good afternoon oh welcome the prime interest i'm perry and boring here and washington d.c. here's the issues that we're tracking today. maybe we buy more maybe i'm talking about bonds ben bernanke and the f.o. and c. announced today that the pace of its q.e. purchases would depend on labor market and price inflation developments the vague new wing would you give the fed up with central exit later in the year something that it's been hinting at so an employment report this morning missed expectations so it looks like the fed maintains considerable wiggle room to keep the printing presses rolling for now both about our previous monetary regime under or in wave with author ben studio and a bit. the new york minutes has been shaved down to

a chicago millisecond and that's just about all the time it takes for high frequency trading algos the front runner trades at the chicago mercantile exchange futures markets from gold to crude oil to soybeans have been game to this way for years gold knight gary gensler was already pushing the c.f. to see the employment new oversight of high speed traders this was after last week's a.p. twitter hack that sent markets plummeting in just a minute this in more on today's daily dual and what's out that is the head of fannie and freddie mel watt is the president's nominee to leave the federal housing finance agency the representative from north carolina would replace ed demarco who has been criticized by democrats for resisting measures to help homebuyers at the expense of taxpayers watch will likely feed were the market didn't know much as the mortgage giants are being wound down now and get to what the new your prime minister.

in two thousand and eight during the worst financial crisis since the great depression then french president and u.k. prime minister called for a new bretton woods an overhaul of the global financial system they voted the memory of the one nine hundred forty four conference here representatives from forty four nations tracks to new hampshire to design a new monetary system for the post war two era. for the label of the world. all agreements must be ratified by the governing bodies

of the nation from the bar before becoming a backroom. why was it all important to establish stabilization of the world's currencies well for one the memories of world war one still lingered specifically the unintended consequences of the peace treaty that the treaty contributed to germany's bankruptcy hyperinflation and economic collapse which is why when designing the post world war two economic structure the focus was on reconstruction rather than reparations the key goal of britain woods was to ensure a stable global currency regime that would help all sides rebuild their economic structure earlier we talked to ben steel the author of the new book the battle of britain woods i asked him at today's currency war is there any resemblance to the currency wars of the one nine hundred thirty you know one of the issues that might have been last year seems to have broken down as you know there was a lot of buzz surrounding the i.m.f. spring meetings last week over whether japan might kick start and do it to.

national currency war but here's the fundamental problem over the past few months you've heard perfectly rational sober economic indicators arguing that the dollar is overvalued that the euro is overvalued that the end is overvalued that the pound sterling is overvalued these four currencies alone represent over half the global economy they can't all be overvalued yet if policymakers in each country pursues higher net exports through currency depreciation some of them at least are going to be disappointed and that's when you run the risk of over protectionist measures now this is precisely what f.d.r.'s treasury department was trying to stop permanently in the one nine hundred forty s. words but we have a graph here a central bank assets of the percent of g.d.p. europe and the u.s. share of central bank assets are steadily increasing over the past six years and japan's are projected to reach sixty percent or higher makes a quantitative easing itself as a relatively recent phenomenon officially chasing back to japan and she thousand

and one is it possible that balance sheet targeting our kiwi itself is a manifestation of new monetary regime and not unlike britain we're in uncharted territory is quantitative easing is a reaction to the fact that official policy rates have zero in all these key economic areas so if policymakers want to provide more stimulus they have to use unusual means the interesting thing is that under the treasury department's philosophy back at bretton woods in the one nine hundred forty s. this would have been impossible because they were determined to institute a fixed exchange rate system where it would be really impossible for central banks to operate in such an uncoordinated manner all during brand loyal the us heavily advocated for fixed exchange rates but now we see politicians calling for floating exchange rates why they were criticising switzerland for pegging to be hero or china for packing to the us out. why have we seen such

a drastic shift in attitudes well actually the attitude has been very consistent with what we saw in the one nine hundred forty s. that bretton woods was a more competitive dollar which is exactly what we're looking for today in the one nine hundred forty s. all the market pressure on the u.s. dollar was upward so by obliging other currents currencies to fix to the u.s. dollar we were actually hoping to keep the u.s. dollar down over the past ten years of course we've seen downward market pressure on the u.s. dollar baeza be some key emerging market currencies particular in particular china's currency so when countries like china peg to the u.s. dollar they're actually keeping the u.s. dollar higher which is why we support floating exchange rates now as opposed to the fixed exchange rates we supported in the one nine hundred forty s. what do you think of the outcome of all this quantitative easing well i think we see the risk of

a sort of uncoordinated on the ground wing of the international monetary system you you had after the financial crisis world leaders like britain the spartan brown and france's president sarkozy calling for a new bretton woods but we're seeing less and less coordination over time and that could kick start a currency war as countries try to increase net exports through depreciation put again if they're unable to do that then they may pursue more overt protectionist trade barriers i like to talk a little bit more about the history of britain why it's and from the description and your book that there seem to be quite the political and are taking even the choice of location and why why is it that this global economic conference took place inside a small unknown town in new hampshire. president roosevelt was determined not to make the mistakes that president wilson made after world war. one in particular not

securing republican support for the league of nations so new hampshire had a republican senator we're going to fulfill my marrying battle and president roosevelt thought well if i can help this isolationists arles toby when his campaign cama a convert to the cause as it were support the new international monetary grima and convert some of his republican colleagues and you know that's exactly what happened . but this happened in one nine hundred forty four and by war today and intel nine hundred forty five so why did this gathering take place for a post war two economy before the war even ended well president roosevelt in particular was not interested in international monetary fairs was very interested in sending a political message to the enemy axis powers that it was the united states and the allies who had the compelling post-war vision actually believed that this would help bring the war to a successful earlier conclusion. there are also some major political figures that

participated in the conference one of them was john maynard keynes who represented the british interest and then harry white representing the interests of the americans both seemed like i'm likely diplomats how did their personalities play out in the congress and they couldn't of contrast to more hairy hairy dexter why it was the son of lithuanian jewish immigrants his father where the hardware peddler john maynard keynes was born of upper middle class cambridge academics and when they came together it was quite explosive and they had actually had to go she for two years in the run up to bretton woods and they fought fiercely about whose plans would win the cain's plan or the white plan at one point in one thousand forty three cain's gets fed up with wife who is jewish and yells at him this is intolerable throws this plan on the on the floor and yells this is yet another tell mode to which harry dexter white responds we will try to produce something with your highness counters. down. well i found it surprising that the us solved britain

as such a threat during the great white conference and had suffered major blowback staring the war and just a few months earlier near bankruptcy in the us supplied them with billions of dollars in bailouts during lend lease act why why have brought in such a threat to this lad remarkable what harry dexter white from the time that he arrives at the us treasury in one nine hundred thirty four is convinced that britain is the natural geo political rival of the united states actually fundamental in his arc from one thousand thirty six eight years before bretton woods in which he writes the more sterling countries there are in the world the more powerful position england will be around the conference table when a conference of benchley takes place so he was determined to pass the british at bretton woods and bretton woods was really part of a larger geo political agenda that f.d.r.'s treasury had which was to eliminate britain as an economic and political rival in the post-war world and if that

happened yes in fact the british agreed to a sort of faustine bargain with the united states the united states provided limited financial assistance to britain in the form of lend lease in a post-war transitional loan in return for which the british agreed to three things to eliminate imperial trade preference this is the arrangement by which britain gave itself privileged access to the markets of its colonies and dominions it agreed to make the pound sterling fully convertible into u.s. dollars again at a fixed exchange rate which was a mortal threat to british solvency because they had so few dollars and so little gold and finally they would have to accept the u.s. dollar as the global unit of account after the war but as british delegate lionel robbins put it at bretton woods we needed the cash well it sends the u.s. close the gold window and one nine hundred seventy one we have seen geomagnetic progression and the dollar debt what kept the u.s. dollar at. the reserve currency there really wasn't any alternative in fact dexter

why it had said for congress in one thousand nine hundred five when you were trying to convince congress to ratify bretton woods that it was inconceivable that there could ever be a time in which the dollar would not be backed by gold keep you believe that if such a thing work to happen the dollar would no longer maintain its privileged place in the international monetary system but because there was no alternative the world as it were gave the u.s. dollar a second chance and i think it was paul volcker who in the 1980's sort of restored international confidence in the dollar and kept the international system from under rubble. paul volcker a combo's accomplish this by raising short term interest rates to over nineteen percent in one nine hundred eighty one which eventually qual the turmoil and volatility and bond markets and created a name for him as a price inflation fighter a legacy that still earned him praise today that was ben steele author of the book

the battle of britain boids stay tuned as we faithfully break down money and no that doesn't involve italian motor cars there might be more back and you would think than a producer bob inglis and i will discuss the fed's announcement today and this is exactly when ben much strap on his tightening tool belt we should vienna for quite the ride when interest rates and evidently rise wasso reveal who wants to put a good housekeeping seal of approval on every h.s.t. algo no really finally it will take a look at the just leave facebook earnings statement. welcome to. here you can feel it.

because there are three choices in life and the first is to work in a mccullough dogs and live on a miserable way like a slave. for a second just to jump the wall and catch the american dream the most of if there are cars and lives there are a lot of. the other show us just to become a member of an organisation and get inside the growing trade. it was something will never forget. a good. book with a slightly who did it by paid for what i've done live with never stop paying.

for it. you might have seen one of these cruising the streets as the five hundred the first

models reduced in italy in one thousand nine hundred seven could go from zero to sixty mph in a whopping twelve seconds a few years ago the u.s. treasury thanks to tarp intervention guided chrysler into a merger with now new and improved five hundred exhilarates along you have a much quicker six point seven seconds but there is another in the monetary world with more torque and accelerate so that a heart could ever generate so let's bring down money or currency investopedia says a government to clear the currency to be legal tender despite the fact that it has no intrinsic value and is not backed by reserves historically most currencies were based on physical commodities such as gold or silver but. money is based solely on faith so why would anyone value this paper money for one thing governments make them legal tender meaning all debts but most important taxes must be settled in

them big coins the open source internet currency are another example particularly because they have no such official backing talk about faith. after world war two when the us dollar became the official world reserve currency the bretton woods agreement fix the price of gold at thirty five dollars an ounce and other countries were pegged to the dollar in specific ratios this was not technically a monetary system since governments but not ordinary citizens could regime dollars for gold but at the current as the cost of the vietnam war escalated there was a run on us gold and other countries realize that president nixon was spending far too many dollars in what could be redeemed in gold so what the nixon do well and nine hundred seventy one he permanently severed of a link between the dollar and gold when he closed the gold window. i have the rest of the secretary of the treasury to take the action necessary to defend the dollar

against the speculators i have directed secretary connally to suspend temporarily the convertible of the dollar. or other was. and late one nine hundred seventy two and i.m.f. committee on finance ministers and central bankers met to discuss monetary reform and according to an a.p. report the committee of twenty eight will be working to build a more flexible system and then the dollars of one special status as the chief reserve currency but this didn't happen because the most important commodity in the world which is crude oil would be prized all only in u.s. dollars whether this was by design or accidental this would allow the u.s. . price inflation to be contained in an essence and exported inflation to its trade partners so what has been the net effect linking the dollar from gold weldon's one hundred seventy one the us dollar has lost more than eighty percent of its value and the supply of money has inflated upwards of nine hundred percent we'll have to

wait to find out but one wonders if the slope on this chart can accelerate forever and that's how we break down the money. it's time now for our daily joining me is prime interest producer great to be here again with you perry and thanks so much for joining me so exciting things happening today the kind of yeah well the federal open market committee released their announcement they said the labor markets have shown improvement some improvement there preparing to encrease or reduce purchase to his so what does that mean they're going both ways you know they like to do that they don't like to scare the

markets too much so what they've done here ben bernanke and some of the other governors and epilepsy voting members have hinted that they're going to finally raise interest rates we're going into your five near zero interest rate policy but they might do it by the end of the year so this little sentence series been inserted into their announcement which comes out about every six weeks and so we might see interest rates rising later in the year and that has tremendous consequences for the markets and that's one of the things that we're going to be covering here of course well i have great news for you ok i know how much you love the fed ok you can now live at the fed and where is this antenna thing the downtown fed building a private retail or a private real estate company has an old fed building and they're renovating it and it's going to be called the last of the reserve and it costs about twelve to eighteen hundred dollars to stay there and are they keeping any of the old remnants from the old federal reserve there are there yeah they're doing it in a way to preserve a lot of the store called purposes and parts of the building i wonder if it's going

to be haunted by the ghosts of the currency some day i guess we'll have to say i'm wondering if you. call the fed in washington have them just print you the money to pay for the rent well that would be one way of going about it you'd be securitized somehow and sold off rated by moody's and sold off to investors in china or somewhere. well also chicago high frequency changers on the chicago mercantile exchange are gaining information before the markets by renting server space directly from the exchange in the data center it's so they're getting a lot of heat for this where you. i think it's important for people to realize that high frequency trading of what is this exactly. a lot of these programs reside on the actual floor of the data centers so we have the new york stock exchange we know that he has a big presence in stocks but it's also in the futures industry and in chicago this has to do with the chicago mercantile exchange we have these goes which apparently

have been front running trades for years coincidentally or not coincidentally enough actually yesterday gary gensler who's the head of the c. up to see was pushing for a resolution or something you have to see that would monitor. and try to rein them in and this is after last week's and you will get a stamp on each one that's all this is this and he said this a couple of years ago he said he wants to put a good housekeeping stamp of approval on every i'll go i just literally impossible leave it up to him to figure out you know what no do we have the capacity to do. certainly doesn't at least goes crying to the senate budget committee again for funding this year well i think you know what's really important to understand is that these companies who are engaging in this are trading and milliseconds and macro seconds so we're talking about thousands of a second millions of a second and ever firm is in this in this market space and they have the ability to take advantage of the lane see issue at the c.m.e.

all they have to do with their servers to be a part of it it's an arms race and you have to figure that the. who are making the most money are the hippie firms and all the big banks like goldman sachs have their have their tentacles into this and goldman sachs is one of the largest traders historically they have been and what what's on the opposite side of the exchange is they have to make sure they're required by law to make sure that there's a fair market for the people like you and me who might want to buy futures contracts or stocks but they're only getting a limited investment revenue stream from the space that they're lending on so it doesn't seem like it's that balance because the money isn't a they're lending the space that millions of other gaming billions on the order of probably an order of magnitude of difference to me i want to say is that they're you know they're lending the space and which may or may not give them information beforehand we're showing the evidence of it but we heard from someone at the c.m.e. saying that this isn't all the time it's just sometimes it's not to malign all of

two strategies that they're not all they're not all causing much market disruptions but one of the arguments against them that they tout is they say they provide liquidity and when we saw it i think we have a graph of this if we can go to a graph of last week's twitter a.p. fiasco the dow jones this is actually some five hundred crashed about one percent within a couple of minutes and then it recovered over the next few minutes and this is something that was affected the futures markets and also the stock market and it was all based on somebody who hacked a twitter account which is kind of ludicrous for the whole reason why their rate they're releasing server space so they can have direct access to the c.m.e. so now we're hardening on them for using that information that they're paying for well that's true but the exchanges are the regulators doing their job by allowing this to happen in the way that it's happening and that's the order well i think what's more important is the infrastructure of these exchanges who's sitting on the board of these exchanges all the c.m.e.

has one of the largest boards in existence you should see it's not only that this is an issue that goes way before. high frequency trading was ever in existence and the infrastructure of the of these companies to begin with can be questionable if you look at the new york stock exchange it's a it's a public company now but it was operated a lot differently what it was just it was just a member exchange ever since it came became public that's when it started having to please the shareholders that's when it started having to generate revenue and that's when it started renting out leasing server space next to each of the firms right next to a status of years all right let's move on to facebook just released their quarterly earnings today and they say parts were good parts were bad to happen ok it looks like there is a bit of a miss one hundred one point four six billion in revenue from thirty eight percent from q one two thousand and twelve ok so this was a beat and analysts were looking at earnings per share of thirteen cents they only got twelve cents you know big well i think you know the problem with facebook

is when you have an i.p.o. the stock is supposed to go up and there are so many problems in the stock is down right now and that's why investors are suing facebook they're saying that mark zuckerberg and company didn't provide adequate disclosures but it's all because they're losing money not the point that goes back to when they issued their i.p.o. there were a lot of traders who had no information for days because well the system wasn't. there a lot of trading problems the day of the the day of the i.p.o. so there was that and i think the underwriters being sued separately for that you know we're going to see what happens with facebook. considering a capital. it

was a ho hum day at the fed but that. didn't stop us from deconstructing the fred non speak chairman does like to have his bonds and hold them do you can't eat a ball and. we also discussed the flamboyant canes in his u.s. rival harry white as they duped out in the woods and brought in for the future of currency we broke down the money and then closed by only looking at the frequency which which trades can be made when you're sitting next to the exchange data server and it's pretty high which margin might be after a b. and a mess on his facebook earnings and speaking of which be sure to follow us on facebook at facebook dot com slash prime interest thanks for watching and make sure to come back tomorrow and all of us here at prime enjoy as have a great night. more

news today violence is once again flared up. again these are the images the world has been seeing from the streets of canada. china operations or would a. clue

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