to abby martin is coming up at the top of the hour. wealthy british style. markets why not. find out what's really happening to the global economy with my next concert for a no holds barred look at the global financial headlines tune into kinds a report. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize that everything you thought you knew you don't know i'm tom harpur welcome to the big picture.

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 then 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 if as the royal golden 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. in the illuminati i don't know if you allude or as the british people say element you. 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 that 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 to 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 add in the cost. before you speak max goldman sachs has replied to this new york times piece and they say they're just being market makers how would i ever guess that well this is fantastic because it's low frequency trading as opposed to high frequency trading you know 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 leach out money and they are destroying the american economy that way here in detroit it's low frequency trading they put a warehouse next to the city of detroit they leach out all the money from detroit now the entire cities 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 leach money out every single day a penny a fraction of a penny at a time he chewed out like a cancer cell just leeching that money out there's lloyd blankfein leaching an enormous leech on the he's a pox on the american soldiers leeching all that money out 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 stock market making i know because i invented market making technologies that could have been used 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 a subsidiary of 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 there's 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 lifting these huge bars of aluminum no 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 that collapse 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 ends up 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 a 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 they are gosh no

purpose entity accounts seven hundred or more with comical names like chook zero 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 why i say enron. 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 it 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 of 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 a j b done in j.p. morgan so they got rid of bear stearns they got rid of lehman brothers and then they absorbed walkover year they were the big 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 what you're describing here is morgan stanley goldman and jamie diamond of j.p. morgan have a position they collude means they are engaging open price fixing there's no competition there's no way is someone to 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 for the story 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. 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 if 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 and ports banks gained 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 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 to mommy 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. then trading in into the pension accounts of the people of detroit there instead of saying we have to write down those assets because we committed fraud instead we're going to put the 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 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 american economy today is you've got these trusts vertically integrated market manipulating 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 or just says they are market making. they're just like you make it so you never thanks once again for explain the salt here on the kaiser report thank you max so just for the second half of a whole lot more. playing

into the future to this. day and you trying to transmission makes for a smoother ride bush and scientists could crystal's the e.u. says he's laser sight some to ponder on one of the take giants comes to town on tuesday update here on. the contrary. live. if it possible to navigate the economy with all the details of his text

message information and media hype you up to date by decoding the main stream have stated if in your right. little. welcome back to the kaiser report i'm max kaiser time that it's our to mitch fire stein author of plan of ponzi here it is the book here is get it right first i welcome to the kaiser's for 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 jan 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 otherwise you just end up with a just as 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 spanning right right because if you look at the balance sheet that ben bernanke has it's probably double what lehman brothers was was when they went bust so lehman brothers was at a leverage ratio of about thirty one the fed is probably at least sixty maybe ninety to one with what they have on 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'll dries 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 had right 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 it so is that a hint to the market that he's been expelled by the administration to get to that was second talk about you know a possibility larry summers coming out of it 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 he did as a senator fishley yet but he is mentioned in this article as somebody who the chancellor that being george osborne can relate to and get to relax the minimum capital requirements and to support schemes like help to buy fund the lend and all these other programs that are meant to increase the leverage because they believe that increased leverage and the increase in 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 as board saying 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 so 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 it was actually on the screen just buy things already on the screen you can see it you start in 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 we have an excessive move to the upside eventually you get mean reversion back down to the norm of which is interest due on this debt that's the problem as well because we've got is 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 when you say really happened 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 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 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 this is 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 have 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 explain this over the table it's 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 and the u.k. here it's just they have the leverage 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 fifteen 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 but you didn't see that

statute exactly but so the latest goldman sachs scandal is the aluminum markets and their 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 when from a few weeks to eighteen months they're 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 that fraud they're committing fraud well aren't they 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 lot of what the cost to you if you're making the price artificially inflated then yes you could say you're mint manipulating the price and you're doing it and a concerted effort when people are doing it together and decide to manipulate the

prices are 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 days i remain to point that too commodities in the world are sacrosanct to a degree copper and wheat 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 rather than let months and sell into 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 in the place of 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 draghi it was 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 gone against the siri ginzler x. goldman mark carney x. 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 lloyd blankfein to get rid of 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 if you're just one we've got to go read time ok this is the book planet ponzi 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 guy's report was made nice guys and stacy herbert i'd like to thank our guest miss feinstein planet ponzi dot com if you'd like to get in touch tweet us at kaiser report and so next time ask us and buy a. little worse cheaper dollars. but for the. minute. what well. good good you never seen anything like that until a. little

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