the more living bulgarians the better boat carries chances believe me but that's just my opinion. welcome to the kaiser report on max kaiser longstanding data patterns broken down stock prices have soared even as bond spreads have declined corporate bond yields are falling while debt is rising yes down is the new up while ironically up is the

new down so the pilots of the global economy and financial markets down there flying upside down or right side up ascending or descending soaring or crashing. yes max this seems to be the problem we have with the global financial system and markets at the time is that you have the likes of paul krugman on one side saying everything is going great then you have the likes of bill gross at pimco on the other side saying this is a dangerous market so we're going to look at some headlines here about who is right markets insight phony q e piece masks rising risk of instability so you really intend to ask are the markets going mad between one thousand nine hundred seven and two thousand and one the level of unemployment in the euro zone was always inversely correlated to the stocks index however as you can see from this chart since two thousand and eleven the eurozone jobless rate has jumped from ten to twelve percent even as the stock's has risen ten percent so you can see from

that chart that they've gone in separate directions the light blue line is the unemployment number inverted in the red line is the stock equities and the x. well they're coming after the bermuda triangle you know the bermuda triangle famously were many planes of disappeared what we know anecdotally about the bermuda triangle is that when the planes fly in there the dials instruments start spinning wildly in opposite directions and the pilots get disoriented and they disappear from the face of the earth now here we have an economy run similarly where the dials and gauges that are used to determine where the economy is the unemployment numbers the g.d.p. numbers the inflation numbers of productivity numbers the stock market the bond market the currency market they're all showing conflicting signals all showing conflicting data they're all spinning in the opposite directions you see bond markets in particular are rising on

a rising supply goes completely against economic theory economic reality of supply and demand whereas gold and silver are dropping on all time high demand again the. community triangle economy who's getting lost those people that are being asked to suffer austerity they're disappearing they're the casualties of the bermuda triangle economy citi group have asked you know maybe unemployment no longer has any relevance it has for thirty forty years perhaps it doesn't ok because we are in a sort of neo feudal system the sort of bottom ninety nine percent maybe they don't matter anymore maybe they're not needed for a globalized economy maybe that's why we could split off or they ask it no longer seems that earnings matter to the stock market either because if you look at this you can see that u.s. earnings revisions have tracked swings in the stock market usually back for decades as you see in this chart but since the start of two thousand and twelve there have been net downward earnings revisions as you can see on the right of this chart

while u.s. stocks have soared again perhaps the earnings of these companies make have no bearing on where the stock prices go apparently not to the investors but as you see from the chart they no longer matter earnings no longer matter to the financial system well i'm a veteran of these markets now for almost thirty years and over the years different data is popularized in the financial press and by the big money managers on wall street sometimes i look at earnings sometimes i look at just the cash flow sometimes you look at asset values you remember the bull mark in the early eighty's started with the really invention of the desktop spreadsheet and the ability to create leverage buyout programs and financing is right there in this big os drexel burnham ameren michael milken and you had the asset value was suddenly the private market value as it was called took precedence over p. or cash flow so now we're in a market where as you point out p. e. v. e.

standing for earnings is highly questionable why is that well you know it goes back to the big four accounting firms who supply the market with the data on the. that determines p. e. and i've been involved in as many scandals as the banks as the hedge funds as the government those big four accounting firms so i'm not surprised people are wondering what the ease stands for well as being supplied by the four remaining old comp list and kleptocrats who are involved in the scandals leading up to this nightmare to begin with citigroup and gillian tett had looked at the earnings seem to have no relevance whatsoever whether on the company earnings or the labor earnings on the stock market they've gone a separate disk directions in the last two years they've suddenly broken decades long patterns so then she looks at debt so too with credit spreads leverage rates in the past two decades spreads on investment grade companies have always widened when corporate debt levels rose but since two thousand and eleven the leverage ratio of euro zone companies has risen from one point four times to one point seven

times all spreads have declined to around two hundred ten basis points towards one hundred twenty basis points a similar pattern is that work at the u.s. this is classic bubble propaganda bubble thinking if you look at the bubble the housing bubble of the americas and the two thousand and five two thousand and six period people were convinced that housing could only go up they're not making any more land you can possibly go down we've never had a synchronized coast to coast downturn and of course that crashed during the dot com era of the late ninety's there was a new paradigm remember alan greenspan thought we had entered a new period of permanent productivity gains and that these stocks would never go down then there was an eighty percent crash in the nasdaq the nine thousand nine hundred eighty seven stock market crash shortly before then i was on wall street we were selling portfolio insurance which gave everyone the illusion that their portfolios could never lose more than one or two percent a year because it was insured well that crash now we're in

a new bond bubble where people think that oh these bonds can only go up in price because governments will never end their quantitative easing and the cross ownership of all these sovereigns amongst each other coordinate by the i.m.f. and the world bank and other global bank. will never and and this is a new period of permanently low interest rates and wages will never matter again and this bubble that we've been talking about now for a year or so well crash and pop and burn just like all the previous bubbles it's just difficult to know the exact date yet so either the markets are crashing or they're sore because only one of those indicators can be right they're supposed to be correlated they're supposed to be you know earnings and the share price are supposed to be related it's one way there has to be some sort of basis a foundation to your economy for the stock market to reflect the foundation so only one of those are right but she's then asks why we're seeing so many indicators that don't make sense she says it is easy to identify the reason for this as this data

has gone haywire in the last couple of years western central banks have been unleashing an estimated seven trillion dollars worth of quantitative easing this is lowered interest rates on government bonds forcing investors to search elsewhere for yield but what has intensified the crunch is that while central banks have been gobbling up bonds the supply of assets has declined you know while a lot of the assets are being retired through mergers and acquisitions but i have been saying now for a couple of years that what will keep the bubble going longer than most people anticipate is that yes the central banks are buying back bonds that are selling and buying the same bonds it's a massive ponzi scheme and the federal reserve bank's balance sheet is increased by trillions of dollars the bank of england's balance sheet has increased by trillions of pounds but the e.c.b. the european central bank which is essentially the bundesbank which essentially germany their balance sheet has not expanded the same rate as these other global

banks they theirs will so they're really the buffer now the germans are the economic buffer that's absorbing all of this quantitative easing in a lot of ways and in the eurozone so numb. one it means that the euro is not going to dissolve or disintegrate number two it means that the bond bubble will continue up until the point of the e.c.b. finally throwing in the towel because that was the lender of last resort was the e.c.b. if they want to go over to an i.m.f. led special drawing right recoverable social the global economy with a one hundred trillion dollar debt debt facility as was mentioned a devils a couple of years ago yet that's possible but we first let's totally flame out and toast out and burn out the e.c. big they also mention that the volume of transactions that multi-decadal owes and that it's what they citi group refers to as stable hands are no longer holding on to these in the markets they're not in the bond or equity markets in fact it's

a lot of foreigners are buying who are the least stable of all investors because they have a currency risk and they often flee that the hot money that flees the markets quickly whether it's the property markets by the way or the stock or bond markets. so we're kind of at stall speed in terms of this lack of liquidity and citi group says there's an entrance with no exit so if you look at the mutual funds that's the dark blue line and that's rising rising rising with the red line that's the e.t.f. including their e.t.f. assets and the dealer inventory is the light blue line and as you see max that's an all time low so explain to the audience what the significance of this the low inventory by the dealers well there's an old saying on wall street feed the ducks when they're quacking meaning that for these people that are buying into this market they won't be able to exit their positions if there's nobody on the other side of that trade it was easy to unload all those junky debt a year ago two years ago because the masses were quacking they were saying oh i'm not getting any yield on my bank deposits i'll buy any junk bond out there i will

look at it just buy it as a blind pool i'll buy anything you throw at me as long as it has a five percent you know there are two percent yield quack quack quack quack ok now . now the ducks are starting not to crack so much of the volume is drying up when the bubble reaches its apex and when it pops then it's time to sell they'll be no bids because the ducks are not quite going anymore so you have a vacuum on the sell side so very bonds within a day well we've seen now every five or six years i don't know what people are going to be surprised by this where there's asian financial crisis the dot com crash of the housing bubble crisis bonds will be no bid was not done before bond market ninety four was a crash we're going to see another ninety four and bill gross of pimco says the same thing this looks like ninety ninety four all over again so you have a crash you'll then double but because these countries are so in debt to their interest cost double not america they're already paying fifteen percent or twenty

percent of their taxes to pay interest on debt and now they're issuing bonds just to pay interest on their debt that's called hyper inflation so you mentioned the low volume we've we've discussed that and the citi group mentions that it's retail investors who are long in this market right now the pros are out because they're not fighting the fed nobody wants to fight the fed these investors like bill gross see these discrepancies and that this is a wild market that the fed will slaughter anybody in there who dares to go against them so you know my theory though is if you're on this plane and you need these these instruments to tell you where you flying the fed is basically has hijacked the global economy with the equivalent of a box cutter it's this flimsy little device called quantitative easing and the two people fighting the feds the two investors are a bit coin and gold and they even refer to this gold towards the end of the citi group thing of what do you do they say gold suddenly not so precious and as you see

as we know the price has been falling but again none of these indicators are right one side of these indicators is wrong so is it the gold or is it. the dollar which one is signaling the wrong story about the global economy and financial markets well are you going to believe people selling for counterfeit paper claims on derivatives that are tied to the theoretical presence of gold that is the e.t.f. market and the futures market in the comics market in london billion markets association market that's leverage more than one hundred to one or are you going to believe millions and millions of people around the world clamoring and queuing up to buy physical gold and silver that's the choice you choose reality or do you choose the phantom into all of this we see bitcoin and the bitcoin vigilantes of which i am one i am a bit coin vigilante the bond vigilantes are dead the gold and silver vigilantes are in a coma but the big going vigilantes are now here. on the scene ready

to do battle against the fraudsters all right stacy that's all the time we have thank so much for being on the kaiser report thank you say to have a second half talking to sandy gently. dangerous experiments on prisoners they want to make money and they have healthy guinea pigs in the regular society and now they will be used to prison i mean they

wish they could. drug tests on human guinea pigs. to call deadly pills. some plague he was killed. he didn't pass away they let him down. is pharmacy really about helping people. some of these traditional chili lines they've been bred and developed and passed down from generation to. this is a told destruction of the culture in new mexico i tell you what i mean this this is not going to impact a swelling in mexico whatever happens here throughout the whole world we're eating out about in the in the open in all boarding and so forth. genetically engineered crops why do you think this country is full of obese and sick people because we

have a crappy food system. back to the kaiser report imax guys are time now to turn to sound deep jaitley of the cancer research dot com sundeep welcome back to the kaiser report things first of all you are my shoes which i wanted to get a good close. pick these up in shortage i'm a hipster now excellent yeah so it's all very exciting so i did daily you are a student of professor professor forget that he recently wrote the price of gold is

heading to extinction everyone wants to know what does he mean by this it's just worth a lab rating on what he means by that what he means is by the price of gold he means exchange of gold against state denominated feet up credit which we call the price of gold so all he's saying is that that exchange is not it's not guaranteed to exist going forward now you have to probe a bit deeper into this basically it's just an expression of subjective exchange now you might be able to exchange pulls for oranges at the market through barter but it would be very difficult to exchange oranges for a sudden for seven you know so exchanging like for like is a part of the preferences of subject of exchange. exchanging go

for state denominated figure out credit isn't a guaranteed exchange basically so all he or professors trying to say is that. because you can exchange states denominated. state credit for go doesn't mean you ways we'll be able to exchange state credits for go i'm looking at what's happening in asia and india and china vietnam thailand people are starting there's been a buying panic of gold and silver and going forward what i'm hearing here is did to put this in context of what this would mean on a day to day basis is that people i think are beginning to sense either intellectually or instinctively that the era of paper is coming to a close or in i guess what you could call kind of a minsky like crack up boom so we're seeing this in the bond market wristing isn't

in the stock market there's a crackup boom it's hyper inflation as expressing itself in in the bond market and the stock market and the people who have a long history in asia for example in america for example very new country it's only two hundred thirty eight years old it's a pipsqueak in terms of the number of years it's been around but the people with long memories and china and elsewhere they've seen this before they're and they're buying gold and silver because they know and to get your point at some point if we if the paper money system collapses and the central banks that are extremely reckless just blow this sucker to bits it will happen we end up with gold and so over again and it won't be a necessarily if a paper money quote for gold because those systems will become extinct so it's a little bit the price of gold is having to extinction the point is that the price is set into extinction not gold of course notes because you're not quoting quality

against quality if you exchange apples against oranges it's quality against quality you know you have to think we're deluded in what we have being told the gold. that's the gold of the silver price it isn't you know and our ancestors would be laughing at this delusion that we're all putting ourselves through at the moment it's also my price signals that you look at if the dollar prize is not terribly relevant yet but what do you look at the ratios are benchmarks how do you view things as the price has been coming down it's been getting more backward dated so silver and gold are becoming much more becoming much more back with the than they were historically so as this price has been coming down gold is coming to a sharper premium rather to the futures price than it was before now typically this will be arbitraged out of a wall because affectively what it means is that you can sell your gold today

simultaneously buy a futures contract yes and lock in a profit without relinquishing your position in the metals exact right so it's a guaranteed profit guarantee people do not exercise this guaranteed profit because they'd rather just own the gold they're buying the gold they want the physical and so you have what's called backwardation and but as i say typically this doesn't last for long because it's a guaranteed money maker what there's a story in all of this max because i started looking at professor's work probably about nine years ago when i just graduated and i was looking to go back with the ocean and i was brought to order boy one of my senior colleagues that gold will never go into backwardation permanently because there's so much of it around people will just of atrocious this thing away so nine years later here we are now and it's not happening what's going on you know so that's what i will say to people who think that gold or silver backwardation is just it's just the thing

basically it's not just a thing well the other way that this is described is in terms of premiums which is kind of another way to describe this phenomenon the. the amount people are willing to pay above the paper price premium is rising so in asia for example i think i saw the gold gold gold is trading now thirty dollars premium which is an extremely high level you know in some quarters we're getting reports as over is trading for five six bucks and over the paper price that's a twenty percent yes so this is what people willing to pay over this paper price because they do they don't look at the paper price they look at alex's they see alice's they view their wealth in ounces not in marginal ball hyperinflated re hypothecated claims that have no possibility ever being honored absolutely a lot of people have said to me max look at look at germany during the

hyperinflation you could so write small for gold well no you couldn't there was no volume of reich small acts that you could exchange for an ounce of gold the only reason there was a right small gold price was because you could exchange right smokes for dollars and dollars for gold if you couldn't exchange rock smokes with dollars then they wouldn't be even the right small gold price you might have been able to exchange a right small for a box of matches but five bucks is a much is you know maybe not an ounce of gold definitely not you know we have to start thinking much more broadly about the concept of price and extol ok let's move from the. academic view of history of gold prices and let's look at kind of the dark side of the equation which is on the manipulation side this is something that's been talked about by the gold action. go what is it gold gotta get gold antitrust action committee that's that data

they've been talking about this for a number of years and at first they were written off as conspiracy theorists but now even the august publication of the dow jones wall street journal murdoch press barron's came out and said that during the april twelfth and fifteenth gold selloff and now this past friday sell off barron's notes suspicious tales of large quantities of gold at low volume guaranteed to get the seller of the lowest price on their cells this is very reminiscent of brown's bottom remember gordon brown telegraphed that he was selling a large quantity of hundreds of tonnes of britain's gold he told the market in advance people were front running that trade and it threw down a two hundred fifty dollars an ounce as people got in there and it ended up with brown's bottom the worst price in decades so here you have the market doing something similar telegraphing its four cells that are killing the price and people

are jumping on there and dumping it ahead of time what do you think well this is these are diversionary tactics if you look at brown's goal so. i honestly think that we have to look at it in a broader perspective there must have been gold liabilities but could only have been settled boy physical gold coming onto the market because you have to remember that the majority of gold trade is still gold that was mined a very long time ago you know fifty fifty percent of turnover is go into the already not go into that we've just got out of the grown so physical new fresh gold on to the market most of only being to satisfy. gold denominated obligations not dollar denominated obligations that would go gold in nominated or blog asians which were being snapped up at the price and the only thing that would have settled it was physical gold so i don't mock the bottom against the

arctic state you know obviously it took a bit of time but it did alright let's take a look at finally on the other side of this debate are the paper the paper pushers and chief paper pusher in new york anyway would be paul krugman of the new york times is arguing against a gold standard and he talks about gold hoarding as the primary reason people would hoard gold or not circulating the gold has no money for law city but of course in this environment where the fed of the touch of banks and the wall street banks are engaged in a quid pro quo where there's no money to the right now there is no money velocity right now when ben bernanke he says deflation is not because for a lack of economic interest in getting business started it's because banks are hoarding the cash there's massive hoarding going on now so when krugman says well there's going to be hoarding of gold as against the gold standard he's wrong on several levels there right here is you must remember that under a true gold standard gold who we're doing is a part of the mechanism it's

a protest of the interest rate being to look so you exchange will go bones for gold coins and you bring the rate of interest up at the rate of interest is higher reverse procedure so go holding per se is an intrinsic feature of the gold standard it's a protest against the rate of interest being too low and the people are costing the vote with gold coins they're exchanging their gold bones the bones would still mature and go at the end of maturity but they see a capital profits because the rate of interest is too low so they exchange dollars going back a hundred years just as one another writes local journey. yeah the trade in other words they had a gold standard of problems were always have the state involved at some stage they want us to think that a pound is different from a pound of silver they determine what a pound you know role of the villain is like saying well we determine what a metre is you know it's

a ludicrous thing for the states to have that privilege i finally got to get your response to one that we only have twenty seconds but mervyn king outgoing bank of england says that the scheme that they lend to buy for housing is another bubble a bubble scheme a ponzi scheme do you agree disagree both it will cause problems. some points huge problems ok we've got to leave it there all right fair enough sandeep jenny thanks so much for being on the kaiser report and its merits. that's all the time we have far less opposite of the kaiser reported like to thank our guests. to catch a research dot com if you like to send us an e-mail please do so at kaiser reported r t t v dot are you. saying. you know how 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 realize everything

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