welcome to the kaiser report i-max kaiser you live in the real world the one with the inflation declining wages rising unemployment then you're probably the sucker of the group i can see no poker table because unless you're living in the high frequency trading dark market dwelling fictitious capital will bring financial world you're never going to be able to afford the real world unless you can think like a fictional worlds where there is no gravity where up is good good is down you'll never be able to compete with those who would steal your real wealth using spoof trades bogus securities and fictitious capital stacey. max and the real world no price matters more to the real person than the price of oil of course they care a lot about how much they're paying to fill up their fuel tank well. it's set in the fictional world where those who operate in with fictitious capital set the

prices shell and b.p. unmoved by price fixing probe shell and b.p. shares were trading flat as markets weighed up the implications of an investigation by european regulators into whether the companies may have manipulated the price of oil for more than a decade oh another one of these price fixing scandals in the oil market yes well we've talked about this before it's a benchmark rate so it's set voluntarily by participants in this market by some bankers it's not set on the free market so it's set by some guys like libel or like that is the fix like the gold fix they call each other up on the phone and say what the price is right so it's a benchmark price that the industry sets for itself and cents they know what they're going to do they trade around it's trading on inside information using unlimited sources of capital which is charged at virtually zero percent interest

rates making ungodly sums of money with zero risk until such time as they blow something up and then they get bailed out by the state whatever state that happens to be lie borja got the credit default swap index benchmark they've got the oil market benchmark so all these benchmarks and all the industry benchmarks are being manipulated they're set and the manipulated by the players themselves and ground does the players themselves so these are called price reporting agencies p.r.a. is in the particular they're looking at platts and there's this benchmark not only is it used to set the price of oil but it's also used to set the price on contracts and the two point two trillion dollar base chemical industry in coal shipping rates so it spreads throughout and little tiny movements in the prices of course over a two point two trillion dollar. industry can mean a lot and in terms of the real world versus this fictional world. course is most

voters because it only comes out during election season with voters think it's saudi shakes who and the royal families who are setting the price of oil as these articles know it spent plats since that and the other p r a's since the one nine hundred eighty s. when the saudis no longer opec no longer set the price of oil it's these guys who report voluntarily what they think the price is but of course oil is the most that we try to commodity in the world and then have all the derivatives of oil including the petro chemical business the plastics industry pharmaceuticals etc that all key into the same price so it along with live war which is the price of money itself if you've got the price of money and oil and you're fixing those two basic components of the global economy or fixing the entire global economy and the court of false concerns against trading on all these facts markets and then also price fixing a lie bore the price fixing on gold and silver which is not stated as such but we know from our own research and from the conversation and chatter that see if you see those privately that is completely manipulated so you end up with

a situation where all prices are basically you know in the imagination of those who are trading around that is virtual trading of or around phantom benchmarks actually bart chilton at the see if he says they are going to investigate alleged price fixing up the london gold fix now most of the mainstream media will say that is a conspiracy theory too far that sure they rig global interest rates sure they rig is defects a three hundred sixty seven trillion dollar market but good god they who'd never manipulate gold but of course you know that's kind of his role isn't to pretend as though he's a regulator of some sort yeah but it's also i think far more in this case it's the these markets and how these benchmark prices are set are so far beyond what most people understand when they go to the pump and pump up you know fill their. i think they don't understand that so it's the role of the media and the media is the one

that's not reporting to people that they catch it in wacky conspiracy terms that gold is somehow separate but the funding of the media let me just point out the history of this goes back to mr dowling mr jones when they created the dow jones index which became a benchmark that was the first way to manipulate stock prices because they would leak what components of the dow jones would be added or subtracted same thing with the s. and p. five hundred and that information became the basis of a huge insider trading scandals and trades over the years i've been reporting part of myself in this headline e.u. oil manipulation program implats pricing window we see this quote the industry has developed a high degree of reliance you can almost call it dependence on price reporting agency says john driscoll the managing director j t d energy services they have tremendous discretionary power in their ability to interpret and publish prices so here you have it that he's saying that the price reporting agencies are interpreted prices for this global trillions of dollars of industry that effect

real prices in the real world where people have to labor for real go to a job work the whole day like a schmuck and then go fill up their gas tank at a price that some guys have interpreted they've read the rooms all of the global financial system and both ways rooms are you and yes and are you i asked right so again it's just a matter of looking at some price discovery prices are not they're not the byproduct of buyers and sellers. what you see are people reacting to fix prices that are set by insiders who are manipulating around those prices now we know it's in the energy business as you just reported live or interest rates gold and silver credit default swaps there's no market in the world that's not in some way tied to a benchmark whose value is simply stated from

a subjective observation from somebody who's highly motivated to cheat if i if i were long you know a thousand pounds of diamonds and you know i would say i think the price of diamonds is a lot higher than what it is today i mean that's what it comes down to well but it's also a form of sort of tyranny because we're a part of the reason why we have magna carter and habeas corpus and things like this is because the kings would become very whimsical and on a whim they would just behead all their friends because they decided on a whim that they didn't like these people well this is a very whimsical it could be just because they need the price up or down by a fraction of a penny that day because they need to pay for their sushi they're having lunch they're sitting there with that the bill is about to come it's very whimsical so it's a sort of tyranny over the markets it puts into context what happened in two thousand and eight with hank paulson remember he wanted to get through a seven hundred fifty billion dollars bailout for his buddies goldman sachs on wall street and they said had to come up with that number he said it was just a one page memo he said i looked at the market this is the number i came up with i

thought a chilling was too high it came out of the seventy billion congress blocked so then they went there the next morning and they said well if congress box with this number of this number that we simply made up basically looking at what we can get away with we're going to crush the market market craft and they force through that tarp relief program and they also come billions of dollars and that's how it was done well the international organization of security commissions concluded in october that price assessments could be vulnerable to manipulation because traders participate voluntarily meaning they may selectively submit only trades that benefit their positions so we know they do and then i want to finally. turned to this bit because we talk about these benchmark rates and illegality and the constant setting and fixing of prices in order to benefit fictitious trades that they've placed by removing using this fictitious trades and capital to remove wealth from the real economy and now jeffrey sachs spoke in april at an event at the philadelphia fed on april seventeenth and a lot of people have been talking about this because he's talked about the

criminality in the banking system but there is one bit i want to talk about is where he refers to the bankers' bonuses and wherever you look we see the same thing continuing until today and that is massive massive bonuses at the top of the financial markets massive civil fines being paid for. really incredible behavior and massive campaign contributions going from this the financial leadership to the political class yesterday's. front page story of the new york times say gave eight salary figures gave it half or two point two billion dollars paycheck. dalio one point seven billion steve cohen one point four billion by the way half of these companies didn't need to beat the market last year it doesn't matter they have the structure

that is independent of any real performance but over a few money managers or has funds beat the market not even warren buffett is beating the market at this point i think ninety five percent of all money managers fail to beat the market but they create benchmarks. and when they go to clients and these are typically very wealthy people who either inherited the wealth or have monopoly positions and by gaming the government or gaming the copyright system or just outright thieving or a copyright manipulation or a monopoly position of software they after the couple of billion dollars you become kind of stupid so you give a bank like j.p. morgan your money and they say we created a benchmark is called the jamie diamond i'm a frickin rip off artist benchmark and by that benchmark we're beating the benchmark we're now being the market we're doing lousy against everybody else out there every asset class including gold and silver but according to the best market we are so spirited that we ourselves manipulate a daily basis that i based my post on that i believe gold of we're doing great so

you should be happy if you don't ask me what i mean more and more we're seeing instances of people whether it's ours who are who was murdered by the head of the n.p.a. first up or others if they don't like the system they get whacked indeed they get whacked and also this is finally that's what i'm saying is that these are billions and billions of dollars being scalped from the markets being paid this bonus benchmark there's a bonus benchmark because now that's been established that two point eight billion is the benchmark against which all these other hedge fund managers will now be judging themselves so that's their benchmark that they have to meet that's the contract that they have to close so we guard lists of the performers regardless if they beat the market regardless of how they perform compared to their competitors they will have to meet this bonus benchmark as well labor could set minimum wage at one hundred dollars an hour and nobody it be they can do is play the same game all

right today's number thanks much for being on the kaiser report thank you stay tuned for the second half a whole lot more. story . you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything is. welcome to the big picture.

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all here on. reporting from the world talks about seventy odd p. interviews intriguing story to tell you. in trying. to find out visit our big. welcome back to the kaiser report by max kaiser time now to turn to dr michael hudson author of super imperialism and his latest book the bubble and beyond dr michael hudson welcome back to the kaiser report thank you very much at the top of the book at the bubble and beyond are we now beyond. well the legacy of the bubble is usually debt deflation not when the bubble bursts prices for the real estate go

down prices for other assets go down but that's remain in place so now we're in the negative equity stage of the bubble we're and if lation and people who have to use their money to pay back the banks and all the creditors whose money build up all of the real estate prices no they have to keep paying and there is no write down debt to reflect the actual ability to pay so you still have. millions and millions of american homeowners can't afford to up there are losing their own state or a lot of the loan market sales that are all being bought up by large. equity funds without any markets at all the extra funds have got into the business so we're in the class warfare stage of the bubble who's going to pick up the pieces and how can this be used as an opportunity to lock in lower wages and prevent wages

really from rising again that certainly in america is the new liberal plan and the obama administration's policy is to keep all of that absent placed to make sure that the banks don't lose money even for false of fiction and millions of overcharging for rent of fake mortgages nobody's being punished for this. center being us paid well sorry we have to care also way when you know any mortgage here's three hundred dollars to compensate it's a travesty of what's happening all right let's talk about this term debt deflation for a second because on one hand the price of the debt is sitting two hundred eighty year highs in america it's sitting three hundred year highs in the u.k. with the record low interest rates brought about by quantitative easing the monetarism that's been the defacto global standard for conducting economic policies

over the past twenty years so when you say debt deflation. what are you referring to is going to kind of drill down a little bit for us because debt is trading at an all time high but of course when you talk about that you talk about the price also the yield but can you just elaborate on the little bit for us do you do you put your finger on the point. from one nine hundred eighty zero the present interest rates have gone steadily from their eyes over twenty percent in one thousand eight to just a quarter of a percent now for treasuries and for three and a half percent for mortgages when you have a lower interest rate the lower the interest rate falls the more you can borrow against a given income so suppose you have a. property that yields a million dollars a year. a million dollars a year won't carry very much of

a debt it twenty percent don't carry only a five million dollars debt but what if the debt falls to five percent it will carry it to some billion dollars will carry twenty million dollars loan so without increasing the interest charged to the interest rates fell down americans were able and british and other people were able to borrow more and more money on it given real estate revenues so they so people could say well look. you're carrying charges. when the debts and the interest rate goes down people good against each other to try to buy property that's rising in price and the winner is the winner is willing to pledge the whole rental income on him or an office building to the banker and so the banks ended up with all of the rental income being capitalized into a larger and larger debt well the problem is at some point there has to be enough

income to pay the interest charge and people began to say well look we're going to not only give you all of the rental income as interest but we expect price of the property to keep going up so we're going to actually pay and speculate even more and by two thousand and seven. one six that the american real estate market was speculating speculators so all a sudden finally when the prices that rising speculators pulled out of there was a huge plunge of property values and this plunged that. should have been normally about forty percent it's already been about over twenty percent in met many areas this plunge of real estate prices left the debts in play so all of a sudden you had property in negative equity you had. the economy moving into a depression you have more and more people spending all of their incomes to pay

that back so now that we're in debt deflation. is in the united states people in the blue collar labor know that government is getting around king real estate mortgages. up to forty three percent of the buyers income so if you have forty three percent of your income going to pay the mortgage that you have about fifteen percent of your. an employee and a credit card debt no other bank yes yes more than half your own going to pay debts and then you have. to change percent of your wages set aside for social security which will olding up for the after taxes and another ten percent for other taxes you have the american worker has to spend three quarters of his budget just on meeting his monthly nut. wage and texas it's oreos any money to spend on services

well if you have what five percent of your income to spend on gifts and services. that needs no recovery ok so. i want you to turn to your view of economics if i can say you're looking kind of through the prism of labor and wages and what you see is that the wages are being gobbled up by more and increasingly on an increasing basis by interest cost and this is causing a centrally i want to ask you something just because nobody makes the point about that i want to ask you about this following question because this is something that nobody really makes this this juxtaposition that i don't think really people understand how it works exactly but the relationship between wages and interest rates we know the relationship between wages between asset prices and interest rates because ben bernanke he says we're going to drop interest rates to create a new housing bubble we're going to drop interest rates to create

a new bond bubble but you're saying you drop interest rates and you at the same time you're expanding the debt burden of the working class so that their overall interest costs at the end of the month are actually going higher and they're getting poorer and so that's what you call debt deflation but economically speaking where do these two intersect interest rates in wages where historically and philosophically do they intersect dr michael had. well you know when ricardo in the classical economists sort of created value and price there in the one nine hundred century the major element of the labors budget was food and so they would take the price of bread as grain as a proxy for wage levels but around one thousand nine hundred you began to have a democratization of property and you began to have instead of a land owning aristocracy in europe people began to buy their own property so no

two thirds of the population in america in england scandinavia and most of europe two thirds to eighty percent owned their own property but nobody has enough money to buy a property for all cash so they have to buy their homes which absorb maybe forty percent twenty five to forty percent of their outlay by their homes on credit and that's where the interest rate comes in so you can say that out of the interest charge and that debt charge if i hear ohms but no in america they have to go deeply into debt to pay for their education so if you're going to become a viable family in today's world you have to go into maybe forty percent a year in this the biome which is what the neighborhood you live in determines your status you have to take on education debt and in america student loan debt is over one trillion dollars that's more than all the credit card debt more than the bank

debt and more than the auto debt put together so after the home debt you have the education debt which you need is a union card to get employment today's world and then you need other debt just to up break even because wages haven't gone up really since. one thousand seventy nine so the way in the only way you can survive is on credit instead of on bread it used to be you know two hundred years ago and classical economics is develop. workers are only the rich get to. know. the whole working class and middle class. as a condition or surviving in today's world right and you still see some vestige of this in france for example where they bury the state controls the price of bread this is one of the fulcrums around which they manage their largely state run economy so let's just to recap a second you're talking about student debt you're talking about credit card debt

housing debt and and on top of this we have to add health care debt because a bomb is new health care bill makes everyone have to go out and get into more debt to afford the insurance to have us do health care so that's another new layer of debt and all this debt is being managed by keeping interest rates artificially low which are great for people who are speculating driving stock market and housing to all time highs they have paper wealth they're rich quote unquote but those low interest rates and stead of giving the middle class the lower classes some kind of benefit all they're doing is simultaneously securitizing and monetizing ever bigger portions of the what used to be run by the government is now run by private enterprise and financialization which results in a huge debt burden and you're calling this debt deflation i want to switch over to japan for a second because here in this country for the first time of any of these g twenty countries we're seeing something new we're seeing interest rates in the ten year bond go up because confidence in the ten year japanese bond is going down interest

rates have increased one hundred percent in the last few weeks as they experiment with radical over the top multi quadrillion yen quantitative easing can chemist some insight to what's happening in japan dr michael hudson well again the key is interest rates the way to explain that is what you describe for the middle class. leader but it is true of companies. when you have low interest rates like you have in the united states and want to date of easing you have people borrowing to take over company and right now you have a huge increase in corporate debt just like you've had and labor dept and the store protest is not to invest in new equipment and build new factories the means of production is take what we get. companies are borrowing to buy their own stocks or to pay didn't for instance you have

a computer here just borrowed at the same time that it made a huge payment didn't work stockholders. leveraging a doctor dr johnson if i can just cut in for a second there focus on apple for a second because they outsourced all their jobs to china so they're not in america they have billions of dollars parked overseas or they're not going to pay tax on but are going to take advantage of these artificially low rates to create a fifty billion dollars bond offering to buy back stock pay dividends to benefit they shareholders and executives in the company so the middle class gets nothing once again apple it's really a travesty but unfortunately we're out of time so we're going to have you on back again soon the book is called the bubble and beyond it's a follow up to the classic super imperialism dr michael wacha thanks for being on the kaiser report thank you very much and that's going to do it for this edition of the kaiser report with me max kaiser and stacey herbert our thank our guests dr michael hudson of michael dash hudson dot com if you'd like to send us an e-mail

please do so at kaiser reported r t t v dot ru until next time x. had a saying you know.