in june interest rates on ten year treasury bonds and mortgages rose to the highest level in fifteen months despite this we have been in a thirty year downturn in long term interest rates earlier i spoke with karl denninger a blogger at market tenet ticker dot org and author of the book leverage so i asked him first about what lies ahead for the fed's near zero interest rate policy. here's what he had to say i certainly can't go below zero now kenya with mario draghi wants to. well even that only buys your version for a period of time because you can't go very far below zero point where there is a revolt among the people who have capital so certainly you could try to extend that like mario has suggested i don't think it's going to work out very well for him but the the general problem with the declining interest rate environment over time is that people get very accustomed to the idea that they can turn a leverage crank and by doing it they essentially print money. people talk about central banks printing money but in point of fact it is the commercial banks that are the ones that ar

it was hard when he was treasury secretary.one story he may not have told you which is how paul volcker worked for him at the treasury, and they did some important reforms of international monetary system. then years later when paul volcker became chairman of the federal reserve, and i write about this in my book, he used some of the same ideas to make monetary policy much better. so in a way schultz's influence extended periods which you don't always think about, and various you don't think about. >> host: what was your biggest restoration as undersecretary of the treasury? >> guest: when i went to washington i was expecting a different job than it turned out to be because 9/11 occurred right after i got there. so rather than going to some fancy halls of negotiations on international finance, i went to kabul, baghdad and in north africa to think about much more difficult problems. we had to put a new currency, a new monetary system in place in iraq. one of the most difficult things i've ever had to do. it was frustrating in a

treasuries are headed for the largest two week gain this year this is after bernanke you assured congress that it was way too early to make any judgment about tapering earlier i spoke with michael hudson author of the bubble and beyond about fed tapering and the true effect of quantitative easing. well quantitative easing is a kind of government spending but it's not the kind of government spending that ends up as part of the budget deficit it's pure money creation that spent on buying securities from the banks mainly their mortgage backed securities including chunk mortgages other bonds so the idea is to pump money into the banking system the pretense is that the banks that are going to turn around and lend this money out to the economy but that's not what's been happening at all either the economy the banks have been speculating in foreign arbitrage currencies or foreign loans or they've been spending it within the financial sector none of the quantitative easing has really gone into the economy at large so whereas keynesian spending is the government is the employer of last resort in q

>>host: role as your biggest frustration as undersecretary of the treasury? >> in washington and was expecting a different job that was different because 9/11 ochered right after i got there so rather than going to the fancy halls of negotiation of finance i went to baghdad and africa to think about much more difficult problems. they had to put it the new currency of the the the new monetary system in place in iraq. one of the most difficult things i had to do it was frustrating but it was amazing and rewarding and the series worked and we could get the financial system up and running with a lot of cooperation from the iraqis and a combination of frustration but to be the frustration of policy in general is that we had gotten off track it is the most tragic that we had as america had a good set of policies in place for nearly a quarter of this century and we're not there now. it is very frustrating to see the slow recovery and from the other countries. >>host: you also write about apollo deal. how did he do? >> he was not there too long and left pretty early

in two thousand and eight the financial system was in disarray treasury second. hank paulson lobbied heavily for a seven hundred billion dollars bailout called tarp that would help mortgage holders and instead the money went largely to the big banks but george w. bush made sure that seventy seven billion dollars also went to bail out chrysler and general motors those funds were by law to be used for financial companies which the two automakers obviously were not the second swindled would come under obama's watch when he forced the two companies into bankruptcy those who had lent money to chrysler in the form of bonds would face a strong armed intervention by the administration to pressed to please the united automobile workers they ended up with thirty three percent more money than other creditors who should have been paid first the point the rule of law was violated to please a constituency well the automakers home of detroit is in the news again more muni defaults will come and the question is will the rule of law prevail or will we see a repeat of the then a r

treasury by fannie and freddie.well on on. there is expected to be a plan put forward by treasury in the not too business stant future. dealing with the dissolution of these gses and figuring out the structure they should have in the newt but this is raging on. they were arguing they were not within this rights to change the provisions which previously clifred significant dividends but not all the profits. >> i can't imagine reading the briefs we'll be reading over the coming weeks and months, steven. thank you. richard perry will be a featured speaker on july 17th. last month google sent a letter to congress trying to ease privacy fears and the letter was not enough to be one congressman. le tell us why he is still concern but first santelli watching the markets and a busy week for the fed. >> especially considering this big taf year ya. i would call it a free brunch. we'll have a guest. it isn't about the main entry of zero interest rate policy. touch one plastic fork and the markets throw a his i hit. we will con

and i think treasury's decision reflects that practicality. but the real news today isn't this hearing that we're having yet again about the administration's decision to delay the reporting requirements for business. the real news is what "the new york times" reported that mr. thomas cited. health care costs for new yorkers set to fall 50%. mr. chairman, i'd ask unanimous consent of to have this article inserted into the record -- >> without objection. >> it states, and i quote: beginning in october individuals in new york city who now pay $1,000 a month or more for coverage will be able to shop for health insurance for as little as $308 monthly. and with federal subsidies, the cost will be even lower. and this is what we're hearing from oregon and places like washington, california and vermont and maryland. and this is what comes from the exchanges. that's going to increase competition and transparency. so, again, this is exactly what the exchanges are meant to accomplish, and this is exactly the type of information that's coming back. and so

they let treasury keep selling securities and raise cash temporarily. for example, treasury can cut back funding pension and health programs for federal retirees, and can suspend investments in a special foreign exchange fund. but the administration got a little help this time from fannie mae when in june the mortgage giant repaid it more than $60 billion from its government bailout. when treasury bumped up against the debt ceiling in may, it told congress the extraordinary measures would allow it to borrow another $260 billion to keep paying uncle sam's bills until after labor day. the president has been pressuring republicans to approve raising the debt ceiling again now, without conditions like new spending cuts or risk railing financial markets. >> i think the president and administration are absolutely doing this to drop the hammer on republicans on the debt fight, on the funding fight. i think they're going to take the high ground. congress only, only congress can pass an extension of the debt ceiling. >> reporter: each time congress has done so,

and we'll talk to the new treasury secretary. with the recovery now five years old, why aren't more americans feeling it? in the gulf, a natural gas well is on fire after an explosion. mark strassmann on the threat to the environment. an emotional moment for the pope before he celebrated his first public mass in brazil. dean reynolds is there. the new prince has a name, three of them, in fact. and michelle miller with american fishermen who fear that their way of life is slipping away. >> reporter: you feel you're getting squeezed. >> i haven't been squeezed. i've been-- i've been destroyed. captioning sponsored by cbs this is the "cbs e this is the "cbs evening news" with scott pelley. >> pelley: good evening. in a summer filled with all kinds of distractions for the nation, the president had a message today-- focus. he wants the focus to be on the economy, saying that washington has taken its eye off the ball. a cbs news poll out tonight finds that 61% of americans believe that the economy is bad. only 37% said it's good. when

our beds now because the government mortgage giants who are supposedly being wound down pay the treasury sixty six billion dollars in profit so the billions uncle sam doesn't need to borrow as much next quarter which means of fed's eighty five billion dollars per month bond buying plan will monetize nearly seventy percent of all u.s. issued in the near future so just to reiterate because our heads are swimming to seven out of every ten dollars borrowed by uncle will be bought by the clause our government enterprise known as the federal reserve and based on recent trends over two thirds of that money printing will end up in poor and brain so couldn't corrode encroach away from burning no wonder you're looking for a new gig. and speaking of new gigs the former harvard president who was scorned for a massage and a sick remarks about would be very summers is increasingly being touted as the front runner replacement next year just today obama and harry reid like summer's facebook style in the press anyway and battle eager slashed of us a journalist telling hill some rats said summers it is to

the private sector to start buying treasuries, because the fed, they're just buying treasuries, we knowwill start to decline in september or december. >> for better or worse, we've had a lot of news events in the last month, starting with the fomc meeting in june, that got everyone in a tizzy about the taper, and now the jobs number. and then another meeting in july. you know, on and on and on. and importantly, next week, is earnings, john. do earnings matter anymore? >> i think they do. the market can't be right every single moment. you know, by definition, there's a buyer for every seller. half of the people are wrong every time. sometimes i think more than half are wrong. i think the market gets itself tied up in a knot. earnings really matter. if earnings advance, keep in mind the stasis interest rates for the economy, the one that keeps it going steady, rises as an economy gets stronger. i think the fed is very careful how they lead. i don't think they overdo it. i think the earnings start to help. >> where do you put your money right now then. >> i'm rotating toward cyclicals. i t

we buy all lead treasuries and government guarantees m b s. in a recession we make money because interest rates go down. >> chairman hensarling showed on the board the the running-clocks. of concern to you, our friend, my friend for 20 years, erskine bowles, clear around the country, alan simpson, here last week, rang the bell on concerns related to the dax -- bedecked -- the debt. compounding problem when it comes to interest payments on the debt. do you believe when interest rates rise over coming years and the spending trajectory we are towards the close of the decade that interest rates along with annual deficits push america's dad to unsustainable levels perhaps close to whatebt to uns perhaps close to what we are seeing across europe. i would say to my grandchildren, it is for my kids, it is for me. the urgency seems to be gone. mr. obama never mentioned it. the big elephant in the room that has never been there as a focal point. and the interest requirements are going to be compounded this entire issue. how would you like to address tha

treasuries and it also incorporates national accounting identities such as the g.d.p. recently i spoke with mr mosley about the importance of these identities within the m.m.t. framework here's what he said. loans create bank deposits to the penny so if you borrow two hundred thousand dollars to buy a house you take it all for two hundred thousand the bank gives it two hundred thousand that were. so the house the bag now has a two hundred thousand dollars loan and there's been a two hundred thousand dollar deposit that didn't exist before and it's a bank liability and we tend to call them money under certain definitions of money that would be considered money so what you have is bank loans made in dollars create going to causes in dollars but there are no net assets created their own loans are something somebody owes in the eyes of something somebody as they kind of cancel each other out they net to zero so for a living i'm sorry so from the end they don't study perspective or the moser economics perspective what the what is the solution to the current crisis that we h

government said the treasury international the bank of the other central banks and it's been ongoing ever since and what we've done is. come up with a bunch of evidence to prove our case and latest market action in gold and silver is evidence of just that and could you dig into some of that evidence that you were talking about just now i believe there are a couple so you have to see whistleblowers what was the result of. first of all we have all kinds of official documents for the b i yes and various institutions that reveal. quietly or they don't want to get out but it's got to what they're doing and then there have been whistleblowers about the activity of j.p. morgan in the gold and silver markets another billion banks and it's quite a story actually and i believe it was your organization revealed actually j.p. morgan that has the largest short silver position on and they got the v. . how does that affect the market having one giant short holder well that's what we have and i trust the united states i mean when we were in front of the c.f. t.c. we exposed how big it was we've gone

at the treasury international the bank of the other central banks and it's been ongoing ever since and what we've done is. come up with a bunch of evidence to prove our case and latest market action in gold and silver is evidence of just that and could you dig into some of that evidence that you were talking about just now i believe there are a couple so you have to see whistleblowers what was the result of. first of all we have all kinds of official documents for the b i yes and various institutions that reveal. quietly they don't want to get out but it's got to what they're doing and then there have been whistleblowers about the activity of j.p. morgan in the gold and silver markets another billion banks and it's quite a story actually. organization revealed actually j.p. morgan that has the largest short silver position on and they got. their breath. how does that affect the market having one giant short holder well that's what we have and i trust the united states to me when we were in front of the c f t c we expose how big it was we've gone to the sea of t.c. about it they refused

treasurys paring their losses.s on the big board pertaining what we're seeing from the fomc it is interesting peter noted about half the fed members are interested in tapering. however we'll continue to watch job creation and payrolls and how they're added. whether or not that is enough to really have the fed make the move. a lot of them say they want tapering. are they actually going to make that move? will that actually be this year? you can see that intraday chart. a huge spike there for the dow jones industrials as we continue to move here. the question as we break to new session highs, that is worth noting too. right now the dow jones industrials are up 37 points moving to session highs. worth noting that the nasdaq composite at these levels would now today close at highest levels since 2000. back to you. ashley: yeah, interesting. u.s. treasury prices also turning higher after those fed minutes. tracy: all right. well oil, trading near a 14-month high on inventory data out this morning. let's get a check what

treasuries and it also incorporates national accounting identities such as the g.d.p. recently i spoke with mr mosley or about the importance of these identities within the m.m.t. framework here's what he said. loans create bank deposits to the penny so if you borrow two hundred thousand dollars to buy a house you take out all for two hundred thousand the bank gives it two hundred thousand were sold the house the bank now has a two hundred thousand dollars loan and there's been a two hundred thousand dollar deposit that didn't exist before and it's a bank liability and we tend to call their money under certain definitions of money that would be considered money so what you have is bank loans made in dollars create going to causes in dollars but there are no net financial assets created their own loans are something somebody owes in the eyes of something somebody as they kind of cancel each other out they net to zero. so for all of them i'm sorry so from the end they don't study perspective or the moser economics perspective what what is the solution to the current cris

making bets on treasury bonds and were successful the problem was they became so big they had to look for the markets to bet on well they turned to gold they leased or rented it from a central bank for a low rate and then they'd made it lee sold it then they use that money to invest in something with a higher return using money right but the markets were roiled and all of the fun bet started going the wrong way and who had title to the gold that's a critical question well the federal reserve organized a bailout and got things back to normal but gold leasing would accelerate over the years and again who owns it we decided to talk to bill murphy of the gold action committee to get an answer first we asked him what get his mission is. founded january of ninety ninety nine by my colleague christine myself exposed the manipulation of the gold and silver markets by what we thought was just banks because it was very obvious what was going on in the trading activity but as we got into it we realized it was much bigger than that it had to do with the us government. at the treasury to banks for

the yield on the ten-year tr treasury note closed on a two-year high. gold lost luster following 3% on a stronger u.s. dollar. >>> the political crisis continues over in egypt. deadly clashes broke out as thousands of protesters took to tahrir square. mohamed morsy and his muslim brotherhood party battling the police and military forces. a state of emergency in the canal region ramped up concerns about oil supplies out of the middle east, sending oil prices sharply higher. crude shot up nearly $2 today. closing north of $103 a barrel and that's a fresh 14-month high. >>> federal officials approved a three-day deal in which japan soft bank asquares some of next tell. the fcc's actions are the final step before a 78% stake of sprint becomes the biggest ever japanese acre session of a u.s. company in a deal worth some $21.6 billion. >>> shares of samsung took a hit today in south korea where they trade on concerns over sales of samsung's galaxy s 4 and some are concerned the rapid growth in the high-end cell phone market may be slowing. whether the cell ph

treasury bill. typically we've used the 91-day treasury bill. just from the baseline there's a higher interest rate for students to pay. then they've picked a premium to put on top to compensate the government for potential loss and risk. and some of my colleagues suggested, we're not quite sure. in fact, we feel very strongly that that premium is much too high for the actual risk and actual costs of the program. and so this proposal has really baked in higher interest rates for students after the first few years. and it is a long-term, permanent fix to the interest rate problem. so i believe what we're doing really makes a great deal of sense. as many people are struggling in many different ways, and particularly students are struggling with student debt, we should ensure that this new rate structure does not leave students worse off. and not look at the first two years but let's be real stick and serious, let's look down the road, because this road is taking us to higher and higher interest rates

the treasury and fhfa have declined so far to comment.keptics point out that the $66 billion dividend helped stave off an ugly debt ceiling debate for another quarter or two, kelly and bill, but a court will have to determine who's right. >> kate, you also just broke a story about the banks and capital requirements. can you bring people up to speed on what's going on there? >> reporter: absolutely. so the fdic is expected to announce new bank capital requirements tomorrow morning at 9:00. and we are hearing that the standards will be tougher than originally thought. under basel 3, as a reminder, they have to hold 3% of the common equity against total asset the, meaning they will be able to borrow a little less in the future as a way to stave off future systemic risks. but under tomorrow's proposed guidelines, that 3% figure goes to 5%. this requirement known as the simple leverage ratio could be a big negative for goldman, jpmorgan, and other banks since off-balance assets are likely to be included in the asset allocation, but they may ha

or should it be based on a three-month treasury note?re is all kinds of different ideas floating around, and no one really knows what is the best solution. now, i have pointed out the necessity for a cap on these loans, and i -- you know, i think about my own experience. when i started college in 1958, there wasn't such a program, but in 1959 and after that, we had what was called the eisenhower loan program. it was called the national defense education act. i went to a window at iowa state university, and i borrowed money. and i borrowed money at 2%, 2%. and the interest rate -- i looked up, the interest rate during that period of time -- the ten-year treasury note at that time in 1959, 4.4%, 4.12%, 3.88%, 3.95%, all the years i was in college, yet i borrowed money at 2%. so our government, our representatives decided that it was worth it for america to subsidize the loan that i had, not charging the ten-year treasury note but actually half of that, almost half of that. think about that. not only did our society, our government say that

what does a former treasury secretary you know the man americans trust with all of their money do in his spare time after he steps down well timothy geithner is still spending his time counting cash only this time it's his own the former treasury secretary is making big bucks these days in the private sector by delivering speeches at financial conferences and i'm not talking about a little bit of chump change try hundreds of thousands of dollars so how does this big fat pile of cash stack up against his other earnings over the years well at as the president of the formal as a federal reserve bank in new york in two thousand and eight he made four hundred eleven thousand and two hundred dollars annually or took a huge pay cut to become the treasury secretary but his pockets were still lined with all that green he made one hundred ninety one thousand and three hundred dollars each year from two thousand and nine to two thousand and twelve but what he earned in one year running the fed or two years as treasury secretary he made delivering just three speeches this year alone talk about p

so now for the rs of the year, the treasury only needs to issue $45 billion a month in treasuries.the same pace, they will buy every new bond. i don't think that will happen. so i think you'll have natural tapering to the tune of about $105 billion for the rest of the year. that soups assumes foreign buye don't -- >> when does the real tapering begin? >> i think the real tapering probably begins later this year. whether it begins in september or december, i think it's almost irrelevant. what is relevant is that the fed chairman has pretty much single handedly recalibrated the range for ten year treasuries now from 1.6% to probably 2.5% to 2.75%. and that ihe's been able to do without damaging the economy and resetting expectations on bond yields. another pot step in the right direction. ultimately what you want is the economy to be -- >> how did he reset it if he didn't do anything different? >> emphasis as we said. >> but either he said something different or he's emphasizing. >> you just gave him credit for doing it, but before you said he didn't do anything. >> markets have done

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it seems like that would give you more latitude to reduce your purchases of treasuries. still owns a relatively small share of all the treasuries outstanding. it's true that as the new issuance comes down, that our purchases become a larger share of the new flow of treasuries coming into the market, but we have not seen that our purchases are disrupting the treasury market in any way, and we believe that they have been effective in keeping interest rates low. that being said, as i have described, depending on how the economy evolves, you know, we are considering changing the mix of tools that we use to maintain the high level of accommodation. >> but the fact that they are -- will be probably issuing less is, i think, a factor that you're considering i guess. >> we would consider that, but, you know, again, our view of it, which, you know, people disagree, but our view is that what matters is the share of the total that we own, not the share of the new issuance. >> all right. chairman bernanke, you mentioned last year in jackson hole that you viewed unemployment as cycli

goldman sachs now expects the 10-year treasury yield to rise to 4% by 2016.as other analysts worried as well. they've told cnbc.com yields are fast approaching a pain threshold for the fed and could stop a recovery in the housing market. thomas lee from jpmorgan is still with us. mike, thanks for joining us. the spreads between 2s and 10s the widest since 2006. what do you think of this t-bill rise? >> well, it was long overdue. and as expected, what really happened was so much was priced in immediately at the first sniff of any higher rates or impending growth down the pipeline economically. i'm not surprised. i think the biggest resip ro cat of all of this over the last week and a half by two weeks has been the dollar and how its relationship right now in a trading scenario carries through with strength in crude oil, the selloff in -- in precious metals, of course, and then lastly the s&p, of course, back above the 50-day moving average and looking strong in front of earnings season. i think it's those relationships that are important. but most important is

and the difficult, the difficult i've had when i worked at treasury, i knew what the treasury secretary's portfolio was, and that was during, particularly tumultuous time during the financial crisis. the president has many other issues on his plate so i try to be judicious in not overloading him, but providing them with information that i think he needs most. i've enjoyed being an advisor. it's a funny thing, as a professor, you have completely different life. as a professor you write articles and to try to discover new things and blow them to the rest of the world. as an advisor it's necessary to be discreet. as an advisor it's necessary to be mindful of your principles time, and not take up more time than is necessary. and to anticipate what information the principal needs to sometimes that information already a table. sometimes you have to develop it and have staff to research. there are different skills i found by really enjoyed working for the president. >> what kind of articles does he point out for you? >> economic articles that he comes across. sometimes academic articles, sometim

tomy responsibilities treasury our policy, as opposed to communications. i was not involved in the decision as to how to accompany the formal guidance that, in the usual way, reflected a treasury decision, how do -- how to accompany that. >> you do not control the way you announce things. let me ask another question. the announcement of the delay and employer mandate came as a big surprise with less than six months to go. what do you think that means for business owners who are planning decisions as well and do you think you have more or less certainty as to where federal policy is headed and do you think they are more or less confused about what will be in place in 2015 and will it only be a year delay at the could be two years or five years? >> i am happy to answer all those questions. >> go ahead. >> first of all, the business community were the ones who requested additional time. to everybody, all the stakeholders, not just the business community, representatives of individuals, individuals themselves, people spectrum of those involved in our health ca

you cannot rely on that, treasury yields moved higher. and the trajectory, and surely rising, does that mean the stock market has -- cheryl: i want to take the nation of the nation's dad, where ben bernanke has been very clear, the fiscal head wind from washington will be marked negative and economic negative, and $7 trillion as the recession began. >> the previous guest made this point, so many people missing get. there's a massive distinction in the capering process engaging and lifting fund rates. and the last three meetings, the reason -- highly accommodative policy, and the funds rate, the tapering process would be less asset purchases, still being very accommodative, this notion of applying less pressure to the gas pedal, this isn't an ideal we are driving home for months, ben bernanke is trying to make that point again here today so that is important. in terms of fiscal policy is interesting to hear him talk about this. he said he effectively one of the reasons reading between the lines one reason the fed had to be so accommodative

they had no idea they could lose money in treasury.ying is there a misprint in my statement? the client says is it over? they are saying treasury yields are going to 5% over the next couple of years. the client then says to sell me out. it will move and equities will attract some of those funds. cheryl: this could be i guess you could call some bonds, but do you think there is that market for alternative investing? >> there's always a market for alternatives as a diversify her. oil and gold have been hurt earlier in the year, but oil has caught a bit, up 25% the last couple of months. gold found a floor, this up over the last month or two. having commodities like those in your portfolio against even geopolitical risk not to say there's any inflation on the horizon. it is still a concern. cheryl: thank you so much for coming down especially on a hot summer day. i have some news for you. a sad day on fox business, the director of this program today is his last day and this is his last show that he will be directing with fox business. we

treasury yields. notwithstanding that, the bank can actually sort of still promise that they could revisit qe in the future. i don't think the macro picture really requires them to do anything in august. and they could -- will be a debate about interest rate cuts because the central bank thinking is that generally around the world that forward guidance works best when you actually cut interest rates as well down to the very lowest levels. >> we are, aren't we? what difference does half a quarter of a percent make? >> in the bigger picture it doesn't produce the macro recovery. in the short-term, it is important. so i think tomorrow's minutes we can actually see the bank of england debating the idea in the option of rate cut again. >> okay. all right. thanks for that. michael, stick around. now, 100,000 euros is being offered to anyone who can pen the most workable plan along the uk to exit the eu. it will award its price to the best blueprint covering britain's withdraw. entrants have to submit a 2,00