debt. driving these prices has never been higher so there's a huge gulf between the statistical representation of reality and what the being spirit on the ground on the street by the average joe and josephine bag of donuts you know i've seen headlines in new york times alleging that these jobs numbers prove that ben bernanke he's quantitative easing the quantitative easing to infinity is working and that we can continue that because these jobs numbers are so good but as you see again you know the participation rate is down and those who are working are having to work two or three jobs to keep up with inflation let me jump in here for a second because over in the united kingdom of course people are saying look at america there stimulus is working george osborne and you know you we need to go away from austerity in the u.k. and bring about american style stimulus there's i mean the people in the u.k. want second and third jobs on top of the you know their current work environment

that they're complaining about that they can seem to get through the day as it is looking for and this is sort of a bad omen as well for what will happen under obamacare because one of the interpretations of this is that it's obamacare means that the employer has to provide health insurance to their employees if they have over fifty employees but if they're working full time and full time they counted thirty hours so apparently a lot of corporations are cutting jobs hours work to under thirty so people are having to find a second job to fill in the hours they need while instead of obama care barack obama should have triggered something called the american individual american well being account and one percent of every securities offering every stock every bond every derivative every securities offering the trillions of securities that are offered and packaged and sold in america one percent would go into the american wellbeing fund wall street would never notice the difference bonuses on wall street would be impacted by very little and all that money would accrue. to the people who

are actually building the country and not the frickin charlatans in things or raping that country barack put your thinking cap on he does so the other big headline news of the past week that everybody in new york city men can hear behind us are shouting with glee running around buying seven thousand dollar bottles of champagne popping them up and smashing them against a wall they don't care about money apathy over the dow's rises and surprising yes apparently outside of manhattan people don't care so much about the dow jones hitting an all time high because christopher caldwell of the f.t. says well looks like a rally may just be the effect of elites passing money among themselves you know you go back to the banking collapse of two thousand and eight we found out that banks like lehman brothers bear stearns j.p. morgan and goldman sachs at the end of each quarter exchanged debts to fool the regulators into thinking that they had less of their balance sheet and then when they booked the debts again after the regulators left they would put that as a capital gain so they were just playing this ponzi scheme of capital gains and

they've extended that now to a multi hundred trillion dollar derivatives market the biggest banks in the world are in this huge here called jerk or daisy chain to award themselves a loser who profits and then pay themselves huge bonuses to options and warrants on their stock price that go up based on essentially what at the end of the day is amounts to financial masturbation i mean the other thing is that as they point out here in the half decade since the western financial system almost collapsed the relationship between stock markets and the real economy has seemed more tenuous you could describe this in many many many ways one of them we've described as neo feudalism that they just don't need the population they don't need most of the population and our financial eyes the world and they could just extract equity in rents from everybody around the world but it's a mistake to point to the disconnect between the economy in the stock market as being indicative of there being some under underlying financial scald. because

the economy in the stock market rarely go hand in hand occasionally they will coincidentally work in march together but that's not generally the average between these two indexes but what we can say is that the wealth is being ported over to the big house of the slave masters and that the people who are not engaging in this stock market rally it's not because there's a disconnect with the overall economy it's because they're being disenfranchised and the slaves were back to priest civil war days the antebellum south will rise again in america you've got sleeves all over america working for uncle tom that is j.p. morgan's jamie diamond who let them in the big house every once in a while and through a boom but other that got their pick cotton you know no good because of jamie duggan you know rather. you all well of course one of the famous sayings about wall

street is where are the clients yachts of course clients have yachts the bankers are the ones that have yachts and this of course is alluded to in this f.t. article where they say the u.s. federal reserve has added more than two trillion dollars to its balance sheet since two thousand and seven in general the tide of liquidity ought to lift all boats in the harbor but when the harbor is an equity market you won't find your listed and less you own one yeah the occupy wall street they should all go to to greenwich country club and the granite yacht club and occupy the great yacht club that's where you need to go and occupy and sink all those frickin boats sink twenty thousand yachts in groups connecticut send a message. there's bankers already have credit default swaps on those yachts of course so they'll make a fortune if you sink at it of course they've got all just collateralized and

credit to. default swaps. so now we've looked at the true story behind those good headline jobs numbers and the true story behind the so-called bouncing booming dow jones now let's look at the maestro and what he says about the sequester you know the eighty five billion dollars in cuts well alan greenspan the former fed chairman was asked about these cuts and whether or not they would do anything greenspan sequester cuts won't be horrendous for economy he says the crucial issue is how the sequester influences the stock market because the stock market is the really key player in the game of economic growth at the moment he says the data show that the stock prices are not only a leading indicator of economic activity they are major cause of a pacemaker is connected to the dow jones so unless the dow jones keeps going up greenspan is going to kill over and die is an important thing to realize that this

is his thinking he says that. prices cause activity cause economic activity and that the reason is the wealth effect of the stock market he says which has risen to a five year high and it explains why the consumer has been able to overcome various headwinds such as the payroll tax increase so the price rises are a looser real they're fake they can evaporate we've seen that happen the tax increases are real they take your real wealth your real savings your real money and transfer it to basically wall street well i mean a great example of that would be a company like correction school of america the biggest largest prison operator in america the start price goes up according to greenspan that's great the fact the deal with municipalities around the world to put ninety eight percent occupancy rate in their jails and you rounding up people and prosecuting them and then jailing them by the needs of that stock price never crosses the mind of greenspan.

again it's a good point the price he's saying is the be and all the what that price represents never enters his brain and then finally max on that on the story of alan greenspan and saying that stock prices are determinant of everything every record dow jones point cost two hundred million dollars in federal debt we're hitting all time highs in the dow jones but there's no such thing of course as a free lunch where does it come from here is the invoice in the past five days alone total federal debt rose from sixteen point six four trillion to sixteen point seven trillion an increase of sixty one billion dollars in five days amounting to one hundred ninety eight million six hundred ninety seven thousand and sixty eight dollars for every of the three hundred and seven dow jones industrial average points again this week because remember us debt is the asset that allows the fed to indeed to monetization and as a result hand over trillions and fungible reserves to banks while they're saying that the accumulation of debt two hundred million dollars of debt for every day jones point is meaningless and the only way they can possibly say that is if the

federal reserve bank in washington d.c. will never have to unwind the debts that they've taken on to make this bubble occur and the only way that's going to happen is if you've got a global recalibration of the major g seven currencies and the only way that's going to happen is if the dollar takes a fifty to sixty percent hit against these other currencies which is exactly what the gold market telling us let me put this into perspective why i'm not that impressed with jones of fourteen thousand because i have owned gold now during this rally for the dow jones to equate my performance in gold it would have to be at forty thousand not fourteen thousand. against gold it's been a complete loser spent a disaster against good coin it's in a ninety percent all time low so it's a big round trip to nowhere how low i was what does it take to keep the dow jones from going up slowly nowhere over less. twelve years one trillion no three trillion

as ben bernanke you said it was still on the fed's balance sheet no the contingent liabilities mean the fed and the us government to take on thirty trillion in new debt to go absolutely nowhere all right stacy ever thanks so much for being on the kaiser report thank you max don't go away much more coming why stay right there. victims multiply here each day. it's very profitable to invest in colombia we did very profitable also the it is a very high return on investment. you'll know me he said but i've been working in this area for thirty years and i've always had to play the armed groups when they needed betis i knew the kind of managers who change their name and strategy but just to the same murderous. high ranking suspects you know

coming. pretty upset about that mr president. to president putin. but. i won't give an interview i'm sorry but no. investigation is a dead. end says you can stop your bullshit and keep quiet or else you'll suffer the consequences. even if they're your bodyguards to watch themselves because the same goes for them. regards from since i've never heard of such a case as ours for so much money and gold has still so many. for all the gold in colombia on our t.v. .

something evil extreme cold isn't a chilling threat to life for women of the if it's a cooling if you look you can see that the water and i and my body feels really warm now and this is good for you. they plunge into icy water to make themselves stronger you can't get used to the cold if you can tolerate it and you can struggle with. people of snow and ice picks as a frost. so having the cold to see.

if you've got. a job. welcome back to the kaiser report max kaiser time now to turn to steve came

the bonking economics steve also got a project kickstarter he's raising money for a dynamic financial simulation called minsky fifteen welcome back to the kaiser report by the way him. steve tell us about this. kickstarter project well the starting point is i want to call him mr right now and what i do is i try i pretend to model the economy and the belief that it's always an equilibrium pretty damn close and it doesn't have banks doesn't have debt and doesn't have money which are all absolutely assumptions that dominate conventional economic theory so i built a method for simply build models that are strictly monetary can have banks and saw the financial transaction the shadow banking whatever you can model you can put in the steinem a could make librium and it's a close a way of getting a lynch looking how the economy actually operates in the stuff which is dominated by economics and meant i didn't see this process coming and i don't know why we're still slowly dragging away out of it so the minsky i'm in minsky of course the

economist but one of his postulates is that you've got a rising bubble in an economy where the the bubble assets are used as collateral to finance more leverage to increase the ball it's all such time as the bubble bursts but all throughout the building up of the bubble people are convinced that alan greenspan said of the one nine hundred ninety s. there's a new paradigm there smoking their own belly button lint they they're getting high on the on the on the high prices mistry that sometimes till there is a collapse so this minsky machine is going to capture the irrationality of markets it makes it possible to capture it you can model actually virtually any system you lock in you can model whether it's using exactly the same basic technology to engineer. as it developed over the last thirty is broken by simulink and visit him and been simmons tell us that engineers would be aware of what economists have never gone and that dynamic direction saw him getting out as a tool it's not actually he doesn't capture light minsky but it lets me express

minsky and most people build any models long as the sun emic and it's monitoring i think one should do that you'll get all the stuff minsky was talking about was in a fundamental way at a accurate vision of the real world but you can't express that visual issue or skype from a cool librium except that the system is fundamentally monitoring once you do that i think miscue stuff will turn up automatically but austrians could use it anybody except street near classical music or they believe in a fairy land so if somebody wants to contribute to the project they've got to kickstarter go to kick solder it's very simple if you bought a book from amazon you're ready to contribute to simply say you want to make a pledge choose the amount the reward you want whatever you can do a good moral than any amount if you want to give it in a particular reward click and next thing you know i mean amazon's by age you make a pledge and you back and get solder again six string this simple all right steve cain. brought along some chart horn for us to look at this is a chart of margin debt to the dow jones industrial average what's what to tell yeah

well this is i've been trying for a long time to find margin debt because i know that the driving force for any asset bubble is the acceleration of the debt that finances it and if you take a look at the correlation of the celebration and margin debt to the change in the dow jones you don't quite perfect but it's too damn close for comfort what it socially was any stock market bubble is driven by accelerating debt and because accelerating debt can't go on forever at some point the bubble has to boost and looking at it the dow is definitely in a bubble now and it model off the year maybe two but it's going to be but this is sounds like a men's game moment it's being developed right now with all this incredible debt you know when the market froze and two thousand and eight. a lot of people had hope that maybe they would instigate some kind of bank reform. put some bankers in jail who had abused the system who had manipulated the markets but instead the response of green greenspan and bernanke the of course his successor was to just pump up the

bubble again yeah that would have tried to risky the posture this is a human frailty no one totally crucified greenspan and co for doing it because they're behaving like all the fools in the process thought they could go back and continue an unsustainable trend the mayans lead to easter island as the wood that kept on going until the last tree we're doing the same thing here rather than saying we need to china learning a lesson the same will go to risky what used to happen in the past the little start happening again once we do that the process is just kick the process further down the road how well the lesson professor be learned that by making this money artificially cheap you're making let's say natural resources artificially scarce yeah you're making a risk artificially cheap. in other words when these hedge funds and these money managers are buying into this bubble of warren buffett for example buying into this bubble they're just taking advantage of a situation that is depriving the bast majority of the population of

a decent savings rate decent wage but why why can't there be any educational process to try to have people come to terms of the fact that you're feeding a model that is either a divine right of kings or a slave model but it's not about a representation all democratic free market system anymore nothing like that it's something which is actually a ponzi capitalism monsey capital and we've let that psycho over the system in the last forty is because it's become what we've always had as a background we think it's normal but people look at us and powerful millennium in sight out of these people not see it as predatory capitalism it's not productive capitalism we need to get back to the not in fifty's america where when you borrowed money it was to build a fire. three of you invent some new technology not to build a bloody derivative and rip a pill off in the process and admit it we call yourself wealthy and an investor we mentioned alan greenspan he's quoted recently as saying the stock market is the

really the key player in the game of economic growth so it's almost like plato's cave or something where he's looking at the shadow of growth that being a stock price and i mean that's the reality even though that reality that he claims is the only thing to look at is the indicator of how we're doing is the very thing that's undermining and causing incredible duress to stress the unemployment an ecological collapse the real problem is late they talk about drawing asset crosses and houses and stops as being what they call the wealth effect it's not the will effect it's the leverage if it is driving up the gap between consumer process message crosses with extra day so what they picking is that the economy is the path of trying did now the change and it can also drive demand on the real economy so you get a correlation between the two he's seeing the stock market as the cause of the change in wealth in fact changing did is what drives the asset market and also pumps the economy up for

a while but as we've seen it can be an artificial pump and it collapses lyta we need to get back to the productive economy not the rip off opponent of the people i bring span to promote it there steve king we're here on the west side of manhattan over on the far west side and looking east just a couple of blocks side the viewers can't see it but i can sit and i can see the headquarters of the new york times and of course in that building occasionally would walk paul krugman there economics editor now paul krugman is a guy who believes that there should be no real supply demand economics there should be no integrity in the banking system there should only be money printing in till the cows come home and using the stock market as a guide a success how come this guy it gets away with such intellectually dis. honest editorials should realize nuremberg trials were so micro dman perpetrating the the financial hole of cos that he is you and i going to be on different sides of this to some extent because crude is talking about the delusions

that come not from the sot of this river but found down chicago and the delusional idiots found the ocean secada economists to the people he actually thinks are his main enemy and they're the ones who spotting and compared to them doesn't make sense and i want you to weigh in i agree with a lot of what he argues in terms of policy at the moment when you've got the private sector sucking money out of the economy you don't want the government being a joint vampire in the process of taking cash flow out of the economy so it doesn't make sense in these circumstances but intellectually is still wrong and shallow because i still believe in he said it in print and it said he's all for including banks and stores where they matter but what's the role of banks in debt and leverage now that is so wrong it's always been picture whiting is a mythology that you can model capitalism without banks that money and that's where his negative contribution really is yeah but that's completely dishonest to krugman because he's saying essentially oh we can expand the balance sheet ad infinitum to

stimulate the economy and the problem are those guys in chicago are taking all these derivatives of the chicago school of economics of the private to the financialization of the world but those are the guys who are hedging supposedly all the risk being taken by the central bank there's a symbiotic relationship between what's happening in new york and chicago and by him claiming that well he supports one and not the other is the sound of one hand clapping this guy just wants it all he's totally dishonest intellectually and again he should bear some responsibility for the catastrophe that the policies that he himself is being indoors were right back in two thousand and two a i get the greenspan create a housing bubble to get us over the collapse of the dot com bubble so in that area i'm going to agree with you that's not it that's delusional we done in a bubble economy when the real production economy but apart from that he's argument about needing the government to pump in cash. when the private sector is taking it out is correct so i'm going to disagree with you on that one but the key is still with the probably picture waiting and intellectually dishonest way of thinking about the economy and that's why i've designed

a program like minsky so people can look at the sort of stuff through and do and that's so old fashioned that's lawns equilibrium that's nonsense that's going to dynamic thinking and that completely inverse the way he thinks about the world i don't believe is dishonest but i do believe his wrong ok fair enough i want to talk about kickstarter for a second because here you have an economic model that's relatively new that relies on altruism to yeah it's a great but according to i ran a kickstarter could never exist doesn't exist altruism is to be discouraged so courting her this comp this this cut this is a company kickstarter this movement of crowdfunding which is now sweeping the globe should be abolished because it supports altruism and we can't possibly have that is iran just a dope it's a lunatic she would have been much more about humanity now than tree made back in the fifty's that's nonsense humanity's always been a competent combination of competition and altruism americans focus upon competition as though that's what made a strong but if we were competing with animals on the african plains with you

walked out by the nearest chimpanzee you could tell you a pot of good tim the two of us together we can take on the chimpanzee so cooperation is what was competition what made a strong a species rand is mad to ignore that cooperation versus competition those two dynamics that drive economics and society in varying degrees yeah here in the united states you're visiting this country you'll notice that this idea of cooperation is considered to be communistic for example and barack obama would say different famously you didn't build that i believe he said referring to the fact that everybody in america is working together to create something called america and that there is no everyone is standing on the shoulder of giants to paraphrase another great philosopher. but how did they get to the. boy in your opinion as a visitor you could be like to talk to bill now observing america as a visitor how did america's psyche get to the point where the idea of cooperation itself became. equated with everything that's evil in the world

it's a good question i think it relates back to the back to the cold war period and demonizing the the sod and believing that the rug because the other side went for total apparent cooperative system the so-called cooperation of the soviet union had to be totally about competition now they were wrong to be totally about cooperation and planning american be wrong to be totally about competition and lack of coordination it's a symbiosis between the two and seeing in the yang thing to get that brought and see a balance they were going to produce an extreme society like the soviet union collapsed and deserved to collapse or in extreme to saudi well you can trust each other you can even pocky car on the street now you need to have a combination of the so we need to get in the middle there and stop demonizing cooperation as much as the russians have to stop demonizing competition it's a blend of the two that makes the society strong and america has got that in a sister and should get back to what ten to fifteen thanks so much for being on the kaiser report. and that's going to do it for this edition of the kaiser at par with

me max kaiser and stacy herbert i want to thank my guest dave came author of be bunking economics if you like this i mean kaiser report r t t v are you guys are saying bio. leads toward. freedom. and. you're ready to clean up a new sort of. new liberty. so lute play free. please. stop cutting. who like to be treated this way. an archie.

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