friends of military spending in a special segment today and here's what's in your interest. i. i. i i. am in the four and a half years since the federal reserve launched the first quantitative easing program according to the c m b c survey q will continue well and its thousand and fourteen i spoke with peter schiff c.e.o. of euro pacific capital and the how long interest rates can remain low and facilitate current u.s. deficit spending given the president's announcement today about the possibility of chemical weapons in syria i first asked if spending either military are domestic

must be severely severely curtailed. this is the guns and butter argument right now we think we can have both and as long as we can borrow money at practically zero percent interest we can pretend that we can have both but eventually interest rates are going to rise and the governor's going to be forced to make some difficult choices there's going to have to be a lot of cutting going on and i think we're going to have to cut in both military and domestic because we're not going to all of florida a lot of these expenditures what do you think it's possible to reduce the debt and the deficit while the fed enables lower interest rates of a quantitative easing. well no i don't think anything is going to be accomplished constructively as long as the fed is spiking the punch bowl i think a prerequisite to a legitimate recovery is going to be sound money and higher interest rates right we're going to have to sober up we're going to have to check into monetary reality we can't keep drinking. and expect to solve these problems i have here

a graph of the federal funds rate sense the ninety's were clearly and a long period of extreme easing stretching back to two thousand and eight now the fed has hinted at it as an exit strategy of winding down large scale asset purchase a it's but i've heard you say that when he doesn't actually have an exit strategy for an atheist famous or infamous for saying he can reverse monetary policy and stem price inflation in fifteen minutes or so do you not believe him now will it best that's wishful thinking but it's not going to happen you cannot reverse this monetary policy without imploding the economy that is based on a continuation of the cheap money we have created a con of me that is completely dependent addicted to zero percent interest rates and quantitative easing if the fed takes that away the economy will implode so but they can't admit that they can't acknowledge that so they have to talk tough right

they have to bark a lot but they can't bite because they have no teeth well what about bernanke is to look at he has a term deposit facility pretty were verse repos and the fed could always sell assets if it was backed against the wall and you really don't think any of these are going to work and sell the assets through who is going to buy them and at what price you know when the fed tries to unload all these mortgages and u.s. treasuries there are no buyers the fed is the buyer and the only reason other people are buying is because they think the fed is going to keep doing it based on the last minutes of the federal open market committee and speeches by various fed officials i think it's possible we might see short term interest rates rise towards the end of this year what do you think are going to be the net effects of that was that the economy can't handle it for a number of reasons the banking system can't handle a big increase and rates the mortgage market the housing market can handle an increase in mortgage rates the u.s. government can't handle the increase in. interest rates because it doesn't have the

money to make the payments i mean look at all the pain that we have because of the sequester which were tiny tiny reductions in the rate of increase in government spending can you imagine if short term interest rates rose just a little bit and the government needed an extra one hundred billion or two or three hundred billion a year just to pay the the added interest on the national debt i mean i may not be a real disaster that's going to happen eventually but i don't think there's any way the fed is this going to allow that to happen if it thinks it can postpone the pain by printing more money which i think is what we're going to do so i think what we'll see first is weakness in the u.s. dollar against other currencies you'll see a breakdown in the dollar index and a bigger increase in the price of gold a big reversal of the recent weakness we've seen in gold i think you'll see the dollar break before we see the bond market break because the fed will print all the way they have to to prop up the dollar but i think the break in the bond market

will eventually force the fed's hand and it will not enable them to kenya to prop up the bond then we're going to have to deal with this problem well one of the arguments for higher interest rates is that it will help save areas especially retired who are earning very low returns on bonds and have been forced into riskier assets just to receive higher rates you don't think this is a good policy you know it is a good policy we need higher rates the problem is big the economy right now can't afford higher rates given the enormity of the debt so what's going to have to happen when interest rates go up is a lot of the debts are going to go into default we're going to have to restructure the economy but you're one hundred percent right before we can have a real recovery we're going to have to have real interest rates we're going to have to have an increase in interest rates that encourage savings reward savings that discourage praful good consumer borrowing government borrowing so that our credit can be available to businesses to make the capital investments that we need to expand our. productive impact capacity to hire people in real jobs and to grow our

standard of living well how do we wean our economy off this federal support. i don't think we could we did offer we got to go cold turkey but unfortunately you know there's nobody wants to do that everyone's everybody wants to pretend that we can just keep on doing exactly what we did to create the crisis and somehow that's going to magically solve the problem do you think the u.s. can continue to hold the world's reserve currency status you know not if we continue on this course i think the dollar is going to lose that status what's going to replace it i don't know i don't think it's going to be another currency i think that gold will be a more important reserve asset in the future than currencies and i think just smart central bankers particularly some of the creditor nations in the emerging markets will be taking advantage of the opportunity to buy more gold now that the price come down and if some of these european indebted nations like cyprus or spam reports lately are forced to sell some of their gold i think would be very wise for

these other central banks to snap it up way when we see this transfer of gold where do you think it's going to go i think it's going from the west to the east from the debtors to the creditors you know and that's the shift of wealth and you know when you become rich you can afford to own more gold when you're broke because you borrowed too much money you end up giving up your gold and you think the u.s. is going to have to sell off their gold reserves as well. well i think we're going to need our goal reserves i hope we don't sell them off i hope we don't i'd rather see a restructuring i think we're going to need all the gold we have because when the dollar collapses i think the only way to really restore confidence in the greenback is going to be to back it by goal and so we're going to need those reserves in order to accomplish that what now crude oil production is up and with technology and fracking and natural gas is it possible that this could take us from the trade deficit to surplus is the potential for energy independence independence and that

it gating factor in what you consider the real crash. well mitigating factor maybe in that it's better that we develop these resources than that we not have them at all or not develop them but it's not going to take us from a deficit to a surplus eventually we're going to go to a surplus but not because we export so much oil but because we import a lot less of everything else because the dollar collapses and americans stop shopping so eventually we're going to balance the books we're going to have to have a surplus and we are going to use a lot less energy as a nation because americans are going to be poorer we were already losing using a lot less energy than we used ten or fifteen years ago because we're poor because fewer americans are in the workforce but that trend is going to continue as you know we're priced out of the market and as people in other countries other nations whose currencies are going to be gaining in value they're going to start consuming a lot more energy we're going to have to supply them with that energy and it's

going to be a good thing that we have it because we're going to need to export it but it is not a panacea it's not like you know we're not going to have any disruptions in our standard of living that we're not going to have to dial it down because we've got all this oil we don't have that much oil is better that we have what we can develop these reserves that we have but believe me it's not to get a free card not not even close ok i want to talk about a piece that you wrote and investment news that i read titled lessons learned from japan and one point that you brought up is that on one hand we criticize the policies of countries that artificially the deflate currencies to biggest export such as in china but then on the other hand christine legarde and ben bernanke he supported japan's policy policies of massive easing which has weakened the yen so what's ok and what's not ok as it pertains to currency devaluation. well i mean japan's policies have been a complete failure i mean a lot of people want to point to the mistakes of japan particularly here in the u.s.

yet repeat those mistakes you know japan has had this monetary easing policy for what two decades now and it hasn't work so now they're just going to increase the size of the quantitative easing they're printing more money there they're trying to create inflation as if that's how you create economic growth it's not i mean if inflation led to economic growth in zimbabwe would have been the growth growth capital of the world it's sound money it's deflation that is more conducive to economic growth it's when prices go down well that's what happens in a vibrant growing because you produce more and prices go down and your standard of living rises they've got it backwards in japan they think if they can just make prices go up the country will be more prosperous well they're going to get higher prices you know sometimes just say be careful what you wish for because you might just get it you know they just had the first price increase in mcdonald and five years in japan they raised the price of hamburgers now twenty to twenty and i have

not been announced and lou it's time to you know are you really going to at look now i suppose that's great news for the japanese maybe for years they were bored every time they went to mcdonald's a burger was exactly the same price now because they're going to pay twenty five percent more for the exact same hamburger somehow this is going to be a boon for the japanese economy you know the crazy thing is they think they're going to create more consumption more demand by debasing their currency there to destroy demand because they're going to destroy the value the currency when prices go up you buy less you don't buy more when prices go up supply and demand means that as prices go down that's what stimulates consumption you demand more of things as the price goes down not as the price goes up so they're going to create inflation japan but it's not going to lead to economic growth if anything it will lessen economic growth and. so this is going to backfire and you know we should learn that because you know we're following in their footsteps only we're doing it from a much weaker position now jack and i think japan despite all their mistakes is in

better shape than we are or maybe we're in worse shape than they are maybe a better way to put it. the prime minister of japan is devaluing the yen by doubling the monetary base with until years japan has the highest debt to g.d.p. ratio n. the world and spends a fourth of all tax revenues on debt obligations that was peter schiff from euro pacific capital from lincoln to bust to obama funding wars has always been a challenge next we'll look into the fine print of creative wartime spending then our t.v. producer bob inglis and i will debate and as you see rule the bank of wal mart's and virgin in space all of this up next.

you know sometimes you see a story and it seems so for like sleep you think you understand it and then you glimpse something else you hear or see some other part of it and realized everything you thought you knew you don't i'm trying hard look at the big picture. my name is that. i am from seeing. the world that constantly.

and every day she says another body in the syria or in arabic. there are. those who are beginning to look far from. the syrian woman is. trying. to show the very most of the film. i'm planning to stay here to show. you life you know should.

work time financing is always a challenge but governments are never short of creative solutions will explore how the iraq and afghanistan wars have been financed off budget but first history offers an instructive insight so let's take a look at what president lincoln and his treasury secretary seventy taste did during the civil war just a few months after iraq did the northern treasury faced record gold outflows to stop this link and chase simply hold gold convert ability which brings us to the age of greenbacks unbacked paper currency it would prove a disaster as the money supply nearly doubled into eight hundred sixty three and along with it wholesale prices soared tears he suspects you in gold market to stop a greenback devalue

a said well he was humiliated time and again and eventually forced to stop printing greenbacks as price inflation soared days and get it to financed. a war with good old fashioned debt to guarantee there would always be a buyer of the new treasury securities they set up a national banking system that uses the debts as reserves this would lay the groundwork for the federal reserve fifty years later the south also experimented with money and the result was hyper inflation without the capital base and strong banking system of the north the confederacy of finance nearly their entire war with money printing after the civil war the us continued to finance its wars by issuing debt here's what defense spending looks like adjusted for inflation since the one nine hundred forty those peaks and outlays put massive stress on the economy nearly all of the money spent on war war to the korean war and the budget but that changed with iraq and afghanistan and since two thousand and one the pentagon has taken

advantage of an old trick to finance its dream budget from souped up tanks to bomb dropping drones and state of the art command centers their wish list has been filled year after year now in normal times the us budget goes through a lengthy and heavily scrutinized congressional process but if there's an emergency that requires additional funds that can't wait for next year's budget congress can pass a supplemental appropriation now this is the tool about pres the president can get immediate emergency funding for war and natural disaster historically supplemental appropriations were calculated into the future costs of war and then put back on budget but as we can see from the green line from two thousand and one to two thousand and eight emergency funding grew each year from thirteen billion to one hundred eighty seven billion dollars the pentagon is addicted to this financing because detect and as much as two hundred billion dollars since two thousand and one is for for instance in two thousand and nine congress wanted

a six hundred million dollars for a fleet of twenty two raptor fighter planes but the request in the department of defense budget was denied in the end the congress simply simply stuffed the f. twenty two requests into that your supplemental and it was automatically granted to this day the raptor has never been used and iraq or afghanistan. lincoln and chase thought they were smarter than the market when they wage the war on gold in favor of greenbacks perhaps the pentagon will get a similar lesson when short term and just rates and evidently rise and the market no longer accommodates one hundred billion dollars slush funds and this completes our book into the fine print of military spending.

now it's time for the daily do all joining me is bob english prime interest producer great to be here thank you for joining me so the jobs act which is the jumpstart jumpstart our business start up act is being rolled out and signed into law last year is supposed to make it easier for businesses to raise capital now at the s.c.c. as opposed to let's lift the ban on general solicitation which limits how private companies can raise capital exactly the kind of been jacking their feet on this but i c c in its defense it's all leadership change mary mary shapiro step down now that area has come in well mary shapiro's said that she did not want to be tagged with an investor legacy and then so her. position comes and her interim chairwoman comes and she's dragged in front of congress and congress says to her why are you dragging your feet and then we have this new chairman and she's this new chairwoman

says that well we have to do this now so suddenly it's in the balls court of the f.c.c. to implement these new rules and this has to do with the creation of an opportunity for business to raise capital that in the private markets through general solicitation there's a lot of questions with this rule so we will say that mary jo white once opposed the rules through and then deal with investor protections later however as. i don't know if the rule even protects investors or not well that's and that's up for debate because the funny thing about this rule is that when it comes to raising capital in the private markets when you have a general solicitation you can advertise on the company's website you can advertise in print but this doesn't necessarily mean that the protections will be afforded for accredited investors i mean why does it really matter and in crime and. in this in this instance has to have an annual income of greater than two hundred thousand dollars or a net worth of greater than a million dollars exact so basically you have to be an investor. no you don't

have to be rich to be an investor to be an uncredited investor but the whole point here is that you know if you're going to be a if you're going to be an accredited investor you don't necessarily have to be rich but. well i think the real question of the day is involved markets have a bank ok so the f.c.c. has a new are actually a dodge frank implemented at three year ban on commercial firms from owning and duster alone companies this expires in july we know that wal-mart has looked after a charter for a bank for several years they dropped that in two thousand and seven so people still speculate they might still want charter i don't know do you think wal-mart should be allowed to start a bank well that's an interesting point because wal-mart is already in the banking industry and in mexico and canada in the u.k. and they're already in the bank and the banking industry to an extent in terms of cash checking in bill payment in the u.s. and they would love to get into the business of providing loans because that gives

them protection it does not give them access to the discount window but that's another story well some people believe that tsunami expect commerce however this dodge for a moratorium only applies to firms that have less than fifteen percent of their assets tied to financial activities so you can have still eighty four percent of your business tied to commercial commercial activities and still enter the financial services world which we've seen with wal-mart they have bluebird which is the prepaid debit card that they work on american express and this is an interesting way for companies to get into the banking system and i think we're going to see a revolution in the payment system in the company in the coming years and there's a backdoor way through the federal regulation federal reserve regulation double for debit card issuers of prepaid debit cards to get into the banking industry and they can only have four or five billion dollars of assets to do so but we're going to see is servicers like wal-mart have cash servicing centers be able to cash your

bills and provide a whole new range of services in the coming years they're not necessarily going to have to be a bank holding company to do this so maybe the question is not should wal-mart be allowed to have a but how was wal-mart going to find themselves. exactly eventually read that and it's quite possible that we're going to be we're going to be seeing the repeal of the bank holding company in the next few years and that would open up a whole range of options for non-bank players to enter the financial realm and i think it's going to be an exciting time we're going to see tech come in and really revolutionize the way that retail banking is done today but i also feel that wal-mart has done a very good job of reaching middle income classes and i feel that they were going to charter a bank that they would probably serve as low to middle income households who have a hard time getting capital anyway i mean it's interesting that you say that because the whole the whole premise peter behind this debit card prepaid debit card is serving the unbanked in the under bank and this was a this is something that's been funded by are funded by the force problems ation

and it's been worked on for a number of years about it we're just seeing it come to fruition now another development that happened just yesterday sir richard branson broke the spell barrier version the acting spaceship to completed its first its first supersonic flight test now the ship can hold six passengers two pilots it actually launches off an airplane and then the rocket the white knight launches off the airplane and they can't get up to three hundred sixty one thousand feet and then you're in the air for five minutes of waiting that's a cool now the rocket only fired for sixteen seconds i'm just going to rattle off a few statistics here that is printing eighty five billion dollars dollars a month ok that amounts to one hundred eighty million dollars an hour or five hundred twenty four thousand dollars over that sixteen seconds so we want to be a prime interest if we didn't tie everything and. forth and that's our end to all

things are joining us. it's been a day of milestones day one of our prime interest one hundred days of obama's second term in one hundred years for the bad all worth the radio we popped in the debt bubble with peter schiff in an interview that was much more sustainable than our fiscal path then we delved into to find some creative wartime spending finishing with a duel over new rules for capital markets and a calculation of the extent philosophy of q.e. good luck mr branson thanks for watching and make sure they come back tomorrow and be sure to follow us on facebook at facebook dot com slash prime interest and from

all of us here at prime interest have a great night. welcome to teal one day here you can feel it. leave it there are three choices you like first used to work on the pillow

door to live on the miserable way like a slave. the second is to jump the wall and catch the american dream through most of their cars and lose their. the other choice is to see come a number of an organisation and get inside the drug trade. to buy something cool never forget. a. good sleep. aid for what i've done that would never stop a. wealthy british style.

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son of a little. live. play live. live. live. live live. live. a roadside bomb kills three teenagers in russia's. explosion went off near a busy shopping center. ready

for syria america reportedly prepares arms shipments for the rebel forces like a chemical scare sees a bomb and threatening present military retribution. adds a new submarine to its fleet believed to be capable of firing atomic missile at a time of a regional allies rage over the country's refusal to sign up to a nuclear nonproliferation treaty. and the rest failed to stop muslim vigilantes from trying to impose their rules on london is with religious leaders fearing it will tarnish the image of islam.