max kaiser this is the kaiser report here we are the year 11. remember the universe restarted in 2009 or in year 11 of the toshiba nakamoto this is the 4th the pock of big coin after having everything is going exactly as planned i'm stoked i'm chuffed as they say in the u.k. you know it's almost like art it's so perfect it describes the human condition so well this big queen so i want to talk about the art world to compare charles saatchi to the u.s.

federal reserve bank because what charles saatchi did what he specialized and he maybe he copied others before him but he was a show man and doing this as he would buy up junk junk art and then announce that he charles saatchi had bought junk art right and therefore he would make a fortune and dumping this junk are onto other people well this is kind of what the federal reserve bank is now doing is they are literally now buying junk they're starting as of just a few days ago to buy junk corporate debt in the in the e.t.f. market exchange traded funds so before we get into this i want to show you how it's how you could turn junk into great art now a lot of people want a special show just for stakes use hair so i was inspired me to come up with an art show right here is stacy's hair looking surprised on purple usually i'm responding to something max has said. you know this is me being shocked at

something you've said this is stacy's hair on yellow you know card looking kind of oh dear max has gone too far without one and i've seen that face many times. and this is me my hair stacey's hair on green looking slyly that's right hair. is the ticker symbol for hair it's a closed end fund and you can buy all of the hair tablo those that we feature here on this episode of kaiser report it's currently trading at a market cap of about $3900000000.00 but we're expecting the fed to come in and front run the market in take this up to a much higher capitalization possibly 7 or 9 trillion dollars and by owning it now you can it's almost like having a lot of tracy's actual hair but it's. got my name. oh my. that's.

really max it had to happen eventually. to stay dead d d new hair on fire. with flaming hair chasing max around the house with a broomstick but i love the charles saatchi analogy because the so perfect you know he created this idea of junk art and this came after junk science and junk finance and junk economics finally junk art was created by charles saatchi and he would take marginally talented artists like damien hirst buy up you know monopolizes art and artificially boost the prices at the galleries that he own and then cash out there here's a headline a tweet actually from the day that the fed started buying these junk bond e.t.f. the century h y g i believe it's a symbol the fed plans to start buying credit e.t.f. today it says its primary goal is to smooth out market functioning although it

already did that with just the promise of buying e.t.f. arguably the fed's goal in following through is largely to preserve its credibility for the next time so this is another interesting point about economics what comes 1st supply or demand classically people think 1st you create supply and if there's any demand for it you'll see demand but here in this case you see demand 1st the central bank is creating demand for junk and then wall street will go out and create more john they'll create more supply and they'll use this 0 percent money infinite quantitative easing to finance this all the market of junk right. of economic principles and they will cut spending on so this is the latest chapter in the effort to replace the real economy of productive assets in wage earners where the fan tast mcgauran whole land of money printing virtual assets of

the nonexistent economy and cooked books and cooks to. sticks i mean these have more value than anything on the federal reserve balance sheet if you were to mark to market everything on the federal reserve balance sheet that is to say what is the actual resale value of the 6 they have the 7 trillion dollars of assets they claim to have what could i get in the open market the answer is 0 there is no market for those assets at all there they have no market price at all so technically even if these collectively got as little as $4.00 or $500000.00 it would be worth more than the $6.00 to $7.00 trillion the fed claims it has on its balance sheet because there's a market for these there's no market for what they have now the fed also strangles the market by the neck grabbed it by the neck and strangles it and you can see that and another statement from another legendary hedge fund investor you know we talked about paul tudor jones getting involved in big point why because the fed because

the fed is dumping junk pretending junk means anything for testing junk has value junk refining the financial system just like the art market was junk a fight here to stand junk and junk in miller everybody always says drunken miller it's hard to say druckenmiller but he was the guy who basically made the quantum fund made george soros a multi-billionaire he ran that fund for over a decade he says that the stimulus will be deflationary not inflationary says negative rates make no sense as they've been saying on the show now for 7 years i think there's a tweak of mine save for posterity or i make this point originally in 2013 that quantitative easing and the stimulus packages don't fight deflation they cause deflation by creating the zombie companies and zombie banks that become the pendant on the ever increasing amounts of money printing to stay solvent or to stay afloat

and it pushes out of crowds out all the productive. companies and productive assets get get pushed down and we have a great example of this right now during the copen 1000 crisis where the zombie banks are being bailed out and these small entrepreneurs are being left to go out of business that means that american economy in 5 years' time will have no seed stock they'll have no ability to grow the economy at all about only have zombie banks and at that point serviced by the fed and the debt levels will as we point out before the fed will go from $6.00 to $7.00 trillion dollars of quote unquote assets on its balance sheet to closer to 80 or 90 trillion dollars of fake assets on its found shape but it will little by that time you will have a hyperinflationary currency collapse in the u.s. dollar so can i have my art back there have a 2nd the stacy's hair remember this is going to be the stock symbol hair it's a i r and we're going to talk about it more every sunday by the way tomorrow well we're going to be doing lockdown with the kaiser so we do a special lockdown live show on periscope just go to our twitter at kaiser report

but you know just as so comparing the fed to charles saatchi is if the market the art market only rewards with excess of return junk art like stacey's hair i pay a premium on that whereas real art say you're a picasso or van gogh or rembrandt or any of these masters or leonardo da vinci and those are undervalued that there is no market for them the players start to play the players and therefore they forget what real art is they don't even know how to value real art anymore and you see that in the market as you had said you know and then druckenmiller obviously watches kies report and definitely spins in every sunday to lock down with the kaiser but you had said this is a tweet from december 3rd 2013 you were responding to somebody who said that inflation was coming because of the excessive quantitative easing you said actually q.e. is deflationary as it supports zombie banks who choke off all money velocity kill q.e.

and you'll get inflation looking to this we. week here is that tweets from sober look a segment on wall street journal live boring observes quote the velocity of money is hitting record lows massive amounts of liquidity but not much economic growth some view this trend as discussed inflationary there is money velocity and it's sinking and collapse right at this point we've talked about many of austerity and how it's a true picture of economic activity and it has steps will be now pro-choice absolute 0 which means the u.s. economy is absolutely a cadaver it's absolutely dead and i love the i you know that the analogy of art i remember in the south of france they had artists so-called on the border of the sea and they were painting and it turns out they send photos to china and china creates thousands of duplicate with chinese workers in factories making thousands of these replicas from a photo sent to them from whatever location you're in and those those paintings are sent to france and then they they sent back they cost

a dollar to make and they sell them for $56700.00 and this is the pretend artist is still like with his bare rayyan and he still like trying to add a few touches to it but it's been for manufacturing china for a dollar so here comes the fed the fed will see that fake artist with fake paintings as nesta t. as a strategic can't let fail business and they'll buy all of his fake art to keep the pipeline a fake art going but meanwhile the actual artist i live in the hills of france or they live in provence they live in paris they are therefore not getting any they're allowed to starve to death so the actual supply of real art dies completely and are left just with junk are just like we have only junk economics junk finance junk science a resist live in a total waste land i got to whip out ts eliot at this point to start reading the way slam because that always comes to mind when we reference the fact that we are sitting on a fricken garbage dump called planet earth speaking of garbage dump. the e.t.f.

that the fed was buying was h.-y. g.e. so again at a certain point you know the wizard of oz the barnum and bailey the show men you know nobody believes it anymore and there's a certain you do do a suspension of disbelief and everybody does russian to junk bonds and and fracking like that was part of the jump on industry is like if you actually open your eyes and look a little bit like it was never making money he said this is a bad investment the same with people rushed into wherever they thought charles saatchi was going to invest invest next because they wanted to front run him right well at a certain point people stop doing it they run out of chumps and possibly look at a look at the art prizes in britain they turner prize awarded at some point to tracey emin for her unmade bed right that's junk art right and that's the reflection of our having been jungle fied by people like charles saatchi you turn

it into a ponzi scheme and gave dame amos damien hirst who is doing spiral graft in his basement to sign up for a $1000000000.00 or at least it was until everything fell apart well he actually had assistance to that but finally i'm reading this tweet oh the irony of closing in the red on day one the feds buying program a classic sell on the news moment to say nothing of the fact that the $750000000000.00 allocated is nearly been offset by new issuance and bond markets since fed announced it was rushing into no man's land like i said people are front running with junk creating junk to sell to price not this artificial demand and they produce artificial supply and that's a complete repudiation of supply and demand economics it's in fact communism all right when we come back much more coming our way don't go away don't forget to buy hair h a i r c c's hair. marty's

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welcome back to the kaiser report imax keyser time now to continue our conversation with royal pal he is the founder and c.e.o. of global macro investor and rail vision group last episode we discussed bad coin and gold and the macro picture we're going to continue up on these things welcome back roll expects good to be it let's talk to you know the macro picture for a 2nd so as a hedge fund manager how would you describe your you know corner of the headphone world what is your you know specialty i guess you could call it if you have one are you just an omnivore that's out there eating everything or are you a macro specifically more macro but can you give us an idea how you classify

yourself and then give us an idea of what you see as being the big macro picture yes i'm a macro going through and through explain what don it's what i know i spent my whole life there global macro investor the clues in the title i write the research for the world's biggest macro hedge funds family offices. bank sovereign wealth funds other stuff like that all macro i just think of the world might my age in the macro community is time horizon have along with some time horizon the most so i tend to operate with 6 months 18 months time horizon and sometimes longer and that gives me a note that should seek not to do the kind of month to month p. and l. trading that everybody else gets forced and so i don't run a page from the new longer just from my money and i thought i was many so that's kind of my age i look at everything or less the classes from equities to come up with his 2 fixed incomes foreign exchange to credit. him i cannot stick

but when you get given an opportunity set like we have now my crew is my current turns are. interesting because my current returns in the down cycle so that's that part of the business cycle when growth is weakening and goes negative usually what happens in the business cycle you accumulate slow returns take a macro any most markets over 8 years that say and then they reverse the unwind happens within 18 months so if you think of it in terms of the ability to make returns you make huge amount of sense and 18 months which is when most of the macro hedge funds look for opportunities like this level it sells explodes and resends it concentrates it from a this we were already going into recession we had a trade war underway we had an oil war underway and the business cycle was going negative well trade was going negative and then we had the black swan of the coronavirus and that morphed into

a recession and now into the worst economic event in probably recorded history so we don't have plays out from him that's the most important thing we've been looking at this on real vision and also you know many of the world's most times investors come and say ok what goes on from here my own personal view is that we have some bounce back as economies open up a bounce back is not enough we're seeing that in china south korea and others where it's still below 0 growth and that probably extends for extended period of time and with social distancing and a number of other things in place including human behavior around this crisis and the reality is is that with the world absolutely laden with that. and i reduction of cash flow after the event we just had which just taken everybody's cash out already the chance of going to or so since eventually insolvency event extremely high so i think we can put it goads the 1st debt deflation insults event

since the 1960 now let's talk about this term you're using here business cycle because and ill days before alan greenspan there was something very clearly in play called the business cycle companies would build up a lot of inventory prices would get wake economy would slow down the central bank would lower interest rates to stimulate lending and the cycle would pick up again but starting with alan greenspan becoming even more exaggerated with subsequent federal reserve bank chair people the business cycle has been overwritten by the greenspan put which became the bernanke he put which became a janet yellen put which became the jay powell point that is the say the central bank roll not allow the cycle to roll over they print and they keep printing to keep stock prices higher the bond market to give you kind of a signal in all this as ben in a bull market for 40 years right so what your comment on that i think it's actually

a popular view in response i don't think it's a reality i think the evidence shows us from japan and the u.k. and europe that monetary printing is not necessarily an asset inflation issue it depends what the structural sense up is in a i think that people believe in the u.s. that the central bank is omnipotent and i think that will be shown to be not true i think we're about to find out and i think we're going to find out what the central bank has been fighting from day one which is deflation and why deflation we've got so that monster bull point where interest rates is 0 and we're about to have negative 3 percent inflation so that means real right sort of 3 percent ok that's higher than they were before the luck previous 2 crises in 20082001 so you tighten interest rates to such

a level in the middle of a recession. so this is what they've always been fighting and now it's going to happen and we give a little and i think that the emperor has no clothes that the own series going to end up being some sort of fiscal and some sort of chip at the end of all of this so i don't believe that that puts israel i think it's a psychological well one thing is for sure it keeps a lot of zombie banks and zombie corporations alive though what a band exterminated if rates were allowed to flow on the markets without fed intervention and we would have had a more natural cycle as you've been describing there but instead we have a zombie economy where a lot of the productive companies and productive assets are squeezed into insolvency and the deadwood is allowed to continue on i mean a great example being the airlines i mean why would why have they been allowed to buy back their own stock with 0 percent money from the central bank for for years at the b. has the horn buffet and then the 2nd a crisis and they go insolvent right that's an example of

a failed market but i want to ask you something about the mechanics of all of this and some of the charts that go on in the signals that we see and how this informs folks and the money management business like yourself are in the media like we are when you see a chart like the velocity of money that's gone straight down for 20 years despite all this money printing what does that tell us me not what do you make of that very straightforward is a function of 2 things. debt and demographics so the more the debt loads increase the less 2 pence to see that is for people to be able to use that money for anything except debt service so we shouldn't housel bubbles it corporation level so money doesn't get spent you know also don't forget the. corporate buybacks is a complete kind of destruction of council because it didn't but it's a so it's a good you sir thank coast. that cause the loss of monies of full the aging population does the same thing we've seen it in japan we've seen it in europe

we've seen it all across the world. well we can observe a aging population so once you do that those 2 things the aging population plus the velocity of money driven by the debt what you end up with is an economy that goes slower and slower and slower over time and has almost 0 ability to generate inflation regardless of the central point sound 2008 their trade move would have been to allow a lot of banks to go bust and stead of trying to bail them out increasing the debt load because off out money as debt and baking into the cake a 12 year later crisis that we're having today would you agree yes but the problem is is you know it's a pesky thing miss because that because it plays up elsewhere so 2008 was the banks this time around so the banks this time around it's a cool projects in the car loans and the student loans and then the foreign borrowers of dollars with that 12 shrilly and of dollars boat all rowing's so you

can kind of stamp announce it just moves around. and part of that is obviously for the same reason that you suggest that interest rates have for some borowitz been far too low and the other still remains to high so it just depends what part of the society but you know in that society where the rich get richer the poor get poorer you know it's flow to others so so it's a it's a complicated world but that that that massive increase in debt that took off again after the last crisis not necessarily the banks we could have stopped all of that. if we had let more people go bankrupt because that we put. you put some sort of risk in the equation the still not enough risk and as you rightly point out the moment the fed starts going cope with credit i understand why they try to bail out the pension as sort of that sort of bail out you know people who are 64 of these old events are time i get it but the problem is on the flip side of that you're encouraging behavior from corporations and others that it doesn't once you get

bailed out so i don't even know how to deal with that situation the fed no easy place to be right now let's say hypothetically that the global central banks are in communication with each other and do a lot of work together as no nomi prins wrote in her recent book on the subject of collusion she suggests that in fact they are colluding they do a lot of bank back channel talk and they work together and let's hypothetically say that the banking industry since the 1980 s. and the introduction of financial derivative products have the ability to separate risk from reward in a novel way that what had been available before in the history of capitalism and an economics and hypothetically this debt that you say hit the banks in 2008 and somehow quote as you say moved. is it possible route will pile that

that risk the word be just just can be packaged with derivatives and shuttled around the global banking system and financial system in a way where it simply is taken off the balance sheets of those who don't want it like informed connected banks and it ends up in places like pension accounts that are huge and as we know not really well managed it becomes a toxic debt dump and this is an 8 a kind of high horse of mine that i write and get on and scream from the rooftops about is what happened was the debt within the system as you say cut repackaged out of the banks because they weren't allowed to take risk by regulation so they are relatively little risk oh what happened is all of that corporate debt load went into the pension system that's it so on the average guy was no understanding of what they're doing they had jammed full of corporate credits with over 0 defaults priced in ahead of the biggest recession in history at retirement age whilst having

an all time high allocation to equities at the same time driven by the pensions industry in the ira and straight i think it's criminal what they've done to repackage that debt and give it to people who need it the yields well they've they needed the yield that they didn't need the risk and they've given it to them and they don't have no understanding of the respect running which is this moral issue to face now i have to deal with this what the hell do we do here because the moment we put bail out the pension system we're bailing out cooperations and that bad decisions increasing debt loads. it's tricky i think in the end they will end up making direct payments to the pensioners and then you construe the corporations are making the stakes in the us all right raul pal founder and c.e.o. of global macro investor a real vision thanks for being on the kaiser report thanks so much really enjoyed it right well that's going to do it for this edition of the kaiser report with me max kaiser in station herbert want to thank our guest raul pal over there ad lobel

macro investor in real vision if you want to get in touch with us it's kaiser report on twitter and that twitter handle kaiser report every sunday at 1 pm eastern time is a 45 minute live periscope broadcast with max and stacey and plucking and a lot of other guests don't miss it and so next time by i'll. join me every thursday on the alex salmond show and i'll be speaking to guest of the world of politics sports business i'm showbusiness i'll see if that. is you'll be a reflection of reality. in

a world transformed. what will make you feel safe. tyson nation will community. are you going the right way or are you being led. by. what is true what is faith. in the world corrupted you need to descend. to join us in the depths. or remain in the shallowness. you are no fan speed you no longer a young woman in fact you are one of the last living survivors of the nazi else asked i'm aware of it. leverage debt all you like.

and you can never forget it maybe you can now auschwitz was really like to be inhaled because you would never believe it to want to go to as a hobby of course for 30 some years of over the counter of it it all seems so a lot of buyers if i were to make it right when i get out on the farm saw you know what it's like ma song to her next to you so he can listen in hopefully bless my heart hurts. the f.d.a. is primary role is and regulation of what the label says is and there is actually in the us the f.d.a. is not regulating quality production sourcing any of those things they're regulating that what you say is on the label is actually on the label the most shocking thing about the pet food industry that that has remained since basically i started doing this work is the f.d.a. compliance policies i still cannot understand how and industry is

provided by a federal tax supported organization loopholes to avoid federal law if you go to the f.d.a. website and just type in compliance policies and then scroll down the page to hand feed and and there's one after another they allow contamination by pesticides contamination by industrial chemicals contamination bad natural toxins contamination filth micro biological contamination over tolerance for permanent drug residues. it's incredible. the law says that can be but the compliance policy says don't worry go ahead we won't enforce. for all practical purposes there's nobody looking out for.