a bank where you can underwrite securities in your dealer that's fine but you cannot do both that's what the congress said one hundred thirty three that was good law until one thousand nine hundred ninety somehow the congress in one thousand nine hundred nine thought they were smarter than the congress in one thousand nine hundred three they repealed it and guess what seven years later another crash it's really not a surprise and you know the supporters of the big banks the apologists of the big banks will tell you think you owe it wasn't good if they were the cause of the crisis it was these you know lousy mortgage originations and investors who didn't know what they were doing and radiates but there's enough blame to go around the responsible but the banks were a crucial ingredient they bought the mortgages securitized them and sold them to the investors the banks for the missing link without the banks acting as securities dealers this wouldn't happen so we've got to stop that and there are other criticisms heard jamie dimon for example say hey it wasn't as it was the big guys it was the lehman brothers it was the bear stirring so counter that when real quick who do you think was financing them i mean if you look at the balance sheet to lehman brothers a look at the balance sheet of bear stearns sure they had huge mortgage inventories they do securities inventories how do you think they finance those bear stearns was

financing them in the repo market with bank of america so if it wasn't for those big banks again financing the whole thing the other thing is with this crisis that lawrence people said well this is about a trillion dollars of subprime and all day you know historic to four rates it never gone above five percent they say let's be crazy and assume twenty percent of forwards which was unprecedented that's a two hundred billion dollar loss in a trillion dollars of mortgages less than the s. and l. crisis is just a for inflation so they said what's the big deal we can survive this what they missed was that sure there were trillion dollars of bad mortgages but there were six trillion dollars of derivatives and the derivatives are the off balance sheet exposure of the banks again the banks are the culprits because of securitizing garbage loans and their derivatives books they've got to be broken up we've got to stop this it's crazy it's what we have but you don't think there's any chance of it so essentially you're saying there is no chance of us getting back to a healthy banking system at all because the banks own the congress and to be blunt i appreciate you there are lines and i kind of thing we talk about all the time there are good men and women up on capitol hill and they're smart they're working hard on the. represent their districts but the fact is the banks in the congress

lock stock and barrel so this is not going to change the template i don't want your look at tempo let's you know today you know he leaves mitt romney's campaign here without you know talking a hard talk about the bank sure and he was thinking about running for president now we go to lobby for them sure in the financial services roundtable was simpler to just took over that's not your normal lobbying organization that's like a club there are only twenty or thirty members and they're the biggest banks so is it j.p. morgan goldman sachs morgan stanley bank of america citi it's the people you would expect that's the big bank clog stream lee powerful plenty it's got a powerful seat and he's going to do his job to make sure that we don't reform our banking system and we don't get rid of the problems from the big banks so this economy is just going to go from crisis to crisis and the other enabler you could argue of banking activity is the federal reserve that should give it plenty of cheap money to spend and you know we just did get q e what some would call to infinity year this is on the tails of the e.c.b. an ounce in an unlimited bond buying program and you think it ends here you think we hear an announcement from china sure in the next thirty days so what do you

think and why well you're exactly right one so that sort of a drug that they're not talking about you know q.e. in terms of three hundred billion six hundred billion over six months this is whatever it takes or you know they used the phrase open ended but that's another phrase for whatever it takes which means of placing so these are the means inflation absolutely is that that's what it takes it takes the place to get nominated to get down to you to be so drugged it goes on september sixth bernanke he goes in september thirteenth the last that we had the bank of japan doing the same thing you're right they've been easy for twenty five years from now whatever it takes so the fourth shoe to drop so to speak for sure is the people's bank of china now they're a little different they don't have an open capital account they're not at the zero bound the rates are in at zero so they don't quite they can't go to quantitative easing because there's nothing to buy there's no robust chinese sovereign bond market to buy anything but they have other tools and they secretly last week in shanghai with a private advisory board the leading economists who are experts in china those advisors told the people's bank of china. you've got to reserve requirements and

corrupt the laws of the powers or issue that allows the banks to lever up so look for that maybe in the next thirty days or so so that will be china's equivalent of q.e. it's kind of monetary s. but not quite the same technically but the question is can any amount of easing delay of the day of reckoning with the debt or the slow downs of the economies that could be coming let's bring in our guest to talk more about it before i die i want to say you know who do has who does have an open capital account. is that we do yes we are zeroing out a little accounts that are going to show you how. we are the open capital account of things that we talk about all the things that people really want to talk to now let's talk to another guest who i'm sure wants to weigh in on the debt and a money printing because our next guest believes we're approaching the end of a sixty year global debt supercycle and the developed world characterized by a massive household sector do you leveraging process and has storage shift of private liabilities on to public balance sheet he said the end game will be characterized by the bankruptcy not just of households but of companies and

governments it's a theme of his latest book endgame and to continue this conversation let's bring in john mauldin president of millennium wave advisors so first of all thank you so much for being on the show is. this is i thought you guys in a very great panel that you were arbitrating mr malden with your records on inflation and deflation before we get to that i do want to bring this conversation to the debt supercycle which mr mileage and you believe are reaching the end game in the developed world at least before we get to outcomes and the future i just want to ask how did we get here and are these super cycles inevitable. they're not in evidence will answer your last question switzerland has awarded one and you don't get there by. not borrowing too much money that's how do you think more who

have money and leverage. you get into a down cycle you don't really want to. use it in the city feels good and then you start believing the good times will never him and over time sixty seventy years that it builds up and then you can plays with a more it's no longer comfortable if you're going to be able to pay it back in some type of currency and that. once i've got to the him that they're going to be comfortable with your interest rates go up and then you get into a spiral and it's on but that's where greece it was and it's still myron's or spain is it really. has basically lost its access to the market without using the branding of initially it'll be france all of europe's and kimchi give us a friends of them to me isn't walker off. and then they don't

have an acceptable way to get out and by acceptable i mean dealing with the debt and dealing with a deficit if holland in france try to deal with the deficit in a reasonable manner which is reducing is dead and reducing is spending his coalition would just simply rebel and the british would be in the streets. i mean at one of the things of going to happen in the not too distant future will be the british are going to confront the fact that they don't have enough money what will happen is that the first things that go will be farm subsidies and how do i know this because there are more old people who are farmers and the old people are not going to give up their conditions so the farmers will be on the job it was now we know how to approach farmers react to almost anything they take their tractors in the street they stop traffic in paris. they burn tires in the middle of freeways

if you want to be fun at all if you're in france but they have a choice they've simply run out of money that's what happens to countries and crises the book that i'm sure jim's the milieu with but coming right or can grow this time is different talks about two hundred sixty six financial crises or will have two hundred years and all are different in how they get there but they all result in the same thing a debt restructuring of some tart and i know and i know mr maltin what your spelling out is a bad scenario for europe and i've heard in regular say that in europe this situation is going to be bad or worse it's kind of like a choose your own disaster scenario that we have really is a theory that that is after eight years after being disaster aid is keeping the euro zone together disaster b. is taking it apart either warren is an economic nightmare the bad policy decisions for the euro zone to go to begin with or without having a fiscal union and the same time we're not possible to create a monetary union and

a visible union the politics weren't there the leaders of europe were so committed these of with the monetary union we have a crisis oh that will be enough to force them to visit the union and maybe it will be yet maybe they'll bite the bullet in europe there's already the amount of commitment in europe to keep. euro zone together is really quite amazing yet somehow with a good quarter to do europe. with the european union which is basically a monster free trade zone. if you have computers with. no. lira but they don't want a market now all trading at a so that you could have one credit card you get is why good. would be a simple thing but no they're going to have one euro they see the symbol of.

a united europe and as long as they're committed to that then they'll go to disaster and yours and you know i guess i i will i'm just going to stop you right there because we do have to go to break but when we get back i know the chair records are going to want to respond to that because i think it to you may have a very different idea about how europe is going to end up so still ahead in addition jim rickards and john mauldin tackle the u.s. debt or try but first your closing numbers from the markets. wealthy british style i think it's time to write.

a new. market why not. find out what's really happening to the global economy with my extremes or no. the global financial headlines kaiser reports.

like millions of americans have lost thousands of dollars in retirement funds and i haven't had as bad as many that's not just about them it's about the need to. say i. need it. now. since this is i get the last word this financial crisis will not be turned off like a light sleep.

i've.

a. all right welcome back let's get straight back to our gas because jim rickards is co-hosting today he's senior managing director at tangent capital partners and we have john mauldin mold to me founder of malden economics with us today so before the break john molding you were laying out scenarios for europe that go from bad disaster a or b. jim records i want to get to end here because i think that you may disagree you want to jump in with your your take john certainly right that you had debt is unsustainable that pretty more money by itself doesn't solve anything doesn't solve the debt problem i was just kind of job to footnotes john one you know in seventeen eighty seven says sovereigns as diverse as south carolina and new york gave up some

of their sovereignty to form the united states of america so you're exactly right that a monetary union is not sustainable without a fiscal union because most suggest that as you said yourself maybe the fiscal union is coming maybe this is just a two step process in the elites are saying that we have to do this in stages we can't cram it down people's throats all once but over time will kind of get there and this with naomi klein calls the shock doctrine which is use a shock to drive through unpopular policy use the euro sovereign debt crisis to drive through brussels and berlin sovereignty in effect over the rest of europe so it might go that way but i have one question on what you said earlier john about actually the u.s. situation i agree completely that we have an unsustainable pyramid of debt i agree the money does not stop printing money does not solve the problem this will end badly and it will be actually none presidentially bad tash obvious you and i are on the same page about that the question i have for you is about timing i think alice have consistently underestimated how long you can kick the can down the road maybe they are kicking the can down the road but maybe they can kick it down for

a very long time and in particular if europe runs out of money you've got the i.m.f. which can borrow n.s.t. r.'s convert those two euros and lend them to europe and then finally they can print f.d.r. so there's a there's a bazooka in the form of the i.m.f. balance sheet that hasn't been as the answer to your comment on that. then i don't agree with. to get i.m.f. money for europe you're going to have to get the u.s. sure canada england brazil china all agree for their you know basic allotments and there's not a snowball's chance in ames you're going to get the united states to say we should live in bunny europe and they can't get their own act together when we have our own crisis here just not going to happen. you're going to solve its own problems absent the i.m.f. thanks to a nice divided frank the us actually has signed a one hundred billion dollars loan commitment so the commitments that are drawing

the money is different i agree with that i mean for it for them to use that commitment for europe. that would be a real political nightmare for the i.m.f. i don't think i don't think they'd want to test that they think might argue election creech that it would create perfect and i mean it wouldn't be able to get funded but in the us for years john i think would you think it might depend on the election on the outcome of the election if obama wins that make it easier for the i have to put in the bar when the us is actually signed the agreement we've agreed to do we just haven't found it yet well i don't think you have funded you've got to get through congress and congress at least in the iterations that we now have and are likely to have is not going to fund and italian or spanish but those are real countries these are not the countries that was put together in its intended form to be able to help and bail out now. let me let me do it.

i mean they they've just been the happier they and they know it and we are driving citizens says the problem is really not a monetary problem it is a physical problem and we are giving you want to carry solutions in order to buy you time to get your physical acts together if they don't get there because they'll actually get other kind that will end up being disaster mean. and mean that at that point. you have to see whether they really want to go through the austere you grow grams that are required to do that and we all know that when you start in that austerity road it becomes a soap that the eating cycle specially when you know. there are problems that none of them are going to address which is the trade imbalance in the list you address the structural problems that are in europe. trade imbalances being the first part.

comes to mind then you can play with monetary policy and don't want nothing's going to change the only way you deal with those structural imbalances is either having an serious depression so that you can change your terms of labor costs or you have a currency that allows you to go in terms of buying a car which is the war traditional ok in europe you would need to do the euro there are more were right they there is a problem mr monk and i want to jumping all think i want to give jim rickards opportunity to respond to that and then i want to move on to the u.s. because i would argue that europe to an extent distracts from the u.s. has problems at least here in washington it seems like at the line and to kick the can for this i generally respond to john i think we agree completely on the definition of the problem in the state a place where we may disagree has come on how things are going i agree that they've got a lower unit labor costs they can't do that go through devaluation the u.s. is out to cheap in the dollars that means

a stronger euro which were saying so they're not going to be able to devalue the euro but you know the average fifty year old greek would probably rather you know show a small bomb than take a pay cut i agree with that but a twenty five year old greek or italian or spaniard who's never had a job living at home is offered a chance to work in say a b.m.w. assembly plant with training benefits in a vast been financed by chinese capital there is some virtuous combination of german technology chinese capital and youth labor that could make europe an export powerhouse i'm a lot more concerned about the u.s. and china than i am about europe so then let's switch gears to the us gentleman because a lot of the similar. situations are going on you have monetary policy that's trying to make up for what many would argue is a fiscal issue at this point and this is been going on for a long time the conversation surrounding the national debt is not a new one in fact alarm bells were ringing loud and clear for the american people during the ninety ninety two election when the national debt was roughly sixty five percent of g.d.p. i want to play you gentlemen both on our viewers

a clip of ross perot. here to my we were going to an additional fifty billion dollars in an hour and a half day now it's not republicans of course it's not the democrats and what i'm looking for is who did it. there's not the democrats or the republicans that if you did it well there's enough culpability to go around i'm sure but mr mullins and i want to get your thoughts if we were able to get through the past two decades without a sovereign debt crisis in the u.s. who's to say we can't get through another two or is it the lack of urgency this time that's a signal like the calm before the storm of some sort. we've heard flip again solve the problem if after this election come january congress instead and says ok we're going to put the deficit on a glide path to getting solved you don't we can't sort of all at once but over the next four or five years we're going to reduce the deficit one hundred two hundred

billion dollars a year every year and this is our going to do it and this is the taxes are going to get raised here is that the spending is going to get cut however that works out simpson bowles in even dozen ways to do it. then we can go along for essentially every bit of the visually you could have a balanced budget and you could begin to have between growth and pain of the doesn't now which is where we were in the late ninety's but get away from that sixty five percent problem that ross perot's so long about and which is a little bit over that they had in the seventy's but resent range not counting the social security debt which i. think we used to go in that knowledge doesn't really exist and there is no trust was no black marks for the trust fund and we can get there but we have to have political will and it's going to take compromise and what i was writing about last week that i think the most important

problem that this country faces is how he'll with a deficit everything else falls out of it if you're interested in jobs jobs are going to be affected by how we deal with those. if your concern is health care that's going to be how you would have on an on this election is about the direction of the compromise. pure and simple one group is going to be a larger government involvement in the country there's going to be a higher taxes one wants to see a lower government print and that's the direction of the compromise but there has to be a compromise otherwise it won't happen and. i become rather than willing to be optimistic that we're going to solve our problems to try to figure out where they have the exits because it will get ugly and i think get ugly within a few years doesn't fourteen two thousand and fifteen the markets start realizing

we're not serious they're going to what europe and what we're going towards japan and load you know my line that i use and my book was that japan is about in search of a windshield yeah that's a great line i think i like i hate to record what you think it is because the problem i mean that's why i think and all that didn't respond i think the markets will look at europe and japan and they'll do the look at the united states not be serious about our bet is that if we aren't in the a boat gentleman if you don't mind we've seen this movie before. we know who we're just going to have. intermission and normally you could go on six seven years we are the world's superpower we were the reserve currency we control our own yeah . we'll see where you don't see it as being serious and. that's an interesting point so we have about a minute left jim i want to give you the opportunity to respond thanks john i get to agree with you on the analysis this is actually this is the easiest problem in

the world to solve and we're seeing the solution in front of our eyes which is inflation five percent place in fourteen years because the value of a dollar and a half and real terms that would basically be a one point five trillion dollar real wealth transfer from china to the united states they've got three trillion of our debt we cut the value of the dollar in half with five percent inflation for fourteen years that's like taking one point five trillion from the chinese and sticking in our pocket so inflation is the easiest way out there for us the most likely way out and that's what we're saying ah so you think there was central banks are doing now this is the course and there's going to be no real fiscal solution i going to charge you this ever this is tell me between congress and you probably just democrats in the white house they'll do a little bit of tweaking around the edges but the real solution the one the central banks are going for is inflation so obvious obvious and we will have to see i would imagine after the elections if politicians move towards any kind of a compromise on the debt i'm not hopeful but i appreciate you jim records and john wall mold in both for being here and weighing in on the euro zone is that you we

big u.s. it was great to have you guys both on. and that is it for our show today thank you so much for watching make sure to come back tomorrow and in the meantime you can follow me on twitter at lauren lyster give us feedback on the show at youtube dot com slash capital account watch as an h d on hulu at hulu dot com capital dash accounts from everyone here and our guest co-host jim records one of our capital accounts favorites thank you thank you so much and have a great night. download the official publication so choose your language stream quality and enjoy your favorites from alzheimer's t.v. is not required to watch all its all you need is your mobile device to watch on

t.v. any time. like millions of americans i've lost thousands of dollars in retirement funds and i haven't had as bad as many it's not just about this it's about me to. me ma'am. it says. that. jesus showed up to say i. need you. now. since this is my film i get the last word this financial crisis will not be turned off like a light switch. colin

. powell's. ball.

field. goal. lead. such. utter utter lead.