tv Keiser Report RT May 16, 2013 3:29am-4:00am EDT
a freebie. i am max keiser welcome to the kaiser report scientists used to believe that the earth was the center of the universe today economists who call themselves scientists claim that the economy revolves around these central banks stacey herbert max to set this episode up we need to look at this william bonzai are here and this is the fractal reserve system behold the sacred dow as you know of course we have this secret dow if the dow jones and the nikkei or the footsie if they rise if they continue to rise then all will be ok in the economy so we sacrifice our
wealth our economy jobs everything to rising a rising dow well that's not what we have not predicted in other words we said that after the two thousand a crisis that there would be massive money printing and one of the likely outcomes would be hyperinflation in the stock indexes people read away from cash they've been shut out of the precious metals markets because there's a huge barrier in the form of these naked short sales so that they've been sold you can't go into precious metals the bond market is already at a three hundred year high in the u.k. or a two hundred thirty eight year high in america so that leaves only one play stock market so they're being corralled into the stock market in type or inflation because in america interest rates are close to zero so you have to really understand that the dow jones is the new currency of the new the new dollar and your ability to buy that dow your purchasing power with your wages is crashing so
it is hyper inflation right now because the wages are static wage growth the static so your ability to buy into the dow which is the currency of the new empire is crashing this is high. also i've noticed a lot of analysts and commentators and so-called economists have apparently they're completely high on free money l.s.d. acid you know free money they're stoned off their brain because if you look at this headline from slate magazine the salvation of japan prime minister shinzo rbs bold recovery strategy is working something remarkable happened on thursday sony posted a profit it was the first profit for one of japan's iconic firms since two thousand and eight the exact same day the price of yen slipped below one hundred to the dollar for the first time in ten years so never mind the fact that sharp another japanese giant reported the following day record losses in the hundred year
history never mind the fact that the yen dropping is causing currency war which is leading to military where there are threats of military conflict china is not happy about this crashing yen which is down thirty percent in the last six months it's exactly right so this crashing yen is at the expense of exports from nations like china south korea vietnam the whole region is having to underwrite japan's emergence as exporting economic growth scenario which is causing huge militarization and military conflict in the region and remember the yen for twenty years has been the funding currency it's been very cheap relative to these other currencies it's a place to go to borrow remember the yen carry trade you borrowed and yet it bought real estate in iceland and then iceland crashed or you borrowed again and you speculated in the other areas of the market the real estate market the dot com even
going back to that era and these markets crashed so they just made the yen more of of a of a funding currency by making it artifice. really cheap in this way japan has a debt to g.d.p. of two hundred percent that's just the government if you include the corporate debt it's closer to five six hundred percent total debt to g.d.p. so here's a country that is attempting to make that debt look smaller by creating artificial inflation by crushing their own currency so that they can say well our debt to g.d.p. is decreasing however the overall economy is now in much probably a bigger bubble now than even in one nine hundred eighty nine was when the bubble economy in japan hit in a crash down sixty seventy eighty percent in the nikkei now they're going to inflate that probably on a less secure economic footing so this could be an even bigger bubble in japan now well ben bernanke he calls. plans he calls them rooseveltian resolve and his
resolve to fight and defeat deflation part of this is a has appointed go karada to the bank of japan now slate talks about this new policy of seventy five billion dollars a month of assets in equity purchases and more money printing than ever is the stimulus program will be affordable because under hirohito the bank of japan is committed to printing as much money and buying as many bonds as are out there well it's funny that bernanke you make that comment because of course roosevelt is somebody who he cast aspersions toward in any any possible moment he's a milton friedman a guy he's a monetarist he's a money printer so to go back and say well it's the roosevelt like stick to it of ness is really again duplicity on the part of ben bernanke he picks a policy i mean this is classic. duplicity on the part of wall street or what
people call selective amnesia where he'll remember certain things if it supports his current theory but don't forget everything else that doesn't support his current theory that could change at any minute so anyway they're praising the sacred meek. the nikkei is up seventy percent since the was elected in december so it's up it's up it's up now of course the yen was at seventy seven to the dollar back in november it's now at one hundred and one hundred two to the dollar so it's crashed by thirty two percent so accounted for half of the rise in the nikkei but of course the slate authors do not mention the whole situation with the japanese government bonds which are limit down almost every single day but the japanese bond market is fukushima so you have japanese bond market like atomic reactors melting melting down so you have double so the cost of funding this growth in japan has been artificially stimulated has doubled remember they've got debt two hundred
percent g.d.p. five percent total the debt servicing just doubled but again bernanke in the rest they don't look at that then look at fukushima remember tepco which is the owner of fukushima when a blew up and created a radioactive fish you flew over los angeles and ended up on the sushi place of spa go diners they did the same jack nothing about it because it wasn't convenient for them to talk about fukushima here the bond market is going through an atomic explosion but it's not convenient to talk about it because it invalidates this idea that their god at the artwork suggest that they're the dow gobs of the markets of their milton friedman on crack and bernanke exemplifies that to perfection well let's continue on bonds we mentioned bernanke ian relating it to japan because he says bernanke blower of bubbles and this is from paul krugman in the new york times and he asks why all this talk about the bond bubble partly reflects the correct observation that interest rates are very low by historical standards what you need to bear in mind however is that the economy is also in
a specially terrible shape by historical standards once in a three generations terrible the usual rules about what constitutes a reasonable level of interest rates don't apply well again is total do. posted it because krugman is saying rates are down because the economy is soft but then the officials in japan are saying rates are rising because it can all make activity is up you say so again it's convenient in japan to say economic activities up so rates are rising but a new side of the ocean they'll say well yeah you know the economy's down there going through deflation it's a basket case that's why rates are so low so here you have jim major economies the second in the top three of the world the primary doctrinaires and dog authors of these two economies can agree even on the general principles that guide these are policies in these economies the bottom line is that interest rates are near zero and they're inflating in an enormous godzilla like bubble that like godzilla will
soon start knocking buildings over worse than the crash of eighty nine one thousand nine hundred. so of course paul krugman made that fatal error there of saying that this time it's different that's what you always hear at south of a bubble so he's using the argument that this time is different to justify these bond rates being at you know bond yields being at the all time lows so he's also saying that the reason why they won't rise is because the fed can control the rates of course that right now he thinks they're like chairman mao and they can just dictate what the markets will do and he then goes on to talk about how that investors are who are betting on a bond crash and anyway just have an irrational hatred for ben bernanke and so i want to talk to one of the biggest bond vespers in the world in fact the biggest bond besar in the world which is bill gross of pimco which is two trillion dollars bond fund never have investors reached so high in price for so low return never have investors stoop so low for so much risk never have so many investors.
who winkled into such a crappy trade and then the. federal defraud so many. wow and my churchill impressionism work i think but the point is they will go search. i use a car maybe a bowl or. bottle of whiskey and a dog. however the point is bill gross that this is. a common era of an illusion within an enigma of a puzzle remember the enigma puzzle solving machine from world war two they had to solve the puzzle but they let the attack happen anyway the original false flag or one of the original false flags of that era because they needed to pop the germans if they knew that the unit machine and solve all the puzzle similarly bill gross c.s. solve the puzzle he's saying look bond market's ready to crash but we don't want to tell the stupid fish over there in the u.s.
like paul krugman who's like the official propagandist you know world war two germany hitler they made that famous film triumph of the will to propagandize their message same thing of proper argument he's the lena the filmmaker of the new york times well finally on this because then krugman says and one should never forget the example of japan where bets against government bonds justified by more or less the same arguments currently made to justify claims of a u.s. bomb bubble ended in greece so often that the whole trade came to be known as the widow maker at this point japan's debt is well over twice as g.d.p. its budget deficit remains large and the interest rate on ten year bonds is point six percent though no that's not a misprint he says well of course he wrote that a may ninth when the interest rates were point six percent within a week there a point eight six percent so that's a pretty huge rise as a forty percent rise in the course of a week listen john i know you get a little tiff going with japan at the moment here so i can really screw him up.
start shorting japanese government bonds really aggressively on the open market with massive naked short sells drive that interest rate to four percent on the ten year and you have to worry about japan ever again ok china by the way used the proceeds to buy gold for your friend max. by colt all right stacy thanks so much for being once again the kaiser report thank you max the second half a lot more. modern russia was built on coal. fuel for its factories. coke for its steel. gold is it more than heat for its people. join me james brown to meet them and spend their lives underground and work in one
a do it your bank and before do it you're back he was at lehman brothers also in london john welcome back to the concert thank you max always a pleasure all right john butler regarding the bank of japan policy sleep magazine writes the stimulus program will be affordable because under how do you the bank of japan is committed to printing as much money and buying as many bonds as there are out there well if printing money and buying bonds worked wouldn't have started to work at least a little by now somehow japan is simply repeating the same mistakes over and over doing things that didn't work in the past on an even greater and larger scale there's no qualitative difference to what is happening now only a quantitative difference but it should be clear based on the track record of all of this that you're well into diminishing returns at this point and japan is simply dug itself into a hole and it should really just start to stop digging as it were doubling down on fell policies now at this juncture however the nikkei the stock market is now
trading up to multi-year highs and people are pointing to that and saying you see it's working they're not pointing to the depreciating currency they're not pointing to the rise in yields on the bond market they're not pointing to any other factor of that economy just the stock market and they're using that as a proxy for success and this is being repeated now in other economies around the world as well so what's wrong with that idea well i think focusing on the stock market at the expense of everything else is a mistake it's very myopic sometimes the stock market predicts recession but it's wrong sometimes a stock market predicts a recovery but it's wrong and indeed when you get into a situation where policy. the makers are not merely setting short term rates but are effectively controlling long term rates with outright bond purchases or targeting currencies through various policies and indeed are increasingly targeting the stock market itself how can you be confident at all that it's telling you
anything real any high quality information at all about the real economy that disconnect simply grows and grows but this also encourages and fuels distortions asset misallocations as any bubble would just wait for the next bust it's going to surprise everybody in its magnitude the history of boom and bust and bubble and bust over the past thirty forty years as a band that they come pretty regularly and there are there are bigger bigger bigger speculative bubbles and much more dramatic bubble bursts and yet the cycle is rapidly compressing right there is the boom bust cycle it used to be nice to get a couple decades behind you to get through a proper boom bust something bigger than just an ordinary recession say but now it takes a few years here a few years there to go from boom to bust boom bust let's just roll back a little bit because boom bust is that armas understood generally refers to. in an economy where you've got inflation and deflation and you also have a rise in wages that would be part of inflation but starting really with the
post capitalistic period of two thousand where we went into a purely financial lives world wages have been stagnant but he still have the bubble and pop so wages have been left completely behind so it's not really boom and bust in the sense of what people understand to be the business cycle as it has been described that's right not a traditional business cycle the boom bust is increasingly concentrated in asset markets alone and central banks look at that and they think oh you know what's the big deal because inflation is subdued inflation is low but just because inflation is low does not mean resources are not be horrifically misallocated behind the scenes at. a result of all these screwed up manipulated price signals coming from the financial markets which in theory are incredibly important signaling mechanism to corporations where should they invest where should they not invest should they invested all should they allow certain assets to depreciate should they build up their capital stock in other areas these mis allocations or destroying the
productive capacity of the economies in question ok let me just those talk about japan a little bit more here the moving parts in the situation have got the stock market the currency market you've got the bond market it's an economy that after the bust of one nine hundred eighty nine where after the huge boom of speculative drill of driven housing speculation and stock market speculation they ran into the last decades of japan to last decades so they come and they double down on quantitative easing they're printing money at an astronomical rate now and you've got the nikkei is moving up but against of course in the yen is also depreciating so it's cut the gains is half right ok so that's the one factor but this rise in the ten year bond is really the interest rate is doubled so here's an economy with the most debt any economy in the world two hundred percent g.d.p.
debt on the on the government debt plus other debt bank debt except they got five to six hundred percent g.d.p. debt to g.d.p. so how are they going how does the debt service doubling in in a week how is that going to work out well it's not going to work out very well and see this is what everybody's missing in my opinion the just the japanese government bond market is a huge market this is not some tiny market this is a massive market and when it sells off when you'll drives what it's doing its effect on the sucking capital in from elsewhere that's what it's doing it implies a general global asset deflation down the road not just in japan. around the world it's a global capital market and as those you'll draw it's that income to service that interest has to come from somewhere else the interest on the debt as a percentage of g.d.p. whatever that number was it just went up a lot exactly and as this process continues that yield is going to continue to go
higher when the bank of japan starts to print money to pay the interest just the interest on the debt isn't that the definition of hyperinflation again if you define hyperinflation in asset terms that is what occurs in asset markets that eventually spills over into actual real life consumer price hyper inflation yes that is a key trigger point if you look at history when governments start printing money or central banks government start printing money not merely to acquire some debt but to actually service the debt interest payments as you point out that has historically been an important trigger point in multiple cases has on the least a very dramatic surge in realized real consumer price inflation so by hyper inflation we are talking about not necessarily consumer prices that are associated with inflation that is to say this boom and bust cycle but we're really talking
more about currency collapse confidence in the yen disappears and so the end simply is a blip you know you had a big stock market rally in zimbabwe. and their currency isn't worth you know you had the one hundred trillion of zimbabwe note it was circulating on e-bay for a dollar a coffee and yet the stock market is going higher and zimbabwe so is that the model that the japan is following well it's beginning to there is a huge disconnect between nominal prices and actual real prices as a result of huge currency swings now let's put it in perspective for you the it has weakened an awful lot in recent months but really it's only weaken back to where it was prior to the global financial crisis in two thousand and eight so yes it's a big. moving a short period of time but it's not as if it takes you to an order of magnitude that's completely out of line with historical cross exchange rates yen dollar yen euro and so on however if this continues yes eventually you get to the point where yen weakness is substantial enough that it will feed into consumer prices japanese
consumers will sense that and they'll start hoarding goods they'll start dumping yen for things that will hold their value be it other currencies be it gold who knows what it might be but that's when you get a shift in the demand function for money they can really hammer the yen hard when domestic japanese people no longer want to hold it no longer regarded as a store of value insist on holding something else instead and beyond that point it's very difficult if not impossible for a central bank to control the value of its currency well the mythical japanese one house mrs watanabe who has over the past twenty years during a period of low interest and low bond yields have been parking their money overseas and you have the famous the end carry trade where you end up japanese yen end up being invested in icelandic krona for example or swiss francs to capture the spread on the interest between those two currencies so and of course interestingly enough i mean mrs watson abi she holds the purse strings on the discretionary cash for
that entire country and so by tracking her movements you can kind of get a sense of where the cash flows and money flows are going to be so in this sense i mean i've been hearing anecdotally that both mrs watson nobby and her counterpart in china let's call her mrs wang. have been buying gold and as gold has been selling off on the exchange traded funds in new york there's been there's been much more in asia speak about them in india and china and as you point out even in japan you're seeing a huge surge in gold demand and if in fact you look at the price of gold. yes in terms it's still essentially at all time highs i mean it hasn't fallen it's about a percent off it's fairly close that's correct and indeed when the japanese look at that five percent decline and they look at what their government's trying to do and they sense where it's all going now actually they'll just keep on buying gold there will be support but there's no let me jump in here because
a couple of weeks ago the end goal in the end actually made a forty year high and it seems i kind of got fishy in that this is when he had an enormous attack on the price of gold five hundred tons of gold sold in one trade practically on a friday afternoon and they smashed the price down now we're talking about japan as being really the the nexus of the global currency markets and the most radical in their quantitative easing is it would it be too far to say that as that gold price reached a forty year high in yen terms it alarm bells rang at the central planners around the world the fed and bank of japan etc it's certainly possible again were central banks doing not only are they setting short rates they're effectively setting long rates bond purchases they're targeting the value of the stock market i mean they are manipulating financial markets generally in a fair what i'd call a more active way they've been caught doing so live up credit default swap energy
markets i mean they're not it's not that there are theoretically maybe a minute delay doing it they're doing caught redhanded they're doing it and so to somehow see all of that manipulation going on but then to have no sympathy whatsoever with the idea that maybe. they're also involved in some sort of manipulation of gold and silver prices because they do function as alternative currencies to me that seems a bit naïve now i'm not saying they are doing it i'm not saying i have evidence to that effect but but to see the blatant manipulation happening everywhere else and then to think oh no it can't be happening with gold and silver just seems a bit naive and inconsistent ok let's talk about paul krugman first he doesn't see the as a bond bubble you know this. what he sees is that the bond prices is proof that the policies of the german central planner ben bernanke are good well this is tautological reasoning the fed is buying the bonds but if you look at the rate at which the federal reserve has been buying treasuries over the path of years they've they've been absorbing essentially half of all the issuance into their own balance
sheet but it looks like the stock market to paul krugman says this is proof that this is a good idea indeed he does but you can't you have to be consistent and what i would say what i would say to paul krugman is you can't on the one hand say all the bond markets tells you everything is following yields are low expectations for inflation are therefore obviously low so let's not worry about it let's really goose the economy and get it going in proper keynesian terms but you can't say that on the one hand then on the other hand say oh yes by the way yes the fed's buying bonds but that's not relevant the fed setting long term rates but that's not relevant you can't ignore the market manipulation on the one hand and then suggest that the market is a free market on the other hand and therefore it's ok to implement all of these policies it is taught a lot chicle reasoning selective amnesia absolutely don't look at the monetarist hokum on one side just look at them keynesian hokum on this is exactly right and that's why also he's blind to zimbabwe or argentina or other economies that have aggressively tried to spend and print their way out of debt problems well we're
going to cut off they're out of time but thanks so much for being on the kaiser report thank you max. all right that's going to do it for this edition of the cause report with me max kaiser and stacy herbert and with my guest john butler and for if you like to send us an e-mail please do so at kaiser reported r t t v dot ru intellects i'm asked by all. the news if she could lumber a jury to mccurry was able to build a new most sophisticated robot which on fortunately doesn't give a donor an amount anything tunes mission to teach creation why it should care about humans in the world this is why you should care watch only on the dot com. real damage and complexity of this oil spill was not something you can grasp just
by looking at dirty birds we have between four to five million people in this directly affected area of the coast and it's pretty clear why it's not being reported because b.p. can't afford to have a reported all along the gulf coast are clean they are safe and they're open for business if b.p. is the single largest oil contributor to the pentagon the us war machine is heavily reliant upon b.p. and their oil this is a huge step backwards for the marker c. it's a step forward oligarchy carex it is toxic as it looked like spraying and. it was it was not a picture that either the government or b.p. really wanted to have out there i don't want dispersants to be the agent on. his bills.
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