you know our western new year we just finished the orthodox christmas yesterday and now we're heading into the chinese new year period soon so this is january is always a you know a crucial month into these the global geopolitics geo economics because all of these things kind of come together at the same point all under a celebrity your birthday is january twenty third if you want to send max anything like that nasty tweeters. like any other day. well here's another reason don trump is not at all happy with the fed and will continue to be frustrated by the world's number two economy he is the first president to suffer the new normal a china becoming more credit worthy than the u.s. that's right america now pays more to borrow money then china does i do want to take issue with that wording from bloomberg because they say china is becoming more credit worthy than the u.s.

we don't know because nobody has looked inside their debt pile and see what they actually have it's the definitely the perception by investors is that they're more credit worthy right but the point being that america's cost of debt now is higher than china so china becomes like the one of the superior credit rating you know their debt right so then they get they get to be top dog in the bond market at the at the moment at the moment and just again some of the debt there is like one year there's overnight that there's a one year debt there's three year to year ten year the ten year treasury is better than some of the shorter term debt in china but so twenty fifteen when the federal reserve began raising interest rates the gap between the countries treasury bills has narrowed and then reversed so that now the u.s. must offer higher yields than china when it sells one year paper that happened for the first time in november. when the spread between chinese and american ten year

no it's also collapsed according to data compiled by bloomberg so here's the twelve month treasuries the treasury bills the lines have crossed i like that line the lines have crossed our calendars are colliding in january and the lines were crossed so this remarkable event and it's something to look at the measure to measure no line is a must and they correctly the magic know the measure no lie you speak french or a world war one you know the mythical line has been crossed the waterloo has been broken the vase of the ming dynasty shattered. yes so it's and a storage event i mean how long will the last it depends on what you know i mean as you point out the chinese however the chinese don't mark has been opaque so we don't know what's in there i mean they could be could be that could be short lived a lot of their debt by the way is u.s. . but if you're saying that the u.s. debt is risky and it blows up on their balance sheet well then neither the largest

creditor or the largest debtor in the world are they'll say to china you played yourself you played just so it just didn't. fire. article bloomberg points out that only forty five basis points separates these two nations in the bond market china still pays a little more in benchmark securities but that historic advantage which coincided with the embrace of the multilateral alliances that made america great and that trump to staines may disappear altogether as investors lose confidence in the full faith and credit of the us which is quite remarkable for me that the likes of the bloomberg news are stating this you and i and even warning about this for nearly ten years now and it's now coming to fruition you should have protected yourself by now at this time i guess the gold silver big coin but it's interesting that even the mainstream press is starting to notice you know you know the masks are falling

and all the hiding behind money printing can only do so much unlike the guy who is in the attic and his portrait is there and it's a fortune adoring great a porch of dorian gray you know this is the moment when the u.s. and britain in particular would brag that they're like oh my god we're actually in a old hag in the in the in the attic or not actually who we thought we were well this is that they've gotten away with it we have gotten away with it for forty years since we went off the gold standard and i says everyone remarkably it didn't all fall apart then like it seems remarkable and hindsight looking back at it that all these other nations accepted. that we defaulted on them essentially everybody but france of course we paid we had to pay them because france sent some naval ships into the new york harbor and came to collect their three hundred million dollars worth of gold but when politely asked for their three hundred million back they didn't get it they got some u.s. dollars so and they said ok jolly good and they went on their way but whether or

not. u.s. and china whether this is going to be so polite jolly good in this shift in power and we don't know for sure that it's going to happen but she's defiant and twenty eighteen signals more u.s. china tension ahead so there was a big gathering in china at the end of the year and it was an event to mark the fortieth anniversary of thanks shoutings reform and opening up a campaign that unleashed an industrial boom that helped china outlast the soviet union and become the world's second largest economy but coming at the end of she's most most risky or since taking power twenty twelve and also serves to assert his own rule at home and push back against critics abroad so they're on the fortieth anniversary we're about forty years after we went off the gold standard as well so it's interesting they're all colliding but anyone betting they say that chinese president xi shame paying would back down quickly in a trade war with donald trump better think again she told the beijing crowd

including some of china's most influential political military and business figures that the country's growing wealth and power had validated the communists parties and thus his own leadership quote no one is in the position to dictate to the chinese people what should and should not be done plus the bond markets at thirty seven years of a bull market and that seems to be rolling over as well so it's a it's a big secular move and change and paradigm shift in the bond market geopolitics and stock market is gold markets gold markets breaking out of the bitcoin the new kid in town now becoming a strategic reserve for countries around the world and the u.s. and britain have got to get back to their roots in case of america that means that they're going to go come local and like in cities like pittsburgh pennsylvania they're going back very local they're making their own beer and making their own. transportation selling their own clothes getting back to the land in britain that

means more marmite more vodka more jim. i think more and more gin more marmite that's what they do in britain when times get tough well it is an important time. at this moment when ever there's a shift in economic global power for game theory and big queen is built on game theory. the us dollar became total fia off the gold standard because of game theory general de gaulle and france saw that the u.s. couldn't possibly have all the gold that they were racking up in debt and he called their bluff and asked for the gold back. and the u.s. was afraid to not. it was in the game there it was their move and they were like sure here's your gold and they expected the confidence to be restored but then what happened a year later. the u.k.

asked for gold back as well because they had been nervously waiting for a year to whether or not they should present their request so this sort of moment bitcoin is built on game theory it is game theory. modified my own incentives yes not greed yes the word for greed and because it is incentives and you have a mutually assured destruction built into the platform that. precludes fifty one percent tax and other vectors attack vectors and a but i think it's a good point though that that big coin is native to great game theory yes there is a family came to it after they hit seventy one the money became the default global money gold was vanquished from the monetary system and it became and it became adaptive to game theory but but because it is native to game theory is born through game theory it is game theory that's why it's uniquely positioned to become the currency of the twenty first century and look at how we're talking about these u.s.

treasuries as u.s. treasuries is this u.s. debt so china oh it's like two trillion japan owns a trillion or two chile and they own trillions so that's where whenever anybody like jim rickards who looks at geo politics and geo economics it's all about game theory right as can china sell those because if they sell them then they lose will the u.s. you know except if you sell them like so it's all about game theory and they all do seem like trapped in a fifty one they all have fifty one fifty percent not fifty one percent yet so they can attack the other so. it's interesting to watch and to watch this unfold right i mean it's nothing about g.d.p. like in the ricardian sands or the adam smith sense of competitive advantage of exports and subtle than gold and what the way the economies to run before became monitor rise and commodified in financial eyes was nothing to do with that where

people made stuff and then they sold it and it was about productivity and production and manufacturing that's all been completely eradicated replaced with game theory monetarist financialization wall street. and interest rate differential is an arbitrage games are played and now we have to go back to actually making stuff and to getting real productive and being humans again when we're a little ways have a game where you pull the sticks out so we're at like the last of the sticks in the game theory of like when that hold that pile explodes but i want to say that china's rise has also provoked a new challenge from the u.s. and other major economies which increasingly see the country as a competitor rather than a cheap source of labor and goods its military might has spurred an arms buildup among its neighbors quote china has stepped into the center of global competition for a while for our and other interests as. dean of institute of international relations at nanjing university now the biggest problem for china's foreign policy is being too high profile china needs to bear in mind that the point when it becomes

a major power is also when other countries start being can avoid get the spotlight now china you know you're going to hear the star of the show so get ready for a close up they should have said toshiba comodo and actually instead of she like removing those restrictions on him basically staying in power forever they he they should have just disappeared all power and like not have any single entity that you can point to or target or sanction or do anything like that if they want to become the world power you know what confucius i think confucius would be more humble when they go back there confucius texts read them you know to help you through this transition to global financial superstar slash anime well we're going to take a break and when we come back i'm going to have a scintillating interview prepared for you and you'll enjoy it so don't go away sit right there don't move.

this praise for a single. super. training very young. eight months of intensive school. reps. and they save lives. seems wrong. but. just don't call. me. yet to see out just to come out to. engage me equals betrayal.

when so many find themselves pulls apart we choose to look for common ground. welcome back to the kaiser report i'm mascots are time now to go to karl denninger of market hyphen ticker dot org yes indeedy in our post christmas early new year predictions special he's the guy with all the hindsight and foresight he's got it all welcome back karl. great going to do it so first the markets on a twenty eighteen on a very ugly note carl while nobody can predict the future what is your sense of how

stock markets are doing twenty nineteen while the fed put some lipstick on the stock market as they normally do carl. oh i don't think so it sounds like mr paul has decided that it is time for the punch bowl to go away. which there is only about ten years overdue but you know i had better late than never i suppose but you know that the problem with this is that the markets have become much like my late sister. who had a certain amount of money drank it all drugged it all and then wind of that they needed some more it because of course they were broke right so you know you get a phone call you're eating breakfast after your mother has passed and oh by the way the cats have no food while the cats have no food because you drank the fifteen hundred dollars that you had three days earlier and so now you need some more money the correct response for a policy maker in such a situation is to bring the cats

a bag of food not to bring more money of course because you don't want to cast a star but the person who has gorge themselves on these things needs to stop and if they don't they will eventually die. the markets have done this they have gorge themselves on cheap money and would if they don't live well for the most part they've bought back stock using debt issuance and issued dividends again using debt issuance and the problem with doing us a course is that if rates go up sense corporations never pay off debts like governments don't pay off debts then when those debts have to be roll over there be rolled over higher interest rates so you have both a capital loss because the stock price is not what it was when you bought back the shares and you also have a funding problem because the carrying cost of that debt has just risen. so that's the squeeze and it's a credit bubble thing. paul essential got boxed in by donald trump and the

republican party with their tax program but where they cranked the full. school spending to an insane degree last year we saw well over a trillion dollars worth of real added debt on the federal balance sheet in the last fiscal year and polled correctly surmises that this is inflation you know you can say well we have a two percent c.p.i. but don't tell that to somebody who's trying to go have their heart fixed in a hospital right i mean car you make a missing point there about the problem of what they call moral hazard you know banks are constantly bailing out other bad banks coming from the central bank and the money printing and they say that oh a little wiggle room is necessary karima al greenspan used to say that well you know a little lawbreaking can be good for the system but eventually it does create systemic problems around two thousand and eight to get to your tough love cat food analogy

you know in two thousand and eight when the markets were crashing and you know hank paulson was all in favor of nationalizing citibank because he recognized that the systemic problems were real and that the banks needed to be taught a lesson and but barack obama overrode that notion and they went down the path of a multi trillion tanda fifteen trillion dollar bailout so is this a continuation of the two thousand and eight crisis karl just sends. the problem was bailing out goebbels by throwing money at it when they pop instead of throwing people in jail for committing criminal frauds is there you just have to blow a bigger bubble because that's the only way you do to actually make the so-called problem go away is to make bubble bigger so the next one is larger and if you remember housing the part of housing that was actually trouble was only about two percent or so of the economy it wasn't very large and yet it threatened to take

down all the commercial banks and it was a result of the fact that these folks a hypothesis. didn't read up on the kitten sliced and diced and then issued all kinds of lever garbage against it and when saying started to tighten up they could sell those anymore so now they're sitting on their balance sheet they gave somebody money for them and yet they're not worth anything. we want it all now we've done the same thing the but we've done it throughout the economy barack obama bailed out the health care sector which was on the verge of collapse in two thousand and eight nobody wants to talk about that but that's what obamacare was about and now we've got a sector that's almost twenty percent of our economy that used full of criminal frauds and needs to be reorganized so that it goes back to being four percent but if you do that we have a depression right talking about the health care industry in america to come basically a hospital disguised as a country now on

a test parth they had their own paul powell statement because you know this is part of the potter game that goes on in the central bank observation circles and i wanted to say i saw his quote as quote did not see a balance sheet run off creating problems and quote just those few words have sent panic around the world so i'll just break it down for us what exactly does that mean as an observer did not see balance sheet run off creating problems and quote what is the what does that mean carl well he has to take the he doesn't a choice but to let the balance sheet rock that's really what he's trying to do is say you know bernie macin yellen we're idiots ok they see through the day they basically spray gasoline on a fire and as a result of the fire burned up everything now there's more fuel and opined away if we keep doing this we're going to get in his place sherry explosion in places we don't measure in c.p.i.

but it's going to bankrupt everybody including the federal government so it has to stop. aig can't say that because he says that the dow's down seven thousand points in an afternoon if we triple the circuit breaker.