news today violence is once again flared up. these are the images the world has been seeing from the streets of canada after. trying to corporations to rule the day.

dreaming of a sea round trip with the open air intertainment. a little bit of exercise to get in shape. and cuisine with all my healthy ingredients. in this case something to. our summer sales on our cheek. store is not a serious delegates walk out of a meeting of states not taking place in tehran and. president assad's regime oppressive. u.n. security council tries again to break the syrian deadlock turkey was also invited

to the ministerial meeting it's pushing for a buffer zone something russia and china strongly object to that's as heavy battles continue. china to drum up business and convince beijing that the euro is all on the road to recovery beijing says the eurozone states need to impose further cuts and reforms. with a new team with more on their stories in half an hour from now on the mean time we bring you with capital account from washington next on. 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 bob or 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 bad 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. we are back on wall street today now after yesterday we descended upon the floor of the new york stock exchange behind me today we're crossing the street for what you could call an alternative exchange we have the opportunity to sit down one on one

with jim grant editor of grant's interest rate observer from where he really does observing jim grant let me just say it is a real honor to sit down with you thank you so much for allowing us into your and to me my pleasure well great thank you so let's start with because there is a huge outrage about this library scandal and when we actually first process this news we were thinking ok jim grant is probably saying this is what central banks do every day and in fact you have been saying that you've been out saying that so why are people so outraged about why bore and banks attempting to manipulate it when this is the job of central banks that we all live under wrote the private bankers the appeal it rates on the quiet when they think they can get away with it surreptitiously opportunistically rarely central banks who are for a living. so it seems to me that the london interbank offered rate scandal

is almost infinitely insignificant compared to the prevailing problem of the manipulation market systemically openly and on principle by our central bankers so do you think that the outrage at the banks is mr repton over libel sure. there are turn around and be outraged the people who manipulate the rates on which live bore from which libraries ultimately derive lahore's that is a rate that is derived in. very good part from the prevailing level of rates that the central bank said. or fix to use the proper word so the federal reserve the european central bank the swiss national bank all the rest are the business of imposing their judgement on the marketplace so they do this many ways most visibly they they set a money market interest rate that goes in this country by the name of the federal funds rate. and that rate happens to be zero zero zero s. before tax mind you so the savers could zero before tax the speculators get to

borrow at zero with which to finance their speculations so one can make. a good many arguments against the nebulae sion of rates and i have but the library scandal it seems to me is is this as a scandal is almost infinitely insignificant the significant scandal is that is the ongoing been a collection of rates by our central banks why do you think more people are making that connection hey of course so upset about live our lives why aren't we more upset about central bank menefee elation at rates as a realist i think that i think there is a ritual loathing of of big money and big financial institutions that is certainly understandable and not entirely misplaced because these outfits are kind of state sponsored cartels in good measure you know they. know.

not many of them would be standing upright and solvent except for the intercession of the central banks. better now that i think of it just celebrating its two hundredth birthday. is only two hundred years old thanks to the taxpayers yeah yeah afterwards they said even though it's anybody else be worth it to us yeah yeah so it's it's not as if people should feel. some throbbing resentment against these mega financial institutions that they ought to but they ought to seems to me. resent more thoughtfully and fundamentally and a more thoughtful and fundamental source of resentment is the becoming the managed and directed central banks that set the rates. really are the basis for things like why bore and just along those lines to follow up do you think that it's monkey see monkey do banks see central banks doing this i said oh it's going to get involved

i'm not sure it's i'm not sure it's the it's the traders the money market or treasury desk or these banks say ah if they do it will do that i think what free traders are saying is i think we can get away with this great write yeah those e-mails now and those are just some fun fodder for at least outrage in themselves but i want to ask you know you have said before that living in a central bank world is like living in a hall of mirrors or living under a central bank it's like being in a hall of mirrors and then more recently i heard you compare it to the truman show that movie where we're truman is in a fake world but he doesn't realize it until he's going along in his rowboat any hits actually on the campus and this is the limits of his fake world i think you said were already there so do you does this mean we're at the end to arrange things can continue to manipulate the fake world that they want. i think that we exit the fake world when people decide that they are living in it the jim carrey character

and in the true and showed it made this discovery one of the proud of his rowboat for member right. tore through the fake canvas sky. i'm not sure how many investors are yet at the moment of realization that the values they see are derived from manipulate interest rates the interest rates are really the. the basis of so much of we regard as value. i am afraid that the that the moment of more or less universal realisation is a way off but perhaps at the margin more and more people say hey wait a second that's guy's not real right this guy this water is it's like plywood a little money how do you think that would take because you could argue that existential crisis that truman had maybe was exhibited in the markets in two thousand and eight there was an existential crisis but what do you think it will take further away that you're going to get there is a there is

a more interesting and and i think more historically remarkable existential event. in which we have been living lo these many decades which is the almost universal acceptance of pieces of paper and stabbed with the premature of sovereign governments claiming to represent wealth. currency. and in fact it does pass for currency people take it and the dollar is a little miracle of faith because it passes for value the world over you stand on the street corner of moscow one hundred dollars bill and people will think better of you for. but the idea that that these pieces of paper no intrinsic value could indeed represent actual value this is a heresy for most of the world's history that has only recently come to be accepted as an article of fact. and i think posterity will look back on our

collective acceptance. of these items of colored paper as money and say they believe that if you read the text in a federal reserve note it says no no now a note is that it is a this is an instrument of debt is a promise to pay something. how much to pay what well nothing actually and there was a guy who worked at citibank for many years he was one of the most thoughtful and perceptive server critics of the fence there was john exter and he is no longer with us but used to say if it were of no use an iou nothing i you nothing so we're talking about the truman show and about our collective acceptance of canvas skies and plywood seasoned. and imagine towns i think that the the article of paper money which is so much a commonplace in everyday life and of commerce and great investing in the city i

think that will be seen in retrospect by our heirs and assigns since it's a thing of amaze with the same for forty years and counting we believe that so our era so do you think the next generation will make this. distinction or i don't have a crystal ball here i'm the scariest of all it's generally has been broken for some . decades. i think. that i think i'm beginning to see signs of people questioning the legitimacy of these certainly the euro has come under some scrutiny euro is the currency of a confederation which an american might say makes it confederate money and we know what happened confederate money. and with faith based currency i want to stick to this topic i have faith in the people that print it so the federal reserve we saw the f o m c minutes come out earlier this week and oh no it wasn't

enough for the markets they didn't promise and of about easy money was going to come there wasn't enough of a sense that it's coming do you think that the fed has run out of the tool of instilling optimism. or hope well it means is it is a as it were kind of a drug dispenser when it's five years it's taking larger dosages and the fed minutes there is some soul searching about whether they have run out of technique. so they might do something more even more dramatic maybe rabbits and have something like that. but there was an expression in the fed minutes of. consternation that. the techniques at hand were not sufficient to off in a maze. so they might do something else but it is it is a pretty worrying sign that the. these massive massive

materializations. of money or whatever they call it you know the it's no longer having the desired effect. do you think that that power of percept then is more important than the power of the printing press for the federal reserve that it which is wrong very great question i think perception is ever so important the. markets perception that the fed is can is in control is an important element in what the fed does. yeah i mean that the what the fed is doing in fact is to cause to come into existence. untold hundreds of billions of dollars as defined which take the shape of electronic impulses that stored in somebodies hard drive at the federal reserve bank of new york that really create no wealth. that at best lubricate

the census and the expectations of people who may choose to materialize themselves bankrate i mean it all gets to be very were conned diet and rather mystical so perception faith is is part of the this magical mystery tour that we call central banking yeah do you think that power perception has run out for for the fad i think that the market is increasingly skeptical in the market needs more and more these larger larger dosages of whatever the feds dispenser. coming up you will hear more of our interview with jim grant and still ahead if libre manipulation central bank manipulation p.s.g. fraud m.f. global fraud all how you're looking for a way out of the financial system you may be interested to hear what jim grant has to say about planting trees and first or closing market numbers.

dreaming of a luxury used see room trip with open their entertainment. a little bit of exercise to get in better shape. queasy in with only l.z. ingredients. in this case something to remove our summer sales on our cheap.

welcome back so why would anyone want to give their money put it in an investment knowing. they would receive nothing in return or they would lose money after all was said and done in a perceived safe haven like a treasury or a government body well let's look at today's news cycle p.s.g. is founder and c.e.o. arrested he admitted it is suicide no he attempted suicide to fraud going on

according to his note undetected for twenty years so does fear over protection of your property rights factor n to what our guest calls a bubble in perceived safe havens where you don't have to listen to me you can hear from him more of our interview with jim grant founder and editor of grant's interest rate observer he's also author of this book mr speaker the life and times of thomas be read the man who broke the filibuster take a listen we've talked a lot about a bull market in safe havens and people willing to level in a bubble and it's a big bubble incident perceive safety now see actual safety we we see in retrospect very clear all that was safe. and but paradoxically that which is substantively safe often appears on say for example the. two thousand two thousand and late two thousand and eight early two thousand and nine. so-called toxic mortgages selling at twenty cents on the dollar actually proved to be

a fantastic investment because they had built inside them a margin of safety built on prints they've been sold down to next to nothing people were sick and tired didn't want to analyze and lo and behold the dregs of this stuff proved to be a wonderful investment if not well certainly a great year long speculation similarly now we are to the. swiss government securities out to five years yielding less than nothing are safe we are told the danish treasury bills french treasury bills german woman's yielding less than nothing or c. . if the tips in this country treasury inflation protected securities yielding less than nothing are safe i submit that less than nothing is not a promising place to start investment. i mean you once investments all too frequently wind up delivering less than nothing but you don't sit out that way right that is the same with the support of the value proposition even passed muster

with a two year old that was you know they know that they're not supposed to give their money to someone they want to get money but is there our role or is there a part that property rights play and this because we've seen m.f. global we've seen i've heard many stories of customers of m.f. global who had their money taken there put it in parent financial group and now the money has been taken from there so is there a role that people are more willing to put their money somewhere they at least perceive not to be safe because they're more afraid of it being taken you know. that is certainly that's part of it i think there's an overarching fear of something terrible yet not strictly definable. and yet this is such a very a gated financial landscape there is this thing without a name this year the causes people to settle for less than nothing on fixed income investments yet there's also a strong enterprising feeling still in the world. you know the

world is a presbyterian saying of sin and sorrow to be sure that it is pretty you know yet there are companies such as google that are in the business of codifying and making accessible the sum total of the world store of knowledge for free that would seem to be encouraging. the higgs potion apparently has been unmasked i mean that every day there are marvels and our material lives so it is a curious. it's a curious juxtaposition between abject fear and hope. of course. one shouldn't invest on the basis of hope but i am not persuaded that less than nothing is the thing to shoot for right just a little higher maybe we can do better than even better speed of shooting higher this is kind of a creative interpretation but i was speaking to someone who was saying that a lot of swaps were done with y.

bore and so a lot of those those investors will have a may have a case there may be a case of print occasion for lawsuits of these banks that have been found i mean in manipulating it so based on that is it first seeable or perceivable that that's a verse or investors can say hey we want to sue the bad for the first that we're getting on our money because they're manipulating it yes it would be a splendid suit certainly the headlines would be splendid not sure about the substance of the litigation but you know if let us say that litigation goes forward with respect to libel or what to say that the. the dark powers of these commercial banks were manipulating the rate down so that means that people paying adjustable rate mortgages were paying artificially low rates that mean they had some you know some made off the state guys and go back say all right more money you mortgage all right but you never are you know it's right at the side i don't see

that happening either before before we go. let's talk about gardening i guess is not gardening but i'm just curious if you are actually bullish on black walnut trees yes yeah let's look at what's with that what did you have to offer ok so. the seedling. of a properly. trained. black walnut. producer university has produced a strain of these things that reach maturity in twenty five to thirty years the post fifty to sixty years cost five bucks. that maturity perhaps because the future is uncertain i say perhaps that it could fetch a thousand and so you the internal rate of return and this look at zero coupon bond of yesteryear that's like when we were had real interest rates you probably read it i don't i don't know what it was a long time. but that represents the rate of return on one of these old fashioned bonds actually paying something. so my thinking is that instead of

taking one's entire risk with the federal reserve to give nature a shot at it as well right. so with a tree your risk of the thousand can cure disease but not so much with you know with peregrine or with the right right right and a different kind of risky conservative kind of risk but or is it is not within the financial system it is outside of the financial system a very innovative alternative government which they say the financial courtney's uncorrelated risk correlative risk there you go in a world of so many correlated thank you so much they were and were getting down there so you need to talk to you it's you know. i guess you could call that the mother nature risk now that is not all of my conversation with jim grant you can go online and catch a web extra at our you tube channel it'll be up shortly because i'm sure you saw the j.p. morgan reported a five point eight billion dollar london whale trading loss to date

a lot more than they originally reported it would be and they will clawed back compensation for two years for the traders involved and their boss i know drew but did these clawbacks reinstate. real estate accountability you can find out what mr grant has to say about club x. the first this. it is friday the thirteenth and we are going to be right so there's a graveyard behind me but there's a church right over here. which i don't know if you're not from new york are you haven't spent time on wall street you may not know that this is actually on the

wall street right across the street which is kind of interesting and for me makes me wonder if during the financial panic during in two thousand and eight if people were coming here. for a case things were just so great i'm sure they were but you know the irony is that the church used to have a lot more power in society in the west of the middle ages obviously than then it does now today the fed is kind of taken over that role of the priesthood the monetary pre-suppose are just a general we call them. monetary priests but they used to be that the church had an incredible amount of power unfortunately now it's kind of waned a little bit now but i think that unfortunately i think that you are you should get back i'm a little competition is the government here but i think that the fed i mean the fed has got such a strong you know stranglehold on the economy and on the culture of this country that the church should step in that vacuum it's been on competitive for a while you used to pay the church for indulgences and things like that if you want

to commit sin you have to pay the church i think there should be some sort of tax on wall street sin i mean if you want to find a link to the quote back of the book club that they are claw back some of those bonuses blow back some of that ill gotten gains where you can do that and you can demand that bankers proportionally pay indulgence. speech the church is a repatriates them right through the government i mean it's an ad hoc i mean it's not the ideal system but i'd like but it's some way to kind of get the money back to people what's interesting about that is you can't legislate morality and greenstein that it's very difficult to prove some of these alleged crimes that occurred during the financial crisis and by the manner of your previous it is morality and it sure is difficult to to prosecute criminal prog you have to prove intent although a lot of these actions in the spirit of fraud are criminal tried so and the spirit that's reading in the spirit has been broken see the spirit of the literary and the

the slobber has been broken and that's why we're here at the church leaders the spirit yet there are still present and we've to really bring that spirit into the law of the law and i was that it's a zombie there because the constitution is so there's some zombie banks we do breed to bring spirit a spirit a life a soul back if we write who should the government and dimitrius the course there are a lot of worry here at the church on wall street that brings i guess the spiritual world to wall street we need to restore this spirit of the law that we all are among the dead who we honor we are not at all of the bed we cannot speak so we can honor the dead no no i don't i don't know oh ok you're putting someone else i'll leave you so that in his book there were there was a day of reckoning already and they were so i part that about that that would send a small i think the point is that on friday the thirteenth we are in a graveyard trying to invoke this spirit of the law that seems to be missing when

it comes to financial crime. right that's it for our show today that's all we have time for from our jaunt to new york but will be back in washington on monday with charles ferguson of inside job until then follow me on twitter that or you tube or hulu and from everyone here thanks and have a great night.