tv [untitled] October 21, 2011 4:30pm-5:00pm EDT
all right good afternoon welcome to the capital account i'm lauren lyster here in washington d.c. and today u.s. president barack obama announced all u.s. troops will be out of iraq by the end of the year saying the future of the two countries will move forward in a different way. this will be a strong enduring for sure with our diplomats and civilian advisers who believe will go along to shrink the institutions that are just representative of the trouble to build a new choice of trade for the farmers but if you want to talk trade and commerce which is a more effective way to achieve this war at a cost to taxpayers in iraq eight hundred billion to three trillion dollars depending on estimates and not of course not talking about that incalculable cost of lives or how about checkbook diplomacy which seems to be paying off for some other countries also federal reserve officials are out talking about more bed
stimulus aimed at helping the lousy mortgage market the idea is to help struggling americans refinance or buy new homes good who is this really help underwater u.s. taxpayers or the investors all over the world who bet on their bad mortgages and it is day thirty five of the occupy wall street what is next for the movement well we don't know but we told you about who's capitalizing it first we heard batman the movie was possibly filming there is a comedy park and now it appears m.t.v. is recruiting from the movement for their next real world reality show we'll talk about that later in the show let's get right to the capital account.
all right so as i just said u.s. president brought obama announced today he's pulling all u.s. troops out of iraq or he promised to at least by the end of the year and said the u.s. will build new time of trade and commerce with the country among other things but the cost of doing business in the u.s. via war three trillion dollars by some estimates and of course u.s. senator john mccain if you watch yesterday my show he said on his visit last month to libya that american investors are very eager to invest in libya and he said hopefully they can do so well now of course we know the libyan leader is dead after the u.s. has spent upwards of one billion dollars backing rebels against him so is there a less costly and bloody way to do business and who gains from these u.s. wars we will get to that but first here's a look at the checkbook diplomacy of china a different tactic so you can see their investment spread all over the world those red bubbles they are investing in metals industry power energy all over the world
this shows where the three hundred seventy six billion dollars of investment lies heritage charted out that charted that out for us and when you go iraq afghanistan libya there are no exceptions at the same time remember china is the u.s. is largest foreign creditor and u.s. defense spending being the highest in the world you can pretty much figure that china is helping to finance u.s. wars but will this continue china reportedly just cut its u.s. government securities in august the most they have into yours and while we're on the u.s. dollar it plummeted today to a post world war two low against the japanese yen also the u.s. money supply has surged thirty three percent as that officials as i said earlier are talking about war quantitative easing so here to talk about what this all means all of those dots i just started to connect well he's executive chairman of the
ludwig nieces in. and we're so happy to welcome to the shout thank you for being here great to be with you all right so as i said the united states has eight hundred billion dollars by modest accounts three trillion dollars by the accounts of joseph stiglitz and linda bilmes on the war in iraq in iraq for example china has spent two point one billion dollars on power and three point four billion dollars on energy there are the chinese able to just capitalize on what some would argue are wasteful spending either us on its wars but if the chinese can make money investing in iraq more power to them. course that one of the aspects of the libyan war was to destroy the billions of dollars of investment in the libyan oil industry that the chinese and to drive out their eighty thousand employees because the us was very upset about that of course is one of the unstated but very real reasons the u.s. just engaged in this horrible war in libya so then is the united states in
a better position now in libya is that the payoff for u.s. taxpayers for u.s. wars but you know it's a better off in an imperial sense certainly the american people the american taxpayer people use the depreciating american dollar are not better off but the oil companies connected to the u.s. government the u.s. government so when mercenary for means you know all of you the cia a pentagon they're all better are the merchants of the people who supply all the weapons they're better off so it's like any empire some people do very well most people do badly through you know killing and occupying controlling very bad things i want to get to the beneficiaries you talked about but just to clarify is there any return on investment for u.s. taxpayers for u.s. morris. well know for there's no return on investment and you know i've been taxation remember is our money seized by force so it's not an investment they take
it away from you whether you want to let him have it or not and they spend it on conquests making people like hillary clinton those are chortling yesterday over the the death of gadhafi so they you know they like this they like conquering an electorate running on this vast money to be made for the special interests connected to the u.s. government the average american taxpayer is far from getting a return on investment is being ripped off every day for every day of dollars depreciating american median incomes are falling so the people connected to the government they're all happy and doing great the those of us who are the victims of the government were being victimized that can follow that through a little bit for people to understand what you're arguing here because you're arguing that the value of the dollar is going down and incomes are going down but how do you connect that to us why. because what causes what's causing the economic trouble in the us and for that matter in western europe is government activities to bail out banks to fund wars and to do all the spending you know the us government
is the biggest richest most powerful government in the history of the world by many magnitudes and certainly the biggest empire most powerful empire as you pointed out militarily the most powerful china spends the next. biggest amount compared to the us so think ten percent of the us military budget is spent by china so. the average person isn't being made poorer as the government and its interests get richer it's a direct subtraction from the well being of the american people to people in western europe really the people all over the world are being harmed by the us government by the federal reserve by their weimar zimbabwe strategy here it's hurting hurting the rest of us but the people who are connected to the government they do very well indeed i want to get to the fed in your kind of talking about situations of hyperinflation but first i just want to touch. on the military industrial complex with a scenario like libya where of course u.s. officials have confirmed that a predator drone an american predator drone took part in the airstrike that hit the
convoy that was carrying libyan leader moammar qaddafi so do you think this benefits a military industrial complex and to what extent with people if they're stocking up on drones or stocking up on weapons against drones or u.s. missiles well of course in other words libya or ghana stand or pakistan or yemen or all the many wars the u.s. is waging and killing people all around the world every day we can only imagine what would be happening if your ransley were crying so it would be total hysteria but we're supposed to think it's a great thing that president obama is sending a groan and so the companies that make the groans the companies that make the cruise missiles that make the ships that make the planes of mr boyd's they're all you know having a party but this is a this is not economically productive spending it's economically negative spending even aside from the moral questions of murder and so forth and the drones it's very worrisome i mean we already know that there are no drones that can be carried by
soldiers in their knapsacks and there were drones in development about the size of a hummingbird so you know you may be eating a lunch in your house and you see this little thing at the ceiling of your guard and if you're at least on obama's secret list of people you can kill his whim in the way of a dictator which is something that is a whole other issue i want to get back to what you're saying about the depreciation of the value of the dollar and the fed because we learned that the money supply is increased the m. to figure it rose by i believe thirty three percent and that specifically to and to at the same time we've heard recent reports that that officials are talking about more quantitative easing in the form of something to prop up the mortgage markets you mentioned why our journey and zimbabwe do you possibly think that that could have us headed towards hyperinflation. well things can get out i don't think the fed intends to have hyperinflation because it's bad for the government it's bad for the banks and it's bad for the power of lead so they don't intend hyperinflation
but in this sort of a situation things can get out of hand because while the central bank like the federal reserve is in charge of the supply of money they're not in charge of the demand for money that's in everybody's mind and pocketbook each of us has our own individual demand for how much cash we want to have as versus other things so yes it can get out of hand this is very very dangerous we're doing at the very least we're going to see you know much more quickly rising prices already prices are going up my guess is we're going to be at least in the one nine hundred seventy s. situation but things are happening that didn't even happen in the seventy's were holding interest rates to near zero which was the crazy scheme of john maynard keynes and of course keynes is the guy who who's the the ideological buddha american monetary economics. so they're they're just they're causing tremendous trouble there's no in order to bail out the banks in order to. help the investment banks and the export industries at the expense of the rest of us they want to
weaker dollar helped certain certain special interests by the way they hate china because they will because china more let them have a weaker dollar in china anyway that's called chinese manipulation but it's not manipulation they're trying to have settled exchange rates but not actually while at the same time we see the e.u. china dumping us treasuries the most in august by thirty six point five billion i want to ask it has got a good travel have to wait until next time but i so appreciate you being on the show talking about the danger that you believe that policies especially as they're talking about possibly doing more right now you're calling it a nineteen seventies scenario that we're already headed towards the higher prices thanks so much for being on the show that was the right he is the chairman of the love big money sense institute.
all right time now for the war that is the fun part where i break down a financial ter or a concept for our very smart viewer but perhaps not the financial experts so where is davos is the bearer of the good news. i'm so glad you did i have a feeling it relates to our word of the day i just i just have this sense. of. how handy our word of the day is her and see and it's so helpful the of a dollar start roast because you know what this is an example of that you have in your wallet. yes exactly all right thanks let's see if you learn anything else since he already knew what currency is ok so you call it we have some in your wallet to this is the currency but here is one reason why it matters as we speak today my last guest just hinted at it but here is a very current example so here's from an article in the new era of global interconnectedness liquidity alone is not enough to extinguish europe's greek fire
talking about the debt crisis there of course the small during flames of default are spreading impervious to money creation so what exactly is money well let's take a look at the definition of currency is a currency that has a government that has declared it to be legal tender despite the fact that it has no intrinsic value and is in fact my physical reserves historically most currencies including this one were based on physical commodities such as gold and silver as the dollar was money is based soley on the authoritative decree of government and the faith of those who are willing to hold it and to understand what that allows a government to do exactly well former fed chairman alan greenspan puts it perfectly. and you got. me. you. ok one thing to
point out i'm sure you're listening to alan greenspan because you see the face of austin goolsbee he is obama's former chair of the council of economic advisers he looked a little confused and a little leery i'm not trying to imagine what he was thinking but it's enough for you to tell that this kind of money can run into some problems because with the out money remember the government stamp is what provides the value and that's so when you keep the printing presses rolling you don't have to be a rocket scientist to figure out what happens to the value of this you keep on going to long and the country can and that's not with this but with a one hundred trillion dollar note like they didn't have all the way which couldn't even buy a bus ticket and that is the out money. go way still ahead right here on. news that may be considering a new program to help the mortgage market i spoke about it a little bit earlier but we're really going to get into. this one really be healthy and first closing numbers.
to the county. all right so as i said earlier federal reserve officials are talking about the possibility of more quantitative easing aimed at the mortgage market one of the federal reserve governors in a speech said this i believe we should move back toward the top of the list of options for a large scale purchase of additional mortgage backed securities known as n.b.'s something the f o m c first of november of two thousand and eight and then in greater amounts beginning in march of two thousand and nine and order to provide more support to mortgage lending and housing markets so in theory what could this do this could help underwater home mortgage homeowners refinance it could help
americans buy homes by lowering the interest rates on mortgages but in reality would that happen and who would this really serve is the bigger question is this about lifting the stock market or propping up big investors all over the world who hold mortgage backed securities and can the fed have been afford it take a look at the fed's balance sheet how it is grown over the years as a result of q e one and q e t two you can see how much it's taken on since two thousand and eight since the financial crisis it's pretty staggering here to talk more about all of this is deputy editor of the very popular blog business insider joe guys and paul and he's been writing about this he was up into the night talking about it joe thank you for being on the show nice to see oh yeah thanks for having me welcome to the capital account all right so if the ben did this in theory it would prop up the price of mortgage backed securities but isn't it a little bit of a stretch to say that it would affect the interest rates on newly issued mortgages
for say you or i. it might have some. pushing mortgage rates a little bit but i think the main point is that that's not really the problem mortgage rates are pretty close to record your record low yields already so you know all of you know buying a mortgage and might have some effect the fact of the matter is that with people in the water with a home values still seeming like they're in decline low mortgage rates just aren't the solution and lower mortgage rates aren't going to do very much and of course it doesn't mean that banks will lend the kind of what you're getting at to mortgage rates are even lower than they already are so then the question becomes joe why are they doing this we know that investors all over the world hold mortgage backed securities is that about propping these investments up. yes i think that is. certainly a plausible outcome that they would be expecting you kind of have this effect where you buy mortgage backed securities and the portfolio so someone. they
get cash for their mortgage backed securities and they might use that cash to invest in some riskier asset like maybe some other junk bonds or stocks or something else so it does have is the impact potentially of lifting all kinds of acids and the fed certainly doesn't mind seeing the stock market go up and other kinds of lending instruments go up so you have nothing else that probably does help inflate as it financial assets or what i want to get more into not just thankful assets across the border a lifting a stock market but specifically mortgage backed security because if we go back to two thousand and eight of course we know that when the fed when the treasury when they bought mortgage backed securities when they took over fannie mae and freddie mac. there were one point three trillion dollars in the hands of foreign investors and central banks around the world and people were arguing that this was a backdoor bailout for us creditors overseas when this essentially the same thing.
yes i think it's pretty clear that you know the fed would like to keep afloat you know this is the mortgage backed security is kind of a essential instrument of the entire global financial system and banks hold billions of them and foreign investors hold billions of the just like everybody owns them keeping the price of preventing them from like segments of our keeping them basically risk free is would be an appealing thing for the fed and i do think that the essential to be a bailout aspect of this crew the dynamics are different people aren't as worried about it beggared two thousand and eight the fear over mortgage backed securities was much more intense than people thought everything in housing was going to collapse we're not seeing that the same way and so i don't think that's maybe that was more the motivation then than it is now but what is the yes go ahead but the bottom line is that the fed certainly is interested in keeping mortgage backed
securities and all the spin off you know with a nice floor underneath prices well and it's interesting because you say that the concern is not as great as in two thousand and eight but there have been recent reports that asian investors middle eastern investors are anxious about the safety of the debt that they own and fannie and freddie despite u.s. government assurances and since its peak in two thousand and eight foreign central banks have been dumping their holdings they've fallen by twenty six percent in g.s. these so they're dumping them that is eating them and who's the sucker at the end of the day the u.s. taxpayer. well look i mean in the end the fed to some extent can monetize all this debt and it doesn't hit the taxpayers directly i think you know the bigger impact there's a certain aspect one of the problems with q.e. two that we saw was that after the fed went in and bought very secured treasury securities people then bought other assets including commodities we saw an increase in oil prices and other commodities after that we saw
a lot of inflation associated with it and we saw this kind of disconnect between risky assets like the market like commodities and the real economy which did not emerge from q e two and the stronger off it would appear but so i don't know it's not exactly i mean it's not exactly the big if u.s. taxpayer is going to be on the hook for major bail it's more about the distortion of the distorting effects of a policy like this but also joe come on doesn't affect my purchasing power of my dollar at that that is going and carrying anything and balance sheet further and be valuing my money. you know good thing and i understand that's an issue you know people there is certainly pushing interest rates down does not is hurting the dollar on the other hand look a lot of people have their money in stocks. other assets so that hurts people as well to the extent of keeping asset prices up keeps the economy from going into the tank you know the truth you know everyone would rather keep their job for example
than have their dollar be weakened so i don't but i do think that's an issue the strings the dollar but i think we should put it into perspective it's not the only thing you know there are other factors to consider there are other factors to consider but it sounds like care if they are considering this to be something that would help homeowners we can both agree it's not necessarily or even really going to do that thank you so much for being on the show that i appreciate it's nice to see you here on the capital account and that was to start he is the deputy editor of business insider he also is a twitter extraordinary and he never sleeps to bring out latest news.
all right so we started the show with and went through all of the very important serious economic and financial headlines that we really think you need to know and look at in depth now here are some that we think you need to know before entirely different reasons these are just really interesting so i brought our producer and contributor and blogger extraordinary dimitri on to the set so that we can talk about these together first of all this is interesting so we've talked about we've talked about how batman is supposed to be failing at filming perhaps that occupy wall street. now guess who else is capitalizing on occupy wall street well i don't know this is all the makings for a very action packed just unscripted show right now will probably have to take an event of this sort of looking into creating a reality t.v. show. wall street and i think this could really be also you know this could be the government trying to maybe from through m.t.v.
. to discredit discredit the movement who they think is of the real if you call it sure it's because as you can see alluded to you said right out and t.v. is advertising for people to contact them for the real world if they are part of the occupy wall street movement see i see it is entirely differently dimitri i think this is m.t.v.'s way of getting out of having to pay for a house they can just film and park and they have all the elements they need for a good show that's a really good point it's a good business but it's really good but it isn't cameras nothing else. goes on and that was on craigslist come on they don't even have to advertise a move to their mother there's only been advertising them for the cruise which is free it's free but it isn't a free show all right why don't we think about just getting ok what's next ok this is another way that somebody tried to capitalize on the raising. price of gold has gone down a little recently but it's still higher than it was historically over the last
months in years one guy who is referred to as an irish wizard need i say more he tried to turn his x. agreement into gold by some kind of alchemy alchemic situation obviously didn't go well. does this show how valuable gold is or you know alchemy is expected to be before christ in the middle ages it was really popular and the whole thing of alchemy to try to transform base metals like wood into gold and this guy said you know what i'm going to go a step further. under the feces and the fume and poop and i'm going to lie down on fire which is what he did and he burned his apartment pretty much thousands of miles of the damage when it turned into gold and they got it going you gotta go to jail or something like i've got three three months censoring but i think this is actually speaks to the bull market in gold and people recognize the gold market and then there's a and there's a bear market in crap and so crap at first orders of gold and you have this this
incredible asset when it comes to alchemy i think that the materials he was are a little easier to get your hands on than some of those other metals the if i want to turn it into a lot of hands on it but if you want to get your hands on it you're right and it didn't pay off warm that for a guy ok real quickly we're almost out of time but very quickly in this economy corporations are still making a profit and one that is making a profit possibly off of increasing poverty is mcdonald's they reported net profits of one point five billion in the third quarter it's a huge rise i think it's been nine quarters of growth right because of the growth right there right around the midsection yes sure hand and this is from their dollar menu or their value menu this is all about capitalizing on people's poverty you have one second what is it this is having mass inflation in food prices just destroy the quality keep the price look at a lot of difference and there you have it that's where we got a levy that's all pressure today thanks for attending and come back tomorrow.
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