tv [untitled] May 31, 2012 4:30pm-5:00pm EDT
good afternoon welcome to capital account i'm lauren lyster here in washington d.c. these are your headlines for thursday may thirty first two thousand and twelve a slew of bad news out of europe what else is new right as irish voters today attempt to exercise their sovereignty there casting ballots in a referendum on europe's fiscal consolidation treaty meanwhile european central banker mario draghi made it clear he is fed up with national sovereignty the e.c.b. says europe needs new tools to buy bank runs and draw he says the lesson from spain's donkey was that the supervision of the euro zone banks should rest with a central authority not those pesky national regulators isn't that what we have in the us though it was not working out we'll talk about it and while we are on spain
the big question will we see a stag's it perhaps before gregg's it well mike said locksmiths as he's better known as here to talk about why that just could be the case and maybe a good thing is that meanwhile u.s. g.d.p. was revised down from two point two to one point nine percent meanwhile the obama administration's attempt to build an industry of battery makers for electric cars is sputtering subsidized firms are struggling they don't have many customers they're operating way below capacity this is all according to the wall street journal what the problem was is that government granted this money it was linked to production calendars and not to market demand so is this an example of what happens when government picks winners and losers or is there a role for uncle sam in alternative energy let's talk about it let's get to today's capital account.
more bad news out of europe and i have to say it's looking like fight or flight on the continent in terms of capital flight data from spain central bank suggest close to one hundred billion euros left the country and the first quarter alone that is around ten of the country's g.d.p. that just took their money elsewhere now the euro has had a two year low against the dollar and best to reserve a russian into what they perceive to be safe havens one of which is the us dollar what you could call the cleanest dirty shirt to quote our friends at pimco now as far as fights are concerned officials including european commission's top economic official only red is reportedly warning that the eurozone could crumble without one
and she gets stronger crisis fighting measures and tough fiscal discipline now the head of the e.c.b. mario draghi is out saying the central bank we can't fill this policy vacuum now that sounds a little like ben bernanke he talking to congress if we're looking at trends but also he's pushing for some countries to forgo national sovereignty pushing for centralized bank supervision and regulation he says that's the big takeaway from banking disasters like banking now let's bring mike shylock in to talk about this though because he's going to bring us a dose of reality amidst these calls from euro kratz technocrats whatever you want to call them now mike shylock better known as misha's investment advisor for sick of pacific capital also writes the very popular blog is global economic analysis so mission thanks so much for being on the show today oh a pleasure to be on the show you know here it is may thirty first of. chicago everything is green it's raining here today you can probably see the trees on my
back window there it looks very beautiful what what a nice report to get to to give us some context before we get to somewhere that's a lot more bleak then dealing with rain spain is dealing with i don't know maybe an . exit from the eurozone so they have this whole just disaster in the banking sector and so people have been writing hey maybe we're going to see as bags it before a grabs it which are now the terms that have been coined a number of other reasons too that they've cited that spain has a unique political and economic situation that's different from other countries also that there's a serious discussion in spain underway that the euro is a problem so what do you think could we see as begs it that all and before a greggs it. ok mike said look i'm an avid posit right there we're having some problems with your audio but we're going to get you all dialed back in so that we can fill our
audience and with all of your wonderful analysis on europe so we'll be back right after a break with more with mike shad lock on the disaster in europe and also had those lousy g.d.p. numbers that were revised down in the united states as in just a few minutes. what drives the world the fear mongering used by politicians who makes decisions to break through it's already been made who can you trust no one who is you know view with the global machinery see where are we heading state controlled capitalism is called sessions when nobody dares to ask we do our t.v. question more. you know sometimes you see a story and it seems so. you think you understand it and then you glimpse something else and you sure see some other part of it and realize that everything. you don't i'm sorry is
a big. story . but in the loan itself you'll get the real headlines with none of the most of the problem with the mainstream media today is that they're completely disconnected from the viewers and what actually matters to those viewers and so that's why young people just don't watch t.v. anymore if they want news they go online and read it but we're trying to take those stories that people actually care about and transfer them back to t.v. . all right welcome back we're talking to mike said locke and yet as he was getting
into as bags it scenario we lost him so let's bring him back and tell us are we more likely to see a speck of that than a greg said and why or why not. i don't think so actually looking at the elections coming up june seventeenth in greece i think the new just democracy party is going to go down in flames once again to the radical left if that happens i don't see any way in spite of what the leader is saying alexis is saying that he wants to stay in the euro zone if the euro zone cuts off the e.c.b. and i am cut off funding to greece they're not really going to have a choice there they're going to default they're not going to have a source of funds so you know the question is does he really believe that or not i think it's about sixty sixty five percent. of the radical left wins this election if he does essentially you're betting that spain is going to leave the euro zone within the next seventeen days so lauren i don't think that's going to
happen but i do think it's inevitable that we do see both the spending and a greggs and both are going to happen it's the only way these these economies have any chance of recovering austerity is not going to do what they they they still need to implement. genuine reforms neither country has done that yet so it's a disaster case scenario here and then we're looking at right now ok and a greggs that is something that that we've been talking about the media has been talking about obviously it's got a lot of attention and so we kind of know you know that there would be an impact on the global economy i europe's economy something like as bad as that spain is a much larger economy than greece what would be the impact of that on on the u.s. on europe on on the global economy. one euro multiply greece by you know five or ten fold and see the. balances you know are you know close to a trillion euros here now that there are rest of the european central bank
governments are going to have to fund the e.c.b. we've got a capital flight that is just summer and you talked about spain out of greece out of portugal out of italy so you know you know where does it stop of course spain is arguing right now they want the european banks stop the e.c.b. to you know banker all of this and we're seeing analysis from the financial times and from crew members from people like that saying well this is what needs to happen well you know what would it do to the euro you know what would it do to germany you know i think it's time lori for a sensible debate on what the best way to break up the euro zone is it's inevitable in my opinion the euro zone is going to break up so rather than every month rolling over these fantasy euro bonds scenarios that are not going to happen because germany cannot approve them without
a poder referendum and. all right all right we lost your audio again we're going to we're going to toss to a quick break we'll have more with miche after the break also still ahead jock's aren't the only group of students being lured out of college for their skills anymore the tech sector is trading lucrative contact tracks for up and coming engineers and software developers who will give you our three cents on the revenge of the nerds you could call it first though your closing market numbers. what drives the world the fear mongering used by politicians who makes decisions to break through that sort of being made who can you trust no one who is you know maybe you who with a global machinery see where are we heading state controlled capitalism is called sessions when nobody dares to ask we do our t.v.
question more. you know sometimes you see a story and it seems so you think you understand it and then you glimpse something else and you sure see some other part of it and realize that everything you thought you knew you don't know i'm sorry is a big. story we're going to. look into the ilona so we'll get the real headlines with none of the most of the problem with the mainstream media today is that they're completely disconnected from the viewers and what actually matters to those viewers and so that's why young people just don't watch t.v. anymore if they want news they go online and read it but we're trying to take those stories that people actually care about and transfer them back to t.v. .
all right welcome back thanks for bearing with us because miss if there's anybody worth listening to it is him so let's continue to get your excellent analysis on europe mike shylock you were talking about how there needs to be a scenario for breaking up the euro zone however today we are mario draghi calling for more consolidation in the sense that he says that banks can't be regulated on the national level we need a central authority in europe to regulate them hey is that the solution my child lock. it's an impossible solution to all out why don't i don't know why these people keep proposing what can't happen we need to start discussing lower and what is possible as as i was saying the german constitution prohibits these things there
would have to be a voter referendum in germany and polls show what sixty seventy percent of the people would not vote for such a thing yet these ideas keep resurfacing on euro bonds you know it's senseless why don't we start having an intelligent discussion more about the best way to break this up because it's inevitable here now the experiment is failed married dr called for you know the heads of all the governments to get together and publish a plan. there are enough or and what are they going to do they're going to come out with what seventeen different proposals one from germany one from france one from greece one from spain they all want something done or actually maybe there's about eight different plans and there are if you write them out but the thing as germany and finland and a number of the northern european states are simply not going to vote for these proposals that are under discussion so why debate what can happen why not
debate what needs to happen i think the best scenario for a breakup of the euro zone is for germany and some of the northern countries to leave and further countries then want to stay in it can stay in it i think will be interesting if we do that lauren what does france do then what if france is now backstopping instead of germany one of france's backstopping alone spain and greece does a lot on changes of benyon here of about what he wants i don't know but at least if germany italy germany can have a credible currency immediately right off the bat. with italy and for. rance remaining in the euro zone and there will at least be a couple of countries there that are you know complete zeros here like greece would be if you tried to go on its own you would have some semblance of your
own falls to parity they're going to default on these debts so what and how does germany need to prepare in advance for that i would suggest that german banks need to be exiting on one hundred percent right now of all of the rest of their euro zone debt these are the kinds of conversations that we need to be have these are the actions that need to be taken in place instead we keep focusing on the impossible the unobtainium war and the unobtainium yeah you know might sound like i don't know why they don't just come talk to you you sound like you have a solution for what an exit could look like meanwhile what we see is countries attempting to act like they have national sovereignty and this vote in ireland where they're voting on a referendum for the fiscal treaty in order to get any kind of aid they need to approve it so are they essentially just pretending that they have a decision here. the aids attract the ridiculous thing about this you know the
the threat of taking away is what's driving voters in ireland to vote for this thing they should be scared to death lauren of getting more aid they don't want to look at what did the great yeah look what portugal spain is complaining right now they don't wonder you know who the prime minister of spain is saying we don't want because we can see what it did to our one so now the voters unarmed are saying oh we need to vote for this thing so we can get more oh i needed to follow ireland has a real economy far more than greece far more than spend far more than portugal so you know ireland should have left the euro zone right then and there and defaulted on all that debt they had a vote on this one of these new people do the come in more exact same policies
bail out the foreign lenders no it is completely senseless this vote's going to pass it's going to trap our own more than they're already trapped that's the sad thing war and this yeah aid is a euphemism for bailing out foreign lenders maybe the same way that hygiene has become the euphemism on wall street for outside speculation with depositors money now meanwhile one of the effects that we've seen of all of this risk in europe is that investors are running to what they perceive as safe haven so you have this effect if we can bring up the chart where the united states with which has staggering public debt has seen its yield fall to record lows the ten year treasury at one point five two the last time i checked earlier today so people are giving the us government their money for only you know one and a half percent return on it but mike said like this is not a surprise to you this is something that you. you predicted you've been on the
deflation side of the debate expecting yields to drop or remain low since the financial crisis so what of the hyperinflation if ness why haven't we seen the dollar collapse that they've been predicting when they keep looking at monetary printing in a vacuum and saying my gosh and they're also to us central focus more and they look at the united states and they say look at all this monetary printing but for all the monetary printing in the united states the printing in china has as been going on at a far far more rapid pace they look at the mess in europe now where they're calling essentially the spain. france even is calling for monetary pressuring to make it as a for earning can can restore capital to these banks and get destroyed the euro look at japan debt to g.d.p. one two hundred twenty years at two hundred forty percent now one of those two numbers so you with with us. let's call it one hundred twenty or one hundred
whatever you want to call it shows you there's a lot more you know to go here in the united states and japan you know both have a couple of advantages here over europe europe is is splintering apart and sense as i said europe is going to bust apart yet we don't know how it's going to bust apart if it's germany that's left in the euro well we'll see the euro strengthen but if germany exits and it's spain and greece and france and italy this left in euro's going to collapse so. we're seeing a confluence of all of these things right now and you know like it or not you know the u.s. capital markets are among the freest in the world and you know that is one of the reasons and the u.s. is everyone's biggest trading partner so that's one of the reasons why the dollar is holding firm the cleanest dirty shirt as some have called it is not metal area and has called it out of the g three currency. now one of the other bits of news we
got that's bad about the u.s. economy is that g.d.p. was revised lower it came in originally at two point two percent it was revised down to one point nine percent and originally it already didn't meet expectations of two point five percent but mike said locke these are government numbers i know that you're critical of that aspect so what is g.d.p. really for the u.s. . well that's a good question it depends on what deflator use the official government number is one point eight six i think a more realistic one is maybe two years of personal consumption expenditure is or perhaps the c.p.i. instead and you'll get numbers in one point two seven i think and one point zero five or something like that if you use the john williams shadows that's you'll get negative ten percent some of the hybrid inflation is actually believe that but if you carry that back we've had maybe g.d.p. in the united states of about ninety percent of the time for the last twenty five years so i just you know shows you that some of these stats out there that people
are producing are you know wildly wrong in the other direction even more wildly wrong in the other direction and you know one of the things they missed again is is the effect on credit they say look i have inflation a lot and i say my god look at all the printing the united states is doing but the credit market is fifty trillion dollars bernanke us printed a couple trillion or whatever and you know that's backstop maybe by you know garbage but it's not a gift it has to be paid back just look at the report that came out the government or to came out today the credit market report us consumers are over at trillion dollars in delinquent consumer credit for and you think that's going to be paid back i don't want close to eight hundred billion of that is is seriously delinquent so you know we're talking about printing
a trillion here in print trillion there yes it adds up and yes the u.s. is going to have a fiscal crisis but it is the whole currency scheme the scheme of fractional reserve lending everywhere are going to blow up first i think so lauren and that's one of the reasons why this deflationists has light gold. call for a flight to safety of gold gold's off its record high of you know nineteen hundred dollars and it's down to sixteen hotter it was four hundred. u.s. dollar index first fell to the eighty three well we're at now it's gone up so all these people are seeing that gold is tied to the u.s. dollar well i would say it's not it's tied to the global current financial crisis. currencies globally not just the u.s. dollar and they're all you know so to say that the u.s. is going to enter into hyperinflation first when these problems are more severe
elsewhere and severe don't they missed the boat or and they missed the boat big turn they missed the boat big time but you are. saying you were caught and you've been saying this all along now i ran out of time to talk about obama picking winners and losers maybe next time for that that's all we have time for mike said luck thanks so much for being on the show he's the best that advisor first pick up pacific capital. to be on this show or him. all right let's wrap up with loose change shannon dimitry your audio better not cut out are writing to me. ok so unusually this caught our eye because kids being lured
out of school out of college with lucrative contracts and perks has been athletes but oh look at the times with the technology boom it is a different crowd being lured this way take a look. that. is a new. baby. you could call him nerds or you can call him billionaires depending on who you're talking about but according to the wall street journal the technology industry is identifying up incoming engineers and software developers early then rolling out the red carpet to lock them up by wining and dining and other giveaways on campus so does this really reflect the change in times that technology is where all of this growth is coming and where talent is really needed you know because these guys are actually producing things so the market proves that because they're pushing them out of college whereas these
bankers are ivy league boys ok boys are the ivy league schools and they get poached they're full of goldman sachs j.p. morgan morgan stanley merrill lynch wherever and they want to bring them in there and operate in their kleptocratic sewage pot and blow it i mean you are on the internet new ball are usually always one hundred percent of the voller and the geeks are cool is a cool thing now especially in silicon valley so you're stereotyping i mean i don't think everybody in tech is a geek anyway i mean i'm saying it's a cool thing to be a good school to be ok it used to be cool to be a banker the really cool new yorker banker now the bankers are whining really upset and they cry all the time and they cry why because they don't like the market by wall street is messing up their little you know of their own like people because that makes them feel upset because it's a. privilege and you want to have you think i think some of the viewers of content that i'm techie so winning. charlie will make you get by with this some
expensive meals moving on this might cast doubt on everything dimitri just said about baking because the vampire squid has a great pool of applicants to choose from it looks like at least if you look at the numbers it's the largest ever according to the bank's president and c.e.o. gary cohn we just hope they don't like this. it is the best bank can you explain how i can work as a banker so for watt you can work in nat west and handle deposits and withdrawals and call yourself a banker i can work on them in a deals and i.p.o.'s what them do you even know what they are no list. yes that was cute but goldman sachs the largest bull applicants do you think this is real or just p.r. because goldman is has suffered a little bit of a hit to the p.r. well they've got the largest i mean you know i don't know what what the situation is of the other investment banks ok but you've got a lot of these these who piglets you know suck from the teat and they want to go
straight to goldman because they don't even know what i mean is they don't know anything they're in college they have a degree from you know dartmouth or some ivy league school or and they're like you know what let me go to goldman sachs i like to steal because i don't make anything because i don't know how to actually build a software system i don't object and technology hardware i don't want to work on assembly line i don't actually create real wealth you know do i want the money shuffling and also shuffling one around slice and dice and sorry guy you missed the boat should believe a brother in two thousand and four it's over now ok moves over there's no more bubble bubble to pop up sorry but just in a corner alone you better learn how to code you better learn how to see and hear instead of slicing and dicing mortgages and then creating c.d.'s is a good approach as i'm sure it is derivatives and you create a universe of exponential exploding debt which is what these guys are good for nothing and there is a force of people lining up to do it all over again but that we're going to have to leave it there for today because that is all we have time for and that's our show thanks so much for watching and make sure to come back tomorrow. and meantime you
can follow me on twitter at lauren lester and give us feedback on the show or catch any you missed it you tube dot com slash capital account come back tomorrow but until then have a great night. wealthy british style such as what are. you going. to do. market. why not going to. find out what's really happening to the global economy with mike's cause or for a no holds barred look at the global financial headlines tune in to kaiser report on our.