hello again except us nine pm here in moscow these the top stories from r.t. tonight the paymaster's are working out whether greece should get more time to sort out its bailout reforms while in germany chancellor merkel's allies say athens leaving we're looking no big deal. u.s. special troops are on standby to go into syria following president obama's warning of authorizing intervention if there are signs damascus is moving its chemical weapons. and russia asked the u.s. to hand over business convict to boot who's been jailed for twenty five years for conspiring to kill americans but he maintains he's the victim of a political witch up. next to our studios in washington d.c.

and capital account with laura list as you say just a few moments away. good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and we are on vacation and you see we've been broadcasting since october so that means we're a little overdue for a break but in that time and in just the last few months we've interviewed so many amazing guests from jim grant to mark father to jim rickards even joining me as a co-host and we've covered so many topics that are relevant on any given day whether it's the fed or the eurozone crisis so we put together some of our very best and most popular episodes from the last few months for your viewing pleasure

and the time while we're off and you can look forward to all the new shows starting september fourth so mark your calendar and don't forget interviews can all be found in their entirety on our you tube channel you tube dot com slash capital account but for now let's get to today's capital account. so boy did sandy weill raise more than eyebrows yesterday when the former chairman and c.e.o. of citigroup said anough with these too big to fail banks take a listen. i'm suggesting that they be broken up so that the the taxpayer will never be at risk. the deposit is won't be at risk the leverage of the

banks will be something reasonable and the investment banks can do trading they're not subject to. they're not subject to not being there don't they can make some mistakes. now the irony said not be lost as sandy weill was at the helm of citigroup when it was becoming the behemoths it is today he was instrumental and pioneering the one stop shopping bank model even violating remaining provisions of glass steagall at the time in the process here is inside jobs filmmaker and predator nation author charles ferguson talking to us about it take a listen citi group wanted to acquire travelers did acquire travelers before the glass steagall act was repealed and so it was at the time and illegal combination of a commercial break in an investment bank is travelers which was at the time an insurance company also owned a large investment bank. but greenspan the federal reserve gave them

a pass gave them a one year exemption in during that one year exemption they got the law changed they got glass steagall repealed. fancy that and now the chairman the former chairman is advocating for something that sounds a lot like it or at least the spirit of it things seem a little paranoid paranormal needless to say this is wall street begin suing itself over lie we're manipulation here to talk about all of this and more is our co-host today he will stay with us the whole show jim rickards senior managing director at tangent capital partners he's also author of the best seller currency wars the making of the next global crisis we'll bring our guest today resource guru rick rule on shortly but first two records thank you for co-hosting capital account with me today had to be here on this is great it is great so let's start with this these comments from sandy weill because it's really interesting you and i have often talked about the problem with with these massive banks they can leverage depositors

to make these huge outsized trades that you said are flat out gambling as in the case of the whale trade so what do you make of the former c.e.o. and chairman of citi group same break up the banks and is that the right solution for why applaud what senator wellstone i think was exactly right look we all make mistakes but the only really bad mistakes of the ones we don't admit are that once we don't correct sandy made a mistake in one thousand nine hundred so a lot of other people program bill clinton john reed lots of people are on board the repeal it wasn't just one individual even though he was the driving force given the experience of the last ten years of your back he says that was a mistake so i applaud that and by the way he's not alone john reed who is cochairman at the time of this city good travelers merger has previously said that was a mistake this should not have repealed was to go richard fisher president of the dallas fed said the same thing so the list of people who say look this is just a mistake let's go back to something like what we had glass steagall work for sixty five years it was an act of one nine hundred thirty three it was you peel the one

nine hundred ninety nine so sixty six years you know we have some we have some business cycles we have some individual bankers but nothing like what happened in two thousand and eight so let's go back to it it does work so you think that that. is the solution you think sandy weill and these guys are feeling a little guilt well again maybe maybe not but i applaud the honesty and again it's very hard to me he was so outspoken he was such a leader in the repeal of glass to go along with others that it takes a certain amount of courage to come out in that human mistakes so i applaud him for that i mean remember why they enacted glass steagall in the first place in the one nine hundred twenty s. we had you know the roaring twenty's we had a huge stock market bubble then the stock market crash there were investigations and hearings in the early thirty's it came to light that the banks who organized the garbage loans securitizing them and selling them to the customers so the congress it will from now on you can do one of two things you can take deposits make loans or you can sell securities but you cannot do both that work for sixty six years now along comes you know glass steagall program i don't know why the congress in one thousand nine hundred nine thought they were smarter than the

congress in one nine hundred thirty four congress in one nine hundred thirty four i just lived through this experience they saw it so any way you repeal glass steagall ten years guess what happens the banks originally i originate garbage loans put them in securities and sell them to their customers and the market crashes it was the same thing over again let's go back to the same solution history repeats itself i was reading actually an editorial from right before a glass steagall was enacted and it was crazy the similarities speaking of the craziness of the banking sector i do want to touch on library because you've also told me that you think one of the big issues to come out of this could be the class action law class action lawsuits and after you told me that then the news came out about these class action lawsuits and we've seen baltimore we've seen charles schwab and just out today bloomberg is reporting that black rock the delany and vanguard may get into the fray where could this be headed this angle of well these lawsuits are going to be huge for us to a little be hundreds if not more of individual lawsuits but what will happen is

some federal judge will consolidate them so that we don't want one hundred separate lawsuits all over the federal court system will be consolidated the single court for the class actions to appoint warren and maybe a couple of law firms. to be the lead counsel for those so they get the all into one giant lawsuit as far as infidelity and others they really have no choice their fiduciary is for other people for pension beneficiaries investors and others they have to sue it doesn't matter if they're suing their buddies or their cronies or their banks they have to sue because if they don't they're beneficiaries will sue them when your produce you're in a representative capacity for the benefit of others if if they represent people who had swaps and they were they had money stolen from them because the bank rate fixing they have to sue to get that money back so this is of course we know the theoretical damages are potentially in the trillions and may only have been five or ten basis points of manipulation but when you apply it to five hundred trillion dollars worth of swaps times five years you get to two point five trillion in

damages enough to wipe out the capital and you're saying that if they don't have it then we're talking bail out so in this crazy world that we're living in where this is what we're looking at and this is the environment that people are investing in the question is how do you hedge against us volatility how do you how do you get fraud how do you had to guess what mario draghi is or isn't going to say well to answer this i want to bring in our guest today jim it is rick rule he is a natural resource industry guru he is also the chairman of sprott us so we're really pleased to have you mr roy you're joining us from vancouver where you are theodore a financial symposium so thanks for being on the show. it's my pleasure and i'm really curious to know because making a big splash across headlines and markets is mario draghi coming out today and saying we support the euro at the e.c.b. one hundred percent and my point isn't whether or not that happens my question is how do you factor into your analysis or your forecasts what

a policy maker might come out and say that everybody gets really excited about. well i think that's a wonderful question i think it's a wonderful question of two points in the first instance given the veracity of the information forward in the past who would really care what they said in the second instance what is it that we that we did they can do. this in circumstances that surrounds the euro are not a set of circumstances i think that gives people a lot of confidence in the fact that it can be saved they're dealing in europe and i think we're dealing in the united states with an odd sort of circumstances we are trained to deal with the solvency issue i.e. oh too much by having liquidity there confusing solvency with liquidity i think perhaps what they're trying to do at the moment is restore confidence in capital markets in the very short time in hopes that a creator or something else can solve their solvency issue in the first instance

i'm not particularly interested in what they have to see any more in terms that the excess in the second instance i'm. nervous about the fact that they are treating a symptom rather than the problem ah ha i do know mr well i have to say i know someone that might have a slightly different view than you so i want to get directly into the back on that because i know you think euro europe in the euro is going to they're going to keep it together i do think that the european monetary system or a man tag of the euro will stick together as a currency that no members are going to leave nobody's going to be kicked out i think some members will be at the question i have for rick rick i agree with you this is a solvent see issue but i think what a lot of analysts are missing you know you have the bonds you have the banks and you have the currency the bonds deserve a haircut i wouldn't touch a great bond with a bargepole and some of the other bonds may take arafat's i think a lot of the banks are insolvent so i think you're absolutely right about that but that doesn't mean the currency that doesn't mean anything on the currency the

currency can hang together even if banks and bonds take care cuts and so i would just wonder if you agree that. those are separate things or if you sort of much them all together for purposes of your analysis no absolutely i have to agree with you jim i think i think the currency is a floating abstraction. and i think that most of these modern currencies are based on confidence i joke that the root word of confidence of course is current. and i agree with you holding back in the context of the fact that this floating abstraction which is the currency to go on as long as people are willing to accept it and transacted the bigger issue of course is from my what if you the banks are insolvent because most of their assets it's the sovereign sovereign debt the banks liabilities are of course money put but the assets are very very serious emira one could assume that something as arbitrary as a currency union could survive the insolvency of some of the issuers or ins or the

insolvency of the banks so i think i think you're absolutely correct i don't see anything that's more abstract with regard to the euro than the u.s. dollar although my friend said don't keep the d.c. famously jokes the u.s. dollar is an iou nothing whereas the euro is nothing. if you i suspect the euro may house were probably more problems than the dollar. gold actually one thing i like to point out is that i agree with you these paper currencies are abstractions they're based on faith and confidence but if people start to lose confidence and you say well what's plan b i've always thought of plan b. as gold and in that case the seventeen members of the european monetary system collectively have ten thousand tons of gold united states has eight thousand tons of gold so i like to point out that europe if you have to go to plan b. you have to go to gold europe actually has more gold than the united states i would take everything you say which i agree with and applied to the united states i think our banks are insolvent and we have what's called in europe i want to quickly

respond to that we're going to get a break. you know i absolutely agree that what i'm interested in is not so much the gold states as with the european stuff but rather the goal that i have the only account i've come to trust in my declining years is my own accounting of my own assets my own liabilities i'm nervous in the first instance about the solvency of the system i'm nervous about the measurement of accounts. i've heard that from my point it's you society is going to have to cure itself and i'm going to have to take care of myself aha there you go self-sufficiency it's a lesson for everybody to take and run with we will have more with rick rule founder of sprott global resource investments after the break as well as our co-host jim records senior managing director at tangent capital partners a and but first a look at our closing markets. the

world. science technology innovation all the latest developments from around russia we've got the future covered. and this is a free. education free transport charges free arrangement free. three. new type of free. download free broadcast quality video for your media projects afridi oh down to r t dot com. welcome back before the break we were talking about gold and gold as money and cash the u.s. dollar the euro so i want to touch on something that is going on coming up ron paul

the lawmaker has been in the news because his audit the fed bill passed the house which is a big deal because years ago people would have said audit the fed bill why is that crazy and now it passed the house with a large amount of overwhelming support but also coming up here ron paul is holding a hearing dealing with this very issue of gold as a monetary metal so i want to bring back our co-host jim rickards senior managing director at tencent capital partners and also author of currency wars to ask what you think the significance is of this hearing in this debate of gold as money right well you know ron paul has been a member of congress for decades this is his last term and he's getting some major accomplishments in his way of cluing as you mentioned there in the house passed by a very large majority of this bill to audit the fed but in a couple weeks he's a member of the house financial services committee but he's also chairman of one of the subcommittees when the monetary policy committee says committee which he's chairman is having a hearing in a couple weeks on the subject of where the gold could actually be used as

a form of money what ron paul is with what chairman paul is saying forget about abolishing the fed and getting rid of the dollar and go back to our let the dollar do its thing but let gold compete side by side as a form of money and so the theory if you're a car dealer and you've got a ford car and it's twenty thousand dollars you can say hey twenty thousand dollars or so to you for fourteen ounces of gold at the current market prices now there's a problem with that today's to work could you do that today the problem is that because gold is a commodity if i bought my gold at seven hundred dollars an ounce and i traded for a car pizza or anything else say fifteen hundred dollars an ounce i have to pay capital gains tax on the difference the hundred dollar difference and so that's very different than using paper money where there's no capital gains tax so you're not really going to see gold used as money until you eliminate the. gains tax because otherwise we got a computer again or a loss and put our tax return every time we quote spend the goal post going to have a hearing on this to going to work through some of the technical issues he's

a thought leader it's not going to change the world and one hearing but it will move the ball and maybe a few years from now this will be the issue that we're talking about saying oh a few years ago that would have been crazy but now people are moving forward on it i want to keep this conversation going about cash and gold and i want to bring back our guest rick rule founder of sprott global resource investments because mr riehl i know before you said there are times when investors will require both cash as well as courage so is this an argument for having significant positions in cash in addition to physical gold and when would be a good time for investors to reallocate their holdings from one asset to another. i definitely think it's period of time where investors would like to have or should have or meet substantial amounts of liquidity in your portfolios i have a book actually and go electric the odd one if you get my gold is good cash so i regard them as in effect part of the same asset class i think the sets of circumstances that caused the psychotic breaks in the market in two thousand and

eight haven't been addressed with the exception of official sector liquidity and as a consequence of the fact that i don't think that a lot of root causes been addressed i think the possibility that that occurring or reoccurring is reasonably high cashed will give you the means and it will give you the courage to take advantage of psychotic breaks in the market and while i'm not certain that a crash is inevitable or certainly eminent i think that the possibility of that occurring is high enough that one needs to be prepared i'm also cognizant of the fact that cash has opportunity of carrying costs the way you get paid for cash relative to the decline in its underwear and purchasing brace means that you have strong opportunity cost inflation costs associated with it but my suspicion is in the next two or three years the benefits of having liquidity and the courage that it gives you involve the markets will overcome the opportunity cost hold and it's unfair for both of you gentlemen add mr will you say you don't know if another

crash is imminent but it's certainly something that could happen i wonder what if any black swans on the horizon you're watching out for are planning for and then i want to get advice or records take on that to. when i look at in the grocery for black swans i see flux. i see discipline solvency in the united states i see a host of european countries i see a lot of banks that may or may not be insolvent and i don't think the banks know whether or not they're insolvent certainly the short true constraints on interbank lending that we had in two thousand it was a function of the fact that people knew their own balance sheets to know that their peers balance sheets were lousy too the idea as an example that the european bank might be one thousand times leveraged and had as its asset base that were marked to mid as opposed to mark the market well in fact their liabilities with both were for the most part money good was not reason we're sure and so when i look at a set of circumstances that could cause us to have difficulties i think there's

a whole range of damages i'm also interested in the discussion you were having about the manipulation of like or but here i would sorry yeah go i had of course i want to hear your thoughts i mean i think a much more serious than if you lation is the effect is the official downward manipulation of interest rates in effect the war on savers the war on producers that's taking place and noted states and canada free market interest rates were not for central bank manipulations would be much much much higher we're having an income transfer for people who are throughout their life and are saving money to those people who are consuming money so if we're going to talk about a nebulous in of interest rates and people who have distorted and the nifty little markets and change people's lives and if that ruined people's lives the right people to sue the right people to prosecute the right people to put in jail or in fact of course the central bankers and legislators you know you're not going to get a lot of argument about that at this table i don't think i certainly don't disagree

i think that the bankers are obviously there's a lot of reasons to be angry at them for manipulating a lie bore and be directed there but you cannot overlook that then the mandated. and the central banks are dealing in record with that's that's right law and i agree completely with with what rick said if a couple months ago i testified before the senate banking committee on exactly this subject the name of the hearing was head of income security and members called income insecurity but the estimate is that there's a four hundred billion dollars per year wealth transfer from savors to the banks because of these suppressed interest rates if you look at where interest rates should be assume normalized interest rate relative to this stage of the economy this stage of an economic recovery and look at where rates actually are and take that difference and apply it to all the savings is four hundred billion dollars a year of missing income to the savers where is it going what's going to the banks because their cost of funds is lower so they can make more money on their holdings of government bonds so what you have is a massive wealth transfer from everyday americans to the banks being orchestrated

by the fed now unfortunately for its last point all these agencies have what's called sovereign immunity you cannot sue the fed you cannot sue the treasury you cannot put them in jail for this but maybe they deserve it yeah this is a which is a real shame you know i do want to make sure that we get to this issue because rick will is obviously a natural resource and i know that you had an interesting question about water fire and make sure we get that in you know we talk you and i talk about gold and other natural resources but i know you you have a broader mandate and that i was wondering about your thoughts on water as perhaps the resource mark of the future we all appreciate the importance of water that's obvious but water's been a little bit of a local commodity you know there's one price in the colorado river basin and one price in beijing if you see the evolution of maybe bulk sales of water a global water market a global water price and and you know derivatives of that at some point the future . i don't i think that water isn't persons well if we control i agree with all of

your all of the rest of your thesis however water is a series of localised markets and i think the water is probably the most mispriced of all commodities it has been allocated politically over time which is a guarantee that it will be misallocated eventually we haven't had a free market water we say in the west the free market water flows uphill the money and downhill the boats and you have the sort of circumstances where of course water has been misallocated to understand water economics first of all you must invest in look out for water is scarce places like the american west and southwest but also in places that can afford to pay for water although water is scarce in somalia and ethiopia discovering it there does it go in no good because the buyers can't afford to buy it the new golden sort of opportunity in water would be to be able to buy agricultural water in the american west and southwest and then be able to do what's called the bullied the water or use rural cattle that water for urban uses there has been limited amounts of that so far but the law with regards to water is law

that was established fifty or sixty years ago when rural constituencies controlled the legislature and the farming interests had no had no way or ability to compete in the market with urban water users and so they put in place legal safeguards to themselves from having a free market water my suspicion although i can't know this to be true is that when we have another good drought in the west and we will the biological record tells us that at the urban voters will begin to put in place the ability for them to appropriate some of that were a water in california my last understanding was the three percent of the g.d.p. which is the states agriculture consumes eighty five percent of the water we need feel good about using water for things like growing rice or alfalfa in deserts but the highest and best use of water from an economic point of view. it's probably brushing teeth and so actually. you have about a minute to respond if you'd like we're going to do their thing you say about the

politicisation of water and the inefficiency of the water market i just raising the issue of somebody if somebody could come up with some kind of global original price index you might be able to actually superimpose a market just make these allocations a little more efficient but that may be a major task. and we will end with a major task that may or may not ever be able to be carried out but i certainly appreciate you mr rolfe for being on our show founder of sprog global resource investments and also a real pleasure to have from vancouver so thanks for being on the show and jim rickards i want to touch quickly we just have thirty seconds but there is news that china is going to start depreciating its currency trying to lower it after it's been raising it a couple of years is this going to be the next round of currency wars between us and china it is it is law and that's one of the points that made the book currency wars are like a ping pong match it just goes back and forth and back and forth when these things sort of they're not over quickly the what i call currency war one lasted fifteen years in the twenty's and thirty's currency war two lasted twenty years in the

sixty's seventy's and eighty's this new currency were started two thousand and ten it has a long way to go so this is just the latest hit of the ping pong ball latest head of the ping pong ball i appreciate you coming here and hitting the ping pong ball with me and with our guest as our guest co-host today that was so much fun thanks jam records thank you learn the senior managing director of tension capital partners author of currency wars and thank you so much for joining us that is all we have time for but be sure to come back tomorrow and in the meantime you can follow me on twitter at lauren lyster give us feedback catch any shows you missed you tube dot com slash capital account watch us in h.d. on hulu and from everyone here including our guest host have a great night.