good afternoon oh welcome the prime interest i'm harry i'm boring here and washington d.c. and these are the stories that we're tracking today. whole what i thought the banks are writing their own legislation that's what a new york times article reveals one bill in particular is carving out exemptions for trades from new what regulation according to the times the bill which quote was essentially citi group sailed into the house financial services committee and study group's recommendations were reflected in more than seventy lines of the house committee eighty five line bill while this probably comes as no surprise that the trend of banks growing increasing influence is getting noticed which is probably not good for mr dimon at all and embattled hedge fund mongul steve cohen continues to face pressure for possible criminal insider trading charges this after he recently had to pay six hundred million dollars to the f.c.c. to settle civil charges borne of senior executives were given subpoenas to testify

before a grand jury many are looking at this case as a bellwether for the largely unregulated hedge fund industry it seems the top dogs in this finance sector are not too big to fail and finally japan's money print money printer and shiva said he would do more to her volatility as domestic bond market commencing the most aggressive program in the history the yen has more than thirty two percent of its value relative to the dollar and bond yields have a spiked the most in decades with a new stock index is also up substantially until recently that is when it crashed in eye watering at seven point three percent in a single day as a tough gig for central bankers who want to have their cake and. here's what's in your prime interest.

as you may be well aware last week prime interest producer bob inglis and i attended the conference and san jose california and now we had the opportunity to interview tracy mayer investor entrepreneur and owner of how to vanish dot com what is the web site that teaches you how to attain financial privacy and i asked him how big into all of this and here's what he had to say. is the first. digital currency it allows you to send money directly person a person over the internet and you're able to do so using just what's called a private key and that's not tied to an identity and so for people who want to

protect their identity when they're purchased the things they're able to use going in a way that doesn't tie into an i and identity so you don't when you're ordering books off amazon. they don't know what you buy and so it's not database in archived and searchable for. the entire future with big point you're able to keep that from appearing in the database and one of the things you talk about are these private keys actually being elements of speech and how does that relate to you know the bill of rights the first amendment and such yeah well congress shall make no all regarding the freedom of speech or of the press first amendment supposedly we hold dear in western the monster supposedly. however what about when people say things that we don't like them saying you know the freedom of speech isn't made for speech that everybody agrees about and it's made for the speed. that really upsets people

and antonio in school of the united states supreme court he recently said in an interview that money is speech and no where is more true than with bitcoin because with big oil it's just a decentralized computer program and those private keys they appear you know sixty four bits so it's sixty four characters in there pretty much random and you can control millions of dollars with millions of dollars of value and you can send it to anyone anywhere in the world at any time it can't be seized it can be frozen it can be confiscated and yet that private key it's just speech in congress shall make no law regarding that in the things that are relevant and what they say department of justice and all that went on this week if you have any comments about if either of that they document well i think the. we're seeing an overreach of the government in all types of areas whether it's assassinating children for political

speech whether it's the i.r.s. auditing and hounding and harassing people for political speech it's this politicization of currency and it's this overreaching of the state that's really causing a lot of faith to be you aust in the currency which are really just political currencies and that's why i think this new move into math based currencies ones that you don't have to trust centralised authorities with is gaining more and more steam in adopting well when you talk about. this big coin phenomenon crypto currencies are relatively untested in the judicial system do you think we might see favorable treatment as cases come up and actually rise to the level of the supreme court i think it will be very interesting to see how the courts actually deal with that point because we have the fence and guidelines which are just guidelines that are neither binding nor deter. going to the regulators to look to big coin in

this as well it walks like a duck and quacks like a duck so we're going to treat it like a duck but there are a lot of backs to big oil in the you know aren't like a duck at all and. those fencing guidelines you can really make a lot of things that issues there as an attorney and so if they do actually try to craft legislation that were to apply it at that point and or cryptocurrency is in general i think it might be extremely difficult for that to pass muster for example it might be overly broad or it might be void for vagueness both tests the would cause a judge to rule it unconstitutional and then you've got also you know freedom of speech issues. people could raise as defenses with this so i mean it's just a new area of law and technology and it's going to be interesting to see how the courts deal with it you also have a publication called the great credit contraction and you talk about how our system

our monetary system today that assets in money can just about great i think one of the things that a lot of people like about that coin is that you can't inflate it so can you talk a little bit more about your theory of economics you know i read that you're big proponent of aashayein economics and why big coin if someone you believe the national economics of laziness theory of why they would be attracted to a big going well when i wrote the great credit contraction back in two thousand and eight it was before big even existed and my website run to gold obviously a fan of that the reason is because gold is nobody's a liability it's an equity based asset and it also removes the counterparty risk that you have when you're dealing with a bank so with gold you're protected against hyperinflation and the counterparty risk you're protected against that well big coin is a film that would go write a book gold that adds a bunch of quiddity you're able to. send any amount of money anywhere in the world

to anyone at any time you can't e-mail gold to someone for example but gold is always going to be there so they're really a perfect complement and big coin white gold is an equity based asset and it's not subject to counterparty risk so you don't have to worry about the bank in cyprus or washington mutual or bank of america merrill lynch or fannie mae or freddie mac. or any of these institutions failing and you losing the value that you have in your big point you're really just more subject to the exchange rate risk and if you can convert it into gold and that's really what you need so that's how i see it playing into this overall large theme of the great credit contraction where capital is burrowing down the liquidity pyramid into safer and more with good assets gold being the safety and big coin increasingly becoming more and more liquid as more merchants accepted and individuals accepted we had a chance to talk with. us and we talked about the multi-tiered payment structure

that we have we have the consumer level payment system where people buy food and gas with the money but we also have for instance u.s. dollars used in a large way in international settlements is it possible for bitcoins to become a global reserve currency is a big enough to get big enough and also retain i'm sorry and also retain its ability to work in the smaller payment system yeah you can divide big coins to the decimal so two point four quadrillion subatomic units so i mean there's enough big point to have even the smallest micro payments in a you know like a five hundred trillion dollars economy so yeah big point could have could could in its current state of you know absorb enough economic activity in order to do that. as far as it becoming a world reserve currency i mean maybe in twenty or thirty years at the most we might have five different. reserve currencies the dollar euro is based on.

on a south american one in an asian one like you on in you know an asset an equity based one like a gold coin in big one would be like a currency for the internet in my opinion what you think it's going to take for the united states to lose the world with their currency if that if they can just do more of the same. but really like the united states is in my opinion it's not going to lose it's it's got a very dominant position and a lot of that has to do just with the geography it's in doubt with you know natural resources it has everything it needs a very highly educated populace it's got energy the natural way and skate with the rivers and the tributaries into. two coasts it's isolated i mean all of these things gives it a tremendous competitive advantage and there's really no other region in the world besides perhaps brazil that has a map that can. lead to a potential competition with it now all that being said all empires in for economic

reasons and the united states is definitely doing more of the same in terms of you know running up a huge budget deficit. having to keep interest rates low which will innervate the economy and so it's in and as a restricts those liberties and freedoms it's going to restrict its economic productivity and the people with the capital are just going to leave they're going to go somewhere else where there's opportunity you know you've got an unemployment rate in the united states you don't have an unemployment rate in singapore it's like two percent if you want to go somewhere and make some money like go to singapore and it's nice it's like san diego mixed with manhattan but we have seen a lot of volatility but then declines we've seen a lot of market corrections do you think that's going to start leveling out. but in time sitting till risk is the. forecasters yeah i don't think so i've see i've been at since like a nickel even before the. at a big point i mean i've seen

a lot of so i've seen a lot of downs there's still a lot of risk with big coin itself cryptocurrency in general it's this new species a currency it's math based currency that's kind of what i'm talking about big picture wise and big one may not be it you know there might be some type of vulnerability that could bring it down but i think that the innovation is what's exciting and that's what's going to be generating a lot of this wealth in opening new markets where people can take a payment from nigeria you know the funds are good so they can have amazon ship the product out that was entrepreneur and investor trace it may or that we met at the conference last week and san jose don't go away because at next i have an interview with a little bit kinko remey about the crowding i've investment spaces and how this will a systemic risk that goes all the way back to long term capital management and bob inglis and i are going to do over bloomberg eight and live facing.

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long term capital management was a large hedge fund that nearly blew up in one thousand nine hundred eighty eight i spoke with the lewin kingery me an associate professor from the university of san francisco and the author of the cross crisis of crowding earlier about this event and how it was similar to the financial panic in two thousand and eight let's take a walk. there are some similarities in the sense that in the long term capital case it was the case of a leopard bank in other words of the ball a lot invested and they had complicated positions in a market that became very crowded meaning that lots of people were doing the same type trades and what happened is once a slight shock occurred and that market didn't look so good as people started selling it put pressure on them in others and with their leverage it ended up causing them to either go bankrupt or require some sort of infusion of funds

and so that was their story it was a slightly different story but in two thousand a lot of these banks had similar complicated positions similar types of short term financing lots of leverage and when the housing market turned as people sold everyone was suffering and everyone sort of was in a chain to go bankrupt so those similarities. and what about that over the counter trade. so the way long term and many investment banks still finance themselves is through short term repose and a lot of the instruments they invest in the fixed income or on type investments they're not on exchange like us stocks they are over the counter meaning they're traded from one bank to another by a phone call and why that created a big problem in long terms case and even today is because fundamentally if we

think we don't know whether the bank is solvent or not we don't know how good their positions are if they own i.b.m. we can quickly say ok well they own i.b.m. so you know they've got to be at least worth this much and we're kind of reassured by this they have a lot of complicated positions that are trades with other banks that we're not aware of. then it's a guessing game as to whether they're solvent or not and that was true in long terms case and rather than figure out a way to make that over the counter market more transparent or more measurable we ignored it and then we got to two thousand and eight where a lot of the same problems occurred again this time more in that housing over the counter trades but nevertheless these type of over the counter trading and it seems that these same issues still exist and our financial system today do you have any solution for the industry. well one solution that i said in my book as well the

crisis of crowding is to create some kind of computer system or exchange for most of the o.t.c. contracts and you know apparently the c s t c is working on this but there has been no formal announcement yet so i think that already would do something wouldn't solve all problems but it would make things better. well let's say that the entire seven hundred trillion dollars mark at was became cleared so there were no more over the counter trades does this itself revenue systemic risk are what we need other measures on top of that. great question no it doesn't it doesn't remove systemic risk but what it does do and again not only does have to go exchange there would have to be other measures produced as well not just that it goes the exchange but that would at least help us have transparency when

a bank is in trouble or even a before a bank gets in trouble we can see very clearly what the positions are and who they're owed to and what their net position is so we can understand if they're truly in trouble or not so that helps a lot but we still have there still could be systemic risk. so other things that could be done. again i'm not saying these are the right things to do but they certainly would help reduce the risk one is to reduce leverage so. it's all banks reduce the amount of leverage they take on or or have higher capital ratios. that would do it another thing that's very hard to control is that we have less crowding . in other words we have less people doing the same trade when many people crowded investment space in cars about space to become very vulnerable that's harder to figure out what the rule is i would say rather than a rule it's more of an independent. banks need to take that into account when

they're making their trains to measure crowding to make sure that they're not going to have crowded space where the risk is higher it's interesting that you say that the government and those involved with this didn't really know exactly what they were doing and i interviewed david stockman a few weeks ago about his thoughts on the ballot in two thousand and i wanted to play for you his comments are. idea that somehow the last standing gambling houses in wall street were going to fail and then this was going to spread as a contagion to the rest of that main street economy is an absolute urban legend i documented in my book the main street banks were not in trouble there wouldn't have been a run on the bank there was no great depression two point zero around the corner that's just. as fears and false scholarship from. yes but it's funny. you know those i've been i mean he believes that the ballots

are basically just a result of corruption and cronyism and i just wanted to know what your thoughts or i know on the ballots in two thousand a. he has a strong view. i'll say this first of all david stockman nor i really can tell you the right answer and the reason for that is because no one knows what would have happened we just don't have that. that sequence of history so we don't know what would happen i don't entirely agree with them for this reason. the bank there was some signs that the banks were in fact going to cause larger problems when lehman failed commercial paper lending rates went through the roof they went from something like one percent to something like five percent and commercial paper is the way a lot of major u.s. corporations borrow money to finance their activities their inventory their short

term production and so companies like g.e. and other companies were getting in trouble at the time because borrowing became extremely difficult so to say that it wasn't going to wall street i think is incorrect how how big it would have been is hard to know and so that's something that we ought to just take a guess on. bernanke there is one thing bernanke e have that he has studied history very well and if there's any credit i can give him is to understand at least how these credit crisis can get worse if something isn't done so i don't agree with that i think that you have to create a system where bailouts are not depended on i agree with that i'm certainly not in favor of governments jumping in every few few crises however if if you do look good in a situation like we had the choice was simple you can do what stockman says which i think would have led to probably a year or two more of severe pain or you could have done somewhat what the

government did and that probably would have at least paper things off a little bit. that was author of the crisis of crowding eluded me. time for the day. another week in the bag almost you've got to get through this dual. all right well we have. i mean it's still generating headlines there was this scandal where bloomberg reporters were allegedly spying on their customers these customers included j.p. morgan goldman sachs china turbo to me geithner and our beloved chairman himself

and it looks like our relentless coverage is producing some results yes prime interest gets results finally but according to the new york times some of the larger bloomberg customers are getting together and they're going to build their own chat network with reuters and market now this group includes barclays citigroup j.p. morgan deutsche bank and goldman sachs now we got a leak screen shot and here it is exclusively for a prime interest of viewers. and there we have hi how are you yes five minutes to fix three months u.s. should be zero point two seven sweet long from zero point two five percent i do have to say just for the lawyers on the thirteenth story here this was a simulation not an actual leak but it does raise an interesting point which is why board so war. was a huge scandal i mean can you just go back in short life for itself is something that's been around for decades and it's a it's a means by which interest rates are basically eighteen banks get together in london

and they tell each other or the british bankers association what their lending rates are from a day to three months to a year and then four are the top four and the top or bottom are subtracted and then there's an average anyway so. very few banks have control over what's basically a three hundred trillion dollar market in derivatives and ten trillion dollars in direct lending and what's amazing was during the scandal basically no one was holding these firms accountable and making sure that everything was accurate what they were producing because basically they could just tell whatever they wanted to and that was one of the problems at the time so that we have any alternatives well we could actually use market rates in the c.f. to see would like to see something like that done gary gensler said why not just use a short term repo market rates for the overnight index while it sounds complicated but basically these are widely broadcast and well known market rates and we don't have to rely on bankers broadcasting things in secrecy and have more people

involved so you're going to get more accurate numbers probably exactly now there was also interesting story we found today amazon by three blocks in seattle and in the process of cleaning out their new headquarters and we got we saw some drawings of what they want to build it's a five story glass a bubble that will include enough for a room for full blown grown trees and that's i think that's all the time we have for this particular type of story of the day and that's the picture from one of the montreal bubble so we think that. might have a great weekend. well it's been a pretty day we learned how bangs cozy up the congressman to get favorable legislation

passed first you have to get along then you go up on. the sam rayburn side and the bank of japan promises to play atlas and hold up the japanese capital markets on its shoulders any bernanke you can let. a fistful of dollars and then trace mayer showed us how big coins are gearing its way with mass lovers who are tired of being politicized currencies and professor kingery need to explain the fed's and wins over the long term hedge fund bailouts and then we finally turn the screws on bloomberg tad and revealed in the competition well that's all i have for today in light of memorial day i will be back until tuesday in the meantime you can follow us on facebook at facebook dot com slash prime interest and from everyone at prime interest i'm perry and boring have a safe weekend. a

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