culch. 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 fill pan to not safe or can come soon batman if you want to protect ourselves from the economy which has strapped on a collective suicide vest we 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 don't need to depend we said well dominic developed out of

course was the prime minister france and he famously said no to that then merican when we wanted to invade iraq with everybody behind us the french refused and he was hated freight freedom. 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 rusts rating of russia so these guys are together and they're upset that the u.s. has wasted three extraordinary privileges as dominic to bill 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 under valuing 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 u.s. debt and undervalue the rest of the world and begin to understand the nature of this collective scam of 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 beg to china to do this i beg 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 view pan well 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 of 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 there are perhaps like one of these c.d.o.

sold by goldman sachs they're going to be suddenly down create it will do 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 to 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 and it 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 put this in 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 that 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 of 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 it is they assume that work and capital itself is worth 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 spontaneous 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 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 j.p. morgan says this crap to be triploid. cologne will leave 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 there is a new generation the generation x. and y. are ready for it why money will soon be extinct research from the curve report finds that sixty five percent of generation xers and 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 to 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 covered good point 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 plutocracy coming in there in the kleptocracy in the congress dr c. undermining it with their central bank model of kleptomania 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 it's nothing to do security no one has any more secure in fact that we're less secure as a result of this but they saw the so-called at 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. 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 accepting bitcoin so you see that this post u.s. dollar command and control top down central bank controlling. system is caput to the max transfer rate again soon as you have become a aaa rating these days you have to read it so. i give it a. dribbling over is kind of they're all right thank so much for being the guys report pink humax so for the second half a whole lot more. poured

into the behind center's numbers we have more than two thousand political prisoners i'm behind right now of course if you look at the system what the bahamian government is trying to do is they're trying to label many of these prisoners as terrorists. as you know if you don't prove. to. everyone in my life that i care about their government and then. i came to skin. i was a national champion in track and field and also i was able to go and qualify for the olympic games. you know nine hundred eighty eight i started to experiment with

that the drugs i had lost all the financial means that i. was really on the street . black market can. get a great. interest here. is real journalism a thing of the past and much of the western world in the name of security challenging the official media message of the elites is often met with serious threats and reprisals whistleblowers are damned in need to feel superior consequences what we may need is a deafening echo chamber warning all to get in line or arms. may disagree. but i believe america is exceptional. yes precarious.

yes we can. bring. them to. seize them up and. we. come just. welcome back to the kaiser report imax kaiser timed out 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 out there saying mike thank you yet welcome guys report so

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 room i was in we were doing very well oh actually it is business ethics and business at we're 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 rocking oh my gosh but 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 the great. so you ask me to sum up my yeah in a minute or two hundred fifty pages there's a period to focus on a little start with the problem of what is the propolis for patroclus the city that henry ford built on iraq it was great it was the city of mass production

that raised this out of 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 start to come up with some problems ok 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 platter as a virus and as a certain ability to sustain growth as that's defined 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 in

a little ball object or unstoppable force or this will be less 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 up six point three percent in the sixty's to one point two percent now there's a decline in what the real sector is giving us the first real problem but then the three side effects the come up 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 or its business try to do it tries to push profits back into the system 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 demonstrably 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 they 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 very much you're characterizing the low returns of capital leading to mal investment as the inevitable consequence of a certain endgame for capital in 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 banks yes i do i think of capital is to find returns and 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 of these banks being destroyed that have to fall into hard times because they made bad investments in the big four banks that partially nationalize or are bought out or involved all kinds of skullduggery why didn't the same jury in concept of trade destruction play out any avenue banks come along and let the bad actors the who 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 wood . 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 not quite despair but seriously daunting with a company who could deliver on the economic social environmental times if we go where we ended up seeing that there is such a wealth to refer stuff that's bubbling up the kilometer we're going for a second because all right so would it be fair is it characterize your work to some degree as a financial architect in that you're let you have you're looking at the finances in terms of their design and kind of macro sense and seeing the inputs and 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 the troubles i want to talk about the main themes here you know 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 example of the 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 older road which essentially off the west gate 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 call these new smart cities in theory with digital gradually they don't write with giant pas must green we have to hope that you'll know what allergy is 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 ultimate baseline nowhere but they're meeting the a some part of curve of zero cost account way over my head with some twenty codes that will let me. put this in concrete terms ok for you what i don't learn a lot is you know you're always chasing bad little lines our job our educated british people you got these i pad cities ok you've got the cities which are built for obsolescence 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 distress 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 viewers if you put it in a giant bowl in the middle does it taste good know what she's distribute this tech are going to get us that this mom might even be 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 regis tribulation that all the risk is being borne by the masses and the wars 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 the power back in the hands and uses technology horizontally to put power back in lines of people and it does in that sense both manage risk for them and create rewards so the nairobi example is very clear on this because you've got no robey crumbling you've got the new cities the fiber of comms

a teacup etc but you've also got these innovation 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 on so long to mobile phone to 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 in it and 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 for the four dollar kickstarter 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 town your lawn the postman

a kerosene thirty eight billion global ok i mean right here in london you have the silicon roundabout us 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 too in a way that we just saw in america the subprime crisis in 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 and 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 get aside and say but what i do is what i think is the reason why they go down as dead in 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 time he places like both one 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 as you know i mean are they going to you know are going by are not going to go and it's like they're saying i'm not big there is a wave of growth which is always a cose 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 bike help to buy 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 that's why not so this train line up north create for

good trains trains are from two hundred years ago why not just broadband shortage could work there is government support going for that but 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 max all right that's all the time we have for this edition of the kaiser report with me max kaiser and stacy herbert i'd like to thank our guests leo johnson author of this book which is truly a good book i read this for a 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 if you want to order miss to leo j. j. it sounds very uptown downtown. i stand corrected and the next time this is my guys are saying bye you. know. that one time i saved money to hire

a hitman to shoot me dead from the next building through. the open window. i searched through the internet typing things like i'm looking for you i'm waiting for you i wrote and waiting for you i'm looking for you i didn't care at all what this man would be like deprived disabled ill. with you know you won't know the better is true. i love everything about him i have grown to love if you're here everyone is just fingertips you may actually be healthier and other guys who drink beer in a branch i've always promised. that if she ever realizes it's too much for her and she decides to leave me i will accept her decision without criticism because it's her choice.

here i mean if we're looking at the situation right now where we have a crackdown almost on a daily basis where we have people getting arbitrarily arrested from their homes during night raids where we have children being picked off the streets where we have people attacked with cheer gas inside their homes where torture. is that not in itself a form of anarchy. it's a quick fix for a long and increasingly intoxicating addiction the us may have a little but it keeps dragging the world into an ever deeper debt is it still possible to break this vicious cycle.

i. the war on shale protesters around the world unite to get the technique known as fracking urging the governments not to sacrifice the environment the sake of show to. get syria locked in a deadly tug of war between the government opposition forces are to gets access to a rebel stronghold. but. america's up and killing machines are on the radar as a senior u.n. official urges washington to reveal. its drone program. just midnight after.