tv [untitled] August 11, 2011 3:30pm-4:00pm EDT
top stories tonight u.k. is reeling from several might some violence on the streets as the p.m.'s threatens to shut that online social networks during the rest meantime britain also if the government will mend breaches in the social system playing for instigating the disorder. is going to produce the building of new settlements in the occupied territories just weeks before palestinian authorities are expected to last for u.n. for recognition of a state. and two american contractors can go ahead with a civil suit over allegations of room for the health and two by the u.s. forces killed in rumsfeld the country's former secretary of defense could be held post. seven thirty pm thanks speak with the cause report next.
i am max kaiser this is the kaiser report. that low. we went to new york city and they downgraded america s. and p. did immediately as we told you they would others doubted us but we guaranteed it and now we're back in france and guess what. stacy here were tell us more well max i'll tell you the headline i assume is max kaiser arrives in france simple a read france may be vulnerable to downgrade following cut to the u.s. yeah well there's a tremendous ripple effects are happening with this downgrade because the u.s.
dollar is course connected to the u.s. treasury bond market and it's connected to the thigh bone connected to it connects to the foot to the yeah baby it's all connected so to downgrade you start to pull the thread on the u.s. dollar the whole kit and caboodle gets on rubble you all might also say however that it's all related to s. and p. itself and moody's and fitch because the u.s. and france are in such bad shape due to all the so-called aaa rated collateralized debt obligations and other credit derivatives that s. and p. allowed to be rated aaa and these countries banks bought these toxic debt so that's an interesting part of the history isn't it during the period leading up to the financial crisis the selling of collateralized debt obligations c.d.o. zur as they're known and other flora and fauna of the derivatives those fear spawned
by the witch herself blith masters. fish and moody's and s. and p. gave these concatenations these abominations their aaa rating and it created this huge ponzi scheme now they've pulled the rug out from underneath them well max another story related to this financial chaos going on at the moment bank of new york mellon charges depositors america's biggest real bank has been forced to start charging customers who have deposited more than fifty million dollars as more investors take cover from the my. turmoil so they're saying that they're basically trying to force people out of cash and into somewhere else because they're receiving so many people coming in flooding the banking system with all this cash and this is something we spoken to james turk about where he envisions reverse capital control that instead of capital controls being on money being taken out of
the us it would be against money being brought into the u.s. in order to avoid the hyperinflation of all those dollars that are overseas yeah another great point trying to stop that money from coming in by charging essentially negative interest rates people so you can take interest rates below zero but you can by charging people to hold their money at the bank they start off with these big fifty million dollar posits and then they work their way down to mom and pop are out there with a couple of thousand dollars on the positive you will be charged one or two percent or more at the end of the year you have that much less in your account as the bank is trying to pay off their bad loans that could've should've been ring fenced and dealt with back in two thousand and eight but instead will lead to metastasize and grow into this enormous economy killing tumor of bad debt and i mean this is another actual point for those who argue that there's deflation and there are some people who argue there's massive deflation so here is
a bank is able to charge money for people to hold this amount of cash but it also the article points out that the news of the levy emerged as a sale by the u.s. treasury of twenty billion dollars of ten day bills offering zero yields further demonstrated investors have now become intent and preserving capital. yeah the trend is obviously toward negative interest rates and that's negative purchasing power and oh by the way that's a good reason to buy gold again we come back to gold well let's move on to the other aaa rated securities about to be downgraded muni market for paris for last aaa ratings so the two point nine trillion dollars municipal bond market is preparing for hundreds and hundreds of downgrades after standard and poor's lowered the u.s. one level to double a plus the first ever reduction for the country so s.m.p. is likely to cut its ratings i mean discipline debt secured by the federal government so just pre-funded bonds tax exempt backed by u.s.
agencies and credits that are most dependent on federal spending write the aaa rating of the u.s. treasury bond is a reference rating that is connected to all these other aspects of the economy like the municipal bond market also on the corporate side i was just looking at zero hedge they made a good point that institutions like options clearing corp or the group that is responsible for clearing of short sells they're all being downgraded too so this is affecting the fundamental infrastructure of the entire system itself is being downgraded as the entire ponzi scheme rattles yes i also read while we were in the states that j.p. morgan is the next for downgraded by s. and p. and the reason why is they said that j.p. morgan rely so much on the u.s. government despite all their protestations despite every year when jamie diamond
collects his tens of millions of dollars bonus he says because i deserve it nobody works as hard as i am i'm so clever i can print money but it's the u.s. government according to the rating agencies that give j.p. morgan its its rating but nobody works as hard at fraud as jamie diamond but as you point out the old they do over there j.p. morgan as they take the risks on their. books and they stick it on the federal government's books that work beautifully for years as long as america had a aaa receiving but now that america has a double a plus rating and interest rates are going to by definition create pyar that is going to be a huge wall of arbitrage agency arbitrage for cock the nightmare bamboozlement that will no longer serve j.p. morgan in their quest to hide losses and that starts going down like a pile of bricks short j.p. morgan some of crack sell it short naked in fact of better naked short at this at
this time would have been bankrupt america if you follow this next had by max bank of america getting smashed as a i.g. johnsons of the lawsuit fray and a big way so sure it american international group is expected to sue bank of america what might be the largest mortgage security related action filed by a single investor the suit seeks to recover more than ten billion dollars in losses on twenty eight billion dollars in investments and mortgage backed securities this is a good one of barack obama came into office they see by not shutting down the too big to fail banks and by letting a.i.g. live another day they're committing massive moral hazard on a incredible epic biblical scale now they're out suing everybody who's involved all the people all the counterparts are that are suing each other are bankrupt and they're suing each other for the right to drain the federal reserve of more of the citizens capital and notice the key word in what he just said counterparty you know
this extends to financial markets as well because when you go from dumb aaa to double a plus suddenly when you start to downgrade all these dishes that are the intermediaries for all these market manipulating fraud deals you have counterparty risk so they say well look for example to sixty trillion or six hundred trillion says really the riveters out there they say well it's not really a rest because they're all oss that it's. there through the counter-party obligations but if the intermediary that's responsible for making those obligations good goes bankrupt then you don't have a good coverage there you actually have a six hundred trillion dollar risk according to the report there's a growing trend of investors pursuing private lawsuits claiming banks misled them into purchasing risky securities the trend also stands from the lack of prosecutions on behalf of the justice department against the largest financial firms and their executives so there you go i'm actually talk about barack obama refusing to prosecute these are these people they too big to fail the banks toure's
this is why we're still in the situation this leave says up to the biggest firms out there who can sue it because mom and pop joe baca donuts can't sue j.p. morgan and bank of america and all these other banks but you know the giant bankrupt organization a.i.g. care and i think this is so important because at the time when they led a.i.g. get away with this massive fraud number they and when hank paulson went to congress i think story of three quarters of a trillion dollars it was all that we got to keep these markets open we can't afford to go bankrupt you can't afford the counterparty risk we can't afford the systemic risk and barack obama just put his phone as. and now to have years later it doesn't matter barack obama but not enforcing the law by not following the constitution it's going to blow up anyway well apparently
a.i.g. is planning to file similar lawsuits against goldman sachs j.p. morgan and deutsche bank and of course after that will come the rating agencies because j.p. morgan goldman sachs and deutsche bank were selling products that were aaa rated by s. and p. but with all these things falling apart everybody losing their aaa america falling apart into a bucket of fraud and nothingness i want. bring up one final headline to think of another option another reality that we could be facing today what if barack obama had been a leader the bull case for gold gold is rising because the world's monetary system is being debased and there is no sign of stopping well what if barack obama instead of engaging in this elaborate stupid awful theater with john boehner what if he had just come out and said you know what forget all these negotiations we're just going to go back to a gold standard and we're going to value it at twenty five thousand dollars an
ounce by and just left and that would have you valued all of their debt and they would be on the road to starting over again that's genius it's the reverse nixon it's a reverse nixon now nixon defaulted on the debts of america by dropping the gold standard when he owed all this money to foreign creditors well america is in the same position now and they could effectively do the same thing they could effectively default by devaluing against gold. that's exactly what's going to happen anyway and barack obama if he were a as you could say if he were a real leader and had that call an ace of was a richard nixon which i can't believe i'm saying that after having been dragged through watergate as a kid and be and been humiliated compared to. richard milhous nixon looks like a genius statesman compared to this no spine leader list none nobody bag enough a bag of worms and that's a genius idea simply and it's going to happen anyway they have to bring back
a gold standard you know that the smartest guy out there in the punditry universe jim rickards you know he points out that those who criticize this idea say there's not enough gold and he would point out and i would point out that there's something called a price discovery mechanism you know markets reflect supply and demand if you have six hundred trillion dollars worth of worthless to rivet of well you some of us going to end up being repurposed as a gold standard at twenty twenty five thirty thousand dollars an ounce that's just the way markets work except market driven capitalism or go home. jason aaron thanks so much for bay as a record thank you don't go away after the break i'll be speaking with peter chef. de mission. could you take three months for charges three.
manager radio show host author all around nice guy peter schiff of europe a civic capital peter schiff welcome back to the kaiser report thanks for having me all right peter schiff as we have been talking about and as you have been talking about the u.s. as downgraded been downgraded by s. and p. their debt from aaa to double a clustered the s. and p. go far enough well of course not but at least they way so in the right direction you know it wall street parlance any downgrade means get the hell out you know they never like to put a sell out anything i say you have to look at they go from. strong buy will buy it means you know look out below and so they did the minimum that they could do but really what s. and p. is saying as far as i can serve is get out u.s. debt eighty dollars denominated debt because what they're really downgrading is not treasury bonds but the dollar because s. and p. knows has. spanned said it warren buffett said they don't have to default they can
print but that's worse especially if you're a bond holder and you get paid back with monopoly money and so what this means is that all debt in dollars should be downgraded whether it's treasuries beauty's corporates you name it if it's paid back in dollars get rid of it all right now let's talk about the whole rating agency motif you know how they how they have the role that they've played in this crisis and what's been going on the last few years because during the lead up to the crisis they document very well in your book crash proof and crash proof two point zero you talk about how the rating agencies were a remix in that they gamed the derivatives a collateralized debt obligations and these other concatenations bastardizations the securitizations triple a rating so why suddenly did they get religion how did that how that happened because they were they were in god it's funny that the obama administration is say well why should we listen to s. and p.
after all they got it so wrong with the sub prime they think we should listen to moody's it fish but they also got it wrong and what everybody got wrong was they rated stuff aaa it should have been fair play and they're still doing it at least s. and p. is learning from its mistakes whereas the other agencies are not and the obama administration is criticizing guess and b. for learning from its mistakes that's interesting i'm looking today and the the unintended consequences i guess you could call it because now fannie mae and freddie mac. are being downgraded some of the institutions like the office clear. corporation and other part of the infrastructure and the architecture of the markets are being downgraded and this woman markets are being downgraded because the player of the u.s. government is a reference range to talk about how this is going to trickle through to these other pieces of the infrastructure and what consequences certainly because if the u.s. is not aaa if the u.s. is double a plus then if you used to be
a double a plus when you got to go down that double a because you're not on par with the treasury if you are somewhat rich let more risk get into treasury you're still more risky because the treasury can tax everybody to pay its bills and the treasury doesn't tax it prince and it debases the dollar that affects all bonds not just its own bonds but you know it's also crazy about the rating system why is china the world's biggest creditor nation we owe china trillions how can they be rated double a minus and we're all and we're a double a plus we were kind of trial ideas on world is the world's biggest debtor a bigger risk than the world's biggest creditor you know why what's kiters comments he says s. and p. is being irresponsible as an s. and p. being responsible like. saying it's big government is big you're responsible they're the ones that are racking up the debt and you know the baba just gratian is all over s. and p. because they claim they got the math wrong that they didn't count his two trillion
dollars of assumed savings over the next ten years why should they count it it's not going to happen and in fact the real math problem is with the administration using the cvo budget numbers all of these deficits assume a rapidly growing us economy for the next decade with low inflation low interest rates this exists only in a dream the reality is we're already going back to recession so you could take all those rosy scenarios and throw in a trash can where they belong the budget deficit is going to be much worse. then both the administration and this in p.c. believe so i mean they're all wrong about all right i think i want greek go over that once more just so because i was talking about this two trillion dollars state this review that again why that's really a false canard in all this and also a comment on warren buffett's remark that moody's that s. and p.
is somehow wrong and that the his investment in moody's that they're right yeah of course yeah people forget that he's got a dog and it's hot because he's a big shareholder of goodies and if s. and p. has got it right that means moody's has got it wrong so when he comes out attacks moody's he's got i mean s. and p. he's got it gent also this guy said he would buy treasuries even if they had no yield so it was good it would good his opinion if it gets that moron you know automate maybe you have you know civilians catching up with a warrant because obviously he can't be a great as great investor as people think and he's saying he's going to buy treasuries you know if they pay zero you know if that's the case let's sell him some special treasuries it will save the taxpayers a lot of money if warren buffett a really buy our debt if we pay nothing and of course he also said that the federal government has a pretty impressed well you know what good is that to our creditors it's great for the government because think it would place the way it's liabilities but it also inflates the way the public's assets including the asses of war and
a warren buffett of course he's criticizing. s. and p. for missing some private housing bubble he missed it too he got it completely wrong in fact many of his companies might have gone bankrupt if the financial institutions weren't bailed out by by the u.s. government but big the true trillion dollar mascara so-called is again based on s. and p. not calculating before him out of the savings that congress claims are going to be made over the next ten years based on what degree to but almost all of the two trillion in cuts. happen sometime after two thousand and seventeen will be a different president will be a different contract congress they will not be bound by anything that was agreed to last week the only thing that counts are the customer made to the two thousand and eleven budget and there are not in fact i just heard barack obama speak and you know last night talked about the need for more tax cuts he wants to cut taxes for
the middle class and for the poor anyone to spend more money on government infrastructure that means he is advocating for bigger increases in a deficit right now ok now you bring something out there it makes it sound similar to what it was experienced during the lyndon johnson kind of guns and butter you know they want it all and this led to a huge all right span deters was the lead ultimately to nixon causing the gold window in one nine hundred seventy one stacy arab or do i do this show with brilliantly asked me earlier in the show can obama if he was really a leader do a reverse nixon and just say we're going to reopen the goal window of twenty twenty five thousand dollars an ounce to inflate away these debts well that doesn't inflated way the debts i mean that that is an attempt to remodel ties gold put the u.s. back on the gold standard yes that's what we should do but there's no chance that we're going to do that certainly not under obama you know that was the last time
the u.s. government actually did default we defaulted on our promise to pay gold and basically rendered a dollar fee aat with no real value but i think that the loss that you're going to see in a dollar it decade ahead is going to be far greater than the loss in one nine hundred seventy s. because the dollar me change its reserve currency status despite the fact that we defaulted on that promise the dollar now is going to lose that status right now the only thing that's standing between a dollar and complete collapse is the foolish actions of the bank of china the bank of japan. and the world is propping up the dollar because they believe foolishly that it's in their political self-interest but as i said when they figure out it's no longer in their interest they will pull the plug and the dollar is going to collapse much worse than it did in nineteen seventies hopefully at some point we will go back on the gold standard but the price of gold will have to be much much higher for that to happen talk about what's happening over there bank of mellon are
charging fees on deposits over fifty million dollars to pass' can you talk about what this charging of a fee on a deposit means in a negative interest rate will we see more of it other words banks charging people to death on their cash and i think i think this is a byproduct of too big to fail because people that have a lot of money want to put it in the shoes gentry's because they feel that they're too big to fail and so they're but their deposits are safe but the reality is better to you because you're safe because they're all bid on it in u.s. dollars so what people need to do is convert there are their dollars in other currencies or gold or look at the swiss franc today this was frank is up almost three fold since you needed dollar thirty two to buy a swiss franc in fact with the euro at a dollar forty want to have the swiss franc is rapidly approaching parity with the euro and it just took parity with the us dollar that happened very recently and now
it's at a thirty percent premium and look at this with frank let me begin to imagine where the yen would be if the bank of japan had flushed the quote of fifty billion dollars down the toilet last week to buy u.s. dollars and of course u.s. treasuries what is japan doing with all those dollars that they're buying their blind treasuries because they want to because they think there's a gun to their head but they're mistaken so instead of paying somebody to hold your dollars sell your dollars and get into this was frank or get it gold i've got about thirty seconds left i just want to go swing back and revisit the gold standard idea . clearly as you point out what with the problem today's inflation and by returning to a gold standard you are coming back with something that will hopefully restrain government from spending and from the printing presses from rolling out of full speed so. clearly you know as it was saying before if you go back to the gold standard got to
find a price that would make sense given the fact we've had all this money printing going on for so long i know you've got a long term target on gold in the fountains but have you thought about what i what price what i don't know because it depends on where we are when we go back to the goals fair obviously if we go to the gold standard today the gold price will be lower if we go to it two years from now when it's going to have to be down much higher so a lot of it depends on where we get religion and of course we have it all depends on how much gold we actually have you know relative to all of our notes that are in circulation because it's a relationship between the supply of dollars and a supply of gold that would suggest that would set. it back and what we're able to give for each of our ious but once we do that then spending stops then the deficit stop we can't do it anymore if we actually go on a gold standard if it's real then we have to abide by it so i don't think we're
going to go to it again until we have a real crisis as long as the world is buying our bonds we're going to keep selling them as long as the world is gobbling up our paper we're going to keep pretty as long as we can live beyond our means we'll do it a lot as long as politicians get elected by plunging us deeper into debt they will do it it's not so they can't it's not until there are real consequences like a collapse of the bond market a collapse of the dollar a sense interest rates soaring that sends consumer prices soaring that case the stock market that puts people in the streets protesting you know that is not. it's all that happens we're not going to do the right thing all right peter schiff thanks again for being on the kaiser report thank you all right that's going to do it for this edition of the kaiser a car with me max kaiser and stacy herbert i'm with my guest peter schiff if you want to send me an e-mail please do so at kaiser report r t t v dot are you until next time this is nice guys are saying.