yes kaiser report is officially the most watched financial news show in the milky way galaxy and beyond following my abduction i can advise you that the visiting aliens aren't interested in speaking to our leader dough ball dave cameron no go balls for them. instead they were concerned with the credit derivatives bubble here on earth apparently the great debt ball of china can be seen from outer space so using. macs well don't ball is partly responsible for that ball because of course

china is just mimicking the west in terms of creating this giant debt ball the ball day job all day lay up the dough to dave cameron here in the barest country what can be more like putin's slim it got the judo going to spend with his finger like this. so let's talk about this great debt ball in china fitch says china credit bubble unprecedented in modern world history so fitch is warning that the shadow banking system is out of control in china they warn that the wealth products worth two trillion dollars of lending are in reality a hidden second balance sheet for banks get a bowl of. paulo. from. a. well this me said this hit in second balance sheet this nation is the epicenter of risk half the loans must be rolled

over every three months and another twenty five percent in less than six months this has echoes of northern rock lehman brothers and others that came to grief in the west on short term liabilities when the wholesale capital markets froze to explain this to the people when you talk about the hidden debt market i mean this is the shadow banking system that people talk about if you look that up shadow banking system everyone recognizes that the banks off balance sheet liabilities that are equal or exceeding their stated liabilities and if you add the derivatives market on top of that the off balance plan it off planet balance sheet liabilities are over a quadrillion dollars now the reason why people freak out when interest rates. go up even one one hundredth of a point a basis point is because it means that roughly quarter my calculations sixty billion dollars of equity is wiped out in the global derivatives business for everyone one hundred point rise in interest rates although people on the visible

banking system will say well my interest rates are not affected that much by one one hundred point move they don't understand that they have to look at the price of stuff like food and energy which ends up moving up as it is in this country is hitting a nine percent inflation rate the u.k. the real inflation rate because of the implosion of the derivatives market and the aliens know this. well you know so we have a situation there saying that seventy five percent basically of the debts in this banking system the shadow banking system are under six months have to be rolled over every six months but there they also talk about the sheer scale of how fast this debt bubble has emerged in china overall credit has jumped from nine trillion dollars to twenty three chilean dollars since the lehman crisis quote they have replicated the entire u.s. commercial banking system in five years fitch said well it's telling also that the

debt is mostly in six month paper or less this is again an attempt to mitigate the exposure to interest rate rises by shortening maturity debt i'm sure that most of that debt five years ago was on average seven eight nine ten years in duration but over the ensuing five or six years to try to save on interest costs they've shortened up that debt now the problem is that they're even more leverage more exposed to rise in interest rate this is why when ben bernanke says or any central bank says we can get out of quantitative easing in fifteen minutes it's no problem he lying he's lying he laughed it was did because when he got into the debt maturity rate was ten years and now it's all six months so it's like. it is like a guy swallowing a porcupine it's easy going in because all the quills are facing out well but then trying to rip that porcupine out the quills are facing the wrong direction and you have one bloody esophagus whether it's ben bernanke the e.c.b.

a bank in japan or this new character mark carney who's obviously but it had to be hockey pucks well of course and you know this is where this libel or rate rigging started was the freezing of credit markets so this is what they're concerned about a seventy five percent of this depends on overnight lending essentially that you need the immediate to rollover that's cash it constantly needs to be new liquidity emerging and new debts arising in the system well that's another problem and that if you look at the re the repo market which is the overnight loans you know banks don't have any balance sheets of their own actually they outsource their balance sheet to the global you know repo market the problem there is that here you have a problem of collateral because they don't count those transactions in a way that would affect their collateral although they should if they were being honest so they their stated collateral of these banks is overstated by almost an

infinite amount that's why h.s.b.c. lloyds barclays world bank of scotland citibank j.p. morgan goldman sachs technically aren't insolvent if you get a mark to market accounting of the actual liabilities on their balance sheet you would find that they are insolvent and goes back to this six month or less global paper floating around that the aliens can see they're flying by our show and the like you guys are going to blow it's going to blow they're trying to warn people in other galaxies that if they have any money parked on planet earth get it out. out of planet earth because that is going to bloom. well of course the only way to pay off all these debts is to grow out of it and this is another thing that fitch points out is basically they've hit a point where it's impossible because with credit at two hundred percent of g.d.p. the numerator is growing twice as fast as the denominator you can't grow out of that. you know with. any

definition of growth most include wage growth there's a growth mean wage wages over the past five years unlike any other balance in the stock market going back sixty years wages have gone gone down every other stock market bounce in the last sixty years you see a relationship between stock markets trading to new highs in a wages trending up or a least wages percent on a percent basis outpacing or at least equal to some rate of inflation this is the only time since world war two the stock market bounced up wages flat and wages not keeping up with inflation so not only are we not having any growth but we're contract ing i mean from so much say we need growth by not but i'm also saying by the way the entire global it cause a global economy is shrinking it's contracting is an irresponsible thing whoever said that is a fool well they do point out also that the home price to income ratio in many

cities across china have hit sixteen to eighteen times so obviously they're never even going to get on the so-called property ladder which is just a euphemism for debt ladder and also hitting a minsky moment warns society generale they say the debt service ratio of chinese companies has reached thirty percent of g.d.p. the typical threshold for financial crises way yeah warn that the country would be on the verge of a minsky moment when the debt pyramid collapses under its own weight she said quote the debt snowball is getting bigger and bigger without contributing to read. well activity so of course they've replicated the us entire financial sector as i said within five years and they've also replicated the entire us economy within five years in that all the debt is not adding to any growth at all but this is what happens you don't put bankers in jail and we don't have. you don't have responsible monetary policy accompany it with george osborne replicating fannie mae and freddie

mac. with this ponzi scheme here with help to buy or china replicating the entire post world war two american experiment with debt as a form of growth if you don't have bankers in jail or responsible monetary policy you're never putting the same thing but at a much bigger scale so here you have let me say something house price appreciation is not growth especially when for every hundred thousand dollars of house price appreciation you're increasing the shadow banking system by million dollars until such point as it collapses and that's what they're saying they're trying to communicate to us but we're not a village of the universe is rife with intelligent life unfortunately the humans of all the various life forms in the in of our viewers with the cognitive abilities were some of the stupidest the stupidest in the universe that's why we didn't want to make friends with us right the stupid kid in class there's a lot of smart and intelligent species around the universe but they don't want to make friends with us because we're the stupid slow kid in the class what can we get a brain was a promise of stupid why don't we did cover such

a fat it well again you know that does not mean they're the real economy the wages have to grow an order to maintain this debt and allow it to be sustainable but of course that's not happening and we'll look at it over in the us tied to this debt situation is why workers why we can make escape this debt trap mickey d's worker sues don't pay by debit card all natalie gun china wanted was to be paid for a fair wage for her work she said twenty seven a dallas township pennsylvania worked at mcdonald's restaurant on the dallas highway from april twenty fourth to me. fifteenth when she received her first paycheck and close was a chase bank debit card with instructions on how to use it and the fees attached now max those fees were norris she went back to her workers at mcdonald's the franchise owner and she asked pay me in a paycheck because i don't want these fees because they were shocking according to the complaint filed the j.p. morgan chase payroll card list several fees including

a one dollar fifty charge for a.t.m. withdrawals five dollars for over the counter cash withdrawals one dollar per balance inquiry seventy five cents per online bill payment and fifteen dollars for a lost or stolen card on j.p. morgan chase or you have jamie diamond he was complicit in the billion dollar theft of m.f. global jon corps and he was complicit in rampant security lawbreaking with the london whale episode and that's just two of the main twenty examples of j.p. jamie diamond and j.p. morgan breaking quite explicitly many many laws there's no there's no deterrence for lawbreaking there's no rationality in interest rate monetary policy so here they come out with a program where they expand the casino gulag prison state where people working mcdonalds there to their pay is tethered directly to j.p. morgan that goes right into their pockets just to check their balances they're charged money just to do normal breathing it's an open air presume it's an open air

presume and there's jamie diamond you know this is a guy who unfortunately is part of the caucus dr c. the most lamebrained least qualified morse most larcenous tickly minded in america end up in positions of power and this is why the country is sinking into pettily around the world that's why it's such a a sinkhole of moral more ality and competitiveness stacy over thanks so much for being on the kaiser report thank you max and welcome back to earth. say to the second speaking to dr steve king. good laboratory was able to build a most sophisticated robot which fortunately doesn't give

a darn about anything tim's mission to teach creation why it should care about humans in the world this is why you should care only on the dog. and.

and. i.

welcome back to the kaiser report max kaiser time now to turn to economist author tweeter steve game steve cain is an expert on i'm an minsky and author of deep bunking economics steve welcome to the kaiser report good to be a max all right steve king your thoughts on george osborne's help to buy scheme do you agree with mervyn king and the i.m.f. that it's a dangerous and moronic policy it is in fact a ponzi scheme your thoughts. well i'm flabbergasted that i can for once and a lot agree with moving a king in the army and virtually everybody else who looks at it because it is the blatantly obvious ponzi scheme and i'm really glad to see the better expression is now being spouted by people at the top of central banks rather than the sort of gaba jelling greenspan used to feed where there was no such thing as a housing bubble well i think in all fairness we should point out that many of the policies put out by many governments around the world qualify as

a ponzi scheme this particular part of this game they help to buy scheme of course is pernicious and ugly because it is a mimic of a scheme in the us by the fannie mae freddie mac. group to puff up the housing market in the us and that of course spectacularly led to the collapse of the global markets in two thousand and seven two thousand and eight well this oz born ponzi scheme to help to buy scheme have a similar impact in the u.k. economy do you think steve came well i think it's what is somebody going to do first of all is drag people into the market who wouldn't otherwise be able to get in there and what that does is it increases the supply. so i call it and it's not helped to help to guide silk to sell because the people who are on the float their properties suddenly get a whole new bunch of people in there with money in their pockets and the money in the pockets comes from two sources not just from the government handing out money to people and saying his five percent or twenty percent of thing in some cases and spend it plays they don't go to the banks and the banks leave that up even more all

and if the banks stayed at the sort of money we know that they lock they do in a ninety five percent loan devaluation ratios and things like that they might multiply that money by a factor of four a far that does boost the whole economy it is more cash in circulation it's more demand it does drive up asset process and people who sell their houses can go shopping for them as ideas benz's and and so on so it does give you a temporary boost to the economy but what it means at the end of course you've got more inflated housing crosses a much higher level of household debt which is already this a political second going to. is the second highest in the world and the only way you can sustain the thing indefinitely is a paypal continue borrowing more and more money which soon is a scheme stop sort runs out of people you know it's effective and it makes the process on affordable even with its own subsidy that's the end of the bubble and assad is coming down again from a high level of debt right so the people in the u.k. that ask well is it a good thing that the government letting me or allowing me to get on the property

ladder let's give them a look at where this is going let's have them visit the ghost of christmas future talk about what's happening in australia now steve gave something i've been talking about for a few years to government governments basically sponsoring us to make themselves look like what economic managers this is being a perennial thing in a strike in politics it takes it goes right back to bob hawke when he defeated malcolm fraser. and if you have used the listeners to go and take a look in the wikipedia who here i'm talking about but they were politicians back in the early eighty's and when whole got into power when the economy was in a slum of the labor in power as opposed to the conservatives where you are. he one of your schemes was the first time and is granted three thousand dollars and that started a little mini bubble in housing then when he had the idea seven stock market crash they did it again with a much larger amount of money and that started a huge bubble hausfraus rose twenty and thirty percent and then they fill twenty and thirty percent on the opposite of it then became part of the furniture in two

thousand doubled again in two thousand and one by by how would when they thought there's going to be an on a slump and each time they did it it pumped up house process even more and if you take a look at what happened to house prices in the strike before they invented this game the average shine every year was about interest compared to consumer processes none more than one half of one percent increase in house process compared to consumer processes over a year after this king came in the average was was four percent per year so i. tom says foster right of prostin craze no real trend at all pretty much zero up to four percent per annum and when this game was absolutely going gangbusters when they had the scheme either in effect or they would they doubled the scream house as went to a guy percent random and twelve percent per annum that sounds great that's a silly measure houses are getting twelve percent more on affordable every year so it's it's a poison chalice if you accept this thing and you done somehow control house

process which the last thing the publishers ever want to do then you make the vase worse off not better off let's take a look at the british housing market as we've been talking about it right here we understand the one hundred percent probability of a stock market or i should say the housing market devastating housing market crash but on the timing side i know it's always difficult to get the timing i have gone on record that within thirty six months we'll have the worst thousand crash on record in the u.k. you would like to add any thoughts on this in terms of the timing let's raise my what what happened in astray with the house process with polling and the and the government then brought in and as they were falling at the time and that michael is saying that full forty percent have a ten to fifteen years and then shortly after i made that call that's when the government reintroduced the they doubled and trebled the first time in a scam which i nicknamed the first time vinda scheme and that restart of the bubble and it kept on going from when they brought it back in until mid two thousand and ten then the house process sort of the fall from that point to get paid off point

on again so that house process for much more slowly than the stock market still might they don't have the total crash the fos this fall and house process with saying was the american one where they did fall something like about forty percent in real terms over about four years but the japanese crisis more like the one i thought we have i'm on for a stronger slow bleed and that's that that's taken something like twenty years but the house for us is full of about seventy percent in real terms of twenty years in england getting it tommy when it peaks is going to be difficult because equally. off of the screen modbus them for you know a couple of years of were good could cause a trouble for a least two years but once it gets to that star age the only way can continue pumping up the hot air balloon of house process is by pumping in momo budget and when you're already running at the second highest level of mortgage that in the western world and that itself is on unprecedented in historical terms then you simply haven't got that much left the new pump has to start coming down and when people start seeing house process falling and the only go up because they were

doing leverage speculation to begin with it becomes a cascade and that's where the americans particularly suffered but even the japanese have suffered very slowly of it's here decades it's not a pleasant way to go down right and the tragedy of course is that the government could have just as easily pump money into a works game and they could have created sustainable economic activity that would have led to real g.d.p. growth and not as a bubble that economics but you know it can amik least speaking there's a term for this if we if we jump into george osborne's mind for a second the chancellor of the exchequer i realize that's a great on seemly and dangerous place to want to be but if we were in his mind i'll take my space helmet. with what we'd see as it is a frightened man who doesn't want house prices to clear her normal machinations of a market but wants to try to sustain his idea of normality

or stability by intervening and of course i'm in minsk you talked about this the more you try to make things. stable the greater the propensity for things to become unstable correct i mean i paraphrase a bit but my feeling is that explain the minsky's theory on this unwise simply understanding history and a little economics would help the u.k. avoid this tragedy go ahead steve can't. well lushly because i met misc he said the fundamental frys he had was that stability a period of tranquility in a capitalist economy is destabilizing that leads to rising expectations the particular thing for us that markets is that minsky also argued that they were pretty much difficulty to proselyte was in capitalism one profitable for ordinary commodities which are pretty much a mock up on call spross didn't vary much from the you know some profit margin on top of the cost of production but he said the knesset processes are independent they can be because they're driven by expectations in the first instance but to turn those they picked into reality you go to borrow money so you can leave as

a process apart from consumer process but the only way you can keep that gap of pop in the very long term is to continue pushing more and more debt to leave the process of as a pot now that only would when people think the process is going to continue as they'll take up more debt and if they keep on doing it you get to the stage where the ratio of the debt you've got to take on to your income becomes something eventually simply unthinkable for most people england's already at that point that's why the markets turned down then in that situation it doesn't reverse again and as it goes in reverse rather than people borrowing money and spending more than i own into the economy which is the the normal side of things in a healthy economy and the deadly side of things when you have a cancer like an asset bubble this is going to cause that's meaning that demands exceeds income when you start having this decline in people liquidating the debt then demand is less than income and the economy can go into a permanent slump and that's again this is japan does cameron want to britain into

another japan it looks like with this policy he does without even knowing that he's doing it which is why is it that we must buy certain saudis brian. steve came chancellor of the exchequer george osborne says he wants to reduce debt in britain while simultaneously line thing help the bison which is an increase in debt so my simple question is is the chancellor lying i think the chancellor like most politicians is focusing on the level of government debt not on the level of household and profit and i think that's the real problem the cause of this process was an out of control private banking sector lending to the private sector to encourage it to speculate on assets even though it may go good let me go let me jump in first i have because that what we have found two thousand and eight going forward is that there really is the such thing as private debt because when these deaths become unsustainable the private sector simply gives them to the government

so ultimately taxpayers always footing the bill for this debt all the combined debt of household that bank that government that it's all the same debt and it's all underwritten by the same abuse taxpayers and the just or by ignoring this is pretending that the u.k. people are brain dead well what he's pretending is that he actually is elected by the biggest rumor any english people he's actually the by the english banks all this stuff happens because the public penguin basically the banks have got the politicians bought intellectual balls they believe that the economy has to have a growing banking sector to be healthy and that's just like believing you gotta have a growing cancer to be a healthy human being pasta certain stage the financial sector becomes a parasite but it becomes such a strong and powerful parasite that the politicians think if they don't lead then that a dog the economy will die that's precisely the opposite of the car should go to get the front financial sector shrink you've got to cut it down in england size by a factor of a lace two and then bills abolishing debt writing it off not honoring the stuff and

sending out for the dead is rather than rather than standing up and voting for the creditors which is what the whole the solutions unfortunately around the world have been doing this time around that's quite different to what roosevelt did back in the great depression and that's one reason why they got out of it because they started rotting off that back in the not in thirty's and shutting the banks and putting the banks under the rock not putting the consumer under the rock. all right steve king well said brad time thanks again once again for being on the kaiser report was good fun. and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert i'd like to thank our guests dave came if like to send us an email please do so as a reported r t t v dot are you are you ready for the truth until next time ask either saying by you all.

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