max kaiser this is the kaiser report here we are in the air a lot of them. remember the universe restarted in 2009 or and year 11 of the toshiba nakamoto this is the force the pocket of big coin after the having and 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 our world to compare charles

saatchi to the us federal reserve bank because what charles saatchi did what he specialized in 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 and to great art now a lot of people want a special show just for stakes 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 no card looking kind of oh dear max has gone too far without one 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. 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 senshi h y g i believe is the 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. on so this is the latest chapter in the effort to replace the real economy of productive assets and wage earners where the fan tast mcgauran whole land of money printing virtual

assets and the nonexistent economy and cooked books and cooks to. mystic's 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 to 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 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 of the fed because

the fed is dumping junk pretending junk means anything the testing junk has value junk refining the financial system just like the art market was junk a fight here to stand junk and jump 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 multibillion or 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 dependent 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 a sound cheap but it will little by that time you will have a hyper inflationary currency collapse in the u.s. dollar so can i have my art back there have a 2nd the stacey'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 say there's 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 lockdown with the kaiser but you know it 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 board observes quote the velocity of money is hitting record lows massive amounts of liquidity but not much economic growth some view this trend as disc 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 then 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 necessary as a strategic can't let fail business and they'll buy all of his fake art to keep the pipeline of 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 wasteland 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 it and 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 so 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 chunks and possibly look at the because they are prizes in britain the 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 art 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 offends 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 see 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. seemed

wrong. rowles just don't call. me old yet to shake out of disdain become agitated and in again trade because betrayal. when so many find themselves worlds apart when she's to look for common ground. you had to do it. because each of us that is given to you because you knew you could you could only get you to grow weed you feel lucky if you could. get a good look up someone's modellers content is neutral when it. comes

to sure this means the ladies influence is focused on just the cures and. cleansing you see if there's. an islam muslim to. do so you can. give food to. the menu for me my siblings sort of do you know for the slow. welcome back to the kaiser report i'm ask as are 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 you or you know corner of the head fun 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 explore what don it's what i know i spent my whole life there are 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 of 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 site 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 19 months which is why most of the macro hedge funds look for opportunities like this where volatiles explodes and resends it concentrates it from a this we're 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 famous 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 is so sensitive and 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 in the old 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 and 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 a jay powell put 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 has been a bull market for 40 years right so what's 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 of days in a i think that people believe in the us 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 ballpoint 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 the end to all of this so i don't believe that that pushes real i think it's a psychological one thing is for sure he keeps a lot of zombie banks and zombie corporations alive that would have been 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 one 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 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 repents see that is fool 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 that 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 ballistae 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 what central point sound 2008 their fridge 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 is 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 and 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 others still remain to hard so it just depends what possible society you know in that society where the rich get richer the poor the 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 point coppa credit i understand why they try to bail out the pension as sort of veteran of the bailout you know people who are 65 years old events were time i get it but the problem is on the flip side of that you're encouraging behavior from cooperations and others that it doesn't once you get bailed it 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 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 the just just can't 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're jammed full of corporate credits with over 0 defaults priced in the head of the biggest recession in history at retirement age well having an all time high allocation to equities at the same time driven by the pensions industry in the strait i think it's criminal what they've done to repackage that and give it to people who needed the yields well they 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 risks they were 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 pension as and then you can screw the corporations are making about mistakes in the us all right raul powell 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 geyser and station herbert want to thank our guest raul pal over there ad global 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 plucky and a lot of other guests don't miss it until next time. we

go to work so you straight home. you are no offense but you no longer a young woman in fact you are one of the last living survivors of the nazi yeah. i'm aware of it. all you like. you can never forget america now al she was really like to be in held close you would never

believe that one. can do to as. cost free for 2 years and both be. for that at all she has a lot to offer to buy tickets i want you all make it right when i get out on the farm saw your. place in the hope for the bless my heart hurts. the only comes from the can be labeled po the negative beyond any doubt is antarctica coronavirus is everywhere from chicago to taper off and from greenland to easter island fashion trends are the same wherever you look everyone is wearing masks and gloves and person number one is hand sanitizer it's just one endless day behind closed doors but people keep working behind these closed doors the best they can 0 in the pandemic this film is about the people whose job it is to observe and film it's about the colleagues traduce ors and cameron who help us make

documentaries all over the world and as you probably understand i will have to make this film without leaving my whole. lives challenged. the virus is the enemy of revolution in chile the outbreak has interrupted protest that had the ration since last october i'm coming alive he said ski who has lived there for many years and has often helped us organize film shoots across latin america. cheating would be usual mc should not go you can meet your school. and they make good on that you can. be used but yes. you must the work to be a. normal one after myself i think there will be another visit plus.