well the. technology innovation. developments around russia we've got the future are covered. by imax kaiser welcome to the kaiser report double double toil and trouble fire burn in college or and bubble yes people the three witches of wall street lloyd jamie and jamie have spoken they say that into their cauldron of perpetual bubble will forever go your toil and trouble and that your economies and your wealth will burn in the fire of their witches are dead. stacy. yes max believe it or not after years of zero percent interest rates just as we predicted world the risks fresh credit bubble switzerland's be i asked warrants

asset prices across the world have risen to the heady levels not seen since the credit boom five years ago and maybe losing touch with economic reality yet again the bank for international settlements is war and that's exactly what i had as my top story i love when we're thinking like exactly the same room the same brain week they see you. i took this out of the paper today and this is exactly what we've been talking about the assets in question of course would be sovereign bonds for example that are trading at three hundred year highs in the u.k. are two hundred forty year highs in america and the yes which warned before the collapse of two thousand and eight that assets were in a bubble warning again so people say you know all those zero percent interest rates didn't produce any inflation so says paul krugman and yet the inflation is on the balance sheet of these central banks that have been buying government bonds to

create the illusion of economic growth and now we're headed for a massive. collapse the biggest collapse in history bigger than the tulip bulb collapse bigger than the south sea bubble collapse bigger than the mississippi company collapse bigger than the nasdaq or collapse the biggest the mother of all collapses. and they also point out that investors are not being rewarded for their risk they're taking so they don't seem to understand how much risk they're taking for example yields on mortgage bonds have fallen to the lowest level ever recorded spread some corporate debt have narrowed to the way for thin margins of two thousand and seven even though default rates are currently three times higher than they were then for junk bonds and twice as high. investment grade companies but this is the genius of this particular central bank enabled bubble and they really over a debt of gratitude to bernie made off because the genius of bernie made up is that

he offer ten percent a year in interest very predictably he didn't offer huge rates of return so people assume that it was safe people assume that because bonds are yielding so low that they must be safe because people don't understand that a. bond is a high priced bond but they don't understand the relationship between interest rates and bonds asked ten of your friends the interest the relationship between interest rates and bond prices and i guarantee you ten of them will get it wrong this is how this is being set up for again the biggest ones confiscation in history part of the problem is as they mention it's insurance funds and pension funds that have money that they have to invest by law they've got to invest it somewhere right and then they go on to mention that because of the zero percent rates. they need a return somewhere so they're looking anywhere even if they're not being

compensated for the risk they're taking this echoes events from two thousand and six to two thousand and eight when the quote unquote savings glut flooded the world with cheap capital compressing yields and putting pressure on insurance companies and pension funds to buy mispriced greek or us icelandic debt for a few extra points of ilda in order to match their future liabilities side this is the problem of big banks like goldman sachs or j.p. morgan or deutsche bank as being the conduit between the government's money printing activities and the real economy they tend to guide that money into areas where they make the huge profits and those are typically areas that are not economically sound but they can package and huge huge credits or commissions and they've done this on a gargantuan scale and totally destroyed the global economy you know back in two thousand and seven the bank of international settlements released a similar report warning about especially iceland and the carry trade going in

there and what was going on there in iceland to explain this magical bubble in their economy was explained to them by coutts and bank chief economist oscar johnson in a paper called the icelandic economic miracle where does the money come from this is where in the march two thousand and six max and he highlighted several things that were all magical that they you know that their economy because of the reforms they brought in because of the great investment banks they have they're all sorts of things explain why a thirteen billion dollar economy was able to buy up much of the u.k. high street and one of the things he also knows is that iceland is a european country with an american labor market the nation may not have more than three hundred thousand people but in terms of the labor force it works like a population of five hundred thousand and that was the myth of the time. they were super men and when markets get out of hand people develop these god complexes even

lloyd blankfein said he's doing god's work because he was being rewarded to commit massive fraud and you mentioned the carry trade business you know based on the fact that the japan japanese economy had gone into a zombie economy thanks to pressure from the central banks and people can borrow money from the zombie at near zero percent and then put it into a country like iceland and make the difference in the interest rates the interest rate arbitrage has its call but no lessons were learned from the mistakes from having central banks create zombie countries and zombie economies and creating malinvestment and enormous bubbles it's become much worse and the way that they get away it doesn't justify this is saying we have much better quantitative analysis now we have better algorithms we have more firepower we have a cheaper cost of capital and this mount vesuvius or mount hecla of global bond catastrophe is here it's now and it's going to be spectacular and probably no

country worst then loved. well at that time it was only japan and switzerland that had alter low interest rates and a quote from that time two thousand and seven when max and i made a film called money guys or to go up there to iceland to look and see what was happening in their economy a quote we read in our film was from glenn stevens who's the governor of the australia's reserve bank he said there is something very strange about a three country referring to japan giving out free money this has an effect on global markets it is by no means clear that it is a healthy state of affairs to persist so as we see right now what happened across much of the world was part of that carry trade that collapsed around the world and sent shock waves of debt collapse around the world right the credit froze when it became clear that this was a ponzi scheme of bernie made off like ponzi scheme and not actually cannot mix. the difference between two thousand and eight today and today is that the rich

people the sixteen hundred billionaires the six hundred thousand multi hundred millionaires with cash on hand are buying gold and barclays here in the u.k. something of the biggest gold storage vault outside of fort knox and the people buying gold are buying it for one very simple reason they're scared to death and they should be because they're about to watch the biggest global catastrophe in history and they're buying gold out of fear so now here's the conundrum both bonds and gold are all. bond an all time high gold trading and i one of these two is not going to make it over the mountain and that one that's not going to make it is bonds so i referred to this film we made money guys are about iceland and i want to show you the actual how this trickle down magic thinking from the economist there in ice it was all screwed johnson in our economy says people like paul krugman who explain why the stock market is so high right now because it's a miracle it's a miracle economy in obama's economy right here going back to two thousand and

seven when we were in iceland here is what the teenager who had just graduated from high school which is why they dress like they are this is what they had to say and what you're going to be. right how is it possible you only have three hundred thousand people that's going. that all those nails corrupt the children you know they get the children of buy into the mythology and they're the ones that are sent off to wars to to die for the broken myth of mythologies or to buy into economic mythology and of course paul krugman is a witch doctor with shrunken heads are surrounding him in a necklace of old economist studies destroyed any bases his entire thinking on the methodology and philosophy grounded in which doctoring. i want to also point out that after the collapse of iceland up to iceland when michael lewis of vanity fair

he wrote a piece and it got a lot of attention that the icelandic people some of them believe in something called little people they do believe in elves but they also believe in a people which many westerners refer to as little people but are actually called folk which means hidden people their hidden people much like our hidden economy our shadow banking system where all our wealth is allegedly stored and this is a recent story from iceland for example max icelandic town hopes angry elves have been sued by songs it is hoped that elves and hidden people around the northwestern icelandic town of boken bark will start to calm down again following their recent dangerous pranks and humans subsequent effort to appease them so apparently some rocks fell onto a village and it was because of construction but the local thought it was because they didn't ask permission from the the hidden people to build their love they're the only ones of paul krugman people of iceland that live in cracks and crevices of

the volcano they believe in the invisible economy and keynesian stimulus packages well what happened is the rock stopped falling once the school kids were let out of school and they sang this song to them so they believe that it stopped because people sang the song to them so get a look at our shadow banking system that keeps throwing rocks at us financial rocks with the flash crashes and sudden tumbles in the market and and threats of all our wealth of operating the manchurian coin trillion dollar cooling this is a tweet from ed harrison and he's referring to this notion that's now happening in america to deal with the fiscal cliff you know things being thrown off the cliff by the hidden people right so there's supposed to be a platinum trillion dollar coin that will magically solve our problem no it's called monetizing a debt with precious metals which is going to happen. anyway so you can call it the magical trillion dollar coin or a return to gold standard or

a de facto return of the gold standard when the people in countries around the world simply trading gold and silver and platinum and ignore the paper money volcano governed by invisible people in iceland q e three treasury styles how credit write downs dot com calls that the treasury mints a trillion dollar coins the treasury deposits the coin into the treasuries account at the fed the fed asset the coin and liabilities treasuries account increased by the same amount future deficit spending by the federal government could thereby continue to be carried out by minton koreans and depositing him them in the treasuries account at the fed this is the equivalent of us sitting around a hidden people do you be do you we don't kill you threw rocks at us oh so back to our gold or silver standard you know they're saying where you get there by continuing the current situation but backing it up by telling dollar platinum coin by the way why don't we just go back to the precious metal standard oh yeah why don't we just do that all right stacey newman thanks much being on the kaiser report thank you much i say to the second half of me talking to david smith of geneva business insider dot blogspot dot com about alice in switzerland.

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welcome to the kaiser report imax guys are time now to turn to david smith geneva business insider dot blogspot dot com david we recently spoke to you about that swiss currency pay to the euro what's the latest on that peg well the peg was established if i remember correctly about twelve or last year so we were just through the first verse free of this decision but if you look at the situation today with the pag in order to maintain the relative weakness of the swiss franc interest rates have been lowered to virtually zero the central bank has embarked

upon a major. acquisition purchasing plan of euro's in particular the end result of all of this novel is that switzerland is holding about four hundred fifty billion of foreign exchange reserves now to try and prove to number that that in some kind of perspective we are talking about you could buy two thirds of apple the biggest corporation in the world for that you could buy general electric twice over and goodness knows how many times you could buy general motors so the question then is how the. how do you deal with this large amount of money and some ideas have been say set up a sovereign debt fund would be one of the biggest in the world already capitalized four hundred billion it would be four times bigger than the one that everyone was gasping at with libya for example but otherwise what we're doing is we're sitting with a pile of paper and government bonds and countries were those hold them see is in

question and we know that the countries involved are printing ever more money i want to talk about the sovereign wealth funds for a moment david you have of course one in norway which is very very big which is serving the country well you have one cutter believe which is a very large and they're able to use that for strategic investments around the world and you're suggesting that's what's real and could have won maybe if they played their hand a little bit differently why don't they have a sovereign wealth fund it sounds from what you just said as if they could set one up isn't one that be strategically in their favor well i think that in stead of just really reacting to market conditions the is no real strategy i don't think in this other than trying to maintain the currency peg and no one really thinks much beyond it and the other thing that i'm staggered about is that a little switzerland is a country which has many good qualities and you can vote on everything from up to

what time of night your neighbor can allow his dog to bark when someone goes and spends four hundred to five hundred billion of taxpayers' money there is no consultation to toll because of course the central banks independent and the only thing is no it is independent to its actions but it's not independent in the consequence of those actions fall upon the citizenry now as a percentage of g.d.p. switzerland what does that number represent we're getting pretty close to one hundred percent of the country's g.d.p. what about. percentage of debt held on private bank balance sheets as a percentage of g.d.p. and also the public g.d.p. how are those numbers and switzerland these days to the public that is. about the lowest in the always he d. countries i think from memory it's about sixty percent and as far as the private banks. are not too sure i don't have access to that information course that number would be hard to get because of the swiss banking secrecy laws i would imagine

would be part of the reason why that number is not widely known however these laws are being challenged from countries like the u.s. for example which has gained entree into switzerland and is now completely changing the banking environment there by exposing previously secret accounts and usurping the laws that would make it illegal to bypass the secrecy laws but nevertheless the u.s. is seemingly almost targeting sorts of land while maintaining in the united states of course is now the biggest country in the world in terms of the various black market shadow banking operations and money laundering we know. banks in america now having like wachovia which is out wells fargo half a trillion dollars of the mexican drug cartel money laundering was there a big kind of scramble for that kind of money laundering business that the u.s.

wanted from european banks and as such targets what someone you know i think is a convenient target i think that's the first thing politically it's very easy to sell the idea that switzerland is all bad i read the moment into the development of the u.b.s. where they have decided to cut back i think they have understood the american environment will be made impossible for swiss banks in number of other supposedly too big to fail banks. because at the end of the day there is yet another inner circle even more protected too big to be to fail banks who benefit from the protection of the i.c.c. the sea f.t.c. and other many other institutions which are designed to basically monitor and control what goes on but they also decide who lives and who dies and if you look at u.b.s. his decision to withdraw virtually from the fixed income business because

you know banking business i think one of prudence on the other because they realize that that game is not going to work for them very much longer because the powers that be want someone else to be playing that game but you're describing there is a hierarchy that one sees in the mafia so the low level thugs get busted but the captains of the mob continue on and out what about the accounting firms because. of course after the enron scandal arthur andersen was put out of business because their involvement in that scandal but of the remaining big four they don't seem to have learned the lessons they've got another major scandal with h.p. and their deal with. autonomy a software company where the accountant in charge of that deal a gross negligence failed to spot major inadequacies to the point of outrageous. transgression of anyone's idea of what a accounting standards should be how coul the accounting these big four of them

remaining accounting firms scaped. any scrutiny at all they seem to have completely the lighted thrill this conspiracy that they're involved with defrauding millions of people around the world as part of their financial crisis i think basically they're like screen of fish following the whales in the whales of the major banks and they make huge amounts of money out of the financial sector there are only four of them and all of them good sweet deals the senior partners are paid an absolute fortune and you know it's not quite on the scale of the top bankers but it's very very very nice living and the basic messages you know don't rock the boat too much and. i originally was a chartered accountant for way back when things were done a bit differently but i've seen in my career you know the kind of firms and partners being put under pressure or partners who are being a bit difficult being edged out and put on two different cases so it is

not immune to let's call it political pressure i don't think they're all virtually dishonest but they also have an issue that. they have a kind of organization chart which means you've got lots of very junior people who don't understand too much you know processing and filing papers and basically providing great big thick files which would switch to protect the firms from being sued so that is and then if you look at the overriding monitoring agency for the accounting profession it is of course that fount of honesty integrity and professionalism called the i.c.c. so one can hardly be surprised that these guys are kind of bent round their little fingers of the very big clients ears phrase overtly dishonest now what we've seen

over the past ten fifteen years. i guess you could call it a game of honesty limbo. in that every six months every twelve months the standard of what qualifies as overtly dishonest is lowered and then you have the bankers and the accountants and the fund managers do the limbo or they get underneath that new bar and the ones that get through are considered to have not committed any overtly dishonest acts but the bar keeps changing and they keep rewriting the laws they keep pressuring politicians that give them exemptions so how from how far into all this idea of honesty is a race entirely from the financial markets and by that i mean at the central banking level if there is no need to possess any collateral at all on their balance sheets if there is no end to quantitative easing if there is no accounting standard whatsoever what professions the global economy from becoming an institutionalized

kleptocracy run by technocrats and a valid larcenous thick wall street criminals. i think the answer is nothing you know that if you if you take the role of the accounting profession they have already accepted that things can be mark to market in any other walk of life other than and the banking profession would be laughed out of court they're also having to the banks are going concerns because if any of these assumptions were actually challenge them taken to the logical conclusion. to my belief or all of these major banks would simply collapse overnight so you know the lie has to be continued. and it's in some ways it's not for the accounting profession to pull the whole system down to is that they are the observers after the fact of what is being done the people who are actually responsible for the very clearly and clearly the banks

the central banks and the politicians and the kind profession at the very best. is an observer in a rather group task. development in the financial world he said recently that bank regulation is being used as a tool of foreign policy soon after you said that david cameron is a foreign policy speech to promote exporting city of london fraud lab right on this notion of banking regulation and. deregulation used in this manner the difficulty with the you know the various applications of regulations are that nobody in the system actually trusts anything anymore and they realize everything comes down to personal issues of you know does this guy like you does that company like you are we playing the game correct late son let me let me stop you right there david search because what you just driving is a royal courts of courts and the sec offense that's going back to the middle ages

now so everything from the enlightment going forward we're getting rid of no i think we go back to the emperor nero it's come to the point where. there are people in the financial sector who can just put the thumbs down and destroy major institutions i mean lehmann was a classic example of the fact that an institution can be destroyed by a very small number of extremely powerful people and everybody is well aware that another limon event could happen at any moment and especially all the banks and institutions and insurance companies and others who who know perfectly well that there are fundamentally flawed and probably bankrupt they can be the next one to go down so they all the old play the game it's like alice in wonderland they keep dancing. you know waiting for been to come and hoping that midnight doesn't come sounds like alice. economics david smith thank you for being on the kaiser report

it's been good to be here again thanks a lot and i was going to do it for this edition of the kaiser report with me max kaiser and stacey erbert i would think my guest david smith got to say i mean email please just so it kaiser report it r t t v dot are you guys are saying but you know . well. technology innovation. development around. covered.