good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for wednesday june twentieth two thousand and twelve well what can i say he's doing it let's twist again like we did last september the bed announced today it is extending operation twist this is its effort to twist the yield curve and keep long term interest rates low selling short dated treasuries and buying long term ones it's just more free market arm twisting if you ask us and the fed says hey it's willing to do more to where do we go next well whales have been popular what about operation humpback whale by both the long and the short end

and sell a bunch in the middle and there you have it will float that idea to our guest later and is this same force behind too big to fail banks driving anti-competitive behavior across the board be it on wall street or in government it is that problem enabled by a parasitic third party that exists in washington that is destroying the economy the party of institutionalized rent seekers jim rickards bestselling author of currency wars is here to explain and mickey mouse was beheaded on mercury does the phenomenon behind this sighting help to explain this spawning market trends we'll show you why we're asking let's get to today's capital account.

what do you know today ben bernanke announced operation twist version two point zero i guess you could call it this afternoon and said that the fed is willing to do more to take further action in the future if the labor market for one doesn't improve he also said this though monetary policy is not a panacea monetary policy by itself is not going to solve our economic problems. ok yeah well we were both those comments before i don't know if he's threatening us or appease saying that lawmakers need to do something i don't know how this all adds up and nash is one example that came out today so here to decipher for us is jim rickards senior managing director at canton capital partners and of course author of the best seller currency wars the making of the next global crisis and

jim records what can i say any day where there is where there are around shot off and currency wars you are the best person to talk to thanks for yeah so things are being on thank you and a month ago about when we last talked to you predicted this you said the fed is going to act it's just a matter of time you also mentioned that hate interest rates have been at zero this is not juice the economy with any kind of recovery that's sustainable that the fed has perhaps wanted or hoped it would achieve and contrary to that it's created an atmosphere of fear or there is an atmosphere of fear and people are saving their money so given all of that what does more operation twist do who does it serve at this point is there anyone well it serves the fed's purposes i'm not sure it serves can everyday mergansers spoke in the past learned about how one of the effects of this is to keep short term rates bankers deposit rates extremely low so if you're a saver trying doing the right thing you're getting no return on that savings investments but what one of the questions they asked chairman bernanke me today is

you know you know tenured no grade says the suspect or the curve that they're buying to kind of keep that down they're already pretty well what good is this going to do what the chairman said was interesting is that when the fed buys a ten year note from a private investor or a deal or they have cash they're going to go buy something else the fed wants them to buy stocks once and of our mortgages it's just more market manipulation so it's more it's more than getting the ten year note rate lower it's forcing investors to buy other riskier assets and that will pump up asset prices such as stocks and housing that's really what the fed wants it's not all about interest rates it's about getting. asset prices and propping up the market the stock market is here the market corrects so then when the fed says that it is willing to act if things get worse is it kind of holding out for some kind of head tast or fee with say europe or the fiscal cliff that the united states faces the beginning of two thousand and thirteen and what would even be the bigger guns at this point them out right buying stocks that has already bought so many fixed income assets well the fed has the

legal authority to do that they haven't said they're going to do yet do that yet although bernanke years ago come in two thousand to give a speech he said that's one of the things we could do so they've acknowledged that legally they have that authority i mean q e three is the big whatever you call it they could say we're going to buy a trillion and that's a that's a pretty big you know bazookas policy is to say but i thought it was really interesting the chairman made it very clear that they will do that they are prepared to do that i do expect to later this year the question is under what conditions were the circumstances that would make them do that we mention to you sort of unemployment gets worse or fewer goes into more of a meltdown obviously it's kind of a rolling crisis over there but he said if it really starts to implode banks start to fail you get the domino effect that's another one so so there are two right there higher unemployment or unemployment not coming down fast enough and a real crisis and you are but again you mention the third one which is the fiscal cliff if we get to next january and the congress hasn't fixed this and we have the largest tax increase in history which is what it will be just just by doing nothing

we get the largest tax increase in history with the expiration of the bush tax cuts that could be a third thing that could cause the fed ex whether it's kind of expects something in august september whether it's then or after the election in january you can see it coming ok and maybe that's when he's saying monetary policy can't do everything which he said before but maybe it's a warning out again to lawmakers hey this fiscal cliff is coming up don't make us do the heavy lifting or what people are perceived would want us to do have a lifting you know which which i don't think a either of us would want but last time we spoke to you you said that you thought the east. the be might act too that this could be the wildcard that the e.c.b. would lower interest rates and now there seem to be expectations a month later that coming up this july fifth meeting that could be one of the outcomes do you still think that that's coming i still expect that probably a twenty five basis point rate cut by the way the e.c.b. rate cut that's coming in i see coming is one of the reasons the fed could hold off if the fed thought the sea was not going to europe is just going to get worse they

might have announced some kind of q e three now but they say they talk between themselves and me bernanke he said he talks to drug use one of the guys he talks to so they can see they're coming to the physician we can hold off on q e three into august september because the p.c.b. is going to pick their part of the slack in the meantime so yes i do expect the e.c.v. rate cuts to come first another question be why didn't those you see rate cuts come sooner the answer was the greek elections which we just said last sunday they didn't want to ease ahead of the greek elections because that makes it too easy on the greeks to keep the pressure on get the greeks to kind of do the right thing which they did then you get your rate cuts then you get your q e three so that's the sequence interesting i want to talk to you about europe in a second because you had a slightly different opinion than a lot of the guests on this show and some of the recent actions seem to be supporting your thesis but i first want to ask you about recent reports that central banks are preparing for a coordinated action and we've been hearing a lot about that that if if things really get bad that their central banks are

bracing to act together to provide liquidity and stem this market crisis how does this factor into currency wars is this kind of a currency cooperation and currency wars are suspended in a situation where it's so extenuating of circumstances that people are worried about toll chaos total catastrophe well usually when central banks were in it's usually about exchange rates which could be part of the currents who are rather than interest rates we've seen the major central banks ease sequentially so you get chinese easing then u.s. easing and then european these things i don't think we've seen them all in a. coordinated global ease where they do sometimes they get together to get the g. seven and the how to coordinate exchange rate intervention usually targeting one currency they did this in two thousand and nine with the japanese yen after after fukushima so that was one example search of those eleven i think it was that was one example that so it would be a little surprising to coordinate interest rates that's kind of neutral from a chorus who are perspective because usually the way you phrase the currency wars

you hold your rates constant i cut my rates my currency gets cheaper but if we all cut our rates at once it's not clear what impact that has on the exchange rates probably not very much interesting and on the euro you have been bullish on the euro despite a lot of naysayers and very different opinion and a lot of people they come on this show and recently just over the weekend we saw greek elections where at the end of the day the greek voters elected parties that are pro bailout are pro status quo are pro euro how does this fit into your thesis and how do you stack that up against some other bad news such as spanish yields that were above seven percent this. is consistent with the thesis i've said all along that the euro with the european monetary system that you know this for the seventeen nations that sponsor the euro will hang together no members will be kicked out no members will quit actually expect are going to add members over time so this is consistent with that greece is very clearly going to stay in the year i think that phase of the crisis is passion last summer it was a foregone conclusion the greek would be greece would be kicked out or quit i think

that's what i was saying they wouldn't i think it's pretty clear now that they're not going to quit the euro leader of a separate issue which is the euro the u.s. dollar change rate partly that's traded in a very broad range between dollar twenty and a dollar fifty over the past two and a half years so the center of the range is kind of one thirty five it's at the lower end of that range now sort of expected to kind of bounce back up to the middle of that range the real news will be here in the i think the next two bits of good news this friday there's a big four summit in europe france italy spain germany and. you know the rest of the countries are a lot smaller they want to get their act together before the european wide summit on june twenty eighth twenty ninth that's when we'll see some very big announcements and i think positive ones ok and on a lighter note we talked about the humpback whale where it's right where you know what else can the fed do and before we started this show you mentioned the butterfly to a oh that well the fly is any tree where you've got to get three points to lower your curve and you want to sell the short sell the long and buy the middle or do

the opposite you might buy the short by the long and sell the middle but basically the idea is there are two wings in the middle so it resembles a butterfly but it's very similar to the whale diagram that you had up there but terry the traders are call that a butterfly trade the problem with the butterfly trade now you don't want to fight the fed i mean the fed's out there buying six to ten year notes they say they set up to thirty but terms of volume most probably be around the ten year note so if the fed's buying the ten you know the bill of course this is selling into them so you might you might actually want to piggyback on the fed trade by the middle of the curve and then sell the wings interesting and what does operation twist mean for gold because gold sometimes you know typically will go a lot because of stimulus but operation twist isn't an expansion of the fed's balance sheet it's rather a change in composition correct how does that affect gold will go and down today and i think gold is looking for q e three goes in for more money printing clearly money printing you know combined with the increase in velocity is inflationary that

will drive the price of gold up so they did not announce new bond money printing today right now and they're changing up the curve but they're not it sterilizes the tech to go terms they're not increasing the money supply so it's kind of bad for gold my my long run thesis on gold hasn't changed i do see it in the five to seven thousand dollar range over kind of a three to five year period as confidence in paper money begins to collapse but that's not something that happens overnight and the world governments and the i.m.f. can print a lot of money before that happens and this is true and quickly before we go to break while much more with mr records after the break but you. i have a slightly interesting new wants reason why the fed may not be auditing its gold as so many have demanded quickly what is the use of this to be allowed i asked the question you know is there really gold in fort knox that i believe there is the best information i have is that the gold is there half of it's in for the bits of west point very sure the gold is there love people are skeptical of that but the reason they mention they say well if it's there why won't the fed or that or why won't the treasury allowing all that they must have something to hide but i can

think of good reasons why they wouldn't or that even if the gold is there specifically gives too much credit to go remember the fed wants to pretend that gold is not important or not this is what we have a because it's a tradition right isn't it any more weight on that than that so if you only or the things are important so by you other than that you're sort of saying go is important they don't want to say that so that's one reason not to or that and we know that the fed is a little obsessed lately with communication and you know i think well is that is on what their communication is indicating to the public we will have much more with jim record stay right here we'll have more after the break on what is eating or extract in from the u.s. economy also still ahead speaking of eating burger king is having their way on wall street today and returning to the public market will give you our three cents on this whopper of a story star you couldn't help it in loose change but first your closing market number and.

what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made can you trust no one who is human view with the global machinery see where are we heading state controlled capitalism is called sasha's when nobody dares to ask. we do our t.v. question more. you know sometimes you see a story and it seems so for lengthly you think you understand it and then you glimpse something else and you sure see some other part of it and realized everything you thought you knew you don't know i'm charging bloggers a big picture. of

me or what you want. but can they loan a fellow you know get the real headlines with none of them are the problem with the mainstream media today is that they're completely disconnected from the viewers and what actually matters to those viewers and so that's why young people just don't watch t.v. anymore if they want news they go online and read it but we're trying to take those stories that people actually care about and transfer them back in t.v. . welcome back let's switch gears now and talk about the dark forth that our guest says is destroying the u.s. economy forget central banks for now though i mean i guess they could factor into

his narrative actually but let's talk about what jim rickards calls a third party that exists in the united states not democrats not republicans i'm talking about the institutionalized rights seekers so jim rickards senior managing director at tangent capital partners author of currency wars is going to tell me who is in this party of institutionalized rent seekers and how are they sucking the economy dry before we have the membership lauri's probably good for the viewers to describe what rand sinking seeking means as actually a technical economic term it basically means an economic participant who takes more than they give so steve jobs is not a steve jobs was enormously wealthy bill gates is enormously wealthy but they gave more than they took they created wealth for society they got their share which is fine nothing only getting which is all you're contributing more than you're giving a rent seekers someone who figures out a way to manipulate the system to extract well for themselves but they give very little back and give nothing back so they actually destroy well for society so

identified you know because the big issue in politics is the democrats and the republicans they won't talk to each other there's no bipartisanship ship they can't get anything done it's all stalemate and why is that and i said you know historically the parties could get along if you go back to dwight eisenhower he was sort of a good liberal he spent a lot of government money on education technology and infrastructure john kennedy a democrat was very conservative he was he cut taxes and stood up to communism so the parties can't get together but there's something holding them back he's rent seekers in the democratic party it's public sector unions who are double dipping pumping up their last couple years pay so they can get inflated retirement benefits retiring at fifty five a lifetime medical in the rest of america's working till they're seventy and paying their own way on the republican side you've got wall street. you've got the banks jamie diamond lloyd blankfein goldman sachs etc they figured out a rigged game they're getting very wealthy they're doing fine for themselves but they're really hurting society with you know derivative so says if each party could

get rid of the rent seekers in its own party if the democrats could separate themselves from the unions and the republicans could separate themselves from wall street leave the rent seekers to their own devices i think we i think liberals and conservatives could actually come together with some solutions that's interesting however how do you do that when you have rent seekers entrenched in politics because they are putting money in and they're lobbying what is it for example with the banks because is it some kind of change in regulation or is it instilling personal liability in these firms where there is maybe like what jim brick or excuse me james grant talks about like to isaac fall back plan to claw back compensation over a certain amount for seven years if your firm becomes insolvent in your federally regulated we're starting to see little glimpses that those are those are very good examples and i think you know scott walker even though he's a republican in wisconsin certainly stood up to the unions union membership is declining but more importantly people are saying the unions but they're choosing not to pay dues so union revenues are declining and on the wall street side you are

seeing proposals like that even jamie diamond said we might have some claw backs coming out of this london will trade so they're little little signs of that most encouraged take rahm emanuel who sort of everyone's favorite liberal or if you're conservative may be at least favorite liberal he's starting to stand up to the public sector unions that you can't go after oh he's the mayor he's an executive position he's got to make the budget work and send to the unions enough already so when you see conservatives standing up to wall street and liberal standing up to unions that's a very positive sign that these people understand that you know we have to create wealth not not kind of suck the economy dry at our baby they just realize that these things are the end of their rope there are only so much sucking that can go on despite that i want to play you a little bit of what jamie dimon said in his hearing yesterday jamie dimon appearing. in the senate last week the house this week lawmakers seeming bowled over by him they didn't give him the hard time that some other people what i would've preferred you were there questioning would have hammerstein's well yeah so

this is why he was saying he does not agree with some kind of reinstatement of a glass steagall type regulation or legislation to take a listen sure. india america which remodeling through its kind of savings companies fannie mae and freddie macas the biggest financial disasters of all time remodeling mortgage insurance companies all of that happened and had nothing to do with classical. i mean of course neglects to mention the firms that were saved by bailouts but that aside is he of course going to protect his too big to fail status and monopoly because that's what allows and enables a firm like his to be a rent seeker well that's pure nonsense from chairman don i actually don't know how he gets away with that but just kind of take what he said for a moment you know there was a lot of stress and fannie and freddie and indy macin all that but why was that because the housing market was collapsing why was the housing market collapsing because of unsafe lending by banks and other originators and why was all that lending going on because wall street could package to the securities and sell to

german banks who had no idea what they were buying so if you didn't have that wall street securitization machine and that wall street derivatives machine behind it you never would have had the lending in the first place or the inflated asset values or the collapse so he's looking at the other went wrong in the telescope he's pointing to the victims and saying see that nothing to do with us when in fact wall street created the problem through securitization and derivatives i think is a disgrace that diamond gets to sit there and say that and nobody challenges our challenges on it and does the status that he is allowed in afforded as a too big to fail institution so made up by his rent seeking ability and status as a party in washington salute look at the look of the campaign contributions j.p. morgan is giving him a sort of a time on capitol hill i talk to some of the members there's not a lot of appetite to go after these banks because they're killing the republican side of the give them too much money on the democratic side they're the i mean they're fully invested in fannie freddie and died frankly democrats don't want to criticize the mess they made legislatively republicans don't want to bite the hand that feeds them so nobody's going out to these guys meanwhile the economy is

suffering so so in some ways the rent seekers are still doing a lot of damage and a wedding but yes do you have hope yet and i appreciate you being here to to explain your thesis and break down all of this news coming out thanks so much that was jim records author of currency wars. all right let's wrap up with loose change dimitri shanahan something has been spotted in outer space and it's not jamie diamond ego now says messenger probe has been orbiting miracle mercury since last march snapping pictures and it looks like they found mickey mouse to take a look. for

a member one more on the mork and mindy show offered interplanetary travel advisories or don't ever go to pluto to make a mouse when it. turns out mercury is the mickey mouse planet inspiring punny headlines mickie on mercury that's goofy things. but does that explain this phenomenon of finding mickey mouse on mercury or remember someone found jesus christ on toast can this be applied to market trends dimitri explain your thesis because you came up with this and it was sorry to someone i didn't come up with i mean it's what we know that human human the human brain is able to recognize patterns better than any supercomputer and. better than anyone better than any supercomputer on the planet we are incredibly good at picking up on patterns but we also see things where they don't actually exist because we form patterns of which and and so that affects i think. in the stock market stock

analysts certainly affect people that say that fall weather we've had before it makes it sometimes so that i think something that seems like a sure thing is actually your mind playing tricks on you so i thought it was interesting because people should always be aware when you're someone so you know this chart is what's going to happen next these guys are fallible human beings who are seeing patterns and you know they could be seeing mickey mouse on mercury but it's not mickey mouse just some creator just creating some shadows shannon do you buy it what we're saying but demetrius and i will say something that kind of resonated with me because he said that we would be replaced by robots earlier this week but obviously i don't think that's true with this theory well you know yeah that's true she just totally so here's a found a flaw in your logic well here's the thing so again i'm just going to have all those years of our i forget let's let it go let it go but the point is that the book is a flaw in the human may critics it's a flaw in the markets we go out of the pattern seeking but good points for like it

and that round you know i mean. i'm giving that one to shannon lead on to burger king burger king returned to the market today ok it's public again on the new york stock exchange here's their c.f.o. daniel schwartz on c. and b. c. . fortune that we are yes. we have a unique claim really playing really platform people like that and over time and we think we can capitalize on that and close the sale get the competitors in north america. can i point something out did it seem like he was trying to keep a straight face when he was talking about their unique flame broiled broiled flavor that gives them the upper as they look like you know what i would like the last thing i haven't seen this video obviously with the pic that i didn't pick it so i had a complete i was going thought was a totally different but when i saw this guy your thought i was like this guy's thing isn't today to me he's getting very gangs going to the bird hearing this film as the suckers the burger king every day o'connor absolutely ridiculous this is one of the faults of capitalism the fact that you can take

a garbage dump like this public and you know get funding for it and then pump people full of crap and they get sick and then the frickin health care is going to pay for it and i have to pay for and i don't want to pay for it and they're just going to stand there with that burger king ground on the ground and so miles that even a burger to me it's like some fifth filler something but as a flame broiled flames are. fine because there is no question about the popularity of i pads and i phones but a look inside reveals they are straining the supply of a member of the periodic table they look this is the i phone for its lithium polymer battery lets you work longer play longer last longer listen longer. so demand for lithium ion rechargeable batteries out of asia has helped lithium prices climb to refold in the past twelve years tripling since two thousand and now investors from j.p.

morgan shocking and black rock are trying to make money in a market now worth a billion dollars a year so apple is completely flexing its muscles and in fact to get entire market over resources and workers forget to call corporate you have to look at an e.t.f. but this is you know the jetliner on the honesty of the city has been a job most of it involved in this invasion of genocide because i guess it's got the bars live in supplies so there's a two fold store and one j.p. morgan to make it it's going to pump and dump this sector and are going to believe that there are supplier or pro consumer i'm sorry and of course of going to sam was obviously concocting a vision. and so that's that was from a demon and on that note i love our beloved is not alone we're going to be fighting the chinese for control of those mines because china went into those mines and got a lot of that lithium in afghanistan but that's where we're going to leave it that's all we have time for thanks so much for watching and be sure to come back tomorrow and in the meantime you can follow me on twitter at warren lister give us

feedback at youtube dot com slash capital account c s n a t d on hulu at hulu dot com slash capital dash accounted for everyone here thanks for watching and have a great night. there hasn't been anything yet or t.v. . it is to get the maximum political power. source material for hopes keep journalism on the we. we want to visit. something else. culture is that so much going on there's a huge musician finding the mark when she came in the can down the road this is how

many see the reason negotiations in moscow regarding iran's nuclear program are the western powers negotiate.