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tv   Keiser Report  RT  September 22, 2017 12:00am-12:30am EDT

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seriously send us an e-mail. the russian foreign minister calls for urgent talks to resolve the north korea crisis in a speech to the united nations to the u.s. impose new sanctions on pyongyang. crowned in paris voiced their fear we have a president mccollum's labor reforms. russia wants every time they should make ends us back to militant groups in syria if they continue to target local governments. that's a pretty phenomena there to be life from here almost studio with all the latest news in around an hour's time with us.
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oh hi there this is a report kaiser you know there's a strategy in betting called a market. yes the market betting strategy that's like if you're at the roulette wheel you bet on red you lose your bet on red again and you bet on red again anybody until you went awfully don't run out of money before anyone is famously used on wall street firms like goldman sachs who make bad bets but since they have an open cash window at the fed with unlimited funds and zero percent borrowing rates they never run out of money that's why from like all the sachs and j.p. morgan can report thirty sixty ninety one hundred twenty straight days of profits on their trading portfolios because they don't take any fricken risk what about people that are not so smart. stacey. you know i'm just responding
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to this story they are one of them a i realize the juxtaposition of that word and the introduction may have been confusing but you know what i meant you're talking about my first headline but yes while you were talking about this martin gayle betting technique you referred to goldman sachs but the most famous one last long-term capital management your guests in the second half jim records he was their legal counsel for a long term capital management to my eyes and he had to unwind that enormous spaghetti plate of nonsense and that's right they kept doubling down and doubling down on the ruble they kept deviling down on the ruble i think they were going along in the ruble kept falling was a perfect example because what if the fed do the fed actually lowered interest rates to my point that the fed is an open source of funds for scoundrels so jim records and long term capital management made a huge error and instead of paying for that error they would not wreckers but again
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i again are you gal this nobel prize winning economist who is there and they were so yes martin and his fellow who created the you know option pricing volatility ok they have an open cash spigot at the fed zero percent interest to fund their mistake yeah they're all working again creating massive hedge fund frauds again and that story had repercussions in two thousand and eight of course because all the other banks on wall street bar one united to bail out long-term capital management i think it was jimmy cayne of bear stearns who didn't participate no let them go bankrupt and of course they weren't there for him when he went bust or maybe it was one of the other big fault lehman was the holdout he was the and then they took lehman out back in two taps to the back of the head on water street and it was done lehman so here's the guy did not get bailed out but he and he paid for his mistake. and it's
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a good lesson because he had had thirty percent returns for like the decade before he went bad ok so past performance doesn't necessarily mean future before myself i'm going to explain why that's it may be for a different context investor who lost millions finally gives up on this china bet mark hart spent seven years and two hundred forty million dollars waiting on a crash in china's currency he lost sleep he lost clients he damn their loss to send any and now he's lost his conviction partly called for more than fifty percent yuan devaluation last year has turned bullish on china and its currency he's the forty five year old founder of cory n.t. advisors in texas and he bet big on the sub prime crash won a lot there for his investors bet big on the european bond collapse as well he won big there as well then he lost big on this trying china bet he assumed that
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china would not that they would want to devaluation partly to stop capital control but to be more competitive and this past week by the way or last week was the biggest surge ever and yuan so he picked the right time to step away well you know another martin gill betting failure was bernie madoff is like you know a big bet on the euro euro paper and believe the doubling down you're talking about john chorus line of m.f. global i'm sorry i don't like all these current is there and i think the fifty two playing cards of financial terrorists to keep track of all those terrorists in cool hindsight the forty five year old founder of korean t advisor sees last year's group of twenty summit in shanghai as a key turning point like many investors suspects the meeting resulted in a tacit agreement among world leaders to prevent the yuan from tumbling he calls it china's whatever it takes moment when policymakers resolved to prop up the currency at any cost i believe that's a reference to mario drug. talking about whatever it takes he believes that and
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fact china determined that they would do whatever it takes and in fact the article points out that china blew through eight hundred billion dollars in reserves propping up the yuan during the mass of capital flight yeah but they learned during the asian financial crisis remember in the late ninety's these asian countries ran out of capital and they suffered catastrophic calamity as a result that's why they went into this period of massive reserve. build up you know in china one to four trillion and yeah exactly but a lot of people like russia when they're ruble was collapsing the liar at the central bank she did not blow through their reserve say they did a little bit at first but then she's like stepped away here he was expecting the same thing the ruble did fall by sixty seven percent when she stepped away from supporting it this guy was hoping that china would do the same allow for fully freely floating currency but they did and they've maintained the peg and in fact
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it's like seventy eight percent this year but this is like two stories and one story is about a guy who gambled and lost and then the other part of the story is what china is doing in their economic policy. sure i follow why we're covering the story i mean i get it china has an interesting way of handling their monetary policies but some lost a bunch of money even though he seemed to know what he was doing and why it's not a story it's a story because you're talking to the guy from currency wars you're talking about a guy who is making a bet on this trying to think they know what china is going to do next and everybody wants to know what china's going to do next because the petro dollar has ended as you stablished with jim records everybody wants to know what china is going to do and there is zero knowledge about what china is going to do in the west nobody understands what china does they don't understand the mindset of having fun
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. five year plans ten years on i think is enough for me because on this show we've talked at length about the shanghai cooperation agreement that's going one china russia around and they for more than ten years have decided that they're going to pull away from the u.s. dollar they're going to do one bill one road across your asia in asia they're going to put a knife in the back of the u.s. dollar and they're going to start launching a currency partially backed by gold i mean that's been clear anyone who doesn't understand that has been watching the concert for i didn't see this fella who lost all that money does not religiously watch the kaiser report that's his problem that's why he's down in his account if you watched our show he'd be like so many people out there fabulous lee wealthy on bitcoin gold and silver and then there's another element to the story of why he's now bullish on china and going along which relates to another theme and actual story an episode we recently covered which is
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infrastructure spend in america and in fact it's zero zero percent of g.d.p. if you take away depreciation so this is why he's going along china so this is why but he's a terrible indicator yeah but listen it's a positive story that china is spending trillions of dollars on infrastructure they're showing that they have faith in their own economy that they have faith in the bilinear of their people to grow their own wealth america has lost faith in itself they are extracting and we in the last episode we talked about private equity stripping it bare stripping the assets because they know nobody will do anything to stop them they are not investing in infrastructure because why would you why would you participate in the economy why would you work why would you get a job you know it's only going to be plundered and sent overseas by the very private equity like thinking c.e.o.'s why would you invest in infrastructure in the
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. this is when you know that this is our system here where is china is able to do five ten year plans are able to have an industrial policy industrial policy is considered communist and socialist here well china's like go ahead if you guys want to think that way we're fine with that because we're running away with all of the wealth and it's good for us that you guys think that's not a good thing to do now i understand that china's official story but i'm not sure how and why you back into the story by the contrapositive indications by some failed trader because he's saying that i'm a loser and i was wrong about china this is my current china play why don't we assume well you know long ago and i'm saying like i went to these two stories here china is a fascinating story of growth and then well well this is a lot of money and the kaiser report covers markets finance scandal we've been covering for the past few years the funny people who have bet big along very a lot of people for the past ten years have been so hard so long against china
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they've lost money the act wins the carl icahn sort of guys of the world keep on betting against china because they don't understand it so i just thought it was an amusing story and i thought the information the data in here was interesting and i also thought because you were talking to the guy in the second half who wrote the currency wars and he would probably tell you that you're always going to lose a currency war if you try to get in there and i thought it was funny so here we'll move to a not so funny story because we have hurricane after hurricane hitting america disaster zone in florida texas all over the world and this is another interesting story about how america decides not to take care of itself and this is oil companies leaking benzene lobbied against pollution rules apply benzene has been detected in the air over houston after four fossil fuel companies reported leaks of the highly toxic compound that can increase the risk of cancer even from brief exposure documents reviewed by the international business times shows that two of the companies exxon mobil and valero. certainly lobbied against an e.p.a.
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rule to prevent the government from more strictly regulating the toxin as a fossil fuel group that counts three of the companies as members the agency ultimately passed a rule strengthening overall benzene regulations but only after the company's filed critical comment letters the trumpet ministration and his e.p.a. has lowered the bar for these regulations so that they don't have to report during force majeure or hurricanes the release of benzene so right now is something like three or four times safe levels there's no safe level for benzene but there's four three or four times acceptable that the e.p.a. is willing to accept for humans to be exposed to it right like that you can have two or three rat hairs in a candy bar but you can add like a hundred different writers in a candy bar not exactly so it sounds like an environmental catastrophe yeah that's what's happening china's cleaning up there in my environmental catastrophes we're going the other way but we've got to go to the second oh love more.
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prescribe medication is widespread on the us market frequent cause of death at that point in my life i decided like everything was ashes my family was literally coming unglued i had actually planned. to commit suicide watch all who was made on to to prison so commonly used we were doing what the doctors told us to do we were being responsible and what the real side effects. was was gently alter what i did was done on a cocktail of legal drugs. just because something's legal it's saying the strength of the european union
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was. very detrimental for the development of local and regional economies and only if these economies developed and. recreate a livelihood for the people they will be in the final event see this stop of this i mean gratian from these countries. welcome back to the kaiser report imax keyser time now to return to our conversation with jim records author of many fascinating compelling raids like currency wars the road to ruin the new case for gold and the death of money i have actually read all of these books they're probably the only books i've actually read in the last few years because of my attention deficit disorder and i can tell you they're really good if you see what the airport. jim welcome back thank you max
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thank you for the kind words also all right we kind of finished up talking about north korea but i want to before we get into that to touch on another topic air so let's talk about the trough will have donald trump will have the opportunity to appoint five of seven governors to america's central bank governor serve fourteen year terms so trump will shape the fed for a generation. do you see this is significant is it significant and what are your thoughts on this jim yes and no let me explain why i said that by the way i work in article my news or subscribers or an article months ago called trump owns the fed i was the title of the article in people what the heck are you talking about you can see this coming as it's getting a lot of attention this week but you can see it coming my way so here's the setup so president trump gets sworn and margaret a president january twentieth. two thousand and seventeen there were two vacancies
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on the board at the time by the way there are only seven seats on the board of governors the board of governors runs the federal reserve they're all these you know as thundering herd of regional reserve bank presidents to leave them aside policy is set by the board of governors in washington there are only seven seats there were two bacon sees once trump was sworn in why with the two vacancies it's because the obama administration messed up those vacancies had been there for a while but but obama thought hillary was going to win like why would you leave vacancies for the next guy with the answers if you thought the next guy was. hillary then then you were in safe hands she was going to appoint some you know ruben as barbara been puppet whatever friendly faces well they messed up because they didn't think trump was going to win i thought john was going to win and some other people to the white house didn't so they gave trump a gift right off the ballot two vacancies and they would have filled those since long ago if they thought he was going to be president so within a couple of months of being sworn in dan tarullo who was on the board resigns and now you've got three vacancies and then stan fisher his term was that he's the vice
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chairman his term was not until next summer but he unexpectedly resigned for personal reasons and wished and well that that was effective on those to me ellie i think it's effective in a couple weeks so. in others for vacancies and then janet yellen the term expires at the end of january so effectively february first two thousand and eighteen that's not that far away there's over of course senate confirmation by the way so chumps going to have to pick a new chairman probably by before thanksgiving so you can have the senate hearings in times of confirmation so that person be in place so that some of the progress that's they can seize out of seven seats now of the two remaining seats one of them is jay powell who is a republican he's already on the trying to train so that leaves little brain or by by february first little brain will be the only ruben you know bob rubin you know protege brought barroom an accolade should be like the you know the maytag
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repairman the very lonely but she'll be the only kind of you know liberal progressive left on the board you're going to have six out of seven republicans five picked by trump one already on board so trump owns the fed now the question is what does this mean for monetary policy by the way i also told my readers months ago in washington inside the beltway people get all spun up and they all talk to each other and they think they know what's going on because they all they're all smart they all talk to each other right they don't realize there's a big world out there but they were all saying gary. khans going to be the chairman of the fed i said no this is the next chairman the fed is going to kevin warship that's a separate story but all this cone stuff you know the president as gary cohen is gary coleman is the former president chief operating officer goldman sachs now head of the national economic council in the west wing since very close to the president you know as if goldman sachs didn't have enough power let's put them next to the oval office and so gary constantly says he decides that the best selection from their share of the fed would be himself gary come so the delegates are spun up in
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leaks and all this stuff. so. this one episode of the sopranos or the godfather you know is a gary you know gary you don't see him no more you know he got whacked a couple days ago because he disagreed with the president you know the the one of my favorite f.b.i. tapes of the mafia was they had been a social club in little italy in the york they they were to have john gotti he was used to be the godfather back in the eighty's and he was talking about how he whacked this guy and he said you know the guy didn't do nothing wrong he just he didn't i asked him to come and he didn't show up on time so he got whacked he didn't do nothing else wrong and i love that line so it doesn't take much to get on the wrong side of the godfather it doesn't take much to get on the wrong side of the trump carrie kahn gave some interview to the financial times jumped in the lake and so he's out but that didn't change my estimate is they also came where she was going to be the next chairman so you're going to get all these you're going to get these new people in place they're all going to be picked by trump they're working on a package deal where kevin warsh wants to do kevin said i don't want to be chairman
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unless i have a voice and all the other seats right i don't want to be chairman of a board of both those and if you the white house are going to pick bozos then on the interested and the white house said ok let's talk and so they're working out like a package deal here's the problem. everyone debates vs hawk but it doesn't matter the hawks or old dogs you have to be because the fed screwed this up as usual the fed always messes this is just the latest episode of a long running you know drama but i said a year ago the fed was tightening into weakness so when do the fed tighten well go all the way back to may two thousand and thirteen the taper talk of december two thousand and thirteen the beginning of the taper nov fourth two thousand and fourteen the end of the taper march two thousand and fifteen move forward guidance december two thousand and fifteen the lift off the first rate hike member that december two thousand and sixteen another rate hike march two thousand and seventeen june two thousand and seventeen two more rate hikes they've been going
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down this path of tightening for four years on the assumption that the us economy was strong enough to bear it's not the us economy is unbelievably we would come very close to recession the fed's preferred benchmark for inflation which is that their target is two percent they use a geeky thing called peace corps price deflator year over year i mean we will skip the explanation but of twenty eight different ways to measure inflation that's the one they watch the time series of data and that from january to june one point nine percent one point nine one point six one point six one point five one point five one point four it's dropped a half of a percentage point moving away from the two percent target no surprise there so the fed is going to have to flip to ease as well one of the reasons gold is going up because the gold market tends to be very forward leaning they can see the fed is coming as one of the reasons the euro is going up and these are all cause i'm in a while ago it was all based on i said they are tightening it a weakness you're going to screw it up you don't have to flip to ease and ease is going to boost the euro boost gold that's exactly yeah i mean jump in here you know
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your call on the euro a spot on for sure and galled does look like it is responding now to perception and the reality of continue to wait this there is a strength but like the last. you have money you know that that chart where it shows banks lending to banks lending to banks is dead it's been dead it's getting even more dead because the fed gives banks a lot of money various q.e. programs or ballot or some other schemes and they just deposit it back on the at the fed for a positive carry so they're just gaming the system of course the economy is weak because banks are leeches if you change the board of directors of the fed it's just like replacing one leech with another leech it doesn't matter they're all frickin leeches because apologies are going to change they're just they're dracula sucking the life blood out of america what's wrong with that statement well there's nothing wrong with a seven max here's the thing you know when i do economic analysis i usually stop at
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like six or seven grade math i mean i can do calculus but most of what is put out its calculus is a waste of time because they're making a lot of assumptions that aren't true here's the thing about philosophy and you're absolutely right you know the the the nominal value of the gross domestic product is basically money supply times velocity that's all it is there's nothing else there right so and they say well the fed printed four trillion dollars i said but i remind people four trillion times zero zero in those if you don't have the lost city you don't have an economy the lost city is not anything that the economists in the central bankers can control it's psychological how do people feel if you feel strong if you feel optimistic you know you'll go the borrow way way way i'm starting to run up but velocity is controlled into the to the extent that the fed doesn't have to take the deposits from these banks are getting a positive carry and forcing banks to loan and take actual risk and they're often a risk with rate of return why would they loan it out to small businesses so why doesn't the fed and these guys just say you know get out you know go lend money to
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businesses well they might just keep lending it to each other but but look you're right next to here's the thing the fed's going to get the inflation you're absolutely right about that they're going to get the inflation they haven't for the last eight years they failed they thought they would get it. i believe in this phillips curve which is garbage you know the film's curve is a unicorn you can talk about it and describe it but it doesn't actually exist in the natural world so and janet yellen is going to like the less person who still believes in the phillips curve little brain or threw her under the bus well as one of the members the board of governors she gave a speech couple days ago she said we in shoes i give her credit for intellectual honesty she said we got this wrong we don't understand it and then her polite academic you know political way she said she said actually said the phillips curve is flat well it's flat summer curves sorry also the point i give her credit for honesty so the fed has got this completely wrong. but they're going to have to change it up they're going to have to get the inflation the united states is going broke now we can pay our debts in money that we print unlike greece which can print
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euro's or argentina which cannot print dollars we actually can print dollars the printing has not worked for the exactly the reason you mention which is the fed prints it gives it to the banks the banks give it back to the fed they are in a spread they leverage a ten to one jamie diamond gets a fifty million dollar bonus for doing something that a trained monkey could do but that's the system we have today it's going to change it's going to change because the country's going broke it's slow right now but you know as a famous line from the sun also rises by ernest hemingway you know the conversation the guys explained he went back to said how did you go bankrupt and the answer was slowly at first then quickly jim was bringing in those high falutin literary references like the fed can get inflation tomorrow by simply stopping their tendency to adjust how they calculate inflation to make it look like there's no inflation because they don't want to have to pay folks anything on their savings and they don't want to pay people their pension accounts they want to take that money came before them without you know stop adjusting what these had done
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a good job one is how you calculate inflation that this talk about they want to place it is false there are a lying it's a false bald faced lie they don't want fallacious they want negative rates they want electronic money they don't want sovereignty amongst in. vigils because they're fricken corporatist fascist crux that's what i say i'm sure you don't necessarily agree with me but am i completely off track by making such a statement well i agree that job job one of the federal reserve since it was created one nine hundred thirteen is to prop up the banks i agree with that completely the bankers are parasites their leeches i agree with that the fed is facilitating that i agree with that but the fed does have a day job and they need to get inflation and you know look leave aside all the different you understand you know john teller's method and have done a good just means different ways to measure inflation there is there are twenty eight twenty eight flavors of inflation so baskin robbins but but the point is the fed has a measure whether you agree or not there is
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a way they look at it and it's not working for them by the way i'll tell you how you can get one hundred percent place in fifteen minutes the board of governors goes into the boardroom of washington a bit in that room you close the door they take a vote they come out the chairman the fed is up to the microphone says ladies and gentlemen as of today as of now the price of gold is five thousand dollars an ounce and we're going to use the gold in fort knox in conjunction with the treasurer's stand up to the market and we will make it to a market in gold and if you think that prices cheap come and get it you can buy it and if you think that price is expensive will buy from you and if the price is fifty fifty were a seller and if the prices for you ninety five were buyer just like any market maker in the history of the world if the fed uses the printing press and the treasuries gold and stands up to the market at five thousand dollars an ounce guess what you just had an eighty percent evaluation of the dollar in fifteen minutes i was getting out of there anyway they did that in one thousand thirty one i believe when they were nine hundred thirty three there in the array and it worked that time
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so i want to get back to me on the guys report thank you that's going to do it for this edition of the kaiser apart with me max kaiser as they say i would like to thank our guests the literary and new yorker reading records out there in westchester county somewhere who has written such classics as the. road to ruin the case for gold and currency wars if you want to reach us on twitter it's kaiser report in seoul next time by you know. the want to. run something like.
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the united nations u.s. president donald trump described his vision of foreign policy as principled realist he also tried to convince the gathering of the general assembly that his idea of america first is compatible with this vision nonetheless he sees the world no differently than his predecessors. this would go with me but it can all those get a little bit. of the new but i you. know both of us but i guess we're kind of this side of this yes or no but if you dump a lot and there's no serious.

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