the. welcome to the kaiser report imax guys are time to reset this sucker the global financial system is couplets keep time to rebuild something better something less corrupt perhaps in fact this three architecting of the global financial system is happening right now as i speak these words doesn't matter whether you like it or not it is happening why the reset well is former french prime minister dominique de villepin recently said the u.s. has used its three phenomenal privileges to put the financial stability of the whole world at risk quote like a truck full of dynamite heading right toward us end quote well hold the freaking kaboom batman if you want to protect ourselves from the u.s.

economy which by the way dominic to feel proud to not say for can come soon batman if you want to protect ourselves from the economy which has strapped on a collective suicide vest we'd better have solid blast barriers in place first up is the redistribution of risk at the moment the collapsing financial system is one in which risk was separated from rewards then bundled up and sold off to unsuspecting investors around the world and one of the main pillars of pricing risk is the credit rating agency as i've said right here in kaiser report many times it's time to read architect this by starting our own true global credit rating agencies oh my god stacy herbert this is the beginning of the true insurrection is the post period those couple may as don't need to depend we said well dominic developed and of course was the prime minister of france and he famously said no to

that and then merican when we wanted to invade iraq with everybody behind us the french refused and he was hated freight created for. eyes were introduced let alone . well he's now in hong kong and he's the chairman of the universal credit rating group and this is formed by de gong credit rating agency in china it's also backed by egon jones you know the very first american credit rating agency did downgrade american debt and russ rating of russia so these guys are together and they're upset that the u.s. has wasted three extraordinary privileges as dominic deville pound said he said these three privileges are the control of the currency we all know that they have the global reserve currency the control of the rules so they have the global department of justice essentially and they could change the rules midway through the game so they always win the third privilege control of the risk the u.s. decides what is risky and what is not that is where the money should go and where

not he said as a way to redirect money by undervalue any risk in the west and overvaluing it in countries like china india brazil or pakistan and they could do this he said because of s. and p. fitch and moody's where they overvalue us debt and undervalue the rest of the world begin to understand the nature of this collective scam this racket because it includes the accounting firms the fund managers the hedge funds government and of course the rating agencies which we've said before are part of the corrupt part of this whole nightmare and in the case of moody's you give them money and they give you a rating and typically they downgrade foreign debt in france of u.s. debt and this is how during these periods of extreme financial terrorism the u.s. has had this extraordinary privilege of having money flowing to its aaa debt only later did we do we find out that it was not aaa was triple c. or worthless entirely and this is what we've been saying we've been advocating for

this for years i begged china to do this i begged russia to do this so not only is russia taken my advice and bought lots of gold but now russia is taking my advice and they're participating in this new global credit rating agency head by none other than dominic do. the important thing here is that you mentioned it would read directing wealth which is misallocating capital of course what happened over the course of the past decade or so is that with this collusion between the rating agencies the banks and the accounting firms the audit firms that they they were mis allocated all of our global capital so we have all these unsustainable bubbles backed by a dilapidating economy we don't have the economy because the capital is not flowing to places where it should be and instead is flowing to places like the u.s. where they're perhaps like one of these c.d.o. sold by goldman sachs are they going to be suddenly down create it will this sound overnight this is where the left wing gets it all wrong because they talk about

redistributing wealth and in a post capitalist world that we live in where wealth is no longer generated through jobs through capital creation wealth is generated through rejecting finances and re financialization securitization therefore when you want to talk about redistribution you must talk about redistribution of risk because the only thing that's in the global economy are quotients of risk some things are less riskier than others and by reestablishing or establishing a new credit rating agency then you'll see the redistribution of capital flowing along the channels of the security world in ways that correspond to a more cogent analysis of where the risk actually is in the global economy yet many people call it the socialization of risk and the privatization of reward they get to keep all the reward and we get to have all the risk doesn't develop and actually addresses this issue he says credit has become the key for the central nervous system of the economy those who control credit control the economy those who

control risk control the credit and those who control information control the risk that's why credit rating agencies and american monopoly have such enormous power most of the sort of perspective the global g.d.p. is roughly fifty trillion dollars a global derivatives market our debt market our risk market is seven hundred trillion. dollars so to get back to my discussion of how the left wing politicians completely missed the boat on this is that they focus on that fifty trillion number and try to redirect that wealth and they completely ignore the seven hundred trillion dollar number where the actual price discovery takes place where the actual changes in distribution would happen that would cause an effect would occur and this is unfortunately i've tried to get this message through to activists and politicians to all the myriad constituents trying to explain to them how this works but they are completely resistant to this notion that somehow by really really defining risk you would change the fortunes of the ninety nine percent the bottom

ninety percent i just don't understand why they're so resistant well one hand we have this misallocation of capital which we've discussed and now on the other hand he points out that there's also been essentially outright theft using the credit rating agencies by mispricing the risk so he says cheap credit led to a bubble in private corporate and public debt the global debt disease as he called it that artificially created economic growth the buyout fever hollowed out entire industries and left even the most efficient firms more fragile and when the bubble blew up the fed flooded the market with even more liquidity so the u.s. having access to this cheap credit because of these global credit rating agencies controlled by them they were able to use cheap money to steal essentially the wealth of the rest of the world in productive capacity right i mean it's a question of collateral and to put this into a way that hopefully the left side of the political aisle will understand is

they assume that work and capital itself is worth the collateral that you can put up and borrow against but that's not true as steve keim who's been on the show many times has pointed out that credit is created spontaneously from nothing and that the spy. chinese credit creation from nothing not even a fractional reserve but zero reserve then becomes the collateral for even more credit creation and you create this global daisy chain of credit that has no collateral whatsoever but is nevertheless used by the top one percent to acquire assets who happen to be going up in value as long as they keep creating phony credit and again this is all tied to rating agencies being able to say look here's a steaming pile of dog poop and we're going to give this a aaa rating and then say using that as collateral to go to the bank and borrow twenty million dollars to buy a chateau or to borrow half a billion dollars to buy a company if they're willing to say that this steaming pile of dog poo is

a aaa rated security that i'm going to borrow against then so be it that's the new papacy in the post capitals world the vatican pope of goldman sachs and j.p. morgan says all this crap to be triploid. cologne will give you security here we have time to develop on saying the same thing he said the system as it exists cannot go on we cannot wait for america to reform and so as we said at the top of the show we've got to reform it ourselves and the good thing is that the new generation the generation x. and y. are ready for it y. money will soon be extinct research from the curb report finds that sixty five percent of generation xers in wires say they are ready for something new as opposed to sticking with the tried and true financial institutions and principles this shift in perception means that individuals are reinventing the financial services typically provided by banks venture capitalists hedge funds and angel investors thereby creating new options to which consumers can save spend borrow and manage

their money they talk about peer to peer lending they talk about fact fractional ownership that you're seeing across the housing market for example but the most radical they point out is bit coin right we cover bitcoin first of any international news organization going back several years with john mcdonogh a guest on the show big calling is really the. new reserve currency of the world that will replace everything and be the building blocks upon which you can create a well risk distributed global economy that is a meritocracy and has attributes like capitalism but not the talk or see coming in there in the kleptocracy in the congress dr c. undermining it with their central bank model of clip domania well in fact you don't need a credit rating agency a corrupt corruptible one to monitor and rate any bitcoin transactions because the community the global community does it with triple book entry accounting and they point out that one of the most radical examples of this shift in the young is the

growing viability of the digital currency bitcoin the currency uses peer to peer technology to operate with no central authority or banks transaction management and the issuing of bitcoin is carried out collectively by the network because it is also entirely open source as design is public nobody owns or controls bitcoin and everyone can take part in it so a decentralized world don't like silk road which was like an online version of wal-mart that used bitcoin the f.b.i. is always looking to steal money and that's their primary function now and they the n.s.a. as well and they is invasive and spying technologies that's the primary purpose is to steal stuff in to do security knowing as any more secure in fact that we're less secure as a result of this but they saw the so-called out one hundred million dollars of the bitcoin so they went in there and they tried to steal in the great thing is that the f.b.i. and the n.s.a. are incapable of cracking the protocol to steal that money that shows finally that bitcoin is bigger than any government any central government any n.s.a.

and this is why people now the bitcoin price skyrocketed after the f.b.i. did a mea culpa and said we're too stupid to figure this thing out yes but in this post america world where you know dominant development is over there in hong kong getting ready for it by do which is the biggest internet company in china which is the google of china they're now excess. bitcoin so you see that this post u.s. dollar command and control top down central bank controlling. system is caput for the max time to write again soon as you have become a aaa rated about these days you never read it so. i give it a four chef at. all i love dominic would say just dribbling over his can of air all right thanks so much bring on the guys report pink you mags say june for the second half a whole lot more. old

. school rights. for the young girls cammo for the future hunger. between two and three hundred million guns united states so you can act like they're not here and keep kids away from them. deposits not if they lard you know i

mean this teaches them a lot of road spots ability and simply come to pay through the eyes of children if we can't do it for our children for future. it's a quick. fixed for a long time to increasingly toxic a picture the u.s. may have the ability to but he keeps dragging the world into an ever deeper debt is it still possible to break the species cycle. welcome back to the kaiser report imax guys are time now to turn to leo johnson a green and investment consultant and author of this book a business and the city of the future makes an excellent christmas gift and

stocking stuffer sleigh a lot of thing max thank you yes well the last report i saw this thing is not ok it's just flying off the shelf mainly bought by my mom this is my secret fear but nobody for some reason i mean there is a kind of. yes which is the least competitive kind of real numbers and we're doing very well well actually it is business ethics and business at home where we're rocking on business ethics that's not a popular section here in the u.k. military intelligence is one of the great it's one of those great books but we're looking we're looking oh my god it's like going to be let's get into the main thesis here of this fabulous book there's three possible futures johnson the propolis side. and the distributed city so i mean it's a whole book is about this but if you can kind of encapsulate that a minute or so. so you ask me to sum up my yeah in a minute or two hundred fifty pages this is purely just to fill in the little star with the prophets what is the propolis for patroclus the city that henry ford built

on iraq it was great it was the city of mass production to raise this out of autism and poverty lifted welfare across the globe. but over time there's this quote from will rogers henry ford which says it'll take one hundred years to tell whether you helped or hurt us but you certainly didn't leave us in the same place what we've seen is this same general purpose technology of the combustion engine which changed people's lives changed the cities we lived in has started to come up with some problems of it before we go on let me just explain that one of the themes here is that what we're finding in the twenty first century is that all these models economic models are hitting against something called what's called capacity constraints of planet earth planet earth as a vironment as a certain ability to sustain growth as that's the fine and it has different

definitions and so some economies are aware of this some are not you're trying to offer some way through the thicket of this. move all for sitting at immovable object or unstoppable force or this will do x. actually worse than that but it's better that there's a triple set of problems not just the carrying capacity of a ok because as mass production has reached full deployment what's happened is the returns on capital to investors have gone down from a six point three percent in the sixty's to about one point two percent now the cline in what the real sector is giving us the first real problem but then the three side effects the come off about the first of course is of course the carrying capacity of the planet because there's a high carbon burden that spits out its fossil fuel group the second pathology is social because its profits go down what is business trying to do it tries to push profits back into this is the by squeezing wages so in work poverty out of work poverty is there as contra offshoring to china the third pathologies of course what governments do is pull the lever they've got to try to bring back consumption bring

back the month stimulate the economy with cheap money flooding into the system and credit fueled debt high levels of personal to high levels of national debt and then into this imbalanced unstable mix. you then have capital that says well i'm getting one point two one point three percent chance this isn't work capital and looks for whatever new routes it can find to reboost its returns so you have the sub prime so you have the misselling of p.p.i. insurance you have a series of bubbles which then of course collapse the gazer that you're characterizing the lower it's arms of capital leading to mal investment as the inevitable consequence of a certain endgame for capital and return on capital given these restraints and you're not applying any kind of contribution of some outright malfeasance now there are some would argue that one of the reasons you have this problem and in this current capitals world is that the main antagonist have militants in their heart

and they're acting as bad characters thered acting not acting well here you know people have taken great joy in beating up the bankers yes i do i think of capital is to find a time that's it's magic it's to find returns the real issue is not the financial sector it's the real sector it's about whether we've go what she refers to as the general purpose technology in play that's going to usher in the next wave of growth or not so bitter also correlate you know creative destruction was one of his great themes and yet in the banking sector in the u.k. i don't see any these banks being destroyed that have to fall into hard times because they made bad investments and the big four banks that partially nationalize or are bought out are involved all columns of skullduggery why didn't the jury in the concept of tree of destruction play out any avenue banks come along and let the bad actors do those names we know well why weren't they allowed under the capital system to die were used to a room where you have

a system that's both deals with the money and you know we can the still very much in place but at the same time what you're seeing is bubbling up. bubbling up and by the way that you always depends on the synergy with the old you start getting word . the old banking systems are going to be chaos it's always about the synergy between these old systems and the new that's bubbling up with the capacity to usher in a great wave of growth and let me say this we started this book in quite this bad but seriously done thing with a company who could deliver on the economic social environmental challenge if we go where we ended up seeing that there is such a wealth to refer stuff that's bubbling up the kilometer with infrastructure because all right so would it be fair to characterize your work to some degree as a financial architect and that yearly you have you're looking at the finances in terms of their design in a kind of macro sense and seeing the inputs in the outputs and does it does it does

it is it fit for purpose and so that getting back to this book which is an excellent book i say i did actually read this book so we talked about but trouble is i want to talk about the main themes here is the way you're kind of from a financial architect characterizing these different clusters of activity economic activity there's cyber yes which i would take it from the description is the plugged in world but please explain this a bit ok you can see this if you want to really concrete examples of these three different cities in action look at nairobi today if you want three different types of city that are all springing up you've got the old and ropey which is essentially off to westgate the risk is that the strategy for business is exodus let's leave this and what's happening instead to this old city that's getting inbound is a new city is being built up as replacement you've got these new smart cities in theory with digital digital if they don't right with giant plaza a screen nothing like this you'll know dollars as it goes down as a some part of curve toward a price point called zero in other words storage processing and and c.p.u.

is always going cheaper cheaper cheaper so here you have african country where they start at a place of baseline nowhere but they're meeting the a some part of curve of zero cost account way over my head we go to kosovo let me. put this in concrete terms ok for you what i did learn a lot as you go out on your own in this case a bad little line our job or is it i educated british people you got these i pad cities ok you've got the cities which you've built for obsolescence yet which i've got quite small technology which is really this mission of interconnected highly vulnerable systems which are not going to be resilient and a lot of capital is going into these new cities and the gated compounds which on can be delivering jobs for the two hundred thousand people a day who are going in a part of distrust migration from the countryside to the city what we need is a different ok so you're right where you can you feel constructive about this suburbia model when i know i feel that it's the next super prime it's not surprising it's the super profit so you need a normal resilient city ok it's the technology equivalent of mom right ok if you

told me i might waste of toast marks yeah and put your money or vegemite for the australian viewer if you put it in a giant bowl up in the middle does it taste good know what she's distribute this tech i'm going to get to this this mom might even lead across the slice finally the distributed setting so this is kind of getting toward the conclusion of the book i believe this is what you foresee as a model to work toward we were talking about distribution of the first after show in terms of risk and capital and that the problem capitalism today is not wealth redistribution but risk free just to be assured that all the risk is being borne by the masses and the rewards are being accumulated by the very few it has more to do about risk management how do you see the distributed city though actually for me the distributed cities the city that puts power back in the hands and uses technology horizontally to put power back in the hands of people and it does in that sense both manage risk for them and create rewards to the nairobi example is

very clear on this because you've got no robey crumbling you've got the new cities the fiber because of comes a teacup etc but you've also got these innovations spaces bubbling up in nairobi sixteen of them. organizing groups who are doing things in this the i hope. what they're doing is using technology to solve the real problems so an example of this might be. where the taking of the deal aren't so light mobile phone light which is great because there's one point four billion people in the world without power but a lot of people can't afford the two hundred bucks a piece of kit costs but if you put a sim card and then people can lease it for fifty cents a day and they can make mobile money transfers and they get access to insurance and then buy fertilizers and then make mobile payments for the footy for dollar kickstart agricultural from pump which means they can get access to the underground water table point three times more crops incomes go up from one hundred sixty to sixty hundred dollars a head suddenly what you're doing is you're reducing the root causes of the

problems that are making people flee the countryside to the city and this is a market that's a billion dollars in kenya alone the postman of kerosene thirty eight billion global ok i mean right here in london you have the silicon around about you this is the home of the startup culture in london is this the kind of thing that's going to take london in to the twenty first century the next fifty years what do you think about the silicon roundabout culture i believe it's great i believe it's a vital part of the future ok let me jump in and ask you this why would that george osborne try to stimulate the economy not by boosting silicon roundabout or by giving broadband all over the country but by creating a housing bubble by offering this help to buy scheme which is clearly an effort to create growth through a pumping up of an asset class housing to in a way that we just saw in american the subprime crisis and the fannie mae crisis utterly fail what what is it about this government that they don't get about your

vision because i believe you're right why is are so blind about the why is he pursuing such a dead end policy such as help bot. on the british government all of the policies one of the great joys in my life is i'm not in the british book aside is it but what i do what i think is the reason why they go down this dead end why don't they see the obvious why don't they just look at this book and say lou johnson is a smart guy we want growth we don't want dead end bubbles popping in people's faces what's wrong with them and if you look at what's not me places like buffalo ny and austin texas the extraordinary stuff going on around the next wave of growth if you look at the last hundred fifty do you think of possibly i am i mean are they going to you know are going to a bar and are going to go in it like there is i'm not big there is a wave of growth which is always the caus when you have a new image you have all this good that's going to new energy sources that get those who want to get growth growth of the debt that's all they want they said that yes they have by helped by scheme by giving mark already the guidance to create

quantitative easing in interest rates down to zero zero interest rates creates mounds and mounds of debt and that's that why not some of this train line up north create for good trains train from two hundred years ago why not just broadband shortage could work there is government support going for that it's bubbling up so it's going to be driven by the people we've got to go. thanks so much for being on the kaiser report thank you mark all right that's all the time we have for this edition of the kaiser report with me max geyser and stacey herbert i'd like to thank our guests leo johnson author of this book which is truly a good book i read this fricken book it is a good book you should buy this book it's called turnaround challenge if you like to get in touch tweet us a kaiser report you want to order miss to leo j j it sounds very uptown downtown. i stand corrected and so next time this is nice guys are saying bye you. know.

well. it's technology innovations all the developments from around russia we've got the future are covered. may disagree. but i believe america is exceptional. we can't. let.

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i. think the war on protesters around the world unite against the drilling technique known as fracking urging the government not to sacrifice the environment for the sake of short term profits. syria look to the deadly tug of war between the government and opposition forces are to get access to a rebel stronghold. and also this hour america's a man killing machines are on the radar as a senior u.n. official urges washington to reveal and ray nagin it's probe program. hundred nine pm it's kevin i mean.