leaders say go shopping because surely then we will all become rich and so we eat and consume eat and consume we consume we consume housing and we have bubbles and housing and bond bubbles and equity bubbles and tech bubbles and green bubbles eat and consume transact and print but the cargo while the cargo that never actually gets there. yes max now everybody knows we've d.n. duster allies so we're post-industrial and just look at detroit and we seem to have forgotten how it is that we built these big economies how we made these airplanes and sent men to the moon how we were able to create these and like we saw in the pacific islands there was a lot of cargo cult activity there because during the world war two all these japanese and u.s. military bases were established there and the. tribes there saw all these planes

coming in and the planes brought with them all sorts of material wealth cargo and in an attempt to attract further deliveries of goods once the war ended followers of the cults in these pacific islands and gays in ritualistic practices such as building crude imitation landing strips aircraft and radio equipment and mimicking the behavior that they had observed of the military personnel operating them so the islanders began concocting like headphones meet at a coconuts and would they would sit out in a you know in this sort of fabricated control tower they would also waive the landing signals while standing on these crude runways that they had built so they would be waving to planes that weren't there but thought by the act of doing that the plane would deliver some cargo material wealth to them ok so we're in a parson industrial society where money printing is not creating any growth. trillions tens of trillions of new dollars and yet euro's printed over the past

couple years two years but there hasn't been any sustainable or meaningful g.d.p. growth however the people in charge like the cargo cult people they mimic the actions from when it did work it used to work that if you hit the print button it used to generate some g.d.p. growth but it doesn't work anymore but it doesn't stop them from like a mad cult continuing. to mimic what those doughs actions that seem to be correlated to g.d.p. growth well it was a little bit the opposite the g.d.p. growth came first we were building things we were manufacturing we are creating wealth and because of that there was a demand for more currency to keep the system operating so they remember that they had to print a lot of money that the money supply was booming along with the economy and now they only remember that there was a lot of money maybe that's the answer if we keep on printing money then the wealth creation will come afterward but it's cognitive dissonance isn't and if there were

going to mimic an action to jet generate real wealth they would maybe do this which is selling or they would do this manufacturing something at the metal printing factory but no they do this this is money printing which is not generating any growth and they don't understand why because they don't understand and they don't know how to manufacture anymore in the u.k. or in the u.s. they don't know what it means they don't know where shoes come from they don't know that there used to be a place called a factory where you made a shoe and the person making the shoe got a wage and that created capital that created something called free market capitalism they don't know anything about that anymore they just see goods arriving at the shops they just use debt and credit cards to buy those things and to get more of that debt into their system to buy more stuff they mimic the central banker who's just doing like a cargo cult they're mimicking an action oh oh you know do this do this so at every

level whether it's government individual or corporate or banking sector we all do behave in this way we're putting like coke and earphones on and sitting up in a fabricated control tower and that is supposed to make us wealthy whether we're participating in a housing bubble or printing at the central bank or transacting member for the banking sector they think that just transacting because. there were a lot of transaction when there was a lot of real deals and business and things happening closer they would come out carney is testifying in the treasury select committee here in the u.k. recently and they asked him what about this economy how do we get things going and like a part of a cold cargo cult he put on the coconut ads and he started making gestures like bringing in the cargo planes and doing incantations like a witch doctor and of course the people who were asked him questions were like that's fantastic when we get the stuff when we get the goods and he kept mimicking these arcane symbolic gestures that are actually not tied to anything having to do

with the real economy and here we have a headline from lord adair turner who is the outgoing head of the financial services authority so here is one headline on that level lord turner lets the cat out of the bag prints money to fund spending lord turner the departing chairman of the financial services authority has defended finance and government spending by printing money arguing that within limits it absolutely definitively does not lead to inflation i read a story and the telegraph that gave a history of governments that have resorted to printing money to stimulate growth didn't lead to inflation they had five years examples in four out of five examples it led to the higher hyperinflation with the exception being the us after world war two but of course they had the world reserve currency that just won world war two when there was a gold standard so you can't even include that in the examples but in the all the other examples it most definitely did lead to higher inflation and in some cases

hyperinflation we already see it here in the u.k. the real inflationary is now just around eight percent for people who are shopping in the high street for food and energy not the two point seven percent that the government erode is sleep reports so now we go to the normal human individual the participants in the economy they are in a post industrial economy they forgot how to create wealth how to make a living so they're out. they're on the runway with their fake signals hoping that and this is the act of using credit cards right because they don't have jobs since one nine hundred seventy one jobs have plummeted real income and wealth have plummeted in the united states this is not the return of disco. no this is this is a cargo cult symbolic message of degradation it was disco we could go for real genuine inflation because back in the services yeah the that was when you actually add inflation well the united states of debt addiction sixteen point seven trillion dollars that is our current national debt twelve point

eight trillion dollars that is the amount households carry in mortgage and consumer debt we are now addicted to debt to lubricate the wheels of our financial system there is nothing wrong with debt per se but it is safe to say that too much debt relative to how much revenue is being produced is a sign of economic problems again you know back during world war two during these original cargo cults we had a lot of debt government debt but it was going into building goods and services and infrastructure and now it's just all we've got rid of all that the things that might lead to wealth production eventual instead we just have the debt and we think accumulating the debt will somehow make us well things i mean this is the idea of doing need more aggregate demand or do we need some good supply so the keynesians out there believe that it's all about aggregate demand because seventy percent of the economy is consumption so we need to stoke consumption with cheaper rates but without supply stuff just being manufactured for wages that would foster savings

would be of course the backbone of the capital so you can have capitalism without capital then if everyone is trying to. get demand from each other you end up with what we have now which is a currency war well you mentioned the savings and one thing that ben bernanke who calls himself a student of the great depression when they look back these cargo cultists. the central banks look back at the great depression they see that savings rates went up really high and they think savings causes deflation so they think that if we target deceiving if we make savings bad then it will disappear and then we'll have a miracle economy the system is now set up to punish any type of savings good luck trying to stash your money in a bank account out run even the steady pace of inflation take a look at the current savings rate for bank of america and there you see point zero one percent well herself hating capitalists there they're not socialists per

se although you would think they were because the banks live on welfare and out of the state and there's no price discovery and it's all fixed but it's not really about socialism so much as being a self hating capitalist they like the idea of capitalism but they don't want to actually work to generate the savings to be a capitalist they just want to buy they want to live large they want to live like a rich couple us but they just never want to work with us a cargo cult as you can even call it capitalism because they don't know what the right to go they are toward you having rights like we were cattle used to be capitals and they know how to act like oh it's post-industrial post work it's not even about work it's not about faking son about i don't want to work i just want stuff it's about i want to do magic dance and i want stuff yes just like the pacific islanders who saw magically these men arrive in big cargo planes and all sorts of canned foods and goods and stuff happened and they thought it was that action of the guy on the runway that brought the connection between work and

savings and stuff is completely severed gone it's completely gone now there are also the banks operating and the corporations operating on this whole level of islanders not uncertain where the wealth came from did securitization lead to risk your corporate lending this is yallow santos vice president in the research institute six group of the federal reserve bank of new york their research showed that during the boom. years of securitization corporate loans that banks securitized loan origination under-perform simular and securitized loans every state by the same banks additionally we report evidence suggesting that the performance gap reflects looser underwriting standards applied by the banks they securitize and what they found that they moved to and originate to distribute model from and originate to hold model and therefore all the standards were not because and then they forgot because they just thought securitization this act of securitization was creating wealth before the nine hundred eighty seven crash there was a man named mike milken who came up with the idea of original junk you don't need

to originated a rated by the way for it to fall into junk just sell junk from the get go this created a ponzi scheme that led to the one nine hundred eighty seven stock market crash of twenty two percent i have to and i was working on wall street at the time and i have to laugh when i see people refer to a one percent move down in the stock market as being you know a crash on the dow jones is down one percent turnover through a twenty two percent crash was all i did that's a crash ok that's a real crash for men. thanks so much of being on the kaiser report thank you all right stay tuned for the second half speaking with sundeep jaitley who is definitely not a member of the keynesian cargo cult. well

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to find out more visit arabic all teeth dogs call. welcome back to the kaiser report imax keyser time now to turn to sandeep jaitley of the cancer research dot com sandeep welcome back to the kaiser report thanks very much mike all right sandeep the big news in town mark carney he was at bank of canada now he's running going to be there on the bank of england your thoughts i haven't really given much thought to a new governor of the bank of england he's been quite very suv in what he's going to be attempting to be doing. but he seems to be the currency debasement kind of philosophy before we get into currency debates but let's kind of put this into a broader context because these days people need to have

a signal in terms of what schools are from and in the case of yourself to your broadly speaking austrian economist through and mark carney i think we it's hard to put him into a school but he's definitely from a neo liberal chicago school milton friedman type of economist who believes in the the sanctity of economics as a hard science and let me ask you to start he uses the term for example of the u.k. economy needs to. achieve escape velocity and i think i know what he means by that but escape velocity is a term from physics and has a very specific meaning as an algorithm for a rocket to achieve escape velocity you know isn't this another example of an economist trying to sound like he knows what the hell he's talking about absolutely i can't disagree with that i mean what what what what. does this cape philosophy mean in the context of economics it is it doesn't mean anything i think what it's what he's trying to say is that the economy needs to grow and to grow the economy

we need to print more money and are willing to sacrifice the risk of having any inflation to create this growth but the problem is that we've had thirty years of this thinking. and every single year from the reagan thatcher onwards the amount of debt it's required to create one unit of growth has been ever increasing almost exponentially so we're at a point of hyper inflation well they don't know what to do this different so they have to portray it in a different way so all of this management speak all of this kind of this nonsense speak i call it is just hiding the fact that they're doing the same old stuff that they as you said they've been doing for the past thirty years more when i ask you about schools of economics austrian school of economics they do a lot of work and describing the credit cycle which leads ultimately to failure and this is very similar to what he. describes in his work and he was very active in

the seventies and eighties is there a connection between the austrian school is that a good model to look at in terms of where we are with this money printing and possible that collapse. the austrian business cycle theory as it's portrayed to everyone who would be watching the show for example is that you extend credit too much whatever that means and you get the retraction afterwards and. there's no limit to the volume of credit that an economy can handle what happens is when you left that credit incorrectly in the sense of lending out short term money on a longer term basis you know say for example if you go to a four year mortgage you know you're actually that's being financed on at most one year money so every time a year comes up you have to refinance the mortgage but the actual maturity of the mortgage is much longer than any of the duration of any of the funds that's being

used to to fund let me jump in because you're describing what some would call the problem of duration risk and in the case of central bank. they've got a lot of debt on their books they say they can unwind bernanke he says it can unwind in fifteen minutes but during these past few years they've changed the composure of the debts on their books so that it are they are now i'm different maturities then would then they were a year ago two years ago five years ago and in fact it's not the same debt on the way out as it is on the way end and i would use it in the analogy of if you were to swallow whole a porcupine. the quills are facing out as you swallow so it goes down relatively easily for if you're trying to swallow a porcupine but then pulling it out the quills are now going the wrong direction

and that's your duration risk i realise it's a bit of a poetic attempt to describe this but how would it would you build on that the problem with our economy apart from credit is the fact that we don't match maturities of the liabilities properly so that's that's exactly that so when they say oh we're just going to keep the balance sheet at a steady three hundred fifty billion it implies that there's no flux going on there but you've got bonds expiring and they'll need to by definition reinvest those proceeds otherwise the balance sheet will shrink so to say that we're going to keep it at a constant level zero and then we're doing this thing where we're selling all short term bonds and buy well you have to do that you have to keep on pushing up the time because if you let your five year bond if you're in a billion pounds worth of bonds with a five year maturity but you want to keep them for ten years you're going to you're

going to be in a quandary at some point what do you do you have to create five billion pounds worth of billion pounds worth of bonds that expire it just to keep this whole sure of going ok so we're just grabbing that the fed takes on a lot of debts and then they actually process those debts in a debt process or on the federal reserve bank and they turn into something very different than what they started at and the idea of exiting is vastly more complicated than we are led to believe that the way this shows up china in the let's say the economy that people see the visible economy is that of course these debts overlap to a great degree the bonds are held on various banks' balance sheets and these bonds on various banks' balance sheets are priced at par they're held in the books at one hundred cents on the dollar but if we're saying the. the credit on the fed's books is impaired and in fact it's nowhere near what they say it is then para pursue to use a banking term with that statement we can say that the bank's bonds on their balance sheet is equally impaired and that the problem with letting the debts on the fed's

or the bank of england's books expire disappear is that you have a mirror effect in the banking sector which then will have to come clean and say you know what our book value is not what we say it is our balance sheet is not what we say it is we are in fact technically insolvent our stock shouldn't be worth one hundred sixty billion like j.p. morgan if we were dizzy you're right you're right i mean. they're not going to on wind this for a very long time. i think of the order at least another five more years if not a decade now we already see in the u.k. prices moving up for stuff that people buy when they go to the shops food energy education these are moving up at what point do you have a situation where the inflation even if you substitute horse meat for county and sell it at the same price it becomes so outrageous that you know in this country that the poll tax riots and not too long ago and people they went on the street and

they rioted seriously remember you have a name you bring british people you can do it if you think you know if you try pull the poll tax riots were an example of something good not bad but what what about this inflation is it going to go i mean you have to think about the median person. what the median person consumes and if you look at well i'm generalizing here obviously but the median what the median person's consumes you're not sort of seeing this ten percent per price rise here i mean. a mcdonald's happy meal hasn't gone up ten percent of the year because ok but listen to get back to that a second but let's look at mcdonald's for a second. if they just announce their hiring twenty five hundred new employees in the in the u.k. the same time very high end investment bankers laying off a thousand employees those a thousand employees who are making probably five or ten times at least more than

the mcdonald's worker now want to and you can say well you've got more jobs and the government says this all the time we have more jobs as economy gave cameron the house of commons will say oh million more jobs but their minimum wage jobs or their temporary jobs or part time jobs do these part time minimum wage jobs generate enough taxable income to make a dent in the outstanding debt of this country. i would imagine. this is a part of a whole shift to becoming a sort of oil economy you know if you don't do anything yourself then you have to be a servant to someone who does something ok let's go back to the other question about inflation for a second the experience of people on the high streets is different than two percent annualized inflation they are buying obviously in the forecourts of the petrol stations they're buying gas petrol at a higher price that's gone up considerably over the past few years and the government doesn't really unclear that in there there and there are p.r.i. calculations price of food there's a lot of substitution going on you know there's substituting let's say that again i

don't want to beat the dead horse but they're replacing beef with dead horses because it's cheaper you know that's inflation we saw the same thing during roman times when they cooked the coins that's inflation well changing the basket the composition of the balls to see ok so how can you so you're saying a moment ago that the average person doesn't experience a higher inflation i know that they wouldn't let's say be experiencing education fees going up sort of ten fifteen percent year on year they're obviously experiencing it but they're not experiencing it to the degree the other people might be experiencing it but there will be a point there has to be a points. where i hope as a point where they do stop and say what the hell are we doing what i think what if i said if i may i think we are saying is becoming normalized it is becoming the norm so this because they're becoming desensitized to this deflation eleven times

that has to go bust currency wars japan they've obviously debased and the china and korea are pissed off about it and they're actually getting it looks like they're in a war on a war footing china's japan you know these two they don't like each other so and japan is saying. we're taking our yeah down. some are positing that japan will be the first into the currency debasement for texas hyperinflation the japanese mindset isn't to cause that kind of problem but they're kamikazes i mean not a are all kamikaze but i don't want to make that assertion in our to be equals kamikaze but if it were the suicide but bombers and and warriors come this kamikaze the japanese word push comes to shove they will come a costly kersey themselves you go to very different true society in japan so if

the if the population folks that they want to. get rid of the yet. that is just in hyperinflation you just want to exchange your currencies as quickly as you have them i don't strap on the headband with the big red dot and i'll fly our currency into the pacific ocean because that's the only way going to get out of this mess all right sanjay they are out of time thanks for being on the kaiser report. all right that's all the time we have for this edition of the kaiser report with me back to kaiser and stacy herbert i'd like to thank my guest sundeep jaitley research if you'd like to contact us please tweet us at kaiser report or at facebook dot com forward slash kaiser report and.

this is his craft to get rid of. but it's also a treasure. it's worth fighting for. and the trap was no way out. i never knew adam lanza person but i was in the same high school as that he was younger than me just a little bit younger. i always thought he was different i always into something funny he rarely talks and you don't he was a shy kid. i don't know anyone whose friends i also know but he was particularly mean to the what i do know is that it was very clear that this person was not like everybody else. can imagine the level of mental illness that would be present to your children.

americans you know so many guns there would be an american behind every tree with a gun. for kids growing up in this environment is good for them at an early age to least see the gun and respected because they need to know what kind of damage it can do. this is our first task as a society. keeping our children safe. this is how we will be judged. and it. goes with.

that in the end of the speech. she. and i. wish. you luck good luck. just send the money in and i. don't mind i mean very little.