when it comes to the macro environment central bank policy and economic risks and their actual impact on stocks or any asset class the results don't always make sense or follow logic don't we all wish in those situations we had appreciate knowledge of the future like this one you sure knowledge of the future to play the stock or we could make treaties. why make truly and when we could make. a trillion is more than a billion. or exhibit. a reason we will want everyone to zip it because it kind of seems people some of them often do not take into account the true value of billions or trillions when they get thrown around just carelessly

right and left like six hundred billion dollars in new government revenue over ten years that's how much the debt ceiling deal reportedly will raise does this really amount to much more than squat in the grand scheme of more than sixteen trillion dollars there it is truly looms in public debt and a trillion dollar coin or two could that really magically solve a debt ceiling crisis or stalemate if it comes to that well chris martenson author of the crash course is here to talk some sense about billions and trillions and give us his two thousand and thirteen forecast there is his book the crash course you can see it right there he also has a great series you can watch online very instructive and thank you so much dr martin as always so great to have you on the show. thank you it's a pleasure to be here again yes so let's talk about the stock market because i have to say if you look at the macro news that i've been reporting over the last year and then i look at the gains of the stock market as seen in the last year i go this is not add up and retail investors we know we've seen report after report of them

pulling out being on the sidelines so the questions that you raise which are good ones which is the interesting questions are why are people pulling their money out of a market that they no longer trust and then who is doing the buying so what are your answers to those particularly the second one who is doing the buying well that has to be three hundred billion dollars question because that's how much money retail investors are pulled out over the past two years from equity mutual funds in preference they've been putting their money over the money market or bond funds or other places where they're obviously getting poultry i think unnecessarily low rate of interest thanks to ben bernanke he so who's doing the buying listen when you have forty five billion in treasury purchases and forty billion m.b.'s purchases every month that's money that's going into this when you were or have been a few problems with dr martens audio we're going to work on getting him out dr martin can you hear me i can hear you helen good good ok so just pick up when you

left off you were saying that when you have the fed buying forty five billion dollars at another forty billion m.b.'s when you have them buying these kinds of bonds and mortgage backed securities that has an impact on the stock market what is that. well it's really driving the market higher than it should be look we have the russell two thousand and all time high the dow is within a percent of two of all time highs same with the s. and p. but the macro day of the stuff that you've been pointing out on the show it's just sitting there with weak retail spending with all sorts of measures that are clearly saying that the economy is stumbling along now with this new tax deal that's in place sixty billion dollars a year coming out of people's pockets that it's just about everybody that's a drag on the economy and then whatever spending cuts should any obviously materialize that will be another drag so i don't see anything here on a fundamental basis that supports where the markets are but the prices are where they are because we now know the price of everything but i think the value of

nothing the price of everything that the value of nothing so then how do you look at the stock market for two thousand and thirteen when when you think about your outlook you know is this an indication that it's going to continue this trajectory and shake off whatever bad macro news comes our way which is likely to happen or does that mean hey two thousand and thirteen really watch out because this could really collapse there could be huge correction well if the old maxim was don't fight the fed i think we have to multiply that by some a whole number maybe ten because it's really we're not just fighting the fed at this point in time where we're fighting the plus all of the leverage that the rest of the financial industry can provide on top of eighty five billion a month more and if you told me this was going to be happening like teleported me here from five years ago i would be running around with my hair on fire. difficult to make any money a difficult money to market to make any money and so then where do you advise or

think about when you when you talk to just normal folks about where maybe they should be thinking about investing where they can both have their money safe in two thousand and thirteen but maybe hopefully get something for it you know unlike these low yielding instruments whether it's bonds or in some cases where we've seen negative yields in the last year. you know so i'm not a big fan of bonds at this point i think they're absolutely going to be certificates of confiscation again at some point i'm not a huge fan of the stock market not of these multiple maybe in some very select sectors but just definitely not generally across the whole index universe at this point in time commodities don't look like they're going to have to run at some point here because the association between commodity prices and their money printing very tight in the series that still looks good and they look forward in time i'd still like gold and silver here even though they've been getting some pretty extraordinary bear rates that have been going on lately but right now the best investment for somebody with

a small amount of money is still in their own infrastructure in their home very close to home this is a period of time where i'm worried about return of principal that return and i advise people to have some powder dry at this point in time because they do think that the chance of the downside risk here is a lot higher than missing out on a bull run ok that's that's a good warning and i'm sad to hear that trend still be one of looking for return of capital versus return on capital people should get some return on capital we've had been answer repression first so long i especially when you look at the tax breaks that are coming this set that everybody payroll tax holiday is over this is something that affects middle class americans that in fact affect everybody and of course we hear so much about the tax increases for the top bracket of those making more than four hundred thousand dollars my question the revenue that that raises the six hundred billion dollars new we're writing about how this is kind of ridiculous you know what does this really need when you look at the grand scheme of the u.s. debt and deficit budget deficit problems. so what's a measure to u.s.

budget deficit in the vicinity of a trillion dollars for next year sixty billion dollars of all of that came next year it won't because this thing is sort of staggered layered out over time but if we even got that sixty billion next year represents about five percent of the deficit so to put this in context we had of or over a billion dollar deficit back at the start of this crisis and now we've got one that's more than two times larger than that this is an extraordinary event when washington can't even find a way to trim more than five percent of that now these spending cuts if they actually do materialize are anywhere from one percent to maybe as much as nine percent of the deficit so the total range here is going to be in the vicinity of let's average it up maybe ten percent of the existing deficit that's all that could be found at this point in time it just means that we have a dysfunctional process as i mentioned when we were running up these massive deficits years ago i said listen don't be surprised when they turn out to be permanent washington can find ways to spend they have a devil of a time trying to figure out how to save and i don't think they're going to start

saving until they're forced to market conditions are going to have to force this in some ploy but we're making maybelline them there could be a while ago so it could be a while which is certainly a model we've seen in japan for example my question for you and the midst of this is that you talked about the dysfunction one idea that we've been seeing cost around a lot today especially on the blog affair and by some economist here that i've seen actually advocate this is this idea that the treasury could have a trillion dollar platinum coin deposit in their account at the fed there you go heidi well actually i think summed up pretty well when she said in her article we can bring up the headline just process today people got real emotional about this too we do have and i hope we can bring it up but she said in her article meant the point why the platinum coin or the title was why the platinum coin it doesn't even work as satire and she says missing a new coin is very much in the interventionists mode of the past four years but the fed programs don't require scouring the u.s. reserve for a plan. and creating some unnatural currency beast it can at least masquerade as an

intellectual exercise at least with the fed creating new money we kind of have this idea of some kind of intellectual exercise going on she's arguing you know with the treasury just making this magical point this is just a new era of absurdity whether people are kidding about it or serious about it what are the actual implications of doing that kind of thing in terms of inflation and also intervention. it would simply be for optics so why spend the money on even five hundred dollars worth of platinum to run this coin just minted out of plastic or something it's the same exact situation we already have the treasury prints up these treasury bonds bills notes the fed buys them the fed holds them and then the fed needs all of the excess introspect to the treasury anyway what's the difference between doing that and the treasury going over just getting money directly well they forego the tiny bit of interest that the fed skims to run its operations which by the way is not a lot of money so really there would be no difference it's just optics it would

just be a way for washington to say aha we've avoided this pesky thing called the debt ceiling through some work but it would just be it's just mental gymnastics is just a more clever way and one word about it looks like our nation's seeking to be clever rather than prudent if we're looking for tricks and gimmicks rather than a fundamental addressing of the of the seriousness of the condition the fact that we print money through one complicated mechanism or some quirky mechanism through the treasury with a coin but it's the same process so that's the fundamental question we should be asking which is how much is too much is there a bright line in the sand that we don't dare cross but if there isn't how or what are we really entertaining is risky are we already punished savers transferred about a trillion in lost revenue to savers through reduced interest payments transfer that same benefit over to debtors so that's really there are a lot of messages coming through this that are very profound such as what's our country really stand for here yes and that trillion dollar coin optics i think will

be a new low of what our country stands for but it doesn't change the fundamentals as you point out or the high jinks that really are going on when you really look at the fed doing thanks so much chris martenson author of the crash course a pleasure. and so head how founded are the claims of gold market manipulation is there more than meets the eye or not all talk to keith wineries present in the gold standard institute and we have a very important message for all of you at the end of the show first our closing market numbers. something. lies beneath.

thousands of meters of ice to draw. the line. that is a for many. but dangerous even to those who keep it to distance.

gold has been on the move down since last october and it tumbled after the federal reserve minutes came out yesterday the idea being that rumblings of an end in sight for q.e. among fed members was not good for gold now folks like dennis gartman publisher of the gartman letter writes that gold bugs who have operated on the thesis that the fed has lost control of the money supply are in tatters other gold traders

according to bloomberg expect prices to bounce back as concerns mount that u.s. lawmakers are not doing enough to control budget deficits and people want to protect their wealth one question that keeps coming up we talk about it is there more to the swings in the price of gold and silver then meet the eye or are claims of market manipulation unfounded we'll keep whiners here and talk about it he's president of the gold standard institute c.e.o. of monetary metals he's here with his views and thanks so much for being on the show welcome to capital account thanks good to be here lauren great sunny beautiful l.a. wish i was there about nice weather now you're obviously a gold advocate judging by your title what i've read of your views from what i understand you advocate for some kind of a gold standard now this puts you in the same camp is some folks who also happen to believe that the market for gold and silver is heavily manipulated you disagree with that one. yes absolutely first i want to say i'm coming from on the same side a friendly side to gold and monetary metals we're about producing the yield on gold

earning money that we are in real money and the gold standard institute were about promoting the use of gold as money and so my criticism of the conspiracy theories comes from the friendly side saying yes we believe in gold but in the mainstream we have some perception issues and i think these conspiracy theories are not necessarily helpful why do you have it just prove them why why do you disagree with them discount them as conspiracy theories ok so i brought a couple of graphs can we put those on the screen yeah we can get out of those so we can take up the graph where the gold price overlaid with the number of gold futures contracts we have that right now so what do you think that this shows. i think i think it's important for people to understand when aig so this is a graph showing the number of the open interest that's called the number of gold contracts contra contracts excuse me outstanding was the green line and then the gold price overlaid with you know mine and it's important for people to understand that when you sell there are two different ways of selling a gold future there is

a sell to close so if let's say you bought a future on speculation because you thought the price was going to rise and then the price starts to go against you you sell that contract and that is going to close that contract chances are the other party on the other side will buy it back and then they make a profit on that the other way is of course what's alleged in the conspiracy theory which is you could create another contract out of thin air and sell it so what this graph is showing if you put that back up on the screen for a moment yeah sure is that according to the conspiracy theory the price falls because the big banks are creating new contracts and selling them but what we see is as the prices falling and particularly want to focus on the latter part of december when i put this together this was the most recent price drop in gold. i didn't have a chance to see the price action this week when i prepared this material but we see that open interest the number of gold contracts is falling and that suggests that

it's what i call naked longs people who speculate with leverage on gold futures or buying their contracts back to me selling their contracts and that's why we see the open interest declining ok so the the the conspiracy theory doesn't fit the data so let's i don't what i suggest and i'm sorry you know that i had. what i suggest is that people think of this a different way then the conspiracy theory says well the banks are naked shorting it and they present the banks as having a lame excuse well we are hedging our our metal it doesn't make any sense why would you buy the metal and had it so what i suggest that people consider is that the banks aren't hedging their mettle they're. arbitraging in order to make a profit the banks are captive like everybody else to wall street and they have to have a good quarterly earnings report and so what the market is doing is that saying ok if anybody out there that has credit of valuable to them you can buy a gold bar and simultaneously sell a future against it and they were to make

a profit for carrying that bar holding that bar and so i think it's important and this is my second graph to take a look at the difference between where the spread between the futures price and the spot price yeah it's called the basis yes so let's bring us up so this is this shows the gold price and it's overlaid with what you just explained is the basis which is the spread between the price of gold futures and the price of gold medal in the stock in the spot market so how does this show there is not manipulation going on in the market as you contend. so first of all it's really interesting to note this is so the basis is quoted as an annualized percentage this is what a bank can earn by buying spot gold in any given day you can see the green line shows you the value and it roughly is between point six percent and point six five percent pretty much now then that's for a whole that's for buying spot gold let's say on the eighteenth of december two thousand and twelve and selling a twenty december twenty third teen gold contract so it's roughly one year so by

comparison if the bank were to buy a one year treasury security those things yield less than point two percent so from the bank's perspective it's simply much more profitable to carry gold than it is to carry a one year treasury note or treasury bill but the other thing that graph shows is that if the banks were so the conspiracy theory says the banks are selling. futures naked and if that were true then what and driving the price down as you can see from the gold mine you know the prices has been dropped over one hundred dollars certainly from september and i think that you know peak to trough from mid november to december over there is almost one hundred dollars eighty dollars something like that. if that were true that would push that green line down because the banks are only selling the future and they don't have especially in silver they're they don't have the silver to sell so they're selling only the future that would drive the price of the future right right you know one hundred dollars down while the spot

price is still holding steady so that green line that spread a future price amount of spot price will fall completely off the bottom of that graph and become negative and it's called backwardation i was a that's called backwardation i know we don't have a lot of time to get into that but what you're arguing that here what's the relevance of it just a simple explanation well it's just like in physics you know and einstein says gravity is going to bend light a certain way or something like that you like to get to the point where you can then absurd. real data and say well if the theory is true we're going to see like going to the left and it's a serious false we're going to see right like going to the right so we now have a situation where if this theory was true whenever the price dropped and the and the conspiracy theorist say that it's manipulation which is to the basis completely falling off a cliff into the abyss and we don't so what i would suggest to viewers is on our website monetary dash metals dot com we're going to have a follow up piece for viewers we can present a lot more information about backwardation and go into more depth and we can change

our thinking and quickly i just have thirty seconds left but what do you attribute their job in gold recently to if not to manipulation what's your theory if you have one twenty seconds to about yeah here. that's interesting and obviously everybody enjoys having an opinion and myself included i think we have to resist the urge to say that every blip in the market has to have a easily point out of all reason that we can say oh well that's it personally i suspect that liquidity conditions are getting tighter both in china and in europe and people have to liquidate assets especially where there's a firm bid as there is in gold and silver versus you know bonds in europe and other things where as much harder to liquidate so they find whatever is not nailed down and they look at it and you know you see these sell offs i think going forward it's obvious that the price of gold and silver is going to continue to rise we shouldn't cheer that because that's really not gold going anywhere that's the dollar going down now and i'm cycling we should do what we're going to have to and if there were

out of time i don't mean to cut you off but you got so much great insight and i really appreciate you being on the show really interesting stuff already thank you take care you. let's wrap up with your feedback and dimitrius joining us for this one because what's more fun then having just me respond to your feedback what's more fun is having the enemy to respond so gibson the log said earlier this week i would love to see colin roche come into the studio for an interview with some better audio his approach seems very interesting there's got so many likes it got more than a dozen at least the last time i checked which was a while ago and we're so sorry that his audio wasn't better but yes he has such

interesting. insight and you can always go read more of it on his blog he has pragmatic capitalism that's his blog t.w. skeptic. represents what many people felt about dimitry and my discussion about the dairy cliff he or she said our tea is anti milk the argument is because we're the only mammals who drink milk of other animals how is that a good argument we also eat rice and beans which are seasoning grains which can be eaten raw and no animal eats if you can explain what the health issues are then why even give an argument there is nothing wrong with raw milk the problem is government doesn't allow farmers to sell it well thank you for feedback let me draw these people off the comment cliff because i would like to point out that there are plenty of health problems with milk to meet you maybe you want to weigh in but i was looking at the physicians committee for responsible medicine they say prostate and breast cancers have been linked to consumption of dairy products contaminants from pesticides drugs hormones both natural and the synthetic are found in count milk type one diabetes is linked to consumption of dairy products they pose risks

for children encourage obesity. i mean look the reality is if sixty percent of adults. just. nonstop as a result of something wrong there. is a coach your stomach worse than all of those health problems. then it was in the dominican so it should be with you there are a lot of that unfortunately that's all the viewer feedback we have to get to because we have a very important announcement this is actually hard for me to say i'm going to get emotional this is our last capital account this is our last day on this show it's been an amazing run a little over a year year and some months feel like a lifetime because we've really poured so much of our heart and soul into this and it's time to move on to new things and i just want to thank so much all of our viewers who have been so supportive all of our guests who have been so supportive

the ones in the beginning who gave us a chance when they didn't even know who we are our staff for being amazing and putting up with us our producers our entire team dimitri you've made my dreams come true and i don't that something called me like was so that before then i guess i would just say the man i want you to continue because the audience has known you for so long i just so very was very grateful i'm very grateful to everyone and so the audit especially you guys have been really remarkable it's been a real pleasure to produce something that we all enjoyed something that i felt was missing before i came to our tea and worked on the show create a couple account and i feel you guys really i thank you for coming and watching every day and and showing the the ability to. to look for something deeper something deeper and there's so much for our team for giving us the opportunity to do the kind of show that we wanted to do the kind of show that

pushed the envelope and did some things that are conventional on t.v. like long in-depth interviews which ended up being a huge hit and so i just can't thank our team enough for the opportunity to do that and lets me drag on and on and droll on about this we are going to say goodbye for good because that is our show for today thank you so much for watching to keep looking for ways to find those to get whatever may stand you know you can follow us both on twitter at lauren lester and dimitri at covering delta go like our facebook page one last time facebook dot com slash capital account will have a message there in perpetuity you can watch our videos at youtube dot com slash capital account and hulu dot com slash capital dash account everyone here at capital account thank you so much for watching and have a great night. download

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