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kolo there i am married and this is us 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 pierced the one thousand dollar bail to look at all shiny and new but it's not just the earning season or america's favorite panda that's bursting at risk assets up the wall of worry yes which channel john hilson wrath and dabble in some fed predictions with the help of chris martin since and tom hartman of the big picture dismisses the fray with a unique perspective on the debt ceiling let's get to the. job

owning isn't simply the problems of those who work a few hours per week on the capital last week for. at the federal reserve chairman bernanke you sent bond and currency markets into a free for all in april of this year all because he 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 nowhere and hello hello now bob before the end of 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 we 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 month 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 then 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 when we finally reached a resolution yes the green light 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 is back open this is the new normal now let's focus our attention on the fed i promise that we would sense that purchased purchased sixty percent of all treasury debt over the last year and 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 fed. rein in spending bob let's look at the options right here we have a fed meeting at the very end of october and what can we 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 were supposed to get a price inflation report those are the two metrics that the fed uses to gauge whether or not it should be upping the ante

a lowering it and the notion that helps them around here is you know what we do need to be as bernanke he's not just us in the tire world it's a big it's open secret is 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 you know 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 nak you can see the little kids can sleep well at night when well at night with the vernacular 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 now 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 they've 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 vidual. t's that were coming out in full force in europe eventually come home to roost here right in the u.s. is now the hub well there you have it on a short term bond but on the subject of quantitative easing you recently talked within its. washington tell us a little bit about yes i had the chance to interview chris martenson and he is the owner of peace prosperity calm 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 or 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 in the fed's going to say hey pimco wouldn't you like to buy a billion dollars in mortgage backed securities which are going to fall in price here you go and 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 the 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 and one hundred basis point rise just on the dia 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 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 in the 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 you. toolkit that he likes to talk about so much to his toolkit which which is perilously small right now right the element of surprise is gone and all that shrinkage clear communication has got us 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 it has almost no

control over right that money gets lent hypothecated spend gets pushed out all sorts of crevices so the putting it out as easy 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 scarem 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 what hit fifty two and a half trillion in two thousand and eight and started the 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 so 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 end against those so-called scheme and you can get a lot of fuel out of high quality collateral in that system currencies 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 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 that 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 had 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 in 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 explosion that burst i think in one thousand nine hundred eight 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 am 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 willpower 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 on us 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. more news today violence is once again flared up. these are the images the world has been seeing from the streets of canada. trying to corporations rule the day played. on the. please please take a look very hard to take a. long long. long have you ever had back with the earthquake

there's no. please. please. please please please. please. please. please. please look at the bottom of the. 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's compared to our house yeah the knowledge that's made even in the green 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 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. as a way of giving the government more elbow room then the republicans got this idea hey we can flip 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 multimillionaire 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 have a house budget and i. ideology actually it goes beyond ideology because the

ideology is being driven by big money what's in the interests of those 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 it would be on the politicians now on the subject of borrowing money to pay your bills that's a very simplistic explanation and it goes back to kind of running the government like you run a household that's too simplistic however to some extent and that is what is happening to me 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. down the road but if we are borrowing to pay our bills currently are we not the fact of matter is as 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's 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 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 that 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's 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 and act in an icon is bob english again by now how are you great there's a big this is a big deal is the big deal now do you think i mean it's 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 but 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 this 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 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 oh 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 ackman 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 happen 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 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 thing that came out and you know basically the market turns were 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 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 all 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 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 part of the 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 merging markets that's going to happen 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 are 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 big blue i'm going to say it again i think so too 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. so it's great overall. ok i could was taking the opposite side so he's going along the stock when you go along this stock in substantial quantity you have to file certain single 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 opposite. it's mark and derivatives etc but it

should be about the time that i would say now could have been two months ago could be two months from now when we would expect to hear more about his position and if it's grown substantially inside in size maybe the shutdown held up his. way of congress for everything and the panic yeah. exactly well now 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 i think that's a fundamental question this put this business has been going on since one nine hundred eighty don't you think the feds would have stepped in by i know well a similar argument can be made for made off who went who flew under the radar he 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 your. team both of them in certain. that it's all over 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 us see you on monday.

first time of the new alert animation scripts scare me a little bit. there is breaking news tonight and we are continuing to follow the breaking news. alexander's family cry tears of joy and a great things out there that there has been rendered into court a wall around online and there's a story made for a movie is playing out in real life.

larry king now the woman formerly known as the girl next door ten the wilkinson half is the most amazing person ever walk in our life you have a mislead girls you know you've been to a no no that was a very different type of situation like where the spice girls i want to love those rumors will be schooled i would rather have control with my show and tell the exact story than have the media tell it for me and screw things up plus i said i'm not doing that that's absolute something i will not do all next on larry king. over larry king now kendra wilkinson jr guest today you know her originally of course is one of you have his girlfriends on the hit reality series.