is europe which faces of threat of will it was such as countries deal with the financial crisis. now while europe is the u.s. is the largest trading partner he pointed out there to detailing the threats posed from the trouble brewing across the atlantic but is the euro zone crisis also helping the u.s. perversely we'll explain finally from bunker timeshare plans to deflation two customers down under from m.f. global australia we'll hear from our viewers all around the world and respond in your feedback let's get to today's capital account. let's see what's new in the euro zone crisis saw good at a zero spain needs

a bailout the country may ask for one as early as tomorrow now there are conflicting reports and comments coming from spanish officials some refuting that spain will ask for a bailout or way but come on trouble is a bruin and different estimates put the money needed for a spanish bank bailout recapitalization whatever you want to call it from twenty seven billion to one hundred billion euros overnight the head of the eurozone finance ministers commented on it said spain will get the green light take a listen. it's been fun. to just put the scream you chose to. write it all have support grades so they can maybe paper over this problem this time if all goes as concocted by these money creators money mover technocrats politicians but what is the road map

for what happens when this unsustainable ride when everybody realizes that it's just that an unsustainable ride well we may have a road map maybe we just need to look south to latin america we're talking about indebted countries that can't pay back their debts i.m.f. programs austerity yeah we've seen it all before but here to lay out just how and why this actually is a comparison we can and should look to is going to follow lira he is in chile he's founder and president of the s.p. group and he is going to lay it all out for us so first of all gonzalo thank you so much for being on the show i'm really excited i don't know if that's the right word because obviously we're we're dealing with some high stakes here but i really do think that this is an important thing to lay out so first of all thanks for being here. it's a pleasure being on glee for having me absolutely so let's just start with what you see as the fundamental problem in the euro zone and that regardless of what angela merkel or mario drive your anyone else says they are not solving or addressing

which use the is the deflationary death spiral so lay that out for us why is this that the core problem well the problem is that you have it just a bunch of countries that went into too much debt and you have the creditors that are unwilling to take any kind of it was cheated some of them and so these countries that zero too much and can't it are slowly winding down now what happens when you have a depletion or spiral debt spiral is your kind you owe too much money you can't pay it and so you try to cut different things you do austerity measures to cut services and what have you in order to pay off these gets well when you start doing that as a country you start cutting services and you services means that you start laying off people start laying off people you've got a lot less threatening the state and therefore as you collect rather less revenue it becomes increasingly harder and harder to pay off the debt and so you start to do even more austerity cuts even more to the bone you already get the money to pay

the debt and that's how you start going into a deflationary spiral everybody starts spending less because they owe so much money to other people so they spend less when you spend less they consume less than you consume less of course producers produce less and start hiring people and those people who have lost their jobs of course start saving start consuming less and so you just start going down the tubes that is if haitian i guess fired up and that is what we're seeing in reese in spain in portugal to a lesser extent and we need to see a little bit in italy you know it's basically. the end game for the european monetary union now they have to figure out how to fix this and of course there are they have had two years to fix it. and have not come up with a buyable long term solution so it's unrealistic and foolish to think that they're going to come up with something over the next you know few weeks they're not going to come up with anything and so what we're going to see is greece and spain portugal probably you are definitely going to exit the euro zone what they're going

to do is they're going to exit the euro zone. go back to their or. point their or their currency for instance is trying to will go back to the set up they will then convert all their gas from euro's into cosette us and then after they have done that conversion they will devalue the septa by twenty thirty percent maybe as high as forty percent at the end of the day the markets will punish that they said they will in the end it be divided by maybe sixty percent but by doing this spain will be able to pay off its debts but of course the bondholders will be left you know holding the empty bag because they'll be paid back in one current's this seems recently likely that will happen in the short term short term the next six months i cannot tell you when it will happen but it will come out and because the euro rats are not coming up with any kind of solution to fix the problem that we have and you thousand really really confident about this and zollo youth down like maybe you've

seen this before maybe you have a glimpse into what that has looked like so take us back to latin america circa one thousand nine hundred eighty and tell us why you are having deja vu. well what happened was that and the reason i've been able to see this issue so clearly i mean i've been talking about the breakup of the euro zone at the rescue dot com since last year early last year and published and publications about two years ago because of what america in the late seventies a lot of a lot of american countries are king t. number zillah chile they've had their currency to u.s. dollar now the reason they did so at the time was because they had rampant inflation or even hyperinflation in some cases for various different reasons that are not pertinent to our discussion but up they kept their currency to the dollar by doing that they halted lation so they had a stable currency which is of course a good thing but what happened was that these countries because of this pay they

went into debt they were able to get cheap dollar loans and pay them off in there are. in there are local currency and d. states would make the exchange between the local currency and the dollar and this is how these countries of foreign reserves were depleted because the people went into massive dollar debt and they would pay them off with the local currency and the state the central bank of these countries would make the exchange and pay off the dollars but in the process start eroding their or their balance sheet and what happened in the end of course is that these countries found themselves in a position that they had no more dollars and they were essentially bankrupt and so when that happened they had to devalue the currency and get off the peg when they did that of these people who had debts in dollars and they were before able to change their local currency into dollars and to pay off the debt well all of a sudden they found that their debts had grown exponentially in some cases but at least you know thirty forty percent because of the devaluation when that happened

these people who were for the most part small businesses and business about different sorts found themselves bankrupt because they could not pay their debts they owed more than a heat generated there their payments were greater. and their revenues so they went bankrupt it by going back of her course they threw their workers out on the street without jobs and all of a sudden literally overnight you had a country that had gone bankrupt and at last its industrial base and had massive or six of the employees i mean for instance when this happened in chile there was roughly thirty five percent unemployment and that is at its peak one could argue if you look at the metrics that it was easily over fifty percent unemployment now we're seeing the exact same thing going on in europe because people don't seem to understand that something that i've been barking for the full years now the euro is not a common currency with the euro is is a currency pay there is i'm glad i'm glad you're pointing that out because you're

talking about a currency peg in latin america and you're essentially saying that what the euro is it is analogous to that so rich quickly explained that why why you can look at europe as a currency pagar as these countries have peg in their currency share because in any dust seventies and eighties right these latin american countries pay their currency their local currencies to the top right right so in a way everybody had dollars that was their currency of choice in europe today what we have is the strong currency in germany europe germany as it were is playing the role that the united states played in the late seventies and early eighties for these latin american countries and the pigs are essentially the little latin american countries that have you know about you know hosted their cart to the german horse now of course germany is a much stronger more efficient economy for various reasons including the fact that they went ahead with their labor reforms in the arts in two thousand and three four and five whereas these other countries of the pigs have not gone ahead with their

labor reforms and so their labor costs are it's the expensive now because of all these issues of these countries are pegged to the german euro if you want to put it that way and they simply cannot pay back the. germany germany is the country that owns that is owed all this money for many respects and so we have the exact same situation that we had in united states and latin america nights and seventies and eighties well the problem of course is that in one thousand nine hundred seventy nine ninety eight the latin american countries were a small fraction of global g.d.p. you know about ten percent that's not europe of course g.d.p. of well i think it's seventeen trillion dollars last year eight hundred billion dollars last year that is roughly forty percent of the global economy if europe goes bankrupt we're going to have a serious serious problem worldwide and the atlantic is not going to be any kind of good solution to the united states yet it is going to be severely affected but i

european clubs and this is what we are about to experience because these countries that have paid their currency to the euro and not pay they have depleted their foreign current there or their hard currency reserves they are broke and we are seeing it of course you were mentioning that the spanish banks tomorrow want to are supposed to get a bailout maybe from the e.c.b. you remember it doesn't matter if it happens tomorrow or next week it's going to happen because all these countries are bankrupt right out because they're bankrupt . they will simply by no other solution except exit is currency an exit in this thing and dollar at i want to stop you right there because you're saying you're saying this is what we're headed towards there is no getting around it euro zone leaders cannot come up with a solution in the next three weeks or six months or whatever so when we get back from the break we are going to look at what you think if it's going to look like what's going to happen based on what you saw when you were in chalet in one

thousand nine hundred three when this was all going down so we're going to go to break we'll have much more with you he's going sala lira founder and president of the ask p g group also still ahead you responded and now i'll answer check out of your comments. caught my eye this weekend viewer feedback but first your closing market numbers. for the. science technology innovation all the most developments around russia we've got those huge earth covered.

welcome back we're talking to good zollo lira in chile he was in chile in eighty three living through the latin american debt crisis he said that that is what the eurozone is headed towards and terms of defaults in terms of the societal cost the unemployment the global economic impact but take a look at the difference and what these areas of the world contribute to global g.d.p. gonzalo mentioned this and i just want to point out take a look at latin america that's combined with the middle east and africa contributes more to global g.d.p. then the e.u. and what you're looking at there is the e.u. fifteen that's not even the broader twenty seven nations that make up the european

union so the impact of this is stands to just be much more severe now let's go back again to latin america because i want to show you some pictures from chile and one thousand nine hundred three from protests from water cannons being shot at students from the unrest that was going on there as a result of all of this only there was a military dictatorship there so let's talk to gonzalo there and see what we can draw from those experiences to figure out what we're going to be looking at across the pond and a who knows what in the u.s. because we know that the global impact of this is going to be significant so. compare to chile in one thousand nine hundred three what you experience what was going on in latin america tell us what happened after these defaults and what you think we can look for in the eurozone if spain exits if greece exits. well because if you had massive bankruptcy is just across the site it was catastrophic and you had catastrophic unemployment and unemployment but of course

the social unrest and some of the images that you showed there and i was actually in some of those roads that was good times but anyway it's going to be so pretty today it's i am sorry for laughing about it because it's in a way very funny because the europeans have nobody to blame but themselves they created the situation and it's their own arrogance and their inability to look at history and the example of other peoples that has led them to this position so it's sad that that same time it's rather amusing because these very arrogant europe rats that it handled this and they simply did not know because they simply assumed that the euro was a good thing and the euro in and of itself is a great thing because it unifies germany and france and that's something that we want because those two countries are gone two or three times in the seventy years before nine hundred forty five franco-prussian war where one world war two so then the well let me let me get in here you don't think that this marriage was made to

fail you think that it could have been a successful marriage yes it could have been a successful marriage if they just kept two people in the marriage but instead of keeping two people in the marriage they turned it into an orgy and you know an orgy at the end of the day always ends you know come the morning i mean the drugs have run out everybody is tired and wants to go home and that's pretty much the position that we're in today you know if it had been just a franco german marriage it would have been effective because france and germany economically are close enough that any differences over and fix somehow but when you have countries be countries like portugal greece ireland you know that because of this they created this massive banking sector in ireland for instance you had all these different countries jockeying for position within the sporgery that eventually of course it was going to be a disaster and we are living this disaster now on the euro krauts who are in charge of the. it's simply do not have the imagination to fix the situation they just

don't know what to do because they've been so hell bent on the issue that none of them have considered how a country can exit the eurozone in an orderly fashion i mean sure they're talking about it now they're coming up with contingency funds they say. but realistically if they don't we conceive of it so they're not going to say this is the time when this country has to be cut it's not going to go they're basically going to be like the guy who has been in his arm and he says oh if i just wait a little bit more it'll go away and then the game goes from his wrist to his elbow and this is all just wait a little bit longer and then the gang we have course goes up to his shoulder and pretty much it's game over that's the problem with european leaders sure they don't know when to call off you are and they're going to let is angry and spread it out let's get a green spread and it's too late it's over so the issue becomes now i don't prepare for it and what is going to happen and what is going to happen is going to be really care over europe and paradoxically it's going to be pretty good for united

states well that's what i wanted to get to so we have president obama today saying hey europe is a big problem but there are solutions simply because he's parroting angela merkel talking points we have ben bernanke saying ok if it's a banking crisis sounds like their plan is bailouts which is hard for the course but there is conventional wisdom that that europe has is this huge threat to the u.s. but perversely this party you're talking about this or a g.e. that ended and nobody wanted to pay the bill have and that party are distracted from the horrible spending origin in the u.s. allowing the u.s. to continue borrowing at one point five per sad has that helped the u.s. yes it has it has if that's exactly what you have to do is a little bit of a. spain greece portugal at least those three countries are going to exit the euro ok let's say for the sake of argument that three countries exit iraq now you're going to have a fall in the value of the euro probably even which part if not below par that is

you know ninety cents american will buy you a euro or something along those lines now when this happens there is going to be a tremendous capital flight a flight to safety from european assets to dollar denominated us courts the most common dominant dollar denominated assets is of course u.s. treasury bonds so what is going to happen with this huge demand for treasuries as europeans flee the euro in order to safeguard their capital of the yield of the dollar is going to flatten even up the yield of the u.s. for a while he's going to flatten even more which is going to drive down the cost of borrowing which will be an incentive for the united states federal government to continue to borrow ok so at this point in time if we have essentially the u.s. government borrow one dollar for every one dollar of income tax that it brings in you know that if there's a big collapse in europe and under the under the the gains the a notion that you have to spend your way out of any problem the government might

well start to increase its deficit spending because it's going to say headed lower borrowing costs are so cheap that we might as well just borrow more and so that ratio of one to one borrowing to tax receipts might increase to one point four one point two or one point three dollars for every dollar of tax receipts as the budget deficit balloons even further because of the fall in the in the cost of debt for the u.s. federal government and so dallaire a long term it is a bad debt better so when the party is really over in europe went to fall to have happen when a bottom is been reached you're saying that already of spending in the u.s. it's going to run out of drugs in the u.s. is not going to be able to borrow and continue its debt binge any longer that will be the day of reckoning it sounds like in your view we're going to have. to leave it there i could talk to you all day we're going to continue this conversation thank you so much that was been salo lera founder and president of the as p.g. group this.

was a good interview was interesting let's wrap up with your feedback though because we've talked about a lot of interesting things this week and you had a lot to say so earlier we spoke to robert proctor that was earlier in the week he is the founder of elliot wave international and he is a deep lation it he laid out his analysis for deflation in a comment like by several viewers on you tube kev riley seven said it can't be deflation if my grocery bill is up forty percent the past year and a half. i know it seems odd i know it sounds counterintuitive but let me help you make sense of how it absolutely can be both a higher grocery bill and deflation ok first and foremost when we speak about

deflation we need to place an in the broader monetary aggregates in other words deflation of the money supply and credit and an economy that has experienced one of the largest across the board asset inflation is in recent memory the kind of deflation that we're talking about is deflation asset prices specifically assets whose prices were bid up during the credit boom that was pumped up by the fed after the stock market collapse in early two thousand now if you listen to gold silver dot com founder and author mike maloney we interviewed him yesterday he argues the fed stimulus we've had since two thousand and eight has been inflating the financial sector but not the real economy which is why he says if the fed votes for more stimulus later this month we could see this you'll be seeing deflation in the public sector of the currency supply inflation in the financial

sector where they place their bets the commodities and so on i know it's perverse but you should go back and watch my. interview to get some more clarification also earlier this week on a much lighter note we bantered about the news survivalist a reality show where the winner receives a bunker we brought it up because wouldn't you know our producer dimitri is a proper. but it is true i have a unit and i have one years of the food supply but i will tell you words on slow vision but all of a bumper and that's. expensive right so i would love to have one of those things was a transitional to get there. call me i could do a timeshare maybe. well let me first say that that bunker comment got a lot of positive response from our guests and the people that we interact with which i thought was pretty interesting steve two three two z. x. similarly i thought it was compelling said dimitri should have

a youtube web exclusive on survival tips how to store food what to buy cetera i have to say i fully endorse this here is a glimpse at what this could help just to sneak peek dimitris showing you how to build a fort in your living room and prepare all and preparing for the end so that's what you can see to come a work on on coaxing dimitri into doing a web video but let's move on for now because we reported on the m.f. global trustee reports out this week too and one of our viewers from down under a customer of m.f. global wanted to alert us to this situation for m.f. global customers in australia and now we'll look into this more fully next time we cover m.f. global on the show but i did want to share some of his email so andrew perrotte i hope i said that right from south australia says essentially m.s.g. a which is australia operated under the u.k. license and the local rules and regulations were obviously not thought out enough

to monitor them so the whole thing is stuck in limbo the administrators have recovered a large percentage of the funds but they do not have a regulatory framework to follow to distribute them so they are essentially relying on the courts to make precedent and provided provide guidance on distribution as a result clients have received zero per cent the worst of all countries now that's according to him some other m.f. global. sources that i talked to customers have confirmed that said it's not australia alone u.k. account holders also have received nothing because the u.k. trustee is waiting for a resolution to the us is seven hundred million dollars claims before doing anything i called james givens office a trustee nothing from him but we will keep you posted on all of this but for now that's what we have time for and that's our show for today thank you so much for watching and do make sure to come back next week for a packed line up also in the meantime you can follow me on twitter more and lyster please do give us feedback on the show or catch any you missed to youtube dot com

slash capital account should go subscribe as well and you can watch us in h.d. on hulu at hulu dot com slash capital dash accounts have a great night and a great weekend.

you with monitors investigating reports of a massacre in your home in syria find evidence of human remains and. this is the u.n. steps up pressure on both damascus and rebels to lay down all. russia crushes the czech republic for one is the euro two thousand and twelve football championship kicks off but there's also controversy as host nation ukraine and poland face accusations of human rights abuses and racism. the eurozone on the edge of a knife experts predicting spain could ask for a bail of issues this week a move expected to ease the country's banks and follows a three notch credit rating slashed. next part one of the a low to show stay with us.

welcome to the lower show we'll get the real headlines with none of the mercy tonight we're doing an extra special show for you we're at the net roots nation conference here in providence rhode island and so whole point of this thing is the supposed to be the biggest progressive gathering it's about furthering the progressive cause and there are a lot of panels but we have some special guests that are going to be on our show we're going to talk a little bit about the federal reserve something that i think is under discussed here at this conference also this year occupiers that have now made their way into the net roots conference there on a bunch of panels have a lot of talk about housing and discussions but one of the other big things here is that technology plays a really big role and asking how it is the you get people engaged right if you want to talk about activism these days everything is happening online so we're going to have a great interview with someone who's come up with a new company i think you'll like it and of course we couldn't do it alone or show without.