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hello there i'm erin aid this is boom bust and these are some of the stories that we're tracking for you today. first up new york attorney general eric schneiderman filed fraud charges against barclays over its dark pool saying that the bank favors high frequency traders over other types of investors and now broker dealers are heading for safer water we'll tell you all about it coming right up then we're bringing you part two of my interview with mr jim rickards rickards is telling us how sanctions the i am and other british nation also factor into the financial world here and the intense stuff and it's the end of the week which means it's viewer feedback day here on boom bust edward harris and i are addressing your question some of the concerns that i have on the show you won't want to miss a moment.

on this summer friday we'd like to issue a friendly warning be aware of dark pools dark ones especially if that dark pool is located at barclays bank now broker dealers are heading for safer waters after new york attorney general eric schneiderman accused barclays of allegedly telling its customers that it would protect them from high frequency traders well actually doing the exact opposite and accommodating those high frequency traders now thursday credit suisse georgia bank royal bank of canada and stanford bernstein all removed connections from their routing systems to barclays dark pool known as barclays l x now barclays l x. it's the second largest dark pool in the us behind the one run by credit suisse now the allegations are pretty significant ones and

they include emails from barclays executives in which they describe decisions to do you have burnt leave mislead clients barclays share price fell six point five percent thursday following the lawsuit now originally dark pools were private trading venues designed to help investors trade large blocks of stock anonymously advocates of dark pools argue that they offer cheaper training alternatives for investors now schneiderman's office is looking into whether dark pools operate in a way that is consistent with how they market themselves that's that's what's in question here now sharon said quote the facts alleged in our complaint show that barclays demonstrated a disturbing disregard for its investors in a systemic pattern of fraud and deceit barclays grew dark pool by telling investors they were diving into safe waters but barclay's dark pool was full of predators there at barclays invitation now what's almost more interesting about this case than the actual case itself is the potential impact it will have on dark pools in

the u.s. markets now investigators are demanding more transparency and the a.g.'s office is also scrutinizing the activities of other major dark pools including those run by goldman sachs and credit suisse the lawsuit against barclays is asking the court to order the bank to halt its current behavior and pay unspecified damages but will that really solve the problem of dark pools that's the question on jack now if barclays pools go away there's still plenty of other banks out there with their own dark exchanges so what will she mean barclays actually really accomplish now i'm not exactly sure i have the answer of how to fix the problem of dark pools but i'm also not confident that eric schneiderman does either i guess today some action is better than no action at all.

think that the three step financial war very is the use of capital markets as weapons to increase one's hundred to one country's strength and we can and other countries track now last week we spoke to economist and author jim rickards whose latest book the death of money is all about financial warfare and today we're bringing you part two of that interview where we explore how sanctions the i.m.f. and other bric nations factor into the financial workfare landscape now i first asked jim if sanctions can within the tools of financial warfare here's what he had to say. there's sort of a gradient if you will between traditional financial sanctions and financial warfare although a lot of the tools of the same you go back you know we've we've had financial sanctions for decades and they're often trade related if someone is putting on unfair subsidies that will put an import tariff on something or ban certain goods so those kinds of things and then they sort of ratchet up from there to isolate

countries like north korea so that they can't trade or earn hard currency so those kind of financial sat sanctions have been around for a long time but where it's sort of being dialed up a little bit is in where it's in conjunction with purely geo political strategic confrontation as is the case with russia and sure there's a whole sort of menu that the low and you know you ban people from travel to the u.s. like i say if you all are guards maybe can't go to the super bowl but at the high end you can take the largest banks in the country and kick them out of the dollar payment system so the two biggest banks in russia for example spare a bond can be next to a biography t v it would become very crippling to them and by extension the russian economy to get them out of the dollar payment system even more crippling to kick them out of swift which is the international payment system based in brussels in belgium then they. even move your rose again or swiss francs actually one of the greatest threats and one of the lot of impudence taking seriously would be to order

mastercard and visa to just continue their operations in the soviet union then it would that with i would really have a street level it's one thing to kick a big bank out of a big payment system that is crippling but if the average russian you know goes to the store and can use her master card visa that's something that would actually affect putin's popularity so but prudence responded study setting up a zone payment system maybe in five years we'll go back and see that you know russia has its own equivalent master card master card visa going to be caught in the middle increasingly between this in the struggle yes that is that's very interesting stuff and i'm glad that you bring up the visa master card issue but i want to ask you what about multilateral institutions such as the i.m.f. now doesn't the fact that there are actual vehicles for creditor nations to extract as much payment from debtor nations as possible make them tools of financial warfare. sure and their math is a really interesting case erin because it's one thing when the u.s. and russia want to square off on a bilateral basis or you know recently you know russia was kicked out of the what

was the g. eight used to be a g seven and they had a russian made of the g. eight now it's back to the g. seven so the g seven recently had a summit in russia was invited except that there were other things going on and it was the actually the commemoration of the d.-day invasion in june sixth and putin was there a connection with with the d.-day activities and he met with all the heads of state i mean met with merkel he met with along the actually met with obama so i caught the g one plus one plus one plus one. rushes where she is simply too important to powerful too big to ignore some of this stuff is symbolic and then taking care of the g seven is one thing but you can't kick them out of the g twenty you can't kick them out of the brics and you can't kick them out of the i.m.f. so they still attend all these meetings and they should i mean it's a very important economic power but it shows there are limits on this kind of thing i've said all along that the u.s. would not escalate economic warfare beyond a certain level because russia's ability to strike back is very potent you know we kicked them out of the payment system where they could freeze u.s. assets in russia they could dump their holdings u.s.

treasuries increase interest rates pop our stock market bubble our housing bubble and even more so the covert or dirty level if you will use hackers to shut down the new york stock exchange so this can get ugly i think the u.s. understands that so you're back to the old cold war paradigm of mutual assured destruction nobody wants to escalate too far because they'll be blowback on them so the weapons are put they're actually more potent when you when the u.s. and some at a place like iran which really can't fight back very well but russia is very capable of fighting back what part do russia and china to take down the u.s. financial system. well then you have to distinguish between capabilities on the one hand and intentions on the other very little doubt that the capabilities are there but by the way the u.s. is not. you know passive in the. the u.s. has the same capabilities and and that again goes back to this mutual assured destruction idea i mentioned the other analogy we used in the cold war was you know two scorpions in

a bottle so one scorpion stings the other the victim is going to die but has just enough strength to stand back and they both die so you would refrain from unleashing its hackers to disrupt the u.s. financial system because they know that we could probably do the same thing to them although we have a lot more to lose that's an asymmetric threat right there because you know we shut down the new york stock exchange we shut down the moscow start your change while the whole world is disrupted but who wins i would say russia wins in that scenario because we have a lot more to lose but neither side really wants to go there aaron and that's why i don't think it will go very far and now it's one of the risks that for some reason it does go that far because people haven't really thought about the game theoretic structure in which you need to understand these issues but the other wish is an accident if you have all these capabilities and you're you know you're creating a software package in your malignant hacking capability to shut down a foreign stock exchange and somebody you know loads the wrong code or pushes the wrong button and so they gives up on

a state that was actually one of the greatest fears during the cold war is out there russia or the u.s. would look with intentionally launch missiles but that having the capability something could go up by accident can you answer link this discussion on financial warfare with your view on reserve currencies. sure you know the dollar is the leading reserve currency at sixty percent of global reserves although that's down from about seventy percent of global reserves in two thousand so in the last fourteen years the us gold reserve position has been drawn down from about seventy percent to sixty percent no doubt that the dollar's leading reserve currency today but if confidence in the dollar is weakened either because the fed policy or the kind of issues we're talking about financial we're fair people going to look for other safe havens i would say gold is number one the euro is another one and i was said all along that you know the us down a little bit because of recent actions by the e.c.b. but not that much and i think it's found the floor and probably go back up against the euro as one of my my favorite currency so that's an alternative so you have

gold in the euro out there now the real alternative to the dollar it's not yet taken center stage but expect it will sooner than later is the special drawing right where the s.t.r. this is the kind of world money printed by the i.m.f. it's not backed by anything it is just like any other printing money like the dollar or the euro you're not going to see the s.t.r. are right away it's being held in reserve for a liquidity crisis the a c. or has always been a low quiddity tool if you have that kind of heart attack spike in volatility and there's a liquidity crisis the fed will not be able to ride to the rescue because they already did that they printed four trillion dollars the west on where they're going to do go to a trillion i mean there's a limit to what they can do so in that situation the global liquidity is going to come from from the i.m.f. by issuing us to yours and at that point you're going to need china and russia and these other countries to go along you know begin to insist that the s.t.r. replace the dollar where do the other brics brazil india and south africa come in

here. well of course they're not nearly as large you know china is the five hundred pound gorilla if you will and russia is the second largest member of the brics but you know brazil's a very large economy and as india and they're both good growth rates you know south korea's a lot smaller south africa is probably included the brics more for political reasons and economic reasons is the stronger economy was quite small compared to the others but they're doing their own thing i mean they're building a brick so internet backbone it's going to start in brazil go across to south africa loop around to india and china and then connect to russia if i was foster i'm not saying that you know u.s. . the u.s. intelligence community couldn't tap into it they're pretty good at that but but it will give them some independent capability they're building their own development bank they're building their own reserve bank basically what the brics are doing there replicating the i.m.f. governance it infrastructure now the reason they're doing that they actually don't want to do that they want what they want are more votes from the i.m.f.

they want china for example is ten percent of global g.d.p. but it's i.m.f. photos closer to five percent so china say we need more votes there are other countries that belgium netherlands that have too many votes relative to the size of their economy so that that paos going on behind the scenes in washington at the i.m.f. but so the brics are siloed give us the votes and will play ball with the i.m.f. and weaken the relative position of the u.s. but if you don't give us the votes we're prepared to go away and replicate these institutions so it's a little bit of a two track strategy. and that was economist and author jim rickards. time now for a very quick break vets stick around because when we return we're bringing you the best of the best from this pos wreak and it's the end of the week which means it's time for our us to hear from you edward harrison and i are tackling your viewer feedback in our weekly internet segment plus remember you can see all segments featured in today's show on youtube at youtube dot com plus from buster t.

and on hulu fully dot com slash boom dash bust. now we got to go before we do here are looking from your closing numbers of the bell. please it was a problem very hard to take a plunge to get along here a lot longer than that sat with governor rick perry. played.

live live. live live live. live . this is what we do we kill people and break things. we can see something as simple as people playing soccer you can see individual players and we can see that. you can only see is facial expression you can see is. maybe cursed us or maybe he asked. for forgiveness for.

there must be near certainty that no civilians will be killed or injured. right from the scene. first street. and i think the church. on our reporters twitter. and instagram. the in the.

welcome back to the show now it's the end of the week and that means it's time for our best of the best segment now first up we have catherine austin fits explaining how we're undergoing a paradigm shift toward a networked economy what's a network on a me you say you got to watch to find out then viviana rendered discusses the dangers of depending on twitter for investing information he says don't do it and explains why it's an unreliable tool and colin roche weighs in on inflation federal reserve policy and the us macro economy that marshall. are back of the fifth take on former treasury secretary timothy geithner bank centric response to the financial crisis and rounding out our best of the week currently expert mark chandler explained power of low ball until the environment makes trading and f.x. markets especially difficult and joy. things are happening one is we're taking digital technology and integrating it into the basic infrastructure and hardware of life and as that happens we're seeing more and more slow whether it's media flow or

financial transactions shifting on to the internet and online systems a big part of this that word is the fact that we now have almost three billion people and rising on smartphones so we are moving from a world where it's not north america which is the biggest consumer market it's not it's not the european union it's big it's consumer market it's people and smartphones is the biggest consumer market and is having a very traumatic shift in both cash flows and the whole marketing presence of all sorts of activities and organisations so so it's this shift that comes with the integration of kitchell technology into everyday life and it's it's not just online systems it's the integration of technology into hardware so we're seeing i call it the digital heartland if you you know it's i'm based in tennessee and if you come out into the middle of the country you're literally seeing this kind of technology in a group it into the basic infrastructure so technology is no longer something that

just happens in silicon valley or around boston it's happening in the trains it's happening in the trucks it's happening in the cars it's happening in the day to day infrastructure of industries from farming to you know to every day walk so silly i think twitter is a dangerous tool to use or to rely on for investment purposes simply because there's so much of the number of tweets or you know we're talking billions of tweets i mean of that you know some subset is going to be done. corrected towards financial commentary. and then of that i think a very small subset subset is going to be coming from individuals who have real credibility within within the investment world and i think you know i have come across you know other people and companies that are trying to make sense of kind of all the financial commentary that's that's actually on twitter but it's dangerous because there's you know there's a big credibility issue and there's

a you know you want to be able to filter all of that all of the data in a sensible way and i think that's a lot harder than some people might think it is i think it would be a big mistake for the fed to assume again that this is a very rare economic environment this is not your you know your nine hundred ninety s. this is not your one nine hundred eighty s. and this is definitely not the one nine hundred seventy s. it's a very unusual economic environment where we're coming out of a credit crisis that's entirely unique and so i think the fed has to view this as its own environment and you know in a situation where are we have for instance the use six unemployment rate over twelve percent and you know you have still inflation is you know that the core rate is still about two percent i mean this is an environment where you have a huge amount of slack in the economy and when you have that sort of slack in the economy it would be very unusual to see a demand call inflation that is sustained i think for several quarters or several

years and so i think that although some of the inflation numbers have ticked up lately in the recent data i think it would be a big mistake to assume that this is something that's going to become sustained going forward just because you know although things are getting better we're still in a very very sort of tepid didn't we. i think that if the fed were sharply i think that you could easily see a reversal of some of the positive economic terms of what is right that banks play a vital role but he i think he sets up a false dichotomy and he's persistently done this from all the time that he was in office the notion is no on bailouts of the kind that we had versus not doing anything nobody said that you should just accept the most extreme libertarians and you should just let the banking system go but there were other alternatives we use other alternatives in the 1930's we we nationalized and restructured a series of banks and directly are the swedes and the norwegians did the same thing so there was no reason why we couldn't actually downsize the banking system protect

the depositors and actually do a loads of. restructurings on all the banks that would get a much better way to go that option was never accepted because i think like many of the other rubin it was too in thrall to the ideas of wall street and therefore never considered it seriously interesting characteristic of a foreign exchange market which makes it difficult for difficult for your viewers as well as our clients at the bank is that volatility is just very low i should rather distinction between like playing squash and playing racquetball i play racquetball the ball bounces around more where you lack in skill you can make up with finesse and speed that's volatility but we live in a low volatile world right now and that's much more like squash we need skill not just not just luck and finesse and i think that's what the capital markets are you know their record low volatility in the currencies in the bond market and the stock market i think it's very difficult for investors to really really to earn that alpha. that was our best of the best from this past week time now for your weekly

accrued interest. in first time we've heard everything now every friday ed and i put you the viewer into the driver's seat letting you steer the show with your comments questions and concerns also interest throughout the week twitter you tube and facebook and let's dive right in capitalist a frequent writer and someone we enjoy writes to say the data supports an improving economy unemployment is coming down and u.s. manufacturing p.m.i. is increasing in recent months cohen is right everyone is looking backwards instead of looking at the improving data now ed is calling right isn't wrong looking backwards and sort of looking forwards at the good news person about. yes you know here's the thing i want to go in to take a deep dive into this one ok and the reason is because i think that you have to

separate the secular from the cyclical basically when you look at what's happening in the economy in terms of what just happened and what's going to happen into the future you're looking at sort of the cyclical trends that is you know what's happening the jobs market what's happened in terms of wages we're looking at you know what's happened to its production things like that and the reality is when you look at all the forward indicators they're all going up and what that means is that what we saw in q one which is a negative two point nine percent decline in g.d.p. on an annualized basis that's really somewhat irrelevant ok what's really important is what's happening going forward now the the two things the. number one how is it possible in the midst of what people are calling a good recovery that we're going to have minus two point nine percent annualized growth in one quarter without something. being seriously wrong yeah you can't all

be weather related stuff that's happening there obviously there must be some underlying weakness that's associated with and that goes to my secular point which is the fact that we have low wage growth we have huge amounts of private sector debt especially in the household sector and at the same time we have very low policy space in terms of fiscal policy from a political perspective as well as monetary policy because you know monetary policy already at zero point where we lower than probably u.c.b. so yeah so if any of this was on a cyclical basis you have a really negative backdrop from a secular perspective which i think means we're going to get more deliberate gene going to get a very nasty downturn and the next recession is not going to be pretty ok so that's my sort of holistic view of the whole thing it's not just about the cyclical the cyclical looks good but the secular basis i still think it's

a very murky picture blammo you hear that now and how markets are thank you. now another remark this one comes from mitch machida writes regarding international reserve and trade currencies it does not have to be all or nothing imagine a future where multiple currencies are used for international savings and trade why switch from one dominant currency to another why put all your eggs in one basket and this is an interesting take what are your thoughts on this so you know the whole reserve currency thing is interesting because you know that i think the french at once they talked about america's exorbitant privilege in terms of having the pressure of currency and it allows us to basically. get away with a lot of things that other countries couldn't get away with in terms of current account deficits and things of that nature because there's always a bid for the u.s. dollar since the reserve currency but the truth of the matter is that there's no one on the horizon right now to replace the u.s. dollar so when people talk about. reserve currencies what do you see i mean you've

got the euro they're having their problems yes there's a lot there's lots of problems but you know some people argue that that there are there's arguments for other currencies or you know i know it's a locked up in a consumer and b. they can say euro there's other things out there now you know you can use those in part but i mean you know there are these are the same size is not the same acquitted in their markets and their credit markets you know the sterling is too small swiss franc is too small over the over and above the dollar i mean there's nothing else yeah so i think that the concept that we're going to move away from the dollar over the long term yes but over the short term not at all there you hear it long term yes short term not all that's all for now please check out our facebook page facebook dot com boom bust our teeth please tweet out us at any rate at edward and it's from all of us here at boom bust thank you for watching have a fabulous weekend.

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