of gold today you're going to love it under that scenario and that is a whole other conversation for another day so i will leave it there for now thanks so much chris martin it's always really really illuminating to talk to you he's chris martin author and energy depletions. thank you.

all right it's friday so time for viewer feedback and this week i want to take the opportunity to clear up some confusion about the buffett rule because we know obama's really been pushing it we've questioned why buffett is pushing it a few times on this show and we got into this topic this week with little rock well now some really appreciate it rains parse for example said lou gives insightful explanation of the buffett rule now some weren't buying at first let me play you a shortened version this is very condensed of mr rockwell's argument of why he believes the buffett rule is pro all of dark and why he believes that's warren buffett's intention take a listen doesn't go after warren buffett taxes which is the capital gains tax and i'm not for doing that. there's no after that it goes after in the income tax of people making a million dollars when the people who are making a million dollars a year are either very successful professionals but for the most part they're young

businesspeople who are building their businesses starting to create something that might actually in a free market become a massive enterprise and of great benefit. so a r r four g t r took issue and said the rock although he makes an intelligent points is peddling some snake oil of his own he says the buffett tax would cap capital gains tax because he would tax capital gains to thirty percent for above a million dollars people making a million or more this year argues a year are not primarily small business owners they are primarily aggressive traders bankers c.e.o.'s so let me first say that i do think that mr rocco raises an important question which so-called super rich this tax this rule would really affect would it be the warren buffets of the world or would it be small business owners and i'll try to get to that but i do want to try to clear up this capital gains issue and how the buffett rule deals with it so first here's warren buffett's

original op ed where he called for this kind of a rule and he said i would raise rates immediately on taxable income in excess of a million dollars including of course dividends and capital gains so he says put them all in there just to be just to be clear on his public statements at least now the version of the buffett rule that the white house has thrown its support behind is this senate bill it's from senator sheldon whitehouse it's called the paying a fair share act which is a proposal for a multimillion dollar earners to pay at least a thirty percent affective tax rate which warren buffett has put his support behind according to senator whitehouse his office warren buffett says i'm delighted to be identified as a supporter of this bill that was in a letter that buffett wrote to white house and to be clear white house's legislation would apply only to taxpayers with income over a million dollars including capital gains and dividends so including capital gains

there now first let me say nothing in washington obviously is done until it's done and republicans are expected to block the buffett rule but if it did pass would it really affect warren buffett and his super rich friends even with. the capital gains that are lumped into that gross income figure well businessweek reports this the highest earning u.s. households have ways to escape president barack obama's buffett rule with tax planning techniques they could for example take advantage of tax free investments such as municipal bonds to escape the buffett rules by they also could time asset sales for maximum tax benefits engage in transactions that don't result in taxable income and make charitable donations that yield deductions so it wouldn't close the tactics and the tactics employed by the wealthiest most sophisticated taxpayers ok people like warren buffett can afford a really good tax plan or who can figure out ways around this and as our viewer

indicated his view is that the super rich affected by the buffett rule work and finance there are other big issues there such as the tax on carried interest this is a source of income for many hedge fund managers and private equity executives you've probably heard of it was made famous by mitt romney's so carried interest tax applies for example when selling stakes in a firm and it's taxed at fifteen percent to simplify the obama administration's approach president obama has proposed to raise the tax carried interest then reportedly backed it up backed off that and proposals like this have not gotten through congress reportedly even when democrats controlled the house and senate so what i find covering issues like these is that overwhelmingly the burden does end up falling more on the small business owners entrepreneurs' that aren't as super rich or super connected or in super high flying at least that's what i've found to be the case in past taxes and regulations that we've covered at least but i did want to clear that up because it has been a concern that's come about more than once and i wanted to address it so that's all

we have time for that's it for show thanks so much for tuning in don't forget to follow me on twitter lauren lyster and give us feedback on the show at youtube dot com slash capital account and from everyone here thank you so. so much for watching have a great weekend i good night and we will see you on monday. culture is that so much to know there's a huge musician on the mark when serious eerie silence at least for now at this moment be one sponsored peace plan for syria has gotten so mixed reviews what happens.

to. wealthy british scientists are. not on the side of. the. market why not. come to. find out what's really happening to the global economy with much stronger for a no holds barred look at the global financial headlines tune into cars a report on r.g.p. . he.