it. was. oh my stars are this is the kaiser report the show that always gives you a happy ending. stacey max i want to show you something and google says this is the good the bad and ugly he says in simplified chinese i'm sorry if they were wrong in the says something rude or something instead but we're going to talk about the good the bad and ugly in china when i talk about the u.s.

stock markets and all the chaos going on there we're going to talk about china because we have to look to the future first i want to start with the good and that is china's trade expo logs nearly fifty eight billion dollars of deals so state media the china international import expo c i e brought thousands of foreign companies together with chinese buyers in a bid to demonstrate the importing potential of the world's second biggest economy deals for intelligence and high end equipment were set to total sixteen point four six billion dollars state media china daily reported on its official twitter like way both sites sales agreed for the automobile sector goods hit eleven point nine nine billion the paper said it was held from november fifth to november tenth and agricultural products also sold twelve point five eight billion dollars at this expo so they were showing that we also import we just don't export well there you

go you know that was the big. five year plan or a ten year plan in china or was just in from the next morning company that was ringing the global for exploration pegging their currency to the dollar in such a way as to make their exports artificially cheap to now you know they've got this middle class. thanks to people walmart buying all the chinese slave made stuff and now they want to show how they can become import powerhouses to drive the next phase of the chinese economic miracle well i think they want to stress as well their import potential because they are concerned about more tariffs not only from the u.s. but from europe and other nations so they want to make sure they did announce that this expo that they would be reducing tariffs on imported goods you know as pointed out many times over the years here is that there's a huge tariff on imports of automobiles manufactured overseas which of course

encourages these overseas manufacturers to build plants in china so that they are domestically produced and things like that so they're basically reducing import tariffs on quite a few good they obviously also need some agricultural imports from other nations now that the u.s. is off basically they can't import soybeans in particular from the u.s. and they're turning to russia for a lot of their imports from as well as good so they're just six basically diversifying their economy and their import export balance well historically the china economy in the last fifteen years is different than other countries emerging that were once emerging economies that became big economies like united states to disable thing they were export exporting it with unfair advantages until they got big and then they transition to a consumer economy so china and britain before then did the same thing so china is

just following history and now they want to become a big consumer economy and so far so good not very many people note that germany is a bigger imbalance in terms of their imports versus exports so. i think china also sees that the imbalance does cause instability and they famously do not like instability germany doesn't seem to mind it across europe that that imbalance and the mass of exports from germany and the near zero imports has caused a lot of friction and chaos within the financial system across europe but i want to also turn to another story showing that signs of perhaps things aren't so good in china and this is the bad of the good the bad and ugly i tweeted you can't eat cash but you can eat ham right or at least some people can chinese company pays bondholders and ham instead of cash as domestic defaults soar instead of saving

cash holders of local currency bonds issued by you based pork producer charging agro pastoral group will be paid with the company's ham thanks to an agreement reached between the company and its creditors assuming the agreement which was revealed in a security filing on the stands and stock exchange holds that quote in kind payments well only applied to the interest on the bonds according to the south china morning post pick pay in kind i'm a big fan of us remember during the big financial crisis in ireland when the troika was demanding payment on those bonds or illegally procured by the irish government i suggested they pay them off and butter because they have a lot of blood. and of course there are companies in the u.k. a there's a coffee company i believe that's floating some bonds or coupon is paid in coffee.

you know this is paying income and there's nothing wrong with it there's no shame in it you know a lot of banks in china are those paid off with there's a huge demand in china for pork products but in fact it here in north carolina is chinese owners of the biggest. manufacture here and manufacture grower here in the united states so they own a lot of the production here in north carolina the agreement was struck after the company failed to repay a five hundred million yuan bond that was due i nov fifth the spread of african swine fever has caused pork demand in china plummet creating a cash on hand crisis for pork producers as of september thirtieth the company had one point three billion yuan in cash against a short term debt load of eight point four billion euro and they are big consumers of ham so at least maybe they'll put it to use they will be worth something thanks to english in debt is the role of true money hard money the only currency in the history of the world that has been

a true extinguisher of debt with non counterparty risk is gold and then beyond gold diggers. and. you know the words you can't pay off your debt with more debt and debts with creating more deaths you know that's the whole pontification or financialization of the united states economy the british economy most developed economies it's all debt based ultimately you run into a problem or you can't pay off and with more creating more debt to pay off with stuff you know to extinguish that debt here we've got ham but traditionally it's gold and that's why a smart company countries are hoarding gold and that's why bitcoin is valued equally as gold because you can extinguish debt with it we've talked about the good we talked about the bad and now comes the ugly not. this comes about that how china's peer to peer lending crash is the strong lives so as recently as twenty

twelve. the peer to peer lending market in china was one billion dollars under one billion in fact now it's over two hundred billion so in five six years as many many many fold so as many as four thousand people have lost as much as one hundred seventeen million dollars as a result of the failure of p.p. meow according to savers who say they were burned and many of them have been coming to china's major cities seeking restitution more than four hundred peer to peer lending platforms collapsed from june through august according to shanghai based researcher in cannes group that still leaves about one thousand eight hundred a number of chinese investment bank china international capital corp expects to contract to fewer than two hundred after more dominoes fall it's amazing how quickly it's unraveling said zen and zap rotten managing director of shanghai based consulting firm zap an asia we're just at the start of what could be

a very messy reconciliation in the p.d.p. industry well first of all p.p.p. now would be an excellent brand name for kitty litter yeah you know p.p. . p. . true they could always pivot paying kind they in cattle are ok you get a peta piece scandal unfolding it's all falling apart payback and that letter you know a lot of cash lot of cat litter this reminds me of micro lending in bangladesh you know it started off crimean bank great idea it's capitalism working for the greater good but it got you know taken over by sharks by wall street sharks and the interest rates skyrocketed and it collapsed here p.p. lending on paper works i mean it's a good idea you are taking the. need for people to save money combining them with the people need to borrow money in a p.d.p. marketplace and you're getting rid of the the banks and it works it's great but

what happens is you know. the sharks come in they they take it over and they ruin it and now it's going to collapse and sounds like that's going to cause a multi trillion dollars and then go well it's multifold what happened here there is a lot of fraud going on obviously grew from one billion dollars to two hundred billion dollars in six years there there was a global liquidity crisis that has been happening and the chinese government did crack down on leverage and over leverage after the financial crash when they injected a lot of money and then so there was a crackdown on the small investors and small and medium sized enterprises so they had to turn to the peer to peer market and that has become laden with fraud in fact they are they have warned investors the chinese government and regulators have warned investors that they could lose everything although not all troubled p.d.p. platforms are accused of fraud officials have said that many failed sites needed cash coming in to pay money going out and other words they were ponzi schemes other

sites attracted investors for only a few weeks before the owner ran away with the money and they also expanded so it used to be mostly you know people looking for money for their wedding they needed the money upfront of they would pay them back in an interest and that was like smaller amounts but then these days p.d.p. sites offer investments in what's called commercial bills or bankers' acceptances which are like short term bonds issued by small businesses such bills issued by companies and guaranteed by commercial banks are usually part of business transactions and the bill can be sold to another financial institution or to the central bank before it refers and some cases involving allegedly fraudulent p.d.p. platforms investors claimed that the underlying bills didn't exist and the money never went where it was intended right take a platform that makes cash very easy transaction matching lenders and borrowers and then you use. the collateral was. a money. raising

and so the bonds that are sold against the platform gets ever escalating in pyramid scheme until blows up i mean that's happens frequently it's highly predictable but again don't blame capitalism a couple of them the problem is fraud well the chinese government is worried because there are thousands of people showing up in cities across china demanding their ten thousand dollars or twenty thousand dollars back you know these are small farmers out in the middle of nowhere showing up in the cities and causing riots because they've been defrauded by some exit scam right and so the billion chinese people listen to uncle max. by bitcoin. well we've got to take a break and when we come back we will be celebrating the joys of the second half.

join me every week on the alex salmond show and i'll be speaking to guest of the world of politics sport i'm sure i'll see you then. gave america a lot of job opportunities i needed to come up here. make some money

twenty five thousand dollars as a teacher or i could meet fifty thousand dollars a year truck so i chose to drive truck people rush to a small town in north dakota was an unemployment rate of zero percent like gold rush is very very similar to. this beautiful story ended with pollution and devastation a lot of people have left here i don't know too many people who just slow down so much they lost jobs that laid off the american dream is changing that's not what it used to be. and that's a tough reality. welcome back to the kaiser report i'm ask iser time now to turn to tyler jenks the inventor of hyper wave. welcome thank you very much max you know it's great to have you on

the show because we rarely get people on the show this experience that you have and we have experience on wall street you survive as long as you do it because you must be doing something right there's a very few people actually who can claim long jetty in this topsy turvy world we call money management and he recently got involved with a big coin and we're going to get to that good but before hand i'll just say they've been managing money for a long time big institutions big money very successful so we won't go into the details there but let's talk macroeconomics so we one of your charts over there a high for a way is the i think the most for me the want to talk about very important chart this is the this is i think the ten year bond yield which has gone down for thirty seven years it looks like it's heading up yet i believe your work suggests that the bond bull market is finished yes ok so let's talk about

that because this is the key metric driving the entire global economy in my view curious what you think take away tyler i agree completely this this is the single most important element of where we are today and we've dodged bullets since one thousand nine hundred forty four through all kinds of mechanisms but the real problem started in the year two thousand with alan greenspan because he responded in a way that the federal reserve had never responded before and then he passed it off to bernanke he who to pass it off to young men who passed it off to powell and they're all doing the same thing which is the only thing they can do and i wrote some things recently the basic. i am in awe of what they were able to accomplish however in accomplishing those things the of left is in a much more dangerous situation because the banks open source second so we

referring to the greenspan put yes in other words when any time markets were down a little bit he would ease ease the credit ease the money exactly the party going and his response to that was well you know our job is not to try to predict which way this economy is going or the markets are going or to have any kind of proactive stance whatsoever we're just here to clean up after the mess exact which is in contravention of what let's say a paul volcker who took his role as central bank seriously and said you know what we're going to raise rates because there's this inflation problem and that would simply be the role of a central bank so if they're not going to be proactively engaging in lender of last resort and becoming the buyer of first resort for these government bonds are sufficiently that what they did was it became a hedge fund. that is not a fair statement yes what happened at the peak of the chart you just held up was paul volcker so you hit that right on the head that was the and basically what had

been a forty year increase in interest rates and inflation and we don't need to go into the details of it but that pinpointed the top and interest rates and inflation have been dropping ever since so the federal reserve in order to keep the party going dropped rates down to zero and kept them there too long under greenspan from two thousand and three the way to two thousand and six until we created a bubble in the housing market and the mortgage market and what you are really seen the fed do is they are attempting to keep growth going through bubbles acid by bubbles and they took the form of mortgages and real estate now they're taking the form of stocks who knows what's next i don't believe there is a next i think we're at a terminal point and which that game continues to worsen the bubble of bubbles it

has popped and that's a call that we have had many folks on the show make that bond market rallies over the past five years almost every major economist in the united states and around the world has made that call been wrong it's famously called a widowmaker that you know you go short bonds and they continue to rally interest rates going down there has been a horrible trade but you're kind of putting a pin in and saying here we are and based on your work on hyper away what you'll get to in a second but before we do i want to ask your opinion on something because you are somebody who has mastered the game i guess you could say what do you make of this unprecedented incarnation of negative interest rates if it came out of no. where the stammer been in any textbook ever written in the history of economics and only governments are offering bonds with a guaranteed loss of negative interest rates shouldn't that have been

a signal of some sort. absolutely once you get down to zero the theory says you can't go any lower and central banks of prove that wrong at one point it's not there anymore but at one point thirty percent of all central banks and their countries currencies had negative interest rates mainly in japan mainly in the u.k. germany for a very short period of time the us hasn't gone there yet but it doesn't really matter everybody else has by following our central banks lead of keeping interest rates at zero for years and years and years and years and what that does is. it assures as long as there is some growth that business will continue to grow because banks will continue to grow because banks are getting free money and they play the spread called the net interest margin between what the federal reserve will loan them which is the only thing the federal reserve can do just one

little aside here a lot of people think the federal reserve moves interest rates up and down they do not. the market moves interest rates up and down the only thing the fed can do is change overnight lending rates between themselves and federal reserve banks right this minute it's fair to say they can still short rates short rates but made it medium medium to long as they have the market exactly or even hundred eighty day were commercial paper thirty days they don't control that the market does however if the banks that are borrowing at zero can lend at twenty five basis points or fifty or one hundred they make a lot of money which then they can loan out that gets businesses going and you can create growth artificially the problem is that it leads to mal investment as a way that you have. corporations aside banks that are technically insolvent if they can continue life by borrowing from the fed is zero or less than zero in the case j.p. morgan they were borrowing at less than zero they were being paid by the fed to

borrow money that's right so he's exactly right so say what deutsche bank same with all these of the big all around the world right so it leads to so that they determine that this is growth and all growth is good but that would be like saying mr jones us cancer and it's good because it's growing the cancer is growing in the faster the cancer grows the better for mr jones that's right there's not any sense that's exactly right it all sounds totally counterintuitive and stupid but that's the world we live in and unfortunately there's an end point to that in the end points mathematical it's when the interest on the debt gets to the point that growth can no longer pay it off and there's a very simple way of looking at it productivity grows at three percent per year for every doesn't get higher it can get lower but it three percent it maxes out g.d.p. tends to average three percent per year why because of productivity growth and it

doesn't matter if we have the internet or chips or a technological advancements or the industrial revolution productivity does not get above three percent so that's a cap on the reality of macro economics what happens if inflation interest rates get to a point that their pain against a debt that the calculation of which the interest can never be paid off we are there now we weren't in two thousand we weren't in two thousand and six seven and eight but we came close and therefore the fed had to start new programs that had never been done before and are not in their purview to do but nobody would say no because we were fighting our way out of a mess right so in other words the way to pay down the debt according to some folks let's. supply side economics economists would be well we're going to encourage this growth at any expense and necessary because the resulting tax revenues are going to

help us pay down the debt that never happened that was a canard that was false but you're saying that looking deeper into this now that the interest on the debt which is half a trillion dollars in the u.s. and growing. trillion dollar short right and if you just apply that to the hard math the hard reality of productivity cap which is three percent therefore once you establish that the interest on the debt forget about the debt rises the interest on that debt mathematically cannot be paid down right you are entering into a currency crisis so yes or no yes ok so why is the dollar rallying because that's because the dollar is the strongest among the weak and as long as it remains the strongest among the weak it will keep going up as long as everybody else is interest rates productivity growth are lower than ours the dollar will go up and it's going up very very quickly which causes other problems there are only four

solutions to this problem. because it happens to be one of them in my opinion and i think in yours but that's not the most probable outcome the most probable outcome is we have to go back to a gold standard and we can talk about that as much detail in the short of time as we can there are two other alternatives one is you can grow your way out of it but that means you've got to grow at least three percent which we've finally just hit after ten years of trying to under the new administration and most people believe and i think rightfully so they can't last for very long so you can grow your way out of the problem as long as you get above three percent or above the inflation rate at now two percent it's going higher if the inflation rate catches up with that growth rate that's the end of the party which then brings you to do next possible solution number four door number four default yes governments will have to say these pensions that iou government employees corporations will have to say that

pensions that we owe you we can no longer what happened in august of one hundred seventy one to the u.s. government bond market based if that's exactly right and also the russian ruble something of the gold window it happens every once in a while and it's very rare it must happen again if we don't go back to a gold standard almost immediately or hopefully a big current standard and that's why i'm so intrigued by bit corn right so we're going to get extensively into because i guess will to carry us over to a second segment. but before we do let's talk to him politically again so what's a pan how of all the basket cases in the world to stand out japan and italy. japan's got debt to g.d.p. of over three hundred percent. italy is part of that crumbling e.u. mass that we saw happen with grace and other countries or of those two which is the

most likely to trigger the next leg of the financial crisis or is there another scenario that you see that is a more pressing. i don't know those are blacks one of them it's and i know that's a cop out but japan has the ability to keep this game going forever and the reason is because they went into recession's slash depressions slash real estate depression starting in one thousand nine hundred nine and they're still in them. and that was a hyper wave what happened in japan and going for the twenty years preceding one thousand nine hundred nine and i've got to cut you off they're going to pick it up with japan in the next segment but thanks for being on the cars report yeah all right i love it saying i don't know what that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert like to thank our guest tyler janks of hyper away if you want to catch us on twitter it's kaiser reports

and i stand by oh. nobody could see coming that false confessions would be that profile in this population a problem for. any interrogations out there what you'll see is threat promise threat promise threat lie a lie a lie the process of interrogation is designed to put people in just that frame of mind make the most comfortable make them want to get out and don't take no for an answer and don't accept or deny. she said therefore we. sent a statement that i would be home by the next day there's a culture on accountability and police officers know that they can engage in misconduct that has nothing to do with all the crime.

to briggs it or not to briggs it that is the question teresa mayes plan to exit the e.u. has been roundly criticised from virtually every corner and with a looming deadline the u.k. could face a hard briggs's without an agreement even early elections how did it get to this point. campsite now and again for people that can't go. in there like so tired. safe house i guess they don't have to talk about what they go through with us because we understand our daughter katie was first diagnosed with a very rare sun sensitive condition if i get sunburned i heal she doesn't feel patients when they have problems with the walk the talk to your son the brains that are actually shrinking inside there is still gets thicker in the brain state small

. the pain is indescribable it's feels like a really really bad chemical burn but it goes through your skin in your muscles all the way down to the bone and there's no relief. we're just not sure this is but this. still friends donald trump is willing to save america's partnership with saudi arabia despite accepting that riyadh may have known about plans to kill descendant of journalist jamal khashoggi back in october. oh. my god.