good afternoon and welcome to capital account i'm more in the surf here in washington d.c. these are your headlines for april twenty fourth two thousand and twelve with italian and spanish bond yields back on the rise we've recently seen the dutch government colao under the weight of austerity talks and french president nicolas sarkozy did not win first place in the first round of french elections now its price discovery is guarded against in the financial markets are we seeing its emergence reflected in the delicacy of eurozone governments as this content is being priced into the democratic process will answer that or try to meanwhile central banks may not be waiting to find out if major currencies the euro or the u.s. dollar for that matter will collapse or be devalued they are stocking up on gold i am at data shows mexico added close to seven hundred tons of gold to its reserves

in march to turkey russia and kazakhstan are buying more too we speak with gold money founder james turk about why he thinks central banks could be guarding themselves from the confetti can incur in c. b. and shot around the globe and in the u.s. we've seen oil prices become a political football in an election year we'll look at what the onion market can teach us about oil speculation and let's get to today's capital account. all right so is the democratic process tearing down the house of cards euro zone policymakers have built to solve the debt crisis let's take stock of what's been going on politically in europe you can decide for yourself nicolas sarkozy the

french president for cozies second half did not win the first round of french elections he came in second place now he and his first place opponent are reportedly buying for the votes of the far right national front party now they fielded first place candidate for third place excuse me i should have said marine le pen now what's interesting is that is europe integrates further internally certain countries have seen the rise in fringe political parties nationalist or right wing movements now france is an example marie le pen though she was defeated got close to eighteen percent of the vote her party seeing unprecedented gains as she reportedly campaigned on anti immigration and economically on protectionism and on at sitting the euro the dutch freedom party that's another example the dutch government collapsed and the prime minister resigned monday after the far right party with ruin support for the government and withdrew from talks about austerity

now this is interesting because the northern countries the richer countries surplus countries have seen themselves as the good guys doing the right thing and actually economically so what happens if one of these countries rocks the euro zone boat or jump ship entirely and what does all of this need for precious metals we spoke to james turk about it he's founder of gold money and the author of the collapse of the dollar and how to profit from it make a fortune by investing in gold and other hard assets here's our conversation. we've seen a lot of coverage of protests in the periphery in greece and spain and portugal we haven't seen that kind of discontent in these richer countries i'm just asking you i know you're not a political expert but you are in europe is there any kind of sense that there could be such discontent in these richer countries that we could see one of them pull out of the eurozone or or the euro. yeah it really is interesting that the are spreading and it's really recognizing you know that the underlying problem is the same in the south as it is in the north the problem has been less labeled it's

called a crisis of capitalism but it's really not that it's a crisis of socialism and both the socialist governments in the north or those that favor you know heavy government spending and those in the south are being affected with that and people who rely on governments and governments who make these promises have to rethink that relationship there comes back to when my favorite quotes from margaret thatcher a few years ago she said the government the problem with socialism is that eventually governments run out of other people's money and that's exactly what's happening in europe that actually happened long ago but not only did they run out of money but they have now running out of borrowing capacity they tried to keep the game going by borrowing money more and more money but they reached a stage where they can't borrow anymore so what governments in europe have to have to rethink in this is true in the north as well as it's in the south some of the socialist policies that they followed in the past because literally they've run out of money they've run out of borrowing capacity and that's the core issue that's

behind the crisis let's talk a little bit more about what impact this could have on the euro because it's interesting it's dutch freedom party commissioned a report that we actually cover back in march that lombard research state called netherlands and the euro and it showed why the netherlands would benefit by leaving the euro saying that italy greece and spain portugal would need a lot more money and germany and the netherlands would end up footing the bill and the parties later and that freedom party is bigger skeptic to say the least what impact would it have if a country like the netherlands exit in the euro. yeah i think what it's doing is it's highlighting the problems of the euro itself and the way it's been managed you know there's nothing wrong conceptually or in theory with a single currency after all the united states has a single currency and the people in california use the same currency that people in new york to you know throughout the fifty states but what's happened in europe is that people in germany are being forced to bail out people in as a greece you know. governments and banks in greece and it's taken

a single currency beyond just the neutral currency that it's supposed to be and this turned into a political currency and whenever you mix politics and money you end up having a lot of problems one of the reasons why the bundesbank was so successful from nine hundred fifty until two thousand managing the deutsche mark is they very clearly guarded their independence they didn't finance government deficits they maintain the purchasing power in the stability of the euro but the e.c.b. has gone another way and it's not too surprising to see some of the problems that we're seeing in the euro rising inflation and some of these issues that are tearing countries apart rather than bringing to them together which is what the hope was for the euro initially well again speaking of the e.c.b. we see i talian and spanish yields on the rise again we've seen e.c.b. step in the past by bonds in the secondary market their programs like the s. and p. recently we've heard it european central banker come out and remind everybody hey this is still a tool in our tool chast do you think that the political will will continue for the

foreseeable future for these kind of policies to try to put a ceiling on yields. yeah you know but they may try to do this they may try to buy more paper in the e.c.b. to keep yields from rising but the e.c.b. cannot keep all you'll this down forever it's just a practical impossibility and just taking the risk away from a commercial bank and putting it on e.c.c. he's banks' balance sheet doesn't really solve any problems the underlying problem as i mentioned earlier is governments have run out of money they've run out of borrowing capacity they cannot take on any more debt yet they continue to try to do that experience has always shown in monetary history that when governments try to take on too much debt in force that into the central bank the currency ultimately gets destroyed so i wouldn't be too surprised if the euro this break up in germany will stick to german discipline and go its own way well the rest of europe might go back to national currencies how it plays out no one knows but it's clear that the

present system as it's structured is it's shelf life is limited it's not going to last much longer well then let's talk about what all of this means and what the fact is on precious metals a lot of it than errors you just mentioned a euro collapse or a euro zone collapse as well as the policies that central banks are continuing to try to push through along with the reality of the them getting countries. yeah individuals should take a cue from some of the central banks outside of europe and what they're doing you know central banks are accumulating gold in their cumulating gold because it's a safe haven it's a tangible asset that doesn't have counterparty risk meaning that it's not the penan on any government or any banks promise it's dependent on the fact that the market gives a value because gold has been money for five thousand years and is likely to remain money for the foreseeable future so one of the points that i've been making for years is that every individual has to act like their own central bank in the world

but what that means is that you have to have your own gold or silver reserves your own physical metal and when you own the physical metal you know you're protected from all of the monetary chaos that we've already seen and the monetary chaos that's yet to come your wealth your purchasing power will be preserved by owning these physical metals and the key is is that look at the price of the metals look at whether they're undervalued and they still are undervalued so despite the politics will be in flux price fluctuations you might see the fact is that they're still undervalued is the important point that you should be focusing on and why you should continue cumulating precious metals that's interesting intense you mention a central bank i thought it was very fascinating that i am that data just out shows that mexico added close to seventeen tons of gold to its reserves then march turkey russia kazakhstan all increase their holdings of gold this is a continuation of a trend you spoke to which is central banks stocking up on gold what do you think they're great think or intention mentioned bigger are they bracing for a euro collapse. well what would you rather own euro or dollar or would you rather

own gold i think the central banks are voting for gold is probably the logical response what along the lines of the central bank mr tarik one thing that we've talked about in the past is allegations of manipulation of the gold market and one argument that people make is that central banks are involved in manipulation of the gold market so how do you reconcile the fact that they're stocking up on gold while at the same time their argument that they're manipulating it i mean are they manipulating it to push the price down to buy on the debt well there are hundreds of central banks around the world and you know there are some that are accumulating in there some that in the past have been the sorting in order to keep the price of gold low the reason why central banks like the us treasury or perhaps some of the european central banks have an incentive is they want to keep national currencies looking good even though they're being pavley managed and have policies that destroying the purchasing power of those currencies you know gold as

a messenger when the gold price rises people start to understand that something's happening with their with their local currency and as a consequence they move to gold you know the incentive of the treasury is to keep people in the u.s. dollars because if you keep people believing that the dollar has value because power to the u.s. treasury and maintains the present system as it's been structured since the end of the second world war so do you think that there will be a day alternately when the price of gold will explode upwards because there won't be left there won't be anyone left to buy on the margin. yeah there will but maybe the better way of describing it is not that the price of gold is going to explode upward but the purchasing power of the dollar collapses you know which is the title of my book going back to two thousand and four the collapse of the dollar you know everything that i wrote in my co-author john ribena wrote about it back then is still very much true today it's just taken much longer for it all to happen simply because there were moments in central banks kicking the can down the road as the saying goes but i like to say that the can is no longer can it's too time bolder

and it's not going to be take much for the interesting and i know you're not you don't have a crystal ball you can't predict when this will happen or what the chain of events will be but you are still a believer that there will be a collapse of the dollar and that that will be nearer rather than later term and i guess i want to know what kind of a scenario it would be that we see that but it's really hard to predict i mean you can go to a place like zimbabwe and see what the collapse of the currency did to the economy but when you're talking about the world. and we will have more with james turk after the break and also still ahead last week we thought president obama pledged to ramp up that hill asian oil futures we'll give you are three all but the onion market yesterday about that that burst or closing markets and i.

just put a picture of me when i was like nine years old on the shoulder of truth. i mean tess and i am in total ghetto friends that i love driving hip hop music and. he was kind of the jester. i'm very proud of the all the love she has for plays. oh. you know sometimes you see

a story and it seems so easy to understand it and then you click something else here's some other part of it and realize that everything is ok if you don't know i'm charged is a big issue. what drives the world the fear mongering used by politicians who makes decisions to break through that sort of people who can you trust no one. if you view it with global machinery see where are we heading state controlled capitalism school sessions when nobody dares to ask we do our t.v. question more.

all right welcome back before the break are with us our guest was explaining why he believes that the collapse of the u.s. dollar is still coming despite the fact that central banks have kicked the can down the road which he now calls a bolder he explained further while let's listen to what james turner founder of bold money and author of the collapse of the dollar how to profit from it said about that. ups of that currency did to that economy but when you're talking about the world's reserve currency collapsing we've never been here before so there's no precedent to save this is going to happen or that's going to happen but if you stop and think that the year zero is mainly backed by the u.s. dollar if the u.s. dollar goes into the black hole will the gravitational pull pull the euro and the other cities that are using dollars as reserves like the japanese yen will they go into the black hole along with the u.s. dollar i think that's what the possibility is and central banks are obviously worried about that nets rather taking this big steps that they're taking you know

the long term refinancing operation from the e.c.b. the huge swap lines that the that the federal reserve is extending to europe but these things are not solving the underlying problem there's too much debt that has to be repaid or written off by the banks and the central banks are afraid if all of the bad that's written off most of the banking system worldwide would be insolvent but it's an inevitability that these debts have to disappear one way or the other and unfortunately central banks today are not addressing the heart of the problem or you think they're protecting the banks at the expense possible that current and paid and apparently. yeah they're protecting the banks and they're protecting the way the system presently works you know this relationship between the governments and the banks all of this new financing that the spanish government to a large portion of it was bought by the spanish banks that gave this the spanish government the currency it needed to continue to filling its promises but the point i was making at the very beginning of this interview we're at we're pretty close to the end of the line here and my timeframe has always been twenty thirteen to twenty

fifteen when things are going to blow up and we are i think moving toward that kind of timeframe that eventually central banks are going to have to realize that the promises that the pursuing are no longer sustainable governments are going to recognize that they cannot count on commercial banks to buy government paper to give them the currency they want to spend and that we're going to need. discipline on the euro and not just the europe and all of the worlds for the current. in the absence of the fiscal discipline that made the burden spoken of the great currency for fifty years it's inevitable that the currencies are going to. collapse go over the end of the cliff or have you want to describe it can policymakers still appear to be trying if you watch the i.m.f. they're just thinking oh hey if we keep trying to paper it over with a large enough bailout fund maybe this will go away but it certainly isn't meanwhile i want to talk about the issue of counterparty risk because here in washington today mr turque there is a hearing going on about how to prevent an m.f. global type collapse from happening again

a firm that collapses taking customer money with it now gold is something that a lot of people own through e.t.f. futures and other derivatives which how counterparty risk do you think people should be liquidating the physicians and going into physical gold. yeah i really do but let's look at it from a big picture point of view when you're talking about wealth wealth comes in two different forms it comes in tangible assets gold silver houses fireman timber land and it comes in financial assets in the bank accounts insurance accounts and that type of thing financial assets have counterparty risk associated with them the value of that asset is dependent on someone's promise words attention to us that the value is in the asset itself and when you're in a financial bust people are concerned about the promises that have been broken and are likely to be broken as the financial post continues so it's very natural to see people moving out of financial assets into tangible assets and you're starting to see that you're even seeing people move out of questionable finance or financial assets into what they think are safer financial assets so there's been

a huge flow of euros from southern europe into northern europe thinking that the northern european banks are better than the southern european banks but eventually when this financial crisis comes to its final conclusion they'll be i think a tidal wave of people moving out of financial assets into tangible assets of all sorts because you're better off owning a commercial building in london or paris or berlin then you are having you know huge amount of money sitting in the bank regardless where that bank happens to be in the world today because there are so many bad assets in the banking system yeah that's really interesting analysis one slightly more specific if you could i wouldn't want to miss the opportunity to get a little more specifically into gold with you miners have underperformed the market for physical gold recently one reason that i think any of the tax policies in the countries within which they are domiciled have affected them why do you think the reason is that miners that underperformed the paper market. yeah it's not just recently they really look at it you know gold's been

a bull market for twelve years and miners have been in a very market really the way i measure the price of mining stocks in terms of gold not in terms of dollars or euros they've been in a bear market for fifteen years going back to the collapse of bre-x. you know share prices are a function of two things that are a function of price and are a function of earnings and both of those things are absolute numbers that we can look at but sentiment really determines the ratio the price earnings ratio and for the past fifteen years the sentiment toward the mining shares is just continually been negative it started with the collapse of pre-x. and started to continue with some of the disastrous hedging programs in the banking system people then saw the e.t.f. as an easier way to have exposure to the gold sector than taking the risk of owning a mining stock and basically that's continued to this day but we're at historic moment in time that the mining shares have never been this undervalued and i basically a value investor so i look at the situation and say to myself well i should just

continue cumulating value because that's where basically the value is but the interesting thing is not only are the mining shares undervalued but gold is undervalued too as is over so i think the whole sector is a place where people should be you know putting more and more of their assets if you gold to be a form of savings and when you're cumulating gold you're saving some money and i think that's a good thing and we will leave it at that with james and founder of all that. our i would only be with our wrapping up with some loose change dimitri and shannon we have something really. funny to tell you so before joining the federal reserve

chairman ben bernanke he was professor ben bernanke as many people know or have been reminded with his recent p.r. blitz of college classes but if you haven't seen our show let's get a brief reminder from his stint lecturing at g.w. university george washington university earlier this year unfortunately the fed met its first great challenge in the great depression and it failed. goes on the monetary policy and on the financial stability so. now we play back as the great depression was his expertise as an academic and paul krugman in today's new york times magazine writes about the burning he can learn from the divergence between what professor bernard he advocated and what chairman bernanke he has actually done and crewman argues that he has gone too far from his academic roots and needs to do much more he argues that chairman bernanke use that has been much more past them professor bernanke is writing would have led us to believe that he says he has not

done enough. and that really he's not getting out of the academic if you want lies this is because obviously i think that he was a little cuckoo while i know even believe it exists because i think you're right on the sense defensively. certainly not should the chairman position maybe bernanke himself should not exist also but but this just goes to show you this kind of have to peer into the mind of paul krugman and you can just see how radical hears because ben bernanke is a crazy academic i mean he's extremely academic everything he's doing is applying his crazy theories to the real world and he's not seen the results he wants or he's saying i'm going to play more my peers ok so this just show you how much of an academic program is because he's saying you're not living in fantasyland enough that you need to come live with things i would be who carry the real world just do more of whatever you want to live look at models the look of reality look at the thing you know the thing is interest rates are at zero they can't go lower so you can't lower interest rates but you should do more you should find something else to

do instead of looking at the fact that if there are interest rates aren't helping unemployment the way that you would like it to then that they've both think he said so that's why you hear people like paul krugman others talk about negative rates because a lot it's ok they're constrained by the laws of gravity by the way i am literally so they want to enter this fantasy world that's where they want to bend time and space right that's why we use that metaphor about destroying the space time continuum that's what paul krugman and break you want to do he want to take rates they're going to be out of the store oh of reality and space and even showed that because kirby wants to go back to diffuse get professor very nagy and bring him back now it's ok if he came to. continue their stand and you want to add anything those who can do those who can't teach and those who aren't in the position brought into the new york times magazine about it. of how it all i'm in

a new york dot. people sitting with the coffee yeah yeah i like about the future of the no i think i like to end on let's move on because last week president obama went after oil speculators we covered it of course you dealing with the high price of oil in an election year and so in response he pledged to go after evil speculators with more regulation take a listen we can't afford a situation where speculators artificially manipulate markets by buying up oil creating the perception of a shortage and driving prices higher. but do or oil speculators really drive the prices higher it's something that's heavily debated we've debated it take a look at this comparison made by an a.p.i. scholar and professor mark j. perry brought to us by reason in a great piece looking at the volatility in the market versus crude oil onions are the blue extremely volatile market and crude is the red much less volatile now

the big takeaway here guess what you can't speculate in onions onions futures are not allowed because onion farmers back in the one nine hundred fifty s. they're traders that speculation was increasing volatility and was leading to the extremely low prices the falling prices of onions so they lobbied so that there would be a ban of futures trading and look how volatile onions are and how. comparatively less volatile crude oil is is there something to this is this a good perspective for us to be looking at in this debate where you are because i mean the whole people people blame the speculators and all those ridiculous whatever you want to talk about volatility or present stop bombing of the middle east but anyway the know the reality either way so it's not that people say it's all sprinklers are responsible for the high price of oil no that's just absurd because they can recognize is that right and so it just compounds the trend if you have you have some sort of short and besides having speculation ok it is important because a speculator is important to be there in order to push if you're going to rise is

going to give a signal to oil producers think to get more supply of the market. in the case the there is speculation but people like obama use that as an excuse as a political football yasmine to do with yeah i mean this adds to the argument that people make that speculation actually decreases volatility also i just want to point out six two thousand and six oil prices have risen one hundred percent porn is that three hundred percent but onions they're up four hundred percent wealthy if you look at that because that's all we have time. thanks so much for tuning into our show do not forget to follow me on twitter out lauren lyster and give us feedback on the show at youtube dot com slash capital account you want to miss tomorrow we will have our favorite zero head blogger english bob on the show for a day now girl capital account debut to talk about the bad the interest rate decision is coming out tomorrow and bernanke he is giving a press conference we'll give you are on it i'm sure but for now from everyone here

at capital account thanks for watching and have a great night. wealthy british soil. the time to be right on. the markets why not. find out what's really happening to the global economy with a much stronger or a no holds barred look at the global financial headlines tune into cars reports. the official policy of the commission join phone call charge from the only choose option. one show on t.v. lights on the go. video on demand cheese month old

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