biomass kaiser welcome to the kaiser report wow i can feel the fraud this give me the creepy creeps all over because i'm in connecticut stanford and greenwich this is the headquarters of the global financial weapons of mass destruction manufacturing business and that's why we've come to find out what the frick is going on stacy herbert talk to me this episode is going to be dedicated to the notion of. fraud because he must have felt that standing in front of u.b.s. anywhere there's a banker wielding a derivative there is deja fraud happening now this concept of deja fraud was introduced by ray mcgovern a former cia analyst and he just wrote a letter an open letter to president obama about the syria situation and he says he referred to obama's use of a government assessment being sold as an intelligence summary they said this is deja fraud it's like the downing street memo where tony blair ignored the advice of

richard dearlove who is the head of m i six and just presented a sexed up dossier let's call it a selective amnesia is something that was reliable for years where the population could be counted on to forget anything that happened two years ago or three years ago but thanks to alternative media and the internet everything is online and being referenced and being shouted about by screaming bloggers and podcasters and of course the show is a big contributing factor to how those who want to believe that the current situation is not just recook. fraud intelligence fraud again are finding it difficult and this to me this smells like the richard nixon era which i'm going to ditto with that at some point but i get where you're going with this so well we're five years into the financial collapse five years since lehman brothers collapsed and lehman brothers collapsed due to a deja fraud a repo one o five repo one to five was what caused enron to collapse and then

a few years later lehman brothers to collapse five years later usa today is asking . two thousand and eight financial crisis could it happen again and they're also asking well they're also saying we should be worried why max because repackaging of debt is bad right this one a five you talked about going back to lehman brothers and other scandals of the past five years ten years it goes back to understanding that banks essentially when they say they've got something on their books they don't really have anything on their books in fact they loaned out the thing that they say that have on their books to another bank that has in fact wanted out of some other bank it goes around in this daisy chain of fraud or deja fraud or a circle of fraud and the problem with the two thousand and eight two thousand one crisis is that there was no reform there was no bank reform nobody went to jail as people understand and so you have not only the situation getting worse as our guest in the second half will talk about i'm sure but you've got the potential for

a much worse situation developing because of the leverage continuing to build you know under like a volcano in the system yes i'm going to get back to that repackaging of debt that's going to cause more deja fraud presumably quite soon in the future now i also want to look at this headline from the u.k. which is alistair darling interview britain was two hours away from total social collapse former chancellor on the crisis that erupted five years ago this week said so here's the chancellor of the checker at the time alistair darling and again this is just like these going back to the tony blair era where we were forty five minutes away from saddam hussein nuking us and wiping us away and here we have what reminder of alistair darling saying we are two hours away from societal collapse over in the u.s. we had hank paulson former goldman sachs c.e.o. saying that there would be revolution in the streets if you guys didn't pass tarp so deja fraud what's sad about the alice are darling quote that the world is two

hours away from massive meltdown but what's sad about that quote is what really we . should understand is that we were two hours away from having some accountability in the banking sector early hours away from having honest accounting for two hours away from getting rid of the bad actors in the massive fraud in wall street the city of london with only two hours away from having an economy get rid of all these crooks and then regenerate itself which would have started we would be right now in an honest recovery with real jobs and real g.d.p. growth instead of this hyper levered comair of an economy that's set to blow once again exactly because we are stuck in a loop which is why we keep on having days off fraud we're stuck in a loop it keeps on happening over and over and had we had the societal collapse he threatened it would have ended that loop and we could have start some thing new now i know you were also in front of r.b.s. down in stanford you saw that he said that was the scariest moment was when the chairman of r.b.s. called him and said all the money is leaving the bank the system is collapsing what

are you going to do about it now mr darling said that was the scariest moment he wanted me to do something about it. right well once again r.b.s. just one of the four horsemen of the british financial apocalypse that is been allowed to missed half the size and grow even bigger in threat to the british economy and i notice that what's happening in britain and in the u.s. and around the world what we predicted on the show is that interest rates on the ten year note are creeping higher now above three percent or just around three percent both sides did land in the pond instead of spending this positively say it's because of positive growth and yet don't think positive for the number of people on food stamps so that's obviously a lie deja fraud all over again as yogi berra might say but what is happening is that the cost of servicing this fraud is going higher for twenty five thirty years the cost of servicing fraud is going to keep or yes that's what kept it going is that the cost of fraud was cheaper ever cheaper that kept the bubble expanding but now the cost of fraud is going up so now we'll see as warren buffett said when the

tide goes out is not a wearing a bathing suit now i want to move to another thing that goes with this deja. fraud and that is nonsense jobs in fact david gruber who we've had on the show he's the author of five thousand years of debt well he used a little bit of a stronger word i'll just say it's often sort to be s. jobs so the modern phenomenon of nonsense jobs in one thousand thirty john maynard keynes predicted that by centuries and technology would have advanced sufficiently that countries like britain or the united states would have achieved a fifteen hour working week and you notice that in fact we have essentially achieved that but we keep on filling it up with nonsense jobs so people are still working fifty sixty seventy hours a week in nonsense jobs whether it's dog walking or serving hamburgers or things that look like hamburgers at various fast food outlets around the u.s. so we keep on having these nonces jobs what is that about so he reckons it's partly like the soviet union where everybody was guaranteed a job in order to prevent any revolution or uprising and the same thing here is

that they keep people in these nonsense jobs just to keep them occupied and feel like they're doing something otherwise you might have revolutions but just like the soviet union you would find three four five six people serving you a hamburger and because they all needed a job we have the same thing here you have five six seven eight nine ten thousand bankers delivering you the same asset for ten this is a mortgage well they rip it up rip it up rip it up and disperse it to tens of thousands of bankers to sell and package and resell i mean they take a mortgage like this and they say oh here's a mortgage we're going to sell to a bank to be from bank day and then bank big simply repackages it as another set of mortgages all these are for mortgages collateralized by the same single mortgage that they had from bank day masel to bank c. of the other sixteen mortgages are going to so that the banks say that we got from bank b. the leverage of bank and this goes on in the days of fraud circle of fraud and creating a snow globe of fraud creating the illusion of growth but what you have is just more fraud and i think what keynes fail to four see is number one the rise of the

parasite banking class and number two. all the productivity gains that would have been there due to mechanization and industrialization of effectively been stolen by the parasite banking class so but failing to see the rise of the what i call the jamie dimon tapeworms syndrome is why he got it so wrong and david gruber also looks at the rise of resentment that goes along with us so the actual people who are the working class have this sort of resentment through propaganda but he compares it to say the case of say they hired these expert excellent cabinet makers but instead they show up at the job and they discover that they have to spend the whole time frying fish so everybody in this cabinet making factory is actually frying fish all day and by the end of the week every week you have fish piling up all over the workshop so it stinks like to high heaven well i think you could see that too in the banking industry because remember u.b.s.

and deutsche bank are two the biggest banks they say you know take all the highest trained engineers out of french universities british universities german universities they hire all these engineers. and then they go and rip up the same piece of paper over and over a faster faster to create more deja mortgages more deja fraud everyone a specialized thing in jobs that they're no good at yes effectively yeah so you take a somebody who was perhaps a specialist in one area but because the economy is not rewarding. excellence in these areas per some kind of meritocratic system that you'd expect in a free market capitalist society because you have money printing and you have subtle planning and you have america's version of the polish bureau you end up with people not doing what they can actually do well being shuffled around of this economy doing stuff that they don't know how to do it all and he goes on to say in that article that the people who end up doing the job like fish frying with no matter if their cabinet makers as they begin to resent the cabinet makers and this was happening in america is that people are beginning to resent everyone else in

this economy because everyone is doing something that they don't really want to do so that resentment quotient is rising and when that becomes what the economists might call a breakdown in social cohesion civil unrest well you know the countdown has begun now that's a good point to segue to deja porn. now you're talkin wow and it goes with these nonsense jobs these are actually the real real jobs i think in the porn industry sizing up or in power to crush the american workforce so you know we had a dismal jobs report come out and the participation rate is now at thirty five year lows not since one thousand nine hundred eighty eight and we had so few americans working here but the unemployment rate fell from seven point four percent to seven point three percent the reason three hundred thousand people dropped out of the labor force so they buried in friday morning's rather dismal jobs report was a particularly strange bit of government data the motion picture and sound recording industry shed more than twenty two thousand jobs in august

a six percent drop over july's number and the biggest workforce decline of any sector last month and they reckon it could be the porn industry well that brings up an interesting point economics was prices are really. discovered on the margins so here you have the mainstream economic model suggesting that all is good to some degree if you will but on the margins you see a collapse in a niche market but that becomes the definition of what's happening in the market overall and so now you understand that by looking at the porn industry you can extrapolate and understand that the core working environment new us is collapsing as well that's why the japanese are developing porn bots so porn box japanese porn bots and some of them are mighty attractive i might add are engaged in japanese porn but sex and this is becoming a major industry in japan and i would imagine a major industry of their export business which hopefully will take the place of all that energy they're losing now the tepco is nucular reacting into the pacific

ocean and has diminished in value to that country's economy all right stacy herbert that's going to do it thanks so much for being on the kaiser report thank you max state of the second half i'll be speaking with jim rickards. it was a. very hard to take. that

. with me. the but. i know c.n.n. the m s n b c news have taken some not slightly but the fact is i admire their commitment to cover all sides of the story just in case one of them happens to be accurate cut. that was funny but it's close enough for the truth to the might

think. it's because one whole attention and the mainstream media works side by side the joke is actually on here. to be coming back . at our teen years we have a different approach to the good because the news of the world just is not this funny i'm not laughing dammit i'm not. ok. i've. got a set of jokes that will handle the stuff that i've got to. all right i'm back kaiser report with you max kaiser reporting from the sanctuary in

this connecticut enclave of hedge funds and granite in stamford but this is a head free zone i in the backyard of author jim rickards jim welcome back to the kaiser report thank you max welcome to connecticut we're loving it out here and of course you're working on a new book and show me the galleys of that very exciting can't wait for that to come out but i wanted to cover some of the recent stories in the news you've recently come back from safari in africa which which is more dangerous jam the african rhinos you encounter in the bush or the banks the sharks you encounter here on metro north train well banks there's a definite a lot more dangerous than riders because right to first of all you don't want to very well be hey but you know they can only charge one person at a time was bankers can take out entire countries entire populations so because of leverage i'd be a lot more worried about the bankers on the line of while in transit back from africa you tweeted past tag fed relationship to brics is like a drunk driver who runs down pedestrians and then blames the pedestrians for being

in the way right well you know i say i wasn't so far but the reason i was in south africa in the first place was to attend investment conference hosted by the one of the largest insurance companies in south africa so i had the opportunity to meet really the top institutional investors in the entire country as you know some of the wealthiest individuals government officials got a very good perspective you know we talk about bricks in emerging markets like there are you know on the dark side of the moon you actually go visit them and we were there government officials in the policymakers you really understand how heartfelt they're feeling as about what the fed is doing to the entire world now the fed officials the reserve bank governors members of the board of governors have said well look we kind of know what's going on emerging markets but we don't care and so our job is to take are the united states economy and you guys are on your own well that's fine but the problem is when you're manipulating every market. in the world i don't think you can be quite so cavalier about what's going on in the rest of the world and that's why i say they're like a truck driver running people off the road they're having an enormous impact on these emerging markets these low this emerging markets capital markets are just not

that big relative to the u.s. and even even europe by comparison so when you you know when you called interest rates zero everybody wants to the carriage has to borrow dollars you know by the local currency invest in foreign assets the cetera they can spread leverage it up make a lot of money will this is the feds are going to raise interest rates you know so-called tapering everyone on ones that can't be true so this mess of lee dumping assets in indonesia malaysia singapore south africa and elsewhere dumping the currencies south africa seeing their currency go from a to the dollar to almost eleven to the dollar in a matter of weeks this is you know incredibly disruptive and down when she did i mean the fed just says well it's your problem you know you've got central banks said your own policy oh so so i was supposed to raise interest rates when unemployment is sky high i mean the problem is there's no anchor in the financial system right now for for you know for eight hundred seventy to two thousand and two two thousand and ten we either had a gold standard or from one thousand nine hundred two thousand we had

a dollar standard not as good as the gold standard but at least it was a standard says two thousand and ten we had no standard so everyone's a drip and i don't think the sense i don't think the fed can be quite so dismissive of these markets are also of a reply let me jump in here sure i can because you're saying that a gold standard from an eight hundred seventy or so going forward to two thousand and ten and then there is no standard with the interregnum or the period of the dollar standard but let's go back to our second because starting in the early seventies you had all you had to oil petrodollar sure and isn't that right now part of this on a winding in the macro sense and we should point out that you're a macro analyst you've got the currency war without a macro look at things are going on your background you've helped unwind long term capital management here as an advocate and you're very keen on this macro issues but to. hey with what's happening politically in america some are positing that it's a breakdown of that petro dollar because it ties in saudi arabia seems to be matched

up against putin over syria for rights to build a new pipeline from saudi arabia to europe to compete with putin's pipeline from russia to europe which is a tad i want to go on a huge expansion politically but what happened to the petro dollars my question is the gold standard was a bit of the one nine hundred seventy one in the late seventy's kind of seventy one to seventy nine it really had a period of chaos here people they initially a fixed rates for the weights go back to gold been a gold setter and you know the u.s. was actively disparaging gold dumping gold at the time and sister no dollar stands for the arabs are very worried so the kissinger cut this deal you're right so look you guys agreed to sell us oil for dollars and will maintain the value of the dollar that was backed up by vulcan reagan and carried all the way through republican and democratic administrations not just by you know volcker reagan but also by bush james baker rubin bill clinton backed it up by raising interest rates only say you know we're going to make the dollar valuable again we're going to make we did it was the king dollar period the sound dollar period so ok not a gold standard but

a dollar stand and that actually worked fairly well for nine hundred eighty two thousand and ten the problem is in two thousand and ten obama geithner bernanke he tore up the dollar standard said we're going to chip in the dollar we want to important. we're going to cut it short you guys are on your own it's another is no standard at all so you have a new period of chaos if you're the arabs you know the deal has been torn up they say you know we're not going to maintain the value of the dollar so they are say well ok what do we get for oil it's just paper money that you say you're trying to cheapen so now they're like they're exploring a lot of alternatives the g.c.c. may have a common currency europe is creating ripples on this in the g.c.c. pain they cooperation operation how the arabs are on their persian gulf right exactly right you're seeing the emergence of a regional reserve currencies you know korea japan and china despite all the tensions around the islands and all the. the fact is they're trilateral trade is exploding and they start to accept each other's currency so and then of course you have the brics and you know by putin most recently and they're going their own way

so what you're see is this slow diminution in the role of the dollars not overnight it's on the media but if it's us foreign policy if us doesn't care if the u.s. is in charge nobody's in charge we see that playing out in syria same thing with the dollar if the dollars not the global reserve currency then it's jump ball and you don't know what you're going to get a return to gold standard is a possibility but i don't see that the immediate future i think we have to have a collapse first a collapse of the dollar standard in the petrodollar deal then had to be replaced with something now that will either be the s.t.r. which is the i.m.f. world money special drawing rights or gold or some combination of the two that remains to be seen but the dollar state is definitely collapsing it's been abandoned by the united states it's not that we're under attack were abandoning it ourselves ok so the two thousand and eight two thousand and nine collapse period were about five years going into that post that period and we've been saying on the show that and really looking at a lot of your work is a lot of the conditions that led up to the collapse are still there but it got much worse because the leverage has got

a lot worse so now we're set up for another collapse and coming out of that collapse you're saying there will be some other reserve currency status cut could be the special drawing right the s.d.r. org looking at gold again or some combination of the two so the question is is this collapse a baked into the cake in other words it's going to happen with a high degree of certainty and b. will it be in fact a magnitude larger than what we saw in two thousand and eight yes both of those things are quite the collapse is definitely coming because there were no structural reforms no changes so in two thousand and eight we heard about too big to fail guess what the five biggest banks in two thousand and eight are bigger today they have a higher concentration of all bank assets to drive as opposed to a larger the leverage is larger we have new bubbles coming up in student loans here we don't have supply mortgages anymore but take a look the student loan market over trillion dollars. it's another accident waiting to happen so all the conditions are there but here's the difference max when this happens not only will it be bigger it will be bigger than the fed the less time the fed bell without a look the fed is taking about she from eight hundred billion to over three point

two trillion in the last four years we haven't had a crisis since two thousand and nine there's no shortage of liquidity if they've taken their balance sheet to over three trillion without a liquidity crisis what are you going to do if we have a liquidity crisis which i expect they can take it to six trillion or nine trillion there at the limit the fed is technically insolvent on a mark to market basis they don't have the capacity so the only clean balance sheet left in the world is the i.m.f. so when this crisis happens the only way going to be able to reliquefy the world is by printing s.t.r. wait a minute he said there was no a liquidity crisis back five years there there was a liquidity crisis yes they met their liquidity reisa by expanding their balance sheet and what you're saying is that unlike that period this next wave will overwhelm any capacity for the fed to expand to what would need to be thirty trillion co-operatively in bad debt so it's like a hurricane sandy crisis where they entire lower manhattan was gone please leave under water and the lights went out and my correct i separate q.e.

one from q e two and q e three q e one was a legitimate role of a central bank when there's a liquidity crisis you're supposed to provide liquidity going back to you know in his description of what a central bank does the nineteenth century in the fed to do it the right way but they were they were right to provide liquidity but once q.e. one was over beginning we q.e. two that was not about liquidity anymore that was about propping up nominal g.d.p. because velocity was imploding that's really micromanaging the economy that's not the fed's job security too in q e three were completely wasteful we will look back and see it as the greatest failed experiment you know in history but the problem is they did it anyway and so now with the balance sheet of three point two trillion if you have a liquidity crisis what are they going to do as i say go to six trillion there is a limit actually spoken to the president of the chicago fed has a locker they lana fed they said. that there is no theoretical limit to the fed's balance sheet maybe legally but i think that's wrong i think there's a political limit there's a practical limit and the when you have a liquidity crisis you know the bank of england so better bank of japan so better

you look around the world people's bank of china has put in more money than the fed and so the only place you're going to get new money printing is from the i.m.f. but let's talk about that limit for a second because the place where that might show up is in the bond market share so the ten year bond market which is the linchpin of the global banking system global economy all credit reversed of the ten year bond market about six months ago or so seemingly hit. low on yields in other words the high on the bonds themselves in the united states it was at a two hundred forty year high and in england i was at a three hundred year high so some are saying that the rise in yields telegraphed economic growth but that seems odd given that there's a huge people on food stamps and hourly wages are down and the job picture is a bunch of part time jobs doesn't seem like growth to me so is that rising bond yield is it telegraphing what you're saying that there's nowhere to hide and they're heading toward another crisis and being is it a secular move in other words is this like a going to be

a ten to fifteen year bear market as you do see these larger cycleways in markets well it's very good question max but you have to remember the fed has been it played in everything so it's hard to look at history know exactly how it's going to play out the thing is there is such a thing as a bull steep in early like an expanding economy with expanding credit you know more demand from all the interest rates should go up that's a normal cyclical expansion that's not what we're saying this is much more of a bear steeping or it's because frankly china and japan are buying fewer u.s. government securities and the fed may taper that will turn increase interest rates now i spent a lot of time saying with the fed once but just because you want something doesn't mean you get it this is part of the fed's impotence in the opponents of policy what the fed wants is either extremely low real rates or even negative real raise they want to situation where inflation is higher than the ten you know. does this put the ten year note at say three percent you've got to get the four percent inflation a three and a half percent inflation to have negative real rates what's been happening is the opposite nominal rates are going up inflation is going down surreal rates are

getting higher and this kills the economy so i mean we'll see what happens with the fed tapering my view all laws of they won't taper but it's a really close call but the let me just say really about thirty seconds isn't there a huge problem i guess you could call the transfer mechanism between what's happening in the central bank level and that money getting into the real economy because it's being aborted by the banks to get in the middle or using it to lend back to the fed or to speculate or to buy assets and again this predatory banking class is becoming highly destructive right i mean this is part of financial repression and say you're a banker ok so you borrow a twenty five basis points you invest it three percent you make two hundred seventy five. basis point you tend to want to get twenty some percent returns on equity it's free money why would you do that gives a gives the treasury a cap to buy or the banks are capped to buyers of the treasury ok we've got only ten seconds left we didn't get the gold exactly but i take it you're still bullish on gold absolutely launch i've got a seven thousand dollars now it's probably higher all right fair enough jim records

author of currency wars thanks so much break on the kaiser report thanks max and that's going to do it for this edition of the kaiser report with me max kaiser stacy herbert our thank our guest author jam records if you want to tweet us do so at kaiser report until next time guys are saying.

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be in the. cautious optimism as talks on syria's chemical arsenal continue into a third day with the u.s. now reportedly saying it won't insist on threatening damascus with force to make it to stop. e.u. taxpayers' show on the syrian refugee exodus as a financial and a terrorist threat while a guilty conscience problems of those so open that door. and the euro crisis builds to a new crescendo as fresh bailouts missed deadlines and overwhelming debt threaten to tear apart what little stability there is in the first place.