your honor to. welcome to the kaiser report on i'm max guys are you know the dutch have got the economic bliss. private debt has got them down the housing bubble is bursting bursting bursting the economy is contracting us therapy is biting oh off. and unemployment is rising but how is this possible when the dutch current account is positive the government deficit is smaller and exports are doing well something does not add up we need to bring in stacy herbert to see what the frick is going on

over there in the netherlands well max remember at the beginning of this financial crisis when it was an economic crisis across europe and we needed to bail out greece and spain and italy and portugal and all these people with a profit get bad spending governments of the south well you know now the netherlands were always the one that were pushing the most posterity but it turns out private debt might matter more than government debt and the situation deflating housing bubble at heart of netherlands economic blues household spending has been falling for three straight years and it dropped again two point four percent year on year in the second quarter dragging the entire economy down with it so they just economy shrank for the fourth quarter in a row point two percent compared to portugal by the way which is growing ok so this is a reverse of the wealth effect people say you know what let's blow a real estate bubble and people will feel wealthier and they'll go out and spend

but here in the netherlands they created a housing bubble housing prices are now down and you've got all this debt which is down creating huge drag on the economy yes actually house prices are down twenty one percent thirty percent of the population is a negative equity because prices are collapsing actually let's look at this data market chart data market dot com and it shows private debt to g.d.p. and as you can see from one thousand nine hundred to two thousand and ten private sector debt to g.d.p. in the netherlands went from one hundred twenty five percent up to about two hundred twenty five percent at the end of that chart which is two thousand and ten now it's up to two hundred forty percent. so the highest across the euro zone and now we're seeing that the government relatively to other nations anyway across europe is is ok in terms of debt but here you have it the citizen what used to be known as the citizen the consumer and the economy is collapsing

under the weight of the debt they need to build some of those fancy dikes to help them from being overwhelmed with debt they need a debt dike you know they're good at building dikes this is a story about the debt in the netherlands if you build a nice big dike you can prevent yourself from being overwhelmed with debt but unfortunately no countries able to effectively build a debt these days and they're all being overwhelmed with the tsunami of debt well it's also a whack a mole sort of situation because we keep on doing this where this a margin is ation and there's always one answer alone that we want everybody to be the same so at first everybody was like we all have to be germany we all have to export it forgetting the fact that somebody has to import one person's expertise somebody has an import well here we have in the netherlands this also this notion that the housing bubble all you need is a housing bubble and everything will be fine and as the f.t.

points out. at the heart of the netherlands persistent case of the blues economists agree is a slowly deflating housing bubble property values in the netherlands rose as much in the boom years before two thousand and eight as in peripheral european countries like spain leaving the country with the mortgage debt load larger than any other in the eurozone as i said it has dropped twenty one percent housing prices since two thousand and eight right well you know this is really another story which is the importance of private debt in addition to government debt so a lot of these countries are loaded with government debt and then the i.m.f. and all these other institutions coming up to reform your government debt but here is a country as you pointed out here that doesn't have the huge government debt problem but they allow themselves to encumbered themselves with huge amounts of private debt but the u.k. for example they have a huge government debt over a trillion pounds of government debt but if you include the banks debt they've got also the household debt and the corporate debt they've got almost a one thousand percent debt to g.d.p.

so they're the most one of the most indebted countries in the world yes and now part of that i was speaking of the u.k. government they are really involved in forcing housing bubbles this is their policy this is their one policy north sea oil is gone all they have is this one thing left and that's how it's in bubbles and of course banking fraud but here in the netherlands also there was basically the government forced this housing bubble bit because the bubble was fuelled by the fact that dutch mortgage interest was fully tax deductible a strong incentive in a country of high income taxes dutch banks developed a series of unique complex mortgage products to help borrowers maximize the tax benefits once again the government is interfering with the market which is you see this all over the world really either have a market based economy or add a centrally planned economy but don't try to mix and match and take the worst of

both policy. but worlds here's the worst of both possible worlds you have a centrally planned economy in europe from the e.c.b. the european central bank that's artificially keeping interest rates low that already stoke all kinds of speculation and bubbles and housing and stocks but you also have the governments coming in and saying we'll give you a tax advantage on top of the free money what happens to prices in that market situation they become completely distorted so you really have to decide what the world has to decide whether they want free market capitalism or free markets of some stripe or whether they want to censor planet scott economics is right now the u.s. essentially plan from ben bernanke it's essentially planned soviet era economy and the results are predictable you've got millions and millions on the breadline and they called food stamps now and it gets worse from there it's not only government intervention however as they say banks always collude with them and they come in with these complex derivatives complex products that are supposed to their toll you

know the the consumer is told this is going to lower your costs in there miraculously give you all sorts of wealth this is our wealth creation this is replace what used to be wealth creation in the original capitalism where we used to you know turn resources and products into we said add wealth to it now we need to hide the wealth in the banking accounts of these bankers banking is not an industry that you can really grow beyond a certain threshold because it's a very simple business it's like a utility business they they provide a basic service but banks to an answer bottom line of come up with products and sits physically to complicated interest rate swaps these types of products products to an answer bottom line which do more damage than anything else even lord sugar who's a big wheel here in the u.k. is suing his bank for having mis sold him interest rates drop while product like so many companies around the u.k. are doing because the banks they're not satisfied with just providing basic service they feel is the case in the netherlands where they have to take my. good use they

have to reset your ties on that the repackage them and create all kinds of new products around the basic services which are now exploding in their face because by the way interest rates around the world are going higher which of course makes all these products value go down now remember the dutch were at the forefront of braving the likes of greece and portugal for their profit spending their government spending so the f.t. points out however here in the netherlands the current account has been more positive in the netherlands than in germany almost every year of the euro's existence the dutch public deficit was consistently smaller than the german one before the crisis and their view of economic policy to the dutch often outdo the germans insisting more loudly them berlin on painful deficit cuts in portugal and other deficit states as the price they have to pay for the financial rescues as an example they imposed austerity just to prove that it can be done and this is part

of the reason why the spiralling house price collapse is they've withdrawn a lot of child tax credits health insurance costs have gone up so the consumer is withdrawing rapidly right so you've got an ideology that's informing a public to commit financial suicide even though the evidence on the ground is clear that these policies are are horrible we have what your guest will talk about is this alice in wonderland economy where austerity for example has never been imposed upon bankers their costs get lower and lower and lower and lower and lower and lower down the looking glass and into the rabbit hole of zero rates for them where all the costs whether it's for health insurance and i'll care that's an ideology. that is low interest rates are always is always good just like drinking arsenic laced kool-aid is always liberating. but it goes good.

well you know so a lot of these the governments in the banks do this to foster the animal spirits right to encourage people to feel good have the wealth effect the well keep and yes the wealth effect of rising house prices. even though it's backed by rising debt consumers somehow still feel good so i want to move on to the next story google patents paper gaze i tracking that could measure and motional response to real world ads so google has granted a patent for paper gaze advertising which would employ a google glass like sense or an order to identify when consumers are looking at advertisements in the real world and online and they will measure the dilation of your pupils to see what your emotional responses to this but you could see this being deployed against all citizens how they're feeling towards. george oz however i also have got a vast copy of the understand these are these these are the new google glass this

is paper gay's ga z. and so what happens and i look at it and i get i get built i get charged presumably you're looking at me you're having a deep emotional response and now they want to sell you something to do with the shower scene comes to mind. but well this paper gay's ok this is according to google's own patent application filed a two thousand and eleven paper gaze advertising need not be limited to online advertisements but rather can be extended to conventional advertisement media including billboards magazines newspapers and other forms of conventional print media ok right so i see a billboard with my eyeball the pad charges the person selling the yes i gazed on that at his paper gaze right yeah oh and potentially everything has an ad to it so the. need to force like like ducks on

a fork off farm in france where they stuffed them with all the grain until the livers become distended in the way they harvest them they'll be in need to stuff our eyeballs with more ads even more than we're already being stuffed with that will be ads with an ad with an ad well on top of this. to talk of ducks in a fog or a farm and it's hard to look at you with. a freaking laugh you know standing right now i know the series good well knows we've got a lot of money being paid by my thoughts of what i'm gazing at when sick georgia sinkers for example will get paid a huge amount of money when schools become dead zones of the imagination bill and melinda gates foundation has provided a five hundred thousand dollars grant to clemson university to do a pilot study in which students would wear galvanic skin bracelets with wireless sensors that would track their physiological responses to various stimuli in the schools so bill and melinda gates have also patterned something similar to the students. those in those head start programs the ones that are already monitored surveyed and everything now we're going to censor motional response to various

stimuli are they offended by their eradication of native american indians are they the sort that are outraged by government like us for a life oh you didn't pay or student loan this quarter so the biometric bill gates pads a bracelet will give you. zero. zero zero zero days to get my guys out of some serious technology all right say there was actually going to cause a report thank you max stay tuned for the second of all level. what do you think would be high enough price for americans and the west in general to realize that the noting with violence is actually extremely counterproductive to down on national interest whenever i've seen all day i logged into being in any of

the middle eastern countries be created all the create a state and went about it is a failed state this is the best place for actually and i because organizations to establish peace is. we speak your language of the will or not of the. news programs and documentaries and spanish what matters to you breaking news a little too much of angles to the stories. you hear. the spanish find out more visit. you know sometimes you see a story. and it seems so you think you understand it and then you glimpse something else and you hear or see some other part of it and realize everything you thought

you knew you don't know i'm tom harvey welcome to the big picture. welcome back to the guys revert imax geysers i'm out of turn two and petted four of prime economics dot org and welcome to the kaiser report thank you great to be him yet you've caused a sensation with this alice in wonderland a phrase that's what viral all over the world because you know that so talk to us a little bit about allison along the line and what are you talking about there well what i thought about is that there's all this frosted excitement in britain about the recovery and kind of worried me because i wondered what is it based on what are the fundamentals and the more you looked at it the fundamentals of the flea no

investment. falling incomes with which to go shopping trade imbalances north south imbalance is that the economy is deeply dysfunctional so where is all this fuss and excitement coming from and for me it seems delusional which is with the alice bit comes in you know she goes into this fairy land and and it's delusional because it's based on basically payday lending we're living beyond our means here in the u.k. proudly we think we've done it before we can do it again and that's inflating prices it will cause greater trade imbalances because it will suck in imports from elsewhere because we can't we don't make things anymore here we buy things from others and we haven't got anything to buy it with because we don't sell things we don't make things so we borrow. in order to live and it's kind of crazy right and it's delusional if you think it's recovery it's alice in wonderland right now on the land of course is a payday lender and that they just raised the analyze rates of interest that

they're charging to five thousand percent now we talk about it on this show and we also talk about a concept called interest rate apartheid so as you describe in the u.k. the government is living on borrowed money the debts and the deficits are rising then you have the consumer gets going. into debt using payday lending exploit the they're not equal borrowers in other words for the friends of george osborne and friends of the government they can borrow from the bank of england for half a percent but if you're living on a council estate somewhere you go to heaven is five thousand percent so it if you're in a semi a small business higher rates than you would get if you're let's say a friend of goldman sachs or j.p. morgan really banker to clear the insiders so this interest rate apartheid really discriminating against people who are not willing to be clipped to kratz because remember the cheapest money the cheapest loans go to the hardest kleptocrats the hardest financial criminals in the society is discrimination against being

a non kleptocrat your thought yeah this is discrimination against being a productive member of the economy as someone who makes things and does things if you're a small business you know if you if you're out there trying even if you're a consumer you're trying to do something and you are discriminated against and what annoys me i may not have. it's a big old bad world of bankers and so on what i don't like is when public civil servants actually aid the process so we have the central bank both in the united kingdom but also the united states stealthily recapitalizing the banks through a kind of carry trade cheap from the bank of england lend to did it to some poor businessman in the in the midlands who's got some big idea which may be risky but it may be amazingly innovative so you tucked in fifteen percent and that way you clean up your rotten balance sheets you know and i do and i'm in favor of the banks

kicking up their balance sheets but why a civil servants and why is a nationalized bank the bank of england doing this for the private sector and not for the rest of us so there's a real not so i think you'll apartheid phrase here is very very powerful because it's about discrimination is. discrimination between the make is and those who just shake the tree and collect borrowers that are always a speculator are given free money essentially the savers and workers have to pay through the nose for their credit but this idea of a character i don't want to focus on this for a second because you've described one where there's an enormous interest rate spread between the out there the midlands who are maybe have a small factory or the enemy small medium size enterprise and that seems to be inequitable but there's also internally a carry trade where the bank of england is lending to these big to fail banks. fail banks but they're not lending it out there to the s m e's the small to medium enterprises either they're actually putting it back on the balance sheet of the

bank of england and there's a carry trade there they're making a positive spread yeah i mean what's i mean look for me what is most bizarre about what's going on max is that. we invented banks and we developed a whole banking system for the sole purpose the sopa the civilian going into the economy and right now what's happened is that banking system is being turned on its head instead of lending into the economy the economy is lending to banks it's really bizarre and it's historically unprecedented we've never been in a situation where we've had to lend to the banks in order to keep the banks one from going completely bust because many of them in my view are effectively in solvent and just kind of extending and pretending for those seven was the focus of that for a second because i'm solvent in that their balance sheets a little with bonds that they say are worth one hundred cents on the dollar but they're only worth one hundred cents of the dollar of the bank of england keeps buying them at one hundred cents so that once they stop their mark to market they get a real value based on supply and demand and they would immediately declare all four

banks in this country the big ones would be insolvent correct well i think so i mean because nobody really knows what the value of those risk weighted assets all become they possible that we don't know what the weighted assets are these big four banks but we know that the government is down there heathrow airport picking on visitors from brazil and i stays with laptops full of information an anti-terrorism act in other words the banks committing acts of financial terror and should the government be concerned about that as they are concerned about let's say what's going on in other countries journalistically mack says far too logical far too sensible far too common sensible but there is a deeper thing here which is why is the government getting so oppressive at a time when it's so protective of what are effectively often fraudulent financial acts basically and is that because the government is very early fifths of social unrest and of i mean all of the surveillance of all of us citizens you don't

need to survey us if you thought we were likely to stand up one day and give you a hard time for us for second hand because you know the. riots broke out a couple of years ago yeah cameron of course you know pointed at that and was talking about the need to more for more law and order yeah all simultaneously letting let's say a just b. c. off the hook for laundering billions of drug cartel money yeah and he doesn't see connection between riots in the council of the states and the policies that are creating this enormous wealth an income gap is the wrong. i think is absolutely wrong i don't think you can polarize your society to that extent and expect your society to be grateful what strikes me though max is that actually there's been very little on risk really considering i mean there was that flare up that summer which i i mean i don't want to make a direct link but i there's no doubt that there was a huge amount there's

a sense of i can see everybody else having fancy teles and wearing fancy shoes and stuff and i think i can't and that sense of you know. wrongness was clearly at the heart of that but if you think back to twenty nine in the big crash and twenty nine nothing happened between twenty nine and thirty three and i'm very fascinated by the american in the history of the american period because roosevelt came to power but almost without a social movement behind in the trade unions were new to it was a little bit of upset around pensions from veterans who have been collecting haven't been given their pensions and therefore went to the white house and made a bit of a castle but but actually and farmers burnt down their farms because of debt of course so there was social. unease and there but there wasn't a revolution there was in the uprising and i think there's two reasons for that which is that people are really scared really frightened they're deeply in debt they're vulnerable they're exposed but also they're confused they don't understand

you know they don't know send they hear we've no money i get very angry about the story the story goes around every day the politician says oh we can't afford welfare we can't deal with with poor people we can't afford better housing we can't do that because we have no money and yet as. congressman burn itself and as found you know the federal reserve and the treasury between them sound sixteen trillion dollars with which to bail out the banking system and where that money come from it came out of sinead you know it came from nowhere it wasn't taxation money it wasn't taxed so we found money to bail out the banks by. confines money to look after the poor in the vulnerable in our society and people don't understand that people who loses money are but they can and i think i think there's a in that i think your show plays a really valuable parts into that educating and helping people understand i just think the web is amazing because before this time really it was very hard to find

out more if you didn't belong to the orthodox club you would just carved out of all discussion because my solution is called it's interesting apartheid in other words the big banks have money because they convince the governments that in the case of the u.s. the u.k. either you lend us at this extraordinarily low rate of half a percent to zero or we're going to crash the system they had threatened they extort the others don't have the ability to crash the entire system to extort as they do but let's get back to why there's not more social unrest here in the u.k. i just read a study discussing about why there's no more social unrest in the u.s. as well and they're saying one of the biggest reasons is student debt they were the students in the sixty's they revolted they stopped the vietnam war they had a social movement but they didn't have the debt yet these days students haven't they were graduating us with forty thousand dollars in debt so it's and there's a huge debt i mean just five six years ago. education was quote unquote free yet here in this country than there is

a top of the and that is race right ahead it's become onerous if you think that's a factor oh absolutely and actually it's really it's really almost evil max you know this this is this burdening of a whole society and debt and and and and you're absolutely right suppressing it and doing that in a way which is a complete key country to to the free market system because the only thing i mean i gree entirely that there is a party for interest rates but there's a part to this geographical apartheid here in in britain you know if you're from the north or you're from london there's housing apart tapes there's all kinds of polarization and and. and that's what partake combined with debt is is really making it really hard for people to organize so we know there's always been class struggle but what people don't understand is that there's also a new way to enforce this class struggle using interest rates which they don't appreciate they think it's a good idea that i can borrow money at five thousand percent

a year they don't see how that plays into their overall being subjected to the pressures of an organized criminal syndicate of bankers and politicians speaking of criminals george osborne has helped to buy scheme is this some call it's a politically ingenious way to buy the next election but economically it's sucks correct i know absolutely i could have to help to buy votes. well said thank you for being on the kaiser report thank you and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert like to thank our guest and better for of prime economic stuff org if you'd like to get in touch tweet us at kaiser report until next time ask i was saying bio. speak your language. programs and documentaries in arabic in

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