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oppressive. clothes chancellor merkel is on her second visit to china in seven months as europe's debt crisis begins to draw together to global economic powers but the chinese say weaker euro zone states need to impose further cuts and reforms . and if no one mr provides her insights into america's current economic woes capital account is next right here on r.t. . good afternoon and welcome to capital account i'm lauren lyster here in washington d.c. and we are on vacation you see we've been broadcasting since october so that means were 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 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. welcome to capital account i'm lauren lyster and i want to get straight to our show today because as stocks fall volatility spikes perceived safe haven yields hit record lows and criminal libel or charges may be imminent things seem a little crazy as headlines even tout global economy in worse shape since two

thousand and nine it just so happens lucky for us a group of investors are getting together in vancouver to figure out how to navigate this terrain right now for what we're calling a sort of anti davos it's a gora financials conference a lot of our guests are there and its theme is innovate or die empire at a turning point so we want to check in right away with the end see eric he's editor of the daily reckoning and chief investment strategist at a gore financial to find out why all of these high profile investors and economic experts are seeing such high stakes at this point and what answers they may have so first of all eric thank you so much for being on. your big conference for the year to tell us all about it and also your insight thanks for being on the show. it's a pleasure warm clothes for having me absolutely so first eric let's just touch on the conference briefly and what you think of my characterization of this as the anti davos because also my producer tells me that you guys were talking about this

conference in the attendees as financial first responders so i'm curious here your explanation of and reactions to both of those comments. well yes i think the davos is what davos is davos is the established order davos is the very comfy co-leader country club ish association of of comfortable c.e.o.'s and and their government counterparts and this is a conference that's not for them this is a conference that is for regular individuals who are trying to navigate. economic conditions that are increasingly challenging and confusing so they're first responders in the sense that. as a group they understand that some things about the way the markets function have changed and they want to be out in front of those changes so that they're not

they're not victimized by them yeah a lot has changed that's for sure let's get into all of this first a lot of concern the headlines today coming out of europe then it's a good point people don't know these days how do weigh the mood and the markle may be in when they're making their investment decisions which is something you have to factor in increasingly arguably meanwhile u.s. treasury yields today eric they fell to an all time record low on all ends of the spectrum the ten year traded below one point four percent the thirty year below two point four eight percent but instead of being lulled to sleep you do not think the u.s. should be asleep you think that the u.s. should learn from a cautionary tale from the extinction of the irish elk first eric what happened to the irish elk. well the irish elk was it was a maladaptive species ultimately so the irish elk. had enormous antlers

and the antlers were according to one theory of it's of except it's its extinction were a major component of the sexual attraction of the males so it was a big part of sexual selection the apparently the female irish heloc dug male alex with beginners. just as that process that preceded it. the large antlered elk would have large antlers offspring and they would grow larger and larger which is such a generation's ultimately we ended up with elk that had hundred pound antlers and they were ill suited to work to forage they were could had to keep their heads up and according to the leading theory of their extinction the antlers became so large they contained sixteen or so pounds of calcium eight pounds of phosphate and

the local grasses were insufficient to support that level of of bone growth so the elk the elk because of their antlers developed a kind of osteoporosis and died off. well you know what it is kind of like that say about us in the early nineties right said fred on i'm too sexy for my cat i'm sexy for well that's what happened with the with the elk they became too sexy to survive and in a way the united states i believe is becoming too sexy to thrive we have been the greatest power on the planet economically militarily etc and in order to maintain that power we're literally feeding on ourselves and building up an enormous debts and and regulatory strictures that are our on. are making it difficult for us to to even maintain ourselves yeah yeah let's bring up the u.s. debt because that's a really big set of antlers the u.s.

has in terms of how it's grown and becomes so over sized so what eric though because we're not seeing this in treasury yields what are the maladaptive traits that we see developing as a result of these huge debt outliers. well i think i think what's happening in the treasury market is something that may not be directly related to to mal adaptation it's rather a response by investors to to changes in the marketplace so as your guest jim graham brought up last week there is a bubble in safe haven assets and i endorse that point of view so you have negative yields on five year swiss bonds negative yields on danish that and invisible yields on german u.s. and so on so that's a response by investors to a very real. disease let's call it in the global financial markets in which there

is so much manipulation so much so much. fraud so much uncertainty even as to as to whether your brokerage account is going to be there tomorrow that a lot of investors are making what i consider a rational choice in in putting their money somewhere where they at least will get it back right at the bridge worry about return of capital not return on capital how does price fixing eric and the rigging of markets by the fed and other monetary authorities in the west fit in here with the maladaptation and the at is becoming too big. well it's it's a late stage phenomenon and it feels to me in the western world where if we. we look at europe and the us exclusively. these are these were the powers that emerged in the second world war and there they emerged and strengthened throughout the

ensuing decades because they were relatively free market societies and the us has been a free market society for a long time. so as those economies have progressed they have become a less free market oriented to the extent that the zero eight crisis opens the door to government manipulation on a monumental scale so instead of doing what a healthy organism would do which is to say ok i got i took a trauma blow or i got sick i'm going to just heal instead of keep in dosing ourselves the governments have been involved in in sending bailouts to every possible place they could send a bailout running up that's in the process they have been manipulating almost every single credit market whether it's sovereign debt whether it's the debt financial

institutions whether it is. mortgage debt now student loan debt and the list goes on and on and on let is the best absolutely yeah real world investors is in case go ahead is incapable of determining ok what's a real price what's a real value what's a real anything and not knowing. they they choose not participate right and i want to bring up we have an endangered species list of the endangered species of free market prices so eric i guess my question for you is what's not on what is priced accurately anything. well as i wrote about a week ago would you what it comes to live for which is the basis of trillions of dollars of loans and securities some have even estimated as high as five

hundred trillion which is a number that's so high it's hard to even believe once you start messing around with a lot of war. it is a kin to two moving magnetic north or moving a g.p.s. system you literally don't know where you're going to land or what direction you're heading so. is something not rigged ok you could say you could say home prices it isn't rigged maybe but then but then the investment value of a home relates directly back to interest rates and interest rates relate directly back to the fed funds which is mislead by the federal reserve and to liable which is manipulating by the reserve perhaps and by traders for certain so all asset values somehow fluctuate around these interest rates of of of dubious value right and so you're saying people are saying ok well i want to take my hands off the steering wheel i don't want to drive this car this is too scary i don't know

where i'm going there are no free market price signals so in this environment i know i read you said fear isn't meaningful insight i guess i want to know if you think there's a proper response. well i think pierce meaningful inside with respect to the financial markets broadly. so i mean and you know again jim grant was on your show talking about growing walnuts. it almost gets the point where you have to go you have to go so low tech and so extreme in some ways in order to find markets that are relatively untouched so. a walnut tree would be an example but beyond that there are agricultural markets that are still relatively untouched there's there are a number of real estate markets that are untouched there are private partnerships that that devote themselves to facets of the of the credit markets that are relatively untouched. and by those fast i mean there are there are mortgage backed

securities that are offering high yields those had been manipulated and had been. influenced by the by both traders and by central banks but at the moment less so so there are little pockets of opportunity. where investors can. can look for a non manipulated financial asset and hope for something better than one point three percent from a ten year treasury you know better than nothing and along with the converts here's all about by the way is that is the quest going to think is is what the quest for what. i. know i'm saying that's what this congress is about is about trying to find a the sort of alternative assets the fair assets that have a chance of providing a return. away from the malaysian of western governments and and agencies

is in fact crazy that that's that that's what it's come to trying to figure out where these pockets are that aren't manipulated that actually are fair i are subject to the free market and we're looking at walnut trees and farms and other things like that before we go i want to talk about in this atmosphere of fear there are some responses that kick in when you're afraid there's fight and there's light and in europe i thought it was interesting because you've been talking about the difference between both of these spectrums in regards to one country and one investment you have german bund yield which are record lows that you show that it's more expensive or was it a point to insure against german defaults it was more expensive to do that than to insure against default of instruments that were rated much lower you compared to viacom so these are two really different stories but they're both revolving around the same country the same bond market so how are you supposed to know what to do there or what does this tell us even that there's

a different fight well light scenarios that's. right without without being too arcane german bond yields are very very low just like treasuries but the price of insuring german debt is very very high higher than the debt of lowly rated u.s. corporates so that's a that's that anomaly a conundrum and. this i mean something yeah it means the financial markets are crazy it means it's very difficult to to figure out how to how to position yourself in a safe way. so. you know i don't want to say there's nothing to do here there are things to do but there at the margin and at the core of things that used to be safe i think you have great respect that are perceived to be safe are actually in fact risky and the solution is relatively simple the solution is to is to allow free markets to operate freely but at the moment the

powers that be in europe and the u.s. have zero desire to try to be all right are to step in and tended to be a late absolutely that's the case eric cry i'm so sorry i have to interrupt and cut you off but i really appreciate you being on the show i guess that big and learns what you have heard about are true thanks so much eric cry at it or of the daily reckoning. and still ahead record high yield on spanish bonds the i.m.f. may be wanting to dump the euro falling a ban on short selling in spain and italy and those are just the headlines you've probably seen widely reported coming out of europe coming up after the break mike said lawful tell us the alarming news you haven't heard the first your closing market numbers.

well. it's technology innovations all the developments around russia we've got this huge you're covered. download. creation so true to life stream quality and enjoy your favorite. t.v. is not required to watch on t.v. all you need is your mobile device more charting any time. all right where do i begin with europe today there are just there's been an onslaught of headlines all bad pretty much that i've seen coming out of europe

indicating that the noble solution or at least the pretending that there was a sustainable solution has once again run out as we knew would happen we see spanish yields spiking we see the i.m.f. saying hey maybe we want out of greece's sin is you europeans have your other funds all set up and ready to go and those are just a few of the headlines but what about the ones that you haven't seen widely reported might shed lock has been diving into those he's investment advisor for sick of pacific capital and he is going to tell us all of this really good dirt that you need to know that that somehow is escaped the headlines because probably there's just so many already thanks so much mike said locke mishra being on the show today. oh pleasure to be back on the show lauren how are you i'm doing really well it's nice to see you you look very happy given how much bad news is coming out of your ass but maybe that's because you've largely been right about europe all

along and here are some indications that are kind of on the periphery but are really interesting that you're writing about mission i haven't heard about black monday and italy but you haven't you're talking about messages on facebook and twitter that have gone viral so what is black monday and why is this significant in your view of black monday it was really just a reference to the markets they were they were europe got hammered today spain was a at one point down five percent actually recovered to be finished only down a percent or percent after something but in italy we're going to have good contacts all over europe and they send me these links and they might be in german or they might be an italian or they might be and spanish i get links from a guy name brand almost every day from spain but today i go one from italy and it was from a website there was an italian website that was talking about messages going viral elop there on twitter and on facebook and it's panic and one

person said on twitter anough of this agony this please give us bach the euro so the that's what social media is saying in europe it's actually not very pretty if you follow that through that's interesting how do you weigh the anecdotal evidence on social media i guess the twitter ended kadir if you will against their bits of news and information that you have coming in. well actually you would just look at you i mean there were absolutely soaring across the board today almost one hundred basis points that's one full percentage point from five and a half percent to six and a half percent in spain today on the to your treasury the ten year treasury had seven now percent uncharted territory. well as of or in the us three weeks ago rejoice the prime minister of spain was saying crisis solved that lasted what three weeks now we're seeing it in italy and the mood is really gotten you know pretty

extreme there they're blaming president obama they're blaming i a mouse they're blaming the builder burger they're blaming everyone and we're seeing the rise of the five star movement and i'm really stunned about this one because i don't understand why this is not made front page news in the wall street journal yet but i think it will best be groucho who is a politician and anti politician almost running for office in italy and he's running on a platform there that says you know we're going to kick out all these politicians and his own personal viewpoint is we need to get off. of the euro and default on it you know that's pretty big news in and you don't hear a lot about it laura that is pretty big news i feel like there is a sense that for whatever reason i haven't really just heard about italy much it's kind of been not i guess the problem child to does your the way that maybe spain

has been recently but another thing you point out about italy is ten cities major cities that are on the verge of collapse so what is really at stake here does that mean more pressure for the federal government does that mean that despite the efforts to prop up italy it's still crumbling from within and what do you what do you take from that on ten cities including on the lawn of naples so in big cities ten major cities actually a whole slew of smaller ones they claim we've already gone bitten the dust they're talking about defaulting on their debt meanwhile the state the federal government of italy is demanding more taxes more austerity measures more firings. so you know where does it end. i think it's going to end in protests in the streets and winced when spain heard the protests last week i said italy's next i think we're going to see it and that's what they were tweeting about today saying you

know we're going to organize some protests here it's going to spill over into italy right now look at it greece is blowing up spain's law you got it all is blowing up all at once the nineteenth euro summit has already broke down on the twentieth break china in the world are going to they're going to declare another summit but what can they do what's it going to do yeah i mean there doesn't seem like a lot that they can do i'm with you there but i'm curious what you think is the relevance of protests in the streets of italy because we've seen them all over europe and i hate to sound like a callous person but it doesn't seem like any amount of protest i've seen in the street there have translated into any kind of pressure for politicians they still pass austerity they still do what the international lenders want at the end of the day so what difference would it make. well i actually made a difference in groups and you know look at the radical left wing from what you buy

are six percent to real close to winning the election i'm waiting for the time to learn some politicians going to stand up in front of voters and say. this euro truly. golden boy we're going to default on the euro that person someone is going to come along and say that warren and that person is going to get elected. there is a prediction there i want to prediction from you on this because you mentioned the spanish yields and a key spanish starter yield going above seven percent to seven point five percent but we've seen this before we've seen spain get to this dangerous seven percent yield price i'm curious at what point is there the turning point where spain can no longer borrow from the markets and where spain does need a bailout. it's there right now it's going to happen i believe the consensus opinion right now is that is exactly what's going to happen bear in mind that

germany flirted with excuse me greece. with its seven and a half percent yeah measures they got to greece flirted with that seven and a half percent for a while they came and the president of the e.c.b. john kotter say at the time you know how many big three parties celebrations do they have over grace before greece finally imploded and we've seen a number of these same celebrations here over in spain and denials there were denying today you know we've had so many to dial how many of denials do you have to add before the country really implodes and i think where they're i i think it's spain is on the verge of a huge breakdown here i think italy's going to follow and there's not enough money in the or the self to bail them all out so what are they going to do we're in a crisis moment here i expect we're going to announce another summit probably this week and will say what are they going to come up with is there is another rabbit

left in the hat i don't think so i said that before but i'll say it again dead at some point the hat runs out of the rabbits it seems like it's getting close to that key rabbit moment where there are no more little bunnies left to pull out but you say there's not enough money to bail out spain and italy but is there even enough money to bail out spain because arguably isn't there not enough money. no there's not i don't see i mean they're talking and hundred billion euros for what's really going to be i think it's probably going to be closer to three hundred four hundred maybe more and this is we're talking about a situation we're talking about a bit this thing is not even funded it's not even passed muster in the constitutional court of germany. i don't know how they're going to rope but the ruling is coming up with a term or twelve or thirteen something like so and already they're adding to work

their want to use him to do well it's not even get rid of fargo enjoy learning the constitutional courts not agree to it thanks so much that was my child like investment advisor for sick of pacific capital and that is all we have time for that's our show today thank you so much for watching and make sure to come back tomorrow and in the meantime you can always follow me on twitter and you can give us feedback on you tube dot com slash capital account or catch any shows you missed missed on hulu at hulu dot com slash capital dash account from everyone here thanks for watching and have a great night.