good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for thursday september twelfth two thousand and twelve the fed gave markets more of that do rather they have become addicted to announcing q we to infinity and beyond you could say that the fed announced it will buy forty billion dollars in mortgage backed securities per month leaving it open ended and they don't just keep doing it until the labor market improves now the fed committed to an extremely accommodative stance even after the economy strengthens extending guidance for reserve to but to what end while stocks are up also gold was up big

today player from gloom boom and doom publisher mark wagner and an editorial from the official chinese news agency shane watt mourns that massive spending to boost china's economy could be detrimental so how does this way into the calculus of china's policies growth or slow down and multiple outlets are reporting john corazon met with officials from the department of justice last week this is close to a year after m.f. global failed we're not letting this news get drowned out by the fed we'll talk about it let's get to today's capital account. ben bernanke you gotta hand it to me announced essentially

a q e until further notice policy today now with two trillion dollars of balance sheet expansion in recent years but still more than eight percent unemployment in this country and with the free market or at least the price mechanism a casualty of fed policy you may ask more combination for what well ben bernanke you made it pretty clear today when he said it was to affect asset prices so house prices is one vehicle stock prices many people own stocks directly or indirectly the issue here is whether or not improving asset prices generally will make people willing to spend. perhaps we will have to see if that makes people feel richer dr bernanke you but we do sure know that the market has been addicted to easy money here's a chart if you need a reminder shows when the fed announced a stock program and the stair excuse me a program in the stock market went up then the market went down when it knew that that program was going to end until the fed announce something new or hinted at

something new when you can see so those red marks are where the program would and that's when the market would start falling in and the bright green that's where you're seeing the fed starting those programs or announcing them now i spoke to earlier who told me the fed is saying without because it's not giving a time limit for when these programs will end it's saying you can't frank around us now and you can't discount us because we're not giving you a date and i spoke to mark far before the fed's decision he's founder of mark's father limited and author of the book tomorrow's gold and here was his warning for our audience. principle create prosperity by printing money and printing money has numerous army intended consequences. but i think it's quite likely that q e street will be announced new on or the other form the question is toward the extend have markets already discounted the

easing moves by the e.c.b. that were announced last week and q e three that maybe announced this week right so some markets which got addicted to central bank stimulus that may be disappointed if they don't get enough of what they're looking for so to speak so let's switch gears because q e three is a story you can see anywhere but i want to talk to you about what you're doing now because you live in asia but you do travel quite a bit and i have to ask before we get into some questions about asia and specifically china what has been your impression of the american economy on this latest trip of yours in new york. well new york may not spirit present a thief because this is the car only. in manhattan of the well to do people and as you know there is a huge wells income inequality not just in the u.s. but where also where by the well to do people still make

a lot of money there said prices have recovered so as an example in two thousand and seven the sandy weill bought a condo in west fifteen and he paid for these three million he sold it to or three months ago for eighty eight million so you can see home prices in phoenix have collapsed in a bland down and nation wise wide. but prestigious trophy properties have continued to actually go up in price the same applies to singapore hong kong tokyo london trophy properties are strong and the property that is owned by the average median. household has been weak until just recently when it started to rebound somewhat yes it was a very picture and inequality is that play in a very different picture in new york or in phoenix so would you say then that the

economic picture is worse in the us than it is being presented through various data points that people gravitate toward and what would you be looking for as a sign of a real sustainable recovery. well if you are just say g.d.p. growth in the u.s. and i'm not saying that g.d.p. is an ideal measurement or rather one should pay attention to standards of living at the average or the medium real income in other words inflation adjusted income of households that would be probably a better measurement of whether the economy's doing well or not and in general looking at the statistics the economies and doing particularly well this is not to say that it is doing better than say europe at the present time but we have to also look at it that way if you have a government that has

a fiscal deficit of say in the case of the u.s. over a trillion dollars say one point three trillion dollars and this is money flows into economic activity and so i asking myself in order to truly measure g.d.p. growth maybe we should make adjustments for the increase in the government day because that gross is not sustainable in the long run that's a great point and just to follow up with the second part of my question what would you see and say ok now i see signs of a sustainable recovery would it be and incomes are rising it would have to be in employed. imminent in industrial production. and in particular in employment that pays high wages because what we have had is

a lot of people who have lost their jobs but have found jobs that pay less say they're suddenly involved in the hospitality industry or in health care or even jobs that are just low paying jobs. in restaurants or fast food and of course and so on so that doesn't give you a clear picture of you just look at employment one would have to really look at the real wages and then when you look at real wages or real household income one would have to determine who is calculating what is real being cause as you know in america the consumer price index in my view grossly understates the rate of cost of living increases for the typical household yeah that's a great point now you mentioned real estate so i do want to follow up on that because in one of our past interviews you did mention that real estate in some of

the harder hit areas in arizona and nevada and georgia were good places to invest do you still feel that way and why. yes i wrote about this already about six months ago that if i look around the world and since i travel a lot i have a little bit an impression about prices here and there but what really caught my attention east at price is georgia in arizona parts of california nevada parts of florida were incredibly inexpensive compared to the rest of the world i think if you're an american and then now they are companies that are buying these empty homes. and they're refurbishing them and then they let them out and they get about the yield of seven eight percent in some cases even more depending on the area in the very dangerous areas the yields are up to fifteen

percent because nobody wants to go and collect the rents there. general i think yes it's still an investment opportunity interesting and what equities because you said better to own equities than to own cash but even if you're right and accurate is outperform cash over the next few years is there a risk that the government could do the equity holders what you believe it may do to holders of gold and that's i mean to be frank confiscate their assets. well to tell you the truth if you look at the composition of who owns equities and who owns gold very clearly the magic already of people directly or even directly own equities. directly owned equities are usually own by well to do people poor people don't own stocks in i.b.m. and in apple and so forth. but indirectly the public own equities

through retirement accounts and through pension funds state pension farms and divorce and so on so to do something really obnoxious. against equity holders would cause another problem namely the funding problem of these retirement accounts these pension funds the state pension funds are already grossly under water they're under from and so if you did something nasty to the equity holders the stock market would collapse this pension funds would not be in a pen in a position to actually pay out their members their retirees. interesting so that's the buffer there and yes gold is owned by a minority it's not widely held and they're specially if you look at members of congress and the people at the federal reserve and the people at the treasury they

own equities directly or even direct the but they don't already call that's interesting and now speaking of members of congress if they don't get it together moody's says they may drop its aaa credit rating of the u.s. if the budget after the next elections if those negotiations don't produce policies that over time decrease the u.s. government debt so i guess my first question is does it really matter what moody's or any of the three major credit rating agencies think anymore and second are budget negotiations even the major driver in people's decisions to buy or sell government debt in today's world or are other factors more important and coming into play yes i think most people who around the world know that the u.s. is no longer aaa but most people also know that if you own u.s. government bonds or bills or notes you will get paid cause the government can

print money so they can roll over the dates but obviously that this is for a start over time the quality of the it will diminish and i think it's already if you if you really calculated the u.s. government that the way your corporation would have to account for it it's accounts then you would have to include the on from the liabilities then the u.s. government that would already be junk. the corporation. cannot train money the u.s. government can print money so people who buy u.s. treasuries say your ten years face you know that one point six one point seven percent they know it's not a good investment but they know they will get paid a return of capital as opposed to on capitol hill rick.

the phrase still had gold was on a tear today after the fed's announcement so we'll outsmart where he thinks the precious metal is heading but first your closing market numbers.

what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one who is you who with a global missionary see where we had a state controlled capitalism is called sessions when nobody dares to ask will we do our question more. the soul is going to. be. illegal in.

the south. you. all right welcome back so after that fed decision today wow look at the price of gold it just shot right up we have a chart showing that green line it just headed straight up came back down a little bit before the close but how does mark father see gold of course we know how the markets are today after the fed announced what could amount to currency debasement with q we into infinity we'll hear from our father but also first we had an editorial out from the news agency the chinese news agency joie talking about how stimulus a massive stimulus was probably unlikely because although china is slowing down that would be detrimental to sustainable growth so this is after we've heard some announcements about infrastructure spending mark knows far better than anyone on

this side of the atlantic as he is called asia home so we spoke to mark about both take a listen. where you call home one of the popular questions out there remains as to whether or not china's economy has entered a slowdown will slow down further china's premier has promised just recently that beijing will do more to boost flagging growth in the chinese economy we've seen and now transfer infrastructure projects how likely do you think it is that we could see not just a slowdown but a contraction in china and other asian economies at this point given what we know. given what we know even the super bowl now i have to admit that there is a slowdown and even the super bowls hopefully know how to look very statistics and if you'll look at the real statistics say railroad movements in china or exports from taiwan and from south korea then you know the

chinese economy has celebrated far more than what the statistics published by the government would suggest so we have this very significant slowdown and now they have announced some stimulus packages and i think they're also printing money the question is then to what extent will the economy recover as the problem in china is that we have in some sectors of the economy huge over capacities now no matter how much you money use throw out the sectors if they are over capacities you could add to overcapacity this further over capacities but that doesn't help in the long run so i think that the chinese slowdown is for real now do stocks rebound i think there's

a possibility that stocks will rebound because of further easing moves by the chinese but i sing in that case of a. we will weaken now my father no conversation with you can be complete without bringing up gold so i want to do that before we go you said approximately twenty five percent of your assets in gold which is a very large amount by any measure i love your often cite and quote that you will not sell any of your gold as long as people like ben bernanke iran in the world central banks so what's your near term outlook for gold and for people that want to hoard it how can make protect yourself from one of your concerns which is confiscation. yes i have some concerns about confiscation obviously especially in the united states in other countries lace and. i still think that over time the price of gold will go up maybe not quite as of march in percentage terms as in the years ninety ninety eight

to last year's high one thousand nine hundred twenty one dollars last september but i think the trend will be up there will be fluctuations in a bull market for an asset class say the market in stocks nine hundred eighty to two thousand and seven in eighty seven stocks fell forty fifty percent and then they went up another eight times so we can have big corrections in all markets and that could also happen to gold i happen to think that probably the correction which began a year ago and if found the low december twenty ninth two thousand and eleven has probably ended and that we are now trending higher but i'd like to see a correction of gold prices down to around sixteen fifty rounds and then it should hold around that level and not move lower that would give me more confidence that

now the next leg of the bull market has gotten on the way because don't forget the central banks for sure we're all praying to money. but i said the markets you know like they printed money like crazy but the real estate still went down so you can have money printing and at the same time negative. behavior of some assets that's an interesting and important point real quickly just a follow up so you're concerned about confiscation in the u.s. so if you're someone living in the u.s. buying physical gold should they be holding it somewhere else yes i think you maybe you should they go all in your garden or or. the whole date to say i would think that singapore hong kong or dubai are reasonably safe i don't think that europe is on a percent safe because if say the us. explore pre eight hundred gold they would

probably go to europe as a you should do the same and savors and sings in the central bankers would be really in that position it probably also. would implement that measure. you are in demand go start digging for you do be sure to watch the rest of our show and tomorrow in think we showed you the entire interview today do you we left a treat for you because tomorrow you'll hear from mark father on what exactly a deflationary collapse looks like in his view because you know we've heard him talk about a lot of war and how europe which is probably the best poster child right now of what a deflationary spiral looks like how europe is doing and his words that is mark father author and founder of mark's father limited.

all right let's wrap up with a little this change dimitri kofi. is in studio and we have to revisit a story that we want to revisit as much as we possibly can because it's still so important and some concerning news about where a criminal case is going but let me back up it's been almost a year since we last heard john corps zein play innocent after m.f. global went bankrupt for this. simply do not know where the money is or why the accounts has not been reconciled today. and whatever but d.o.j. officials sounds like finally got around to questioning him according to multiple

multiple reports that came out late last night early this morning that meeting was last week with d.o.j. officials and some other officials from government agencies and this is what i think dimitri why do you think ok this went on last week evidently according to reports this meeting between junk and the d.o.j. why do you think the reports of it came out late at night early in the morning before a major fed decision when everybody was expecting q.e. . i don't know what do you think they don't want this story to knock out a lot of attention. you know that's the thing lauren before i came to work here and i guess i still have a lot to learn when it comes to media savvy like that because it's true i never would've thought of that you're one hundred percent correct absolutely that's the thing about the media they can use the cloud prism i mean this is pure speculation and b.s. i obviously don't know anything but i just think it's very interesting that people

sources close to this story or investigation or whatever came out with this news to the press the night before a major decision when it said fed is everywhere in the business news but we are not let now slip by anybody hopefully there will be criminal charges a case something to at least try to bring justice to this put john corazon on the stand i want to see that but let's move on because our minds to be seen because there is a new game in japan that's combining the virtual world with real life through food and farming take a look. at the kit be it's a virtual. farming game players purchased tools and fertilizers and tend their virtual form what could be aside from all the other gain ritual farmers who receive real fruits from their daily work. so in the us there is farm ville where you can

do some kind of virtual farming but this is a virtual farming game where you actually receive the crops that you have virtually farmed in real life what do you think is the significance of this going to actually live the stories this is in japan. further north korea long ago there was a korean woman the north korean woman who. call for memories she sure had a baby and she was busy on farmville feeding her virtual baby. virtual baby and growing virtual vegetables forgot to feed her analog baby in the real world and the baby died that's really horrible if that's the case if that's true or not remember the source so the thing i think is you know we're going into virtual slavery but it has real world cons are just as funny as guys are growing virtue of us both are by and reversible will enable him to follow your line of thinking if in fact someone was so addicted to farmville that they neglected their child at least in this case

if you're addicted to virtual farming you're receiving food so you have the sustenance coming to you so you can feed your kids in case you should be able to go to the grocery store and i think this is going to virtual wal-mart's buying virtual gem of food they should do well that would really go along with your back story which we have barely any time for but i want to mention it because kraft foods chief executive the c.e.o. recently revealed that at least six if not more of crops revenues come from food stamps i thought this was so interesting because this is you know kraft foods i don't exactly think of as good healthy food i think of kraft macaroni and cheese and kraft is not alone i mean we've heard had michael kroger on the show has said that wal-mart's essentially a food stamp play wal-mart we know does it pay its employees and to really subsist without. extra help so essentially the government is subsidizing these horrible foods that's not good and for people in them i have a problem with this look she find fresh food because she is using her abt card wisely. i saw

a lady on that's my soapbox for the day because that's our show thank you so much for watching make sure to come back tomorrow and in the meantime. you can follow me on twitter and have a great night. wealthy british soil the sun. is not on because.

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