canada. trying to operations a rule today. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for tuesday july third two thousand and twelve u.s. manufacturing activity contracts for the first time in three years the week i asked them data came as a shock to economists reportedly but then it came out orders placed with us factories rose in may for the first time in three months according to other data we'll talk about where figures show global economy confidence crazies and slowdowns are really headed also black rocks vice chairman byron wien according to him he spoke to the smartest man in europe and what he had to say was terrifying basically that massive amounts of debt will bring the decline of western civilization but

that in the meantime before that happens the policymakers would pull every trick they could in order to stave off a catastrophic event why do you have to how the unnamed smartest man in europe as christened by a blackstone big wig say that for about to hold weight just want a lot of smart med and women who break this down openly any given day right here on capitol hill today come on these groups are rogers will do the honors and it is one to the restrikes your all out as barclays top three executives resign in the wake of the library manipulation scandal chairman c.e.o. c.e.o. now we ask why haven't we seen this kind of fallout a big banks based in the us for many settlements and scandals they've come in across move news over it as what do you know j.p. morgan finds itself under investigation for manipulation of electricity markets

let's get today's capital account. so stocks rallied today in the u.s. and europe and if you believe the headlines it's because american factory order numbers came out beating expectations does it easing concerns that manufacturing is faltering there is another report that came out before that showing that it was now also there is speculation central banks will act or i don't know maybe the potion from the e.u. summit short term solutions last week that weren't off regardless headlines aside stock market action today aside what does any of this potentially market moving data mean and context about where countries currencies the global economy is headed

well look at this out today in the german paper der spiegel the english language version take a look at this headline the euro endangers the german economy the common currency union was supposed to benefit the economy of the entire european union now that the euro is struggling however it's bringing growth down with it germany's economy once seemingly immune to the crisis is now facing mounting difficulties. in germany turns against the euro project that what i don't know maybe bankruptcies but is that just what economies and banks need under the weight of too much debt that they're saddled with well jim rogers investor and author of this book a gift to my children a father's lessons for life and investing gave me a few lessons in both last night i asked if the measures that came out of the e.u. summit including the rescue funds ability to bail out banks directly in some cases

which will apply to spain for example are short term band-aids or bad precedent all together you know he said every time something comes out of one of these summits there's something new that sounds wonderful for days or maybe even weeks until people figure out this is nothing different it's just propping up failure take a listen. but this is the same oh you know injection of funds into some bodies are very into some of these vain hope we're going to keep the situation together until after another election in lieu of continuing this kind of life support and who knows when the patient is going to die i know you've talked about bankruptcy and said that it's bailouts actually that could lead to even some kind of a war scenario what is that scenario you could see playing out. this is that throughout history when you've had economic times that go bad and then get worse

people get angry. and blame and they always blame far as they blame other countries they blame bankers i mean this is always led to eventually lead to strive let's hope it doesn't this time but throughout history. what scenario would you see playing out that lead to that what does europe really need to a void at this point but does it have to be a war in europe was a big world you know it could be civil war in europe we've already had that inklings of some strife you see what's happening in greece i mean you see people in the streets in the u.k. and other countries so we could be civil strife and civil unrest as well or it could be you know they can blame the asians everybody loves to blame somebody far away i don't know who they are blame the next time around but misunderstood throughout history since the beginning of time we've had wars i would love for the us to stop wars because they're total waste of time money and everything else the energy in human life it's their disasters unfortunately we've never learned our

lessons i'm with you on that it definitely would be a disaster scenario and terms of the disaster that appears to be the euro right now what would it take to stabilize it never what time period will it take. well i was going to stabilize his for there to be sound economies and sound economics through the countries that are part of the euro and with it in my solution would be to let people go bankrupt like greece the bondholders take losses the banks take losses and then start over another scenario which is not as good as far as i'm concerned would be to throw the greeks out or let the greeks go and so the the and whoever else has to go that's not going to base their khana me on sound principles then you start over with a new euro basically just our own countries i don't think the euro could survive that kind of scenario but that would be another way that it would work but the way it's going now is that it's just not going to work you keep having a band-aid every four or five months that's not going to work that's going to end

in disaster someday and if there is a bankruptcy allowed if there are say mass bankruptcies and the government got out of the way stop trying to put on band-aids when the free market be enough to solve this or does it require any mix. what you just described is capitalism going to be wonderful. if you're living on all we haven't seen in a while it started it would be now well that's what is your i mean the chinese have more capitalism than we do what it's all they would be terribly painful as lister i assure you it would not be fine but what we're doing now is going to be more painful in the end if you have wait wait another year or two or three and then at some point the market is going to say we're not going to give you any more money we're not going to lend you any more money we fund this absurd and at that point the whole situation collapses there's nobody who can say because the germans don't have enough money the chinese the europeans the americans nobody at that point we

have attached to the and that's when you start having real civil and perhaps worse on rest because at that point they get even bigger because it's just been passed around to. some kind of more central authority or bigger player now the weak demand that we're seeing as a result of what's going on in europe the weaker demand from north america has contributed to weakness in china's factory activity reportedly a shrink in june the fastest pace in seven months now these signs of slowdown globally are what some are attributing a slumping commodity prices are dropping them too right now your index. says commodities are down just over twelve percent last quarter are you concerned that the short term commodities are going to continue falling. well you're exactly right . around the world slowing down the chinese have been purposely for three years trying to slow the economy rightfully so in my view i mean they raised interest

rates several times they raise reserve requirements and. they've been trying to slow the economy down to the real estate bubble and to get rid of inflation so i can see why anybody surprised that the world economy is slowing down europe is in chaos economic america's got staggering this look across the world economy is slowing down and anybody who sells anything is feeling the effects including the people who produce commodities so there's certainly. this year but the medals and the energy of service. and looking over the past ten years a broader trend commodities in u.s. stocks have diverged significantly only twice and both times for about nine months our viewers are looking at a chart of that right there so we're currently seeing another divergence right now with commodities declining this time and stocks rising do you think this current divergence is sustainable. no i suspect what will happen is it as the

economy slows you will see governments and central banks around the world printing more money and then bet money usually goes into real assets that where it goes that's where it goes for us by the way i don't i didn't see the chart but i will say to you that the moderates have done seven hundred percent better than stocks over the past twelve thirteen years so maybe there's something wrong with your chart i'm sure there are. periods when they have done whatever you said but commodities have done much much better over the past in years than stocks how long do you think it could continue with as stocks and commodities averaging. normally stocks and commodities do diverge i mean that's the way the way things normally work the over the long period in secular markets you have commodities going one way they doing badly and when stocks are doing well and vice versa you have the big picture over a decade or two they usually go separate ways ok and they have in the past ok and

we've seen a steady increase in the price of gold over the last ten years you and i have talked a lot about it and this trend is reversed. since late last year you said earlier this year if gold drop below sixteen hundred dollars you'd be interested in buying more. how do you're worried at. all a little bit i mean not in the. knowledge that i bought some but yes. gold is a bit of eleven years in a row and that's i've never seen any asset that i can remember it was a eleven years in a row with a downturn so it's normal what's happening and go you go continue to go down i hope i'm smart enough to buy more but i have no idea where is the story yeah a little bit recently for a variety of reasons but a lot of talk about ok i know that we don't have a crystal ball you're certainly smart but i don't know if you have psychic powers that do you think now is the time to buy or do you think there are potential

significant drops and gold i know you've talked about a correction before do you think we still haven't seen yet. but i don't need psychic powers i watch our t.v. . they know everything but i'm not buying go now we're not surprised you know the indians are talking about their people in india talking about banning the sale of gold or certainly making it very difficult for indians to buy hugo the indians of the largest consumers of goat in the world if something like that happens also this so the price will go go down a lot if that happens i hope i'm smarter to buy more. and that's not all still ahead we'll have more with the investor and author jim rogers his take on the federal reserve's claims about inflation last balrog central banks e.c. bears say they're overworked and bank of england may have played a role in the library scandal we'll talk about it in loose change but first because the market numbers.

what drives the world the fear mongering used by politicians who makes decisions to break through it sort of deeply and maybe who can you trust no one who is you who view you with a global missionary to see where we had a state controlled capitalism is called sasha's when nobody dares to ask what we do our t. question morning. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else and you sure see some other part of it and realize that everything you saw you don't i'm sorry is a big. but

in the alone or so you'll get a real headline with none of them are the problem with the mainstream media today is that they're completely disconnected from the viewers and for 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 to t.v. . welcome back speaking of goal we were talking about it right before the break and today gold prices rose to a two week high word on the street as investors are speculating that central banks

around the world will act or print i want to say some believe gold of course is a hedge against major inflation i asked our guest john rogers about the federal reserve's latest claims about inflation take a listen talking about inflation the president of the federal reserve bank of san francisco john williams said on monday that those who have forecast that the fed's tripling of the bonnet terry base for the past four years would cause inflation have been dead wrong here's what he said he said despite these dire predictions inflation in the us has been the dog that didn't bark in a world where the fed pays interest on bank reserves traditional theories that tell of a mechanical link between reserves money supply and ultimately inflation are no longer valid what is your take on this because it seems that just by all this printing we haven't seen the inflation you may expect but what have central banks done if

they've been successful and simply inflating their own balance sheets but not the broader economy what do you think. mysis i would suggest mr williams go shall we. go with his brother to go shopping or his wife or whoever goes shopping his family he will see that prices are up a lot what is he talking about the man's nuts of maybe he should buy some insurance or education or entertainment prices are up the government is lying about it he's part of the government he has to carry all the lives but nearly every country in the world acknowledges that there is in place except in the united states now i find that in comprehensible we can have inflation everywhere in the world except the united states but the people and everybody who's watching this program shops for knows that price is a rose so i suggest mr williams stop putting our government propaganda and go shopping well you know it's funny when my cab fare and when the pizza place started charging higher prices downstairs i thought of you talking about if i think you

know a job thing and now you know you see how much the prices are rising don't listen to the government but one thing that to go along with his government inflation numbers that he said was that maybe when his view of inflation started really impacting the economy what the fed would need to do is maybe pay more interest on excess reserves that banks keep at the fed what happens in that scenario i mean it can the fed accord to do that if they go into cash flow negative territory. what's going to happen is what's happened throughout history as inflation becomes six more into the world economy interest rates go higher interest rates are going higher in other parts of the world. i would remind you interest rates will go higher the u.s. government will have to pay higher interest rates and including the federal reserve does that throw the federal reserve into a negative cash flow i don't know i have to look at their balance sheet i know they have a lot of junk on their balance sheet without adjustable rates so i'm sure it would

throw the federal reserve into more difficult times too but mr lister i've said to you before in america we've had three central banks the first two disappeared for a variety of reasons this one's going to destroy itself i mean they keep making such absurd decisions that they're they're going to put themselves out of business eventually which will be good news for all of us i mean the world has difficulties without a central bank but this central bank my goodness it's certainly not good for america or for the world well and one thing though that we have seen is people still running to the u.s. dollar and u.s. treasuries and giving some kind of placating effect on the fed and the u.s. government and policymakers here in d.c. with the euro being in the situation it is how long does this prolong the slumber and the u.s. or do you see some kind of a day of reckoning. well i own the u.s. dollar at the moment i'm not quite sure how much longer i'm going to own it whether on another day or another year i don't know i want to because of the turmoil in the

rest of the world until there's no mean the u.s. dollar is not a safe haven the u.s. dollar us of the largest debtor nation in the history of the world so it's not a safe haven but since people don't know what else to do they go to the dollar but eventually we too are going to have to pay the piper there's no question because we keep making more of our situation overall is worse than europe situation overall it's just that the attention at the moment is on europe. if you can figure out a way and i have to watch our t.t.p. some more now but i'm looking for a place i'm looking for a sound currency and so far they don't exist. and in that context do you see any opportunity for the right men be if for example it became more flexible or are does china's current situation with a more global slowdown make that not at all feasible. well

remember it's a blog currency right now they have been making it more and more open for the seven years and they continue to i would do it i would do it this afternoon if i were china but i'm not sure i don't have this rate i would make it open now and then conceivably some day when then they could compete with the u.s. dollar but that would take a long time lauren even if they made a convertible this afternoon it takes a long time these are these are huge movements in world history and world economics so it takes a long time for the need to compete but there's not much else that i can see on the horizon except the rim and b. or if somehow we could have a euro that could compete with the u.s. dollar interesting so would you say just looking broadly that we're a world right now with kind of perverse is things going on where you have the euro deteriorating and europe deteriorates of people are running to the dollar which really shouldn't be considered a safe haven because look at the us debt so now is perverse things going on do you

think we're going to see a lot of unintended consequences down the line from these perversities. i wouldn't call them diverse i would call them that you know when you are excuse mistakes like that what do you expect to happen do you think everybody wakes up and says this is wonderful we're all spending money we don't have this isn't this is the way the world should be is our first this is natural what's happening and of course the politicians keep digging deeper and deeper holes and making the situation worse and worse and eventually we're all going to have to pay the price we're going to see more institutions disappear we will see more governments but you know we're going to see some countries fail you cannot keep building up staggering amounts of debt it is never worked in history to keep debt on debt on them a green chile you have us just terrible unrest within europe out of me and then terrible unrest within your society and eventually it's always lead to war i mean let's hope it doesn't just but it's always happened that way. there you go you

don't have to be vice chair blackrock quoting an unnamed source in europe jim rogers says right here jim rogers investor and author with that analysis. thanks. thanks. thanks thanks thanks . all right let's wrap up with loose change dimitri shannon let's not end with the federal reserve let's keep this going on central banks because the european central bank well first of all they're taking a firm stand when it comes to greece listen to this. the european central bank has told greece not to waste time trying to renegotiate its international bailout to water down we'll stay with the measures demanded that investors reform why is that

could this be because the e.c.b. is too overworked its personnel at least to deal with proposals for renegotiating because according to a new e.c.b. staff will eighty point one percent of employees complain of a heavy workload seventy seven percent said they were working longer hours with no extra pay nearly sixteen percent of the seven hundred staff polled said their workload was having a serious effect on their private life and or health i mean i guess it's just hard work going to put an extra hours manipulating interest rates and and these guys a little tinkers in the economy and you guys are wimps these guys are wimps had i had an opportunity to turn. in brussels at the e.c.b. it and take it i didn't take it but i was i was i was offered while i'm at work and they did it in balad good. active well anyway look i don't think we're going to take you back now after all you've said about don't forget them i know we're

friends wimps i mean they're complaining about their job or that i will work a lot of hours and so hard who doesn't and when it doesn't job you know work a lot of hours in a war hardly going to kill me they're complaining if you have the time to complain a whole i mean can you bring this job is a joke this is typical bureaucrats nothing worse than a bank bureaucrat nothing is worse than that i mean bankers top but then right above them it's like a special cream and it's the institutional bankers that you know are at central bankers or part of the v.a. or whatever yeah i mean there are plenty of people that are overworked and feel like they don't get enough time off that are doing so for far more every study right here and less consequential to the economy and the consequences of their actions jan you want to add anything. i mean i'm just going to say obviously greeks are sometimes hard to do with. well. let's move on and speaking of manipulating interest rates the barclays fallout

continues over the four hundred fifty million dollars settlement and scandal surrounding the allegations of barclays traders tried to manipulate the libel or the london interbank offered rate less than this just twenty four hours ago the chairman market so just was announced his resignation he said the buck stops with him and twenty four hours later the c.e.o. has said that he would stand down off saying he wasn't prepared to. so that didn't stop with the chair man because the c.e.o. stepped down this c.e.o. resigned so three top executives resigning as a result of this scandal i want to remind our viewers that about twenty other banks are under investigation and involved are related to this including j.p. morgan and citi group and h.s.b.c. and r.b.s. so we don't know where that's going to go my question though how come we haven't seen heads roll like this in the u.s. for huge settlements and scandals if you look back for example dimitri at the abacus settlement goldman sachs with the s.e.c.

that was a five hundred fifty million dollars settlement that was a really big settlement and you don't see lloyd blankfein ever pay for it with any kind of consequences like these top there are you know what interests me more is the way that these guys are manipulating live or. you know trying to because it's the idea is if it's one bank that's put it has it's poll it's a poll that creates us right so it's one thing doing it in order for that to work when there are to be more banks colluding in this whole notion i had an interesting take on mood mechanics when i was a traitor and what was that i actually did not have any. then you have something special say about the way that they were trading with live or i did not maybe you didn't mean three well no greeks are hard to deal with saw. continue let's play nice folks. dimitri all right so library is basically a poll from what i understand right it's not like the federal funds rate. and i think what's interesting though is that the traders are barclays were beside the

mark brokers picture of credit there was also the individual banks in this case of barclays with the trader basically saying the executives they understand what's going on the credit markets understand why bore so that we can get better credit terms because they need these we need this liquidity to keep our trades on yeah well one thing i want to add is that some embarrassing reports evidently were coming out that show that the bank of england might have had something to do with barclays manipulating this rate so i don't know maybe when you you do the central bank wrong and you're going to embarrass them that's when c.e.o.'s get pressured to step down i don't know just saying and we'll leave it at that will let you decide because that's all we have time for thanks so much for watching and have a great night and you can always follow me on twitter and to our next show get this feedback at youtube dot com slash capital account or catch any you best remember yesterday if you missed it we had a totally different perspective on commodities from

a different guest you can also see us in h.d. on hulu hulu dot com slash capital dash account no show tomorrow we're off for the holiday enjoy yours if you have it for everyone else thanks for watching and have a great night. there hasn't been a scene yet on t.v. . it is to get the maximum political impact. the source material is what helps keep journalism honest. we want to visit. something real. and. you know sometimes you see a story and it seems so for lengthly you think you understand it and then you glimpse something else you hear or see some other part of it and realized

everything you thought you knew you don't know i'm tom hartman welcome to the big picture. more news today violence is once again flared up. in these are the images the world has been seeing from the streets of canada. giant corporations to rule the day.