welcome to the kaiser report max kaiser you know in two thousand and three according to buckingham palace officials the royal household cost each taxpayer in the u.k. about one loaf of bread in two thousand and four that cost was just under two pints of milk and in two thousand and nine a mere m p three download that certainly sounds much better than telling the taxpayer the queen cost them forty one million pounds annually to maintain meanwhile across the pond goldman sachs role in the aluminum market has cost the consumer five billion dollars over the past three years or is as the royal goldman household would have you believe that's

a mere zero point zero zero two cents per can of soda pop or just twelve dollars per automobile not much when you look at it that way but size think of all the tourist money the royal families of wall street bring in now to explain all this in greater detail we turn to stacy herbert first max of all. this is going to be a controversial episode because we're going to talk about goldman sachs and the aluminum market. the british people of course call it alan minium so there are going to be hundreds of comments saying they pronounce it wrong because i don't reside in the illuminati i don't know if you allude or as a british people say aluminum. yes they're british say alan minium but it's aluminum anyway so as of two thousand and three you know all the banks on wall street looked at what happened to enron they were able to coin it basically rigging energy markets and as of two thousand and three the federal reserve and congress

allowed banks to get into that basically into the commodities market the physical commodities market delivering energy we saw j.p. morgan just this past week being fined five hundred million dollars for rigging the energy markets exactly in the same way that enron did by the way and now we have this new york times piece covering the aluminum market so in two thousand and ten goldman sachs bought metro international which has twenty seven warehouses in detroit and here is their story a shuffle of aluminum but two banks pure gold the story of how this works how they're able to add five billion dollars to the cost over three years to aluminum x. begins a twenty seven industrial warehouses in the detroit area were goldman subsidiary stores customers aluminum each day a fleet of trucks shuffles one thousand five hundred pound bars of the metal among the warehouses two or three times a day sometimes more the drivers make the same circuits they load in one warehouse

they own load in another and then they do it again so since buying this the average delivery time for your aluminum has gone from six weeks to now eighteen months because of goldman sachs adding the cost before you speak max goldman sachs has replied to this new york times piece and they say they're just being marketed. how would i ever guess that well this is fantastic that does is low frequency trade. as opposed to high frequency trading in high frequency trading go that will put a computer next to a new york stock exchange or front run trades in the siphon off cash and they leech out money and they are destroying the american economy that way here in detroit its low frequency trading they put a warehouse next to the city of detroit they leech out all the money from detroit now that entire city is in receivership now the entire city of detroit is going bankrupt because folks like goldman are set up shop next door in these huge warehouses to leech money out every single day a penny a fraction of a penny at

a time they leech it out like a cancer cell does leeching that money out there is lloyd blankfein leeching an enormous leech on the he's a pox on the american soldiers leeching all that money at it and of course he claims market making which is false any time lloyd blankfein uses the phrase market making substitute fraud f r a u d fraud it's fraud it's not market making i know because i invented market making technologies that could have been is to. create markets that did not have predatory cancer cells like lloyd blankfein but unfortunately that technology is being warehoused by another wall street firm but this is not market making that is false so the metro officials the subsidiary goldman sachs are saying they're responding to market forces and that's why it now takes eighteen months to get delivery now the price of aluminum is now we flexing the eighteen months to it takes to deliver your aluminum this is this these facilities in detroit that goldman owns represent twenty five percent of the aluminum storage market is one point five million tons of of aluminum there but now

it's the london metals exchange which regulates it and the london metals exchange collects one percent of all of goldman sachs rent that they're able to charge their clients so these are the costs that they this whole sharod this whole dance of of lifting these huge bars of aluminum and she could see in the photo from the new york times and moving it from warehouse warehouse warehouse and this is the height of capitalism this is what capitalism has become is this just moving for nothing it's exactly like what soviet union did you know there's a parallel to the soviet union times for sure that the state would demand certain deliveries be made regardless of the market conditions and of course the collapse of the new america will collapse just like the soviet union did but when lloyd blankfein talks about market making what it really means is financialization what financialization means is that you take a market that's working fine and you add another market on top of it and then another market on top of that some would call the derivatives you know you put

a knob on a top of an option contract or you put a warehouse next to an aluminum delivery facility to make market of corn to lloyd blankfein but to add another layer you get the c.m.e. taking their cut the goldman takes their cut everyone in between takes a cut inflation and in the prices for the day to day of the average person but that's offset to some degree because you're getting some stuff made by slaves in china for garments accent or. so you don't see it showing up in the c.p.i. right away but financialization is creating the wealth and income gap in america which is causing social unrest and it's causing pre-revolutionary kind of unrest in america but a lloyd blankfein is the guy or jamie diamond to point to who are creating this unnecessary financialization so now remember enron used to be an energy services company and what they decided to do is that there was no money and that they just they are the first ones the financial eyes the energy markets like that your question purpose entity accounts seven hundred or more with comical names like

chico to hide massive debts off the balance sheet worst j.p. morgan and jamie diamond and all this oh they have ninety trillion dollars off the balance sheet in derivatives so they are enron times one hundred that's what i would say and wrong as is and j.p. morgan are going in the same direction they're going to zero j.p. morgan stock will be zero at some point i'm willing to bet anything on that happening within the next five years well ken lay at enron just determined that trading derivatives is actually more profitable because they can just clearly scam everybody the nationalization yeah so here we have the banks saw that and they didn't do anything to help stop it they said we want in on that business so in two thousand and three using special exemptions granted by the federal reserve bank and relaxed regulations approved by congress the banks have bought huge swathes of infrastructure used to store commodities and deliver them to consumers from pipelines and refineries in oklahoma louisiana and texas and by the way how many

problems have we had with w c i because of exactly these guys the pipes don't work the pipelines don't work things aren't delivered nobody knows how to trust w.t. i anymore to fleets of more than one hundred double hold the oil tankers at sea around the globe to companies that control operations at major ports like oakland california and seattle well the main purpose of the crash of two thousand and eight was to get rid of a lot of competition for goldman and j. be done in j.p. . and so they got rid of bear stearns they got rid of lehman brothers and then they absorbed walk over here they were they have the big too big to fail banks got even bigger and that's one of the that's one of the points that that whole financial engineering collapse occurred in two thousand and eight so now we're describing there's morgan stanley goldman and jamie diamond j.p. morgan have a position they collude means they are engaged open price fixing there's no competition there's no way there's so many come in there and so you know what we're going to offer a cheaper service to do this to competitively because they'll be forced out of the

market because deregulation regulators are in the pockets of the bankers well you know that there's a case going on against tory from former goldman sachs about these subprime mortgages that were dumped into collateralized debt obligations and sold to passive pension funds around the world and we know that goldman sachs and their preferred clients were able to profit knowing that these things would blow up knowing that greece would blow up the same thing here is they control twenty five percent of this market the storage market so because the price of storage is baked into the aluminum cake then they are able to know whether the prices are going to rise or fall and they can they could easily make it faster delivery so that they know that the price will collapse but now the article then goes on to note that by controlling warehouses pipelines imports banks gain valuable market intelligence investment analysts say that in turn can give them an edge when trading commodities in the stock market such an arrangement might be seen as a conflict of interest or even insider trading but in the commodities market it is

perfectly legal it is insider trading it's overtly insider trading and of course they also have the ability to create indexes around this inside information and data that they then manipulate with another layer of financialization so all the commodities would then go create five or ten or fifteen new indexes based on the components of these commodities markets that they're manipulating and then introduce contracts that are based on these indexes that they are manipulating and of course all that ends up being thrown into pension accounts one reason why detroit has to go bankrupt is because goldman and j.p. morgan have dumped hundreds of billions of dollars of the toxic securities that they've. when trading in into the pension accounts of the people of detroit then there instead of saying we have to write down those assets because we committed fraud instead we're going to put that entire city into receivership and hope nobody ever digs into the pension account and say wait a minute j.p. morgan committed fraud goldman sachs committed fraud committed fraud they're going to it's like the america's. policy in vietnam just kill everybody just kill

everybody and hope nobody looks for the dead bodies back to this story because the federal reserve bank is looking into this because i want that approved it and one of the reasons why they said for giving the banks the ability to do this is that they would provide efficiency and market making and liquidity but here we see that before whoever oh in this before without goldman sachs' involvement was able to deliver their aluminum in six weeks now it takes eighteen months now. put this into context of what's about to happen the two primary things in the world of metals copper in the agricultural world wheat those are the two things that even the u.s. doesn't allow to be tampered with because those are so basic to the fundamentals of everything about our fabric of our lives well after a sustained lobbying effort the securities and exchange commission late last year approved a plan that will allow j.p. morgan chase goldman sachs and blackrock to buy up to eighty percent of the copper available on the market so they're already in plans to expand this sort of model

where they're able to be a bank that on the one hand can trade on insider information gained from their warehouse which they alone control how fast or slow they are delivered if teddy roosevelt were alive today he'd break these trust up that's the problem the american economy today is you've got these trusts vertically integrated market manipulation inside colluding bankers and politicians who are creating this enormous wealth gap america is now the twenty seventh in terms of where that middle classes to other countries around the world it was number one of the richest middle class in the world now it's number twenty seven and it's dropping like a stone and that can only lead to one outcome max just to be clear goldman sachs says they are market making. they're just market make that ok well so you never thanks much again for explain this all here on the kaiser report thank you max so two for the second half of a whole lot more. nobody

chooses to be home nobody chooses to me and my sorrow. is the world for the. good in the six pm get out six b. the six a year. they were a. school that. had to me the class people. who are against. it's tough to think about all of them comes in. and to know that many may not have only been the last to choose should never be me but there are also do different closures that never should.

choose your language. because with zero in federal custody still some of. the concerns get to. choose the opinions that immigrate. choose the stories that impact the. choose be accessed off to. my own last set of questions about the president of this country lied to me and put in and i know that you personally called him a dictator why do you find so disagreeable about him we're going to follow you him till the moment one whit when he will give up and leave his place we're going to follow him we're going to be his his knights knights knights nightmare.

welcome back to the kaiser report i am max keyser time now to turn to mitch fyrst on author of planet ponzi there it is is the book here it is get it right first i welcome to the kaiser's war again chuffed to be here matt so you're just saying that because jan squirrels use that word and everyone loves her and you're just trying to be a local like jeff skiles i think it's going to work all right so here's today's financial times the bank of england capital taliban choking fragile recovery warns vince cable so this kid will is calling outgoing mervyn king a financial terrorist he's comparing him to the taliban because she's insisting that banks hold on to a minimum capital requirement reserve on their balance sheets now you're the author

of planet ponzi right what's going on here is it isn't this idea that they need a certain capital requirement or the wise you just end up with a justice huge ponzi scheme right but we've entered a world of fantasy so basically what we have is debt credit and leverage that that actually runs the markets now so the q.e. global q.e. is basically a giant roach motel there's a big welcome sign outside you can come in but you can't exit so there's no exit strategy to get out and it's all perpetuated by excessive leverage and to keep the scheme going need to pump in eighty five billion a month ok but to keep that scheme going part and parcel with that is to ensure that banks are not required to keep minimum capital requirements on those get that leverage ratio it spending right right because if you look at the balance sheet that ben bernanke has it's probably double what lehman brothers what was when they went bust so we were brothers at a leverage ratio of about thirty one the fed is probably at least sixty maybe

ninety to one with what they have in the balance sheet so it's just going to church so the issue. in the markets had the little taper tantrum i guess two weeks ago when you saw you will to rise i don't know one hundred basis points fairly quickly they all panicked because they said oh my god we just lost two hundred billion they said oh we know what it feels like to be a hedge fund now because we can't control this and i think that what they think is that they can control interest rates which is a big mistake so now what they've got to do is try to figure something out if you notice there's a massive scramble and p.r. campaign going on to replace the fed chairman who said that didn't even say he's leaving at so is that a hint to the market that he's been expelled by the administration to get to that was second it's all about you know possibility larry summers coming out of center but i want to stick on this idea for a second of minimum capital requirements and what the central bank is saying because here in the u.k. now we've got mark carney he comes in from bank of canada he is going to be a money printer we know that from the onset heat as a senator fishley yet but he is mentioned in his article as somebody who the

chancellor that is being george osborne can relate to and get to relax the minimum capital requirements and to support schemes like help to buy fund the land and all these other programs that are meant to increase the leverage because they believe that increase leverage and the increase of asset price that come with that increase in leverage is growth even though the underlying economy is shrinking jobs are shrinking wages are shrinking they still see growth because they're inflating a ponzi scheme because bernie made off just because he had a huge fund that one up every month because he was engaged in a ponzi scheme he said he was growing judge or a board thing is growing in fact they should be raising interest rates correct to deflate this nightmare apologies because as you point out at some point it ends and there's a crash where you don't want my you can't pay or you can't spend your way out of debt with borrowed money so you've got to compare it to your revenues and when

you're spending four times what you make that's not us in my world that's not a sustainable for me. for economic growth in an in an economy so what grows an economy cap ex and savings do we have any of that know this is a debt fueled for recovery because if you look at where g.d.p. is globally i mean it's nowhere it's flat to down and you look at the stock markets everybody says oh we beat earnings but if you look at revenues the revenues have declined or they're flat so the revenue numbers are what you really have to look at because numbers never lie but central bankers politicians lawyers and mainstream media which was slanted is that the u.k. which way is it going up well we have a chart we have a chart of the debt in the u.k. oh you bet it was actually on the screen as buy things are really on the screen you can see it you start on the left hand quadrant going it just goes something like this so i mean that's a parabolic move like we saw in apple stock a parabolic move straight to seven hundred bucks every parabolic move in trading in

the history of trading ends badly because when you have an excessive move to the upside eventually you get mean reversion back down to the norm of which is interest doing the step that's the problem as well because we've got zero boundary to the downside so if you go back to the one nine hundred eighty s. basically what's happened with interest rates they've come straight down in a straight line but you've got to zero boundary to the downside but while interest rates came down they've amassed tons and tons and tons of debt to stay really happy with the fed the fed basically what they did they used to control interest rates by manipulating or changing the discount rate as you know that's disappeared since one thousand nine hundred seventy nine the discount rate has been lowered and raised and you could see the desperation in two thousand and eight when they came in something like eleven times and cut by seventy five basis points proportionally the biggest cuts they ever made they said this isn't working so we're going to have to try something else and that's when they tried buying all the bonds of buying all the mortgage securities and creating a four trillion dollar roach motel that there's no exit strategy for it they just

can't get out of now how can they say we're not monetizing our debt even though quantitative easing means or monetizing debt well. are they do you think that the government is being honest about everything that's going to go you ask yourselves the primary dealers as intermediaries were saying there's not the primary we're not monetizing the debt the primary dealers are monetizing the debt they're not saying but there's twenty one primary dealers right and m.f. global was one of them so we also can get into a discussion what happened to john cores and he just rolled off the page and with that one point he went into the sunset slowly into the sunset with a one point six billion in customer funds and that just got rolled off and nobody did anything about it so now banks make money how by creating debt right is it ok so the banks have an incentive to create a huge amount of debt the amount of debt in the u.k. is now hitting record amounts because debts are being created by banks that's their business model to create debts the u.s. the u.k. government to hold back the debt creation of the banks which is their mandate like a cancer they can't stop themselves that's they wake up thinking about this what

they do all day long is create more debt they need to be curtailed because that debt service is eventually going to overtake all the income in the in the u.k. and the only way to stop it is to regulate or raise interest rates or to somehow clamp down on this monster of the banking sector but that's not happening and so you have this extraordinary situation where the debt in the u.k. and rather all is exploding where you have asset bubbles being created off the back of that which is what happens and you need to control that and they're not controlling it but if you look at them to. in the united states explained over the table it's just money supply basically and so what's happened in the u.s. you can see the numbers have gone up because they've been printing all this money but in europe and the banks in the united states largely have the leverage to an extent so they don't have as much exposure as europe in the u.k. here it's just they have the leverage of nothing and you still have the same old insolvent crew out there so eventually you're going to hit the wall probably after merkel's reelection i don't know if things are waiting for but italy is on the brink you've got sixty percent youth unemployment in spain in greece and you've got

three trillion euros of debt that needs to be rescheduled in italy so i don't know how they're going to pay it and we're going to reach a point where it freezes again and it won't work and that's coming it's coming and that's when you're going to see gold take off quite a bit and go much higher ok well you mentioned gold so i want to talk about gold and we haven't talked to larry summers yet but let's talk about commodities for a second because goldman sachs is now involved in another scandal i don't know what number scandal this is got to but they've got to be involved in more than fifty major frauds in the last ten years that you know going back twenty thirty years would have put all of them in jail many many times over but they've changed the laws to make fraud legal they're too big to prosecute the you didn't see that statute exactly but so the latest goldman sachs scandal is the aluminum markets again there say they're just acting as market makers with this scandal where they're in detroit they've got warehouses full of aluminum they delivery times one

from a few weeks to eighteen months shuttling it back and forth in the in the warehouse to dilute to create more fees for themselves and they're adding about a penny to various costs of all the aluminum products out there twelve dollars to a car a fraction of a penny to us thought it can and the new york times says well it's just it's just peanuts as to what we should care about this what are your thoughts it's like three card monte watch the red you know when the cards are shuffled around shuffled around but most of all they're going to fraud they're committing fraud well yes or no you know it's. i'm not a regulator if i was a regulator then i would go in there's a study where the cost to you if you're making the price artificially inflated then yes you could say you're meant manipulating the price and you're doing it and a concerted effort when people are doing it together and decide to manipulate the prices higher what's more concerning to me and what should be more concerning to the viewers and to everybody is people keep letting the same stuff happen like the definition of insanity is you know repeating the same thing and expecting to get a different result mary shapiro who was the head of the f.c.c.

left and as a parting gift like you get on the television show i'm waiting for mine by the way i guess it's gold bullion so. i gave j.p. morgan and goldman sachs the right to control eighty percent of the physical copper markets this was signed off on in december now that's extremely troubling because that means that they'll have basically a monopoly on the copper market which is probably one of the biggest industrial metals in the on the planet that's necessary for everything so does there need to be an investigation yes there needs to be an unbiased investigation into this warehouse scandal because it's a gigantic scandal most next year remained a point that you commodities in the world are sacrosanct to a degree copper and wheat and that are both very fundamental to the way the global economy works and that governments have been protective of these two commodities in the end because they realize that if they let a goldman sachs or j.p. morgan into manipulating copper market over the months and selling to manipulating the wheat market the possibility of revolutions social uprising in the collapse of

social cohesion it raises exponentially but now they've finally broken down so all the over the years of goldman sachs just. picking at the regulations and and putting their own people into place so that they have their own people running the fed their own people running the treasury their own people in congress their own people the senate after years and years they finally at the point now where it's been a complete coup d'etat it hasn't been a good it's on america from the bankers have completely taken over now and we're just running amok and creating the can do. as for mass hysteria i think i think i think what you've got going on is a group think that's very dangerous because you get the same people with the same ideas because you know you've got in the form of mario dr you is x. goldman running the e c b o x go right and you've got the head of the f o m c in new york is a guy named bill dudley who's also xcode actually altogether against siri ginzler x. goldman mark carney ex goldman who's the head of the bank of england so you've got all these coincidences and mario monti of course who used to be the head of italy

then i think also you know running all these markets running all these countries running all these regulatory agencies while the same companies buying up rights to all the commodities why is that not a dangerous monopoly position was that like soviet union was like your mind if i get here is that the big wall street the big issue is the debt right the debt has spiraled out of control so if you compare q.e. to the titanic voyage on the titanic and actually if you look at the pictures of the captain of the titanic they look like ben bernanke with the same beard ok so what are they going to do you've got to resolve the debt issue people were wearing life jackets on the deck of the titanic while the band was playing saying i don't understand why we're wearing these life jackets out here it's the same thing the problem is the hole in the boat and you're sinking the problem is the debt nobody's addressing the debt max least of all it's your job or you've got to go read time ok this is the book planet plans they all right thanks for being on the kaiser thanks for having me here again max all right that's all the time we have for this edition of the kaiser report with me max kaiser stacy herbert i'd like to thank our guest

mitt feinstein plan of ponzi dot com if you'd like to get in touch tweet us at kaiser report and so next time ask i was in by up. to. this point so no two updates on you trying to transmission makes for a smoother ride. bush and scientist. says he's laser sight some joke on one of the take mr talentless. leave the country. please liz.

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little bit. clumsy. but speak. to. her or her. mother with. a little. bit longer misleader a little. luck. and . let her. know maybe

a little. edward snowden could make russia his home but still lacks the paperwork to walk out of a moscow airport transit zone for the u.s. was a blow is still waiting for a decision on his asylum application. the n.s.a. phone data color. program the snowden exposed it will stay in place as the u.s. congress rejects legislation aimed at the government spying activities. and the u.k. launches an ad campaign to persuade a legal immigrants to text the old stories for advice on how to become legal to go home.