polo there i'm married and this is boom bust here's the story we're tracking for you today on the show welcome back to the new normal the s. and p. five hundred smashed its own ceiling today closing at all time highs and google peers the one thousand dollars bail look at all shiny and new but it's not just the earning season or america's favorite panda that's boosting risk assets up the wall of worry yes we channel john hilson wrath and dabble in some fed predictions with the help of chris martenson and tom hartman of the big picture dismisses the fray with a unique perspective on the debt ceiling let's get to the show. jawboning

isn't simply the province of those who work a few hours per week on the capital lest we forget the federal reserve chairman bernanke you sent bond and currency markets into a free for all in april of this year all because you simply hinted that the fed would eventually trim quantitative easing it would capture the world's attention was the two plus week affair with the shutdown that we're calling a debt trench as an whole never mind the very institution charged with funding the nation's purse held the world never mind that at all but fortunately the markets have resumed some level of normality and america's favorite band is being safely webcast to an i pad near you thank goodness to joining me now to discuss it all is

bob it we're at hello hello now bob big. right into the shutdown you know we took a look at the evolution of the borrowing costs of the u.s. treasury can you update us on this show only if we can get to the fed right after this only ok ok you got it we showed the start a couple of days ago this is before the shutdown actually occurred was we're still in progress and the resolution has yet to occur at the very bottom we see this is one months three months six months twelve months out and this is how far the treasury is trying to borrow and on the y. axis we have point zero five percent all the way up to a whopping point thirty five percent we can see borrowing costs for the government were very close to zero on september thirtieth and now we fast forward a couple of weeks to right before the resolution took place and the short term four week bond market had spiked in terms of yields almost up to the thirty five basis point mark well that was not acceptable so what happened when we finally reached a resolution yes the green line shows that the short at the very left and that's

actually below where we were at the beginning of this crisis so yes the new normal is. the new normal now let's focus our attention on the fed i promise that we sense that purchased purchased sixty percent of all treasury debt over the last year now some thought it was taper in september or never is the end of october meeting finally firmly off the table that's the question and if so when does the fen reign in spending let's look at the options right here we have a fed meeting at the very end of october and what can you do that well he already used in his last meeting the excuse that the fiscal problems were mounting and he said all right we're not going to taper right now that surprised the markets now even john hilson roth who you mentioned before he's saying that the fed will probably not taper so maybe ben bernanke you will actually do the opposite i don't think so the fed is simply lacking a lot of data that it relies on at the very beginning of this month we're supposed to get an unemployment report we are supposed to get

a price inflation report those are the two metrics that the fed uses to gauge whether or not it should be. up in the interior and the foundation of health and around here is you know what we believe to be as burnett is not just us and the tire world it's a big it's open secret as an open secret policeman is next. now you know i want to get to this it wouldn't be a proper suspense story without a feel good and yes as we mentioned the panda cam it's back up and running and we also found a camera now this is the first first the panda cam there was a balloon in its cage and we also found a camera at the mariner eccles building that's where the fed is ok as chang is out there nat he can see the little kids can sleep well. at night with a bird actually it can right there yes no you know we mentioned this a little bit yesterday but what are the consequences of the bond market's reaction to the shutdown even though it looks like the markets are back to normal right know what i said was there is a boy that cried wolf here and that's congress that's the president in terms of the

long term view eroded their credibility so while the bond markets might have calmed down a bit and they were only affected in the short term spectrum in tenors right now would the next crisis flares up that could be as soon as january february probably in that time frame maybe later in the year we're going to have problems again and the markets are going to call the bluff of the congress and the president and we're going to see the bond vigilantes that were coming out in full force in europe eventually come home to roost here right in the u.s. is now well there you have it on the on the short term bond front and long term but on the subject of quantitative easing you recently talked with a. fed watcher tell us a little bit about yes i had the chance to interview chris martenson and he is the owner of the prosperity on this very subject and i first asked him about the asymmetrical fed policy that would be when the fed buys high and sells low contrary

to what you're told to do in school all of a part of the q.e. so how does this work or not work in the reverse when the fed. begins its exit strategy here's what he said. the fed now is going to do the reverse of that they're going to step into a market where they are selling into this market now so that price of these things are going to be falling and the fed's going to say hey pimco wouldn't you like to buy a billion dollars of mortgage backed securities which are going to fall in price here you go and i'll guarantee you they're going to find all kinds of reasons that pimco doesn't have the money or what doesn't want to do that at this point and it makes sense it's easy to buy things from a market where you're giving them a profit it is hard to sell things to people who are going to end up taking losses on those same things so it's not an asymmetrical process we already saw that in june we saw the ten year treasury rate go from one point to one point six to two point six percent of one hundred basis point rise just on the i that they might slow the purchase from eighty five to seventy five billion that's the market front running the reverse of this process which scares you and the entire premise is that

the fed is supposed to be if they're going to be selling and bernanke you said he really doesn't want to sell but theoretically the fed is supposed to be selling into a growing economy were real wealth is being created but we're really not seeing that and i think the problem for the fed is they're going to be draining money into an economy that's already and they make and they have a couple of mechanisms to do that besides the bond selling could you speak about some of those tools and bernanke to look at that he likes to talk about so much to his tool kit which which is perilously small right now right the element of surprise is gone and all the shrinkage clear communication is gone so they don't really have that many tools left so when the fed's going to manipulate liquidity they have to physically go out and take cash out of the system so no and they always do that by exchanging something in its stead so a thirty day treasury bill goes back out and the liquidity comes in they think they're going to be able to unwind this relatively easily they probably can when it comes to the excess reserve balances that are sitting there but not when it comes to all the money that's really sloshing in the larger system because the fed is

powerful in some ways it can release a powerful amount of money into the market but what happens next is. no control over right that money gets lent hypothecated spend gets pushed in all sorts of crevices so the putting it out as easy to getting it to come back is much harder and so we have not seen any credible signs yet that the fed is going to be able to undo this process and so they're waiting they're just going to continue this expansionary policy until something happens and they've said oh well they've got a couple silly things i don't think they really care about the unemployment rate i don't think they really care that inflation you know if it hits two and a half that won't scare him what'll scare him is if they see interest rates starting to do something they don't want to have happen interest rates and so when they do a verse this process will drain liquidity the asset markets will fall interest rates will start to spike that will compound all sorts of government funding issues it will kill the real estate market there's all kinds of reasons they don't want to do this so you're right we have an anemic economy and there's no possible way the fed kid at this moment start to even taper i think let alone unwind its prophecies

and that's the thing that's what i want to people be ready for is the idea that the fed will keep doing this until it is forced to do something else i want to touch on that in a second and first i want to go back to the tools because one of the tools that the fed has introduced as of late and they've been preparing this for about six months or doing some trial runs typically the fed has only transacted with the primary dealers and these are the select banks and brokers that are really big in the market but now they're going after money market funds and what's different about this is when the fed is draining cash from money market funds they're going to give them high quality collateral aka treasury securities in reverse and this possibly from the fed's point of view might keep the shadow banking system alive which is kind of starved for high quality collateral which might be an issue in the future can you comment on this well absolutely when we look at the total credit market debt you know when it hit fifty two and a half trillion in two thousand and eight and started to reverse and that was a really scary moment because we have

a banking system that for better or worse it has to constantly have expanding credit or gets very sick threaten to collapse so some awful things. so the way that the fed had to combat that is we saw when you look at the aggregate of that fifty two trillion what it was a huge component that was what are called financial firms and most of that was in the shadow banking system we saw corporations kind of hold their debt constant actually increase it recently we've seen the obviously the public side the federal government particular but also state governments step up do more borrowing households were kind of constant what was happening was the shadow banking system was lending less and doing less now that shadow banking system needs high quality collateral to function and whether you've got actual currency out there or you've got treasury bills the shadow banking systems of gnostic about that but they actually like the treasuries a little bit better because they'll take those they will lend against those then the real lend against those so-called scheme and you can get a lot of fuel out of high quality collateral and that system currency is not quite as good so yes i'm not surprised that the fed wants to see if they can start

funneling some more of this stuff back in because the fed has bought sixty percent of all the new issuance treasuries over the past year they are literally draining the quality collateral from the system but what i do know is we have a bubble that's in search of a penny ok bubble in search of a pin and i like that and how does this resolve are we going to if that one this pin hits the bubble are we going to have the political will to make structural changes that need to be made are they simply going to be forced they'll have to be forced because this drives me nuts when i actually had it up this way you know this all started in the early eighty's when we started borrowing faster than our income was rising so you know debts rising at nine percent a year g.d.p. is going up for and that went on for three or four decades we have this little hick up in ninety four in the corporate bond market alan greenspan responds by removing sweeps from banking put it implementing what's called the sweeps program reserve requirements the ninety's that's history right we had all this lending of course because banks had no reserve requirements practically at all it was an explosion that burst i think in one thousand nine hundred eight am with sort of that first

piece right apparently were within hours of a complete fiscal meltdown and a financial meltdown that would have just seize the whole market. they responded to that very aggressively then we got into two thousand they responded even more aggressively we have the housing bubble so the pattern i want to paint here is one of the frequency is getting closer and closer in the amplitudes getting larger and larger and so in that model i'm expecting that the next accident that happens is going to be larger than the prior ones and that's going to be a function where will that suddenly give us the will power to meet structural issues if it doesn't it will be because we're really once again going to try to take one more run at this and see if we can evade reality i don't think we're going to be able to i think this next crisis is going to force reality honest and that's a good thing you know that we can that was just part of my interview with chris martenson and for the full interview check out our you tube page at youtube dot com slash boom bust our t.v. . now coming up i interviewed tom hartman of the big picture right here on our t.v.

about the three ring that circus just played out and today's big deal is a big ponzi at least according to bill ackman yes we're talking about herbalife which is now facing a new class action lawsuit will we see a new round of the battle of the hedge fund but you must stay tuned to find out. that. we're going to do the show did you know the price is the only industry specifically mention of the constitution and. that's because a free and open press is critical to our democracy but there's. in fact the single biggest threat facing our nation today is the corporate takeover of our government and across silicon we've been a hydrogen right hand full of transnational corporations that will profit by destroying what our founding fathers once told to us by job market and on this show we reveal the big picture of what's actually going on in the world we go beyond

identifying the problem to try and rationalize based on a real discussion critical issues facing an ever ready to join the movement then welcome to it. i am the president and i'm a society that i think liberation i know to consume. the bankers. that it's all about money and i was specially fix our politicians writing the laws and regulations that corporations bankers put their hands up. just like crap in today's. top of that.

earlier today i sat down with tom hartman host of r t is the big picture to discuss the debt ceiling and the general population's understanding of what it is and why it even exists take a look. at how much of the population do you think actually understands the debt ceiling and the idea of debt in general. one ten thousandth of a percent is that why it's so easy to politic about it because it gets compared to our house yeah the allergy that's made even in the immigrant in the media is that the debt ceiling is like you just hit your credit card limit and it's got nothing to do with that it's not like that at all you know yes i have a credit card yes i have a household but i don't issue my own currency the united states is the issuer of its own currency japan has had a. national debt this twice you know two hundred percent of g.d.p. for decades it hasn't hurt them in fact their economy has been very very strong we had a national debt that was one hundred twenty nine percent of g.d.p.

when we came out of world war two eisenhower got us out of it by raising taxes on the rich to raising taxes on corporations and most importantly by investing in infrastructure building the internet the interstate highway system things like that so you know growing the economy really simple stuff so if you believe there should be no debt ceiling no debt ceiling is stupid because what the debt ceiling you have to go back to the history the debt ceiling the debt ceiling was put into place for world war one and the reason why i was put there was because congress was saying basically to the president we're going to fight a world war we've never done that before we have no idea what is going to cost so here's a relatively blank check a really high and absurdly high number that you can spend up to go for it and it is so from from the one thousand nine hundred spaces when the when the debts it was put into place until the late one nine hundred fifty s. the debt ceiling was always a way of giving the government more elbow room then the republicans got this idea hey we. flipped this upside down from its original purpose and use it as a political weapon so now they're saying ok yes we voted for the war in iraq yes we

voted for the bush tax cuts yes we voted for the war in afghanistan yes those three things constitute two thirds of the total debt national debt we voted for all that stuff but now we don't want to borrow money to pay for it and you know and even though they voted for it which is crazy now why haven't we passed a budget since two thousand and nine. well there was this brief window in two thousand and nine before scott brown was sworn into office where president obama had a filibuster proof majority in the senate plus a majority in the house plus he was the president so you could pass a budget ever since then we haven't passed a budget because there's been no agreement between the republicans and democrats about things like should we raise taxes you know the republicans all swore allegiance to k. street multi-millionaire lobbyist grover norquist instead of the constitution and and if we're going to cut spending where do we cut spending like you know do we dial back the war in iraq or do we cut off women and infants so it's just because

no one can agree it's the reason we haven't passed a budget is my. ideology actually it goes beyond ideology because the ideology is being driven by big money what's in the interests of this handful those thirty or so major billionaires who are funding so much of this austerity stuff is not in the interest of the average american right but they own the politicians now on the subject of borrowing money to pay your bills that's a very simplistic explanation and it goes back to running the government like you've run a household it's too simplistic however to some extent and that is what is happening you know the shutdown we couldn't jamie dimon said that he's going to take care of the security and he was going to happen as a political move but i mean you know not political it was a good p.r. move that he did potentially for political run down the road but if we are borrowing to pay our bills currently are we not the fact of matter is is. long as we're the reserve currency of the world it's a good thing for there to be

a public debt because that means that there is treasuries out there that people can buy public debt equals private equity and that's how we're completely different from a household if a household is in debt it doesn't mean that they've got something on the other side of the balance sheet that equals that unless that happens to be a mortgage ok now prior to the one nine hundred seventy four budget act funding gaps they didn't lead to government shutdowns all together but do you think that we were better off prior to this one nine hundred seventy four in one thousand nine hundred three in the implementation of these nine hundred seventy four acts yes can you explain why. well frankly i would rate roll back the entire reagan administration and you know we had a country that we had the fifty's sixty's seventy's we had three decades of g.d.p. over three point two percent never happened before in the history of the world never have or at least in history the united states solid middle class all these kind of things. that was one of many actually changes that reagan put into place the other the other big one is how c.e.o.'s are compensated you know the big one is

the taxes and then beginning the changes in trade policy the clinton put on steroids that have just ripped apart our country so is there anything else. you can check out tom show tonight and every weeknight at seven pm right here on our t.v. time now for today's big deal. another day another drama for real life and believe it or not today is drama isn't coming in the form of bill ackman a group of hispanic and black leaders in california are calling a probe into herbalife accusing the controversial cellar or of recruiting minorities into its quote pyramid scheme now the coalition has been spearheaded by

an outspoken herbalife critic brant wilkes the national executive director of the league of united latin american citizens joining me to discuss all things are real life enactment an icon is bob english again find out how are you great this is a big deal this is a big deal is the big deal now do you think i mean is clapping his hands this most recent you know coalition for me and trying to take down let's call it a pretty big victory he had to cover some of the shorts of course is the guy who went short against herbalife you put out this was it one hundred pages i don't even remember it was this huge p.d.f. document powerpoint presentation in december of last year where he outlined the case that herbalife was a giant ponzi scheme and this is even after a court had actually ruled somewhere else that it was in belgium i believe yeah exactly he went short big time this was when herbalife was trading seventeen twenty twenty five dollars well guess what it's shot up many times that since at least doubled in price and he was forced to cover at least forty percent of his position

so i think he's kind of crying a little bit and let's mention also. that one of the reasons mark shot up is because people saw him. his big short and people like icon were like well there's nothing like the short squeeze but also he was betting against the general market now it's one thing if you're if you have in place a legal framework or a case going there were a judge can say ok this is a ponzi scheme or the feds can close down your operation seize your assets but other than that it's been a great year for stocks so he was kind of betting against the fed at the same time if the market were in a bear market he could have still held out and wanted even if he didn't have a favorable court ruling now like you mentioned we know that oxman his are treated a little bit from his position i believe it's forty percent but he's now covered in the opposite direction just in case but then things like this happened today and also there was news coming out of india that they were they were looking into that as well what do you think this means for him and his position well let's take a look at india and let's let's give him the benefit of the doubt and say it's not

a ponzi scheme all businesses are looking for what we know even though. you know that. this ties into a lot of the house or you don't see here because you're marketing and we have multiple legal jurisdictions where standards of law or different for businesses like this to survive they have to engage in growth india is a huge market for this and i think you have some details about the actual practices you know well here's the thing that's kind of playing that game and you basically have the market turns for markets seen the product our product with ridiculous claims like it could cure cancer and you know. i believe it no i don't think so i don't think so there's no true confirmation on that yet but this is how the marketers are signed and herbalife you know rebuttal to the noise around this is hey we can't control what our marketers do this isn't gonna know i mean. this kind of reminds me of the snake oil salesmen in the wild west in the eighteen hundreds. you know there is

a certain degree this all comes down to cultural responsibility the infrastructure in terms of the rule of law people are going to say well it should be regulated of course the market is a. later but when you don't have the standards of education that we do in other parts of the world such as no i'm not saying i'm not trying to malign the entire indian population i'm saying they have it a little bit rougher and there are people who are just as gold bullion to the people who are just as culpable here in the us they just happen to have a larger population so yes my the original point before i can completely put my foot of my most of my original point was i was giving the herbalife the benefit of the doubt and saying ok it's not a party scheme if it is they absolutely have to go in and find new investors to replace the old investors and pay the old investors up that's the very nature of a presidential and you know the multi-year market in some of their biggest markets are emerging markets that's where they have to go what happens when they run out of margin markets as we now can get cash and i will bet it's going to have to switch to other markets and the allegations are true in this class action route they were

targeting different sectors of the us population like i said there's no lack of global people in the world and they haven't run they haven't run into any serious you know regulatory issues here in the u.s. yet but there has been you know courts aren't there's been a lot sometimes and just as recently in california everyone's going up against them but you know there it isn't hard to forget it i mean it is hard to forget the on air duel between an icon earlier this year it was beautiful and epic and there's big blue i'm going to say it again i think sent to i think we should i mean i hope we will but why do you think we haven't seen we haven't heard the location. of icons position anywhere anytime soon it could be forthcoming when he would take. over all. ok i could was taking the opposite side so he's going along the stock when you go along the stock in substantial quantity you have to file certain seeing things with the government otherwise you can be accused of violations so he needs

to secure permission to put on sizable positions you can there are other ways of doing that synthetically in the op. mark and derivatives etc but it should be about the time that i would say no could have been two months ago could be two months from now when we would would expect to hear more about his position and if it's grown substantially inside in size maybe the shutdown held up his. congress for everything and the panic yeah. exactly well again you know it goes back to all the regulations about herbalife and we could talk about this for a really long time but really why haven't we seen action the us ok ok that's a fundamental question this put this business has been going on since one nine hundred eighty and don't you think the feds would have stepped in by you know well a similar argument can be made for made off who went who flew under the radar if you had a lot of standing in the industry he was head of bindra one of the top securities very private security regulators and he went undetected for what we don't know how

long he was conducting the ponzi scheme but it was probably at least i don't know five ten years so it's possible for these to thing for these things to go on longer than bill ackman or bill ackman can stay solvent i think is a good many money manager and he got out of j.c. penney at the right time so my bet says he will survive this for sure ok so you're . both of them in certain. that's all for now but you can see all segments featured in today's show on you tube at you tube dot com slash boom bust r.t. we also love hearing from you so please check out our facebook page at facebook dot com slash boom bust r.t. and for all of us here boom bust thank you for watching on monday.

we're suffering not from inflation and as ed pointed out we're suffering from debt deflation we have any collapsed economy where prices are not going up nearly enough to produce. enough demand in the economy and economy so that people can be put back to work we have the highest level of sustained unemployment since the great depression ok now i don't know if you are standing on everyone. question if you go on to the right ask him as well as the real world and you ask people whether they think whether they think wall street is a problem i think they would agree with me that wall street is a problem and go ahead i will tell you i'm in the real world i don't know what

world you're in less but the real world they want the economy going they want their wages going higher they want prices lower. i would rather ask questions to people in positions of power instead of speaking on their behalf and that's why you can find my show larry king now right here on our t.v. question for. coming

up on r t n.s.a. whistleblower edward snowden is speaking out what he has to say about allegations he gave top secret intel to the russian and chinese government details just ahead and force feeding out get mo should the u.s. government have the right to force feed striking detainees a judge here in d.c. is hearing a case that's asking for an injunction to prevent the inhumane practice will have a report from the court coming up. and governing by crisis it seems washington can only make decisions when there's a looming catastrophe but is this hurting the u.s. economy we'll get some perspective on that later in the show. it's friday ah.