tv Prime Interest RT October 16, 2013 4:30pm-5:01pm EDT
there i marinate and this is boom bust here are some of the stories we're tracking for you today. welcome to the final octave masterpiece of political theater while congress acts as though fiscal brinkmanship is a form of off brooky the markets have taken notice and we cut through the hype and hyper partisan bickering and tell you all about the fallout from the weeks of political headedness and grease no stranger to true austerity measures is in the news yet again now for now because another piece of the bailout fund placed them on the table and thankfully the deputy prime minister of greece sat down with layoffs and provided fascinating insight into among other things his lost generation and
finally with the fiscal can now kicked if ever so slightly we can turn our attention to the federal reserve can anyone say exit strategy without a smart because i can't i just can't do it or just sit under a charge of the madness two four plus years of quantitative easing let's get to the show. the ink on a shutdown and debt ceiling fix has yet to even hit the page but that sure didn't stop a round of self-congratulatory back patting earlier today now here's senate majority leader harry reid check it out. and political adversaries sort of side their
differences and disagreements to prevent that disastrous. i think republican later this legislation also funds the government through january fifteenth and averts default through february seventh. great super awesome no default february seventh and that's just the senate bill the house hasn't even touched it yet now with the u.s. fiscal situation now secure until early two thousand and fourteen if all goes according to plan and then come black friday this will all be put a distant memory to the turkey stuffed shoppers that's right about the time that congress performs its next choreograph encore in january that's when the latest g.d.p. figures will show a resilient economy and consumer so merry christmas us economy. however mr market has a long memory and the fallout from this kick can of worms will inevitably linger joining me to discuss bob inglis hello there how are you doing today very well now
turkey dinner right already getting excited now it's easy to get lost in mainstream media coverage twenty four seven of this political squabble that's been going on but what have the actual markets done in terms of reaction to this political squabble sure there's been a lot of finger pointing and talks about doom and gloom has there actually been any well the answer is yes all we have to do is look at mr market and we have. a graph here that shows the u.s. treasury curve and this is just one month to twelve months so this isn't the full u.s. treasury curve but the blue line at the very bottom almost touching zero is what it looked like on september thirtieth and this was the beginning of the shutdown and now if we move in time just a couple of weeks forward to yesterday october fifteenth we have a different picture and that red line is showing that one month treasury dress has spiked to thirty five basis points and that's just an average and what we're seeing here is an inverted yield curve on the very short run so what does that mean the short term funding markets and what does that recall lehman brothers have been in
a little bit of chaos recently and i'm not saying that we have a lehman brothers situation just yet but we have the makings of it right and actually fitch one of the major rating agencies and we all know where there is good . is there they don't they recently put us dead at what is this negative watch quote negative watch and it's reminiscent of when s. and p. they out right downgraded u.s. debt in two thousand and eleven to what was it a plus big a big a little anyway they don't simply did great it in two thousand and eleven get in the markets at that point so what are the long term consequences of all of this because there has to be long term we're looking at the short term now but no one really can of forms that i mean just imagine that story about the boy who cried wolf how many times can congress kick this can before the market catches up with them we saw here recently was something unprecedented there's something called the ted spread the euro dollar spread another short term funding market indicator that went negative for the first time ever so eventually if congress keeps doing this
it's going to blow up in their face the u.s. dollar is a reserve currency status is jeopardy if congress doesn't make structural changes to the way it's handling our deficit and debt situation so what you're trying to say is that this time it is time only believe. that i hope i got that through i heard it ok you did there now in a related story leave it to the benevolent wall street masters to stand up for the little guy you know really actually this time they kind of did today jamie dimon announced that if the government failed to make social security and other scheduled payments that j.p. morgan would step up in front uncle sam the money or remember this. morgan is admitting it violated laws in the london whale scandal j.p. morgan and others are driving up the price of aluminum to company was accused of misleading buyers of complex mortgage investments j.p. morgan facing a record fine the allegation did energy markets we made a terrible agreed. almost no excuse for. now of course jamie dimon he was referring
to the fallout from the london whale débâcle so by offering to front social security benefits is this just a brilliant p.r. move it sounds like one to me bob when you complete oracle question of course it is and can i just add that only today the c f.t.c. is finding j.p. morgan another one hundred million dollars they had yet to find them for anything related to the london whale debacle but yes anytime we have a situation of extreme political intransigents the wall street will smell blood and they're going to use it to whatever benefit they can and of course here j.p. morgan it needs all the goodwill that it can from this you know this latest poll it's under increasing pressure they just released third first i don't loss ever in a quarter since several years ago so i mean their legal bills alone are a struggle in terms of billion dollars nine billion and they go and so i should've been a lawyer a lesser known fact is that j.p. morgan is one of the biggest players in the federal and state food stamp program
and the banks serves as a middleman and issuing what are called e.v.t. cards those are like debit cards but how is this serve their bottom line apparently very well tell us about a j.p. morgan got into this business in two thousand and four two thousand and five when they bought out the citi group unit now at the time the food stamp programs are a snap it's more accurately called was not such a big part of the us in title and proceeds are what they did was they capitalized on extreme amounts of people forty three million today signing up for these programs and committing lots of fraud that is not being investigated and this is something we're going to be talking about and in the future and it's made them billions of dollars that we think that this business may have for sure well there you have it as always we'll be tracking this and keeping you posted on all the latest and. now speaking of a country that knows a thing or two about to fall and i'm not talking. at the u.s.
let's talk about greece during the u.n. general assembly i sat down with the deputy prime minister of greece evangelos venizelos to discuss his country's pretty serious fiscal and civil turmoil now i was one of many of those was one intimidating guy but i have to say that to me he came off as relatively warm particularly in light of the fact that we were discussing greece's particularly its position in the euro zone currently and when i asked him about the social unrest in his country he had this to say. here a social explosion if you will in greece if if this is must we must avoid we must avoid. the social explosion we must understand. there or. that is essential. we must respect the second is made by people who made the calculation. now just several days before that very interview greece's far right golden dawn
party which is described as a neo nazi group was implicated in the killing of a prominent left wing artist known for his anti-fascist views and after six years of recession and with youth unemployment at sixty percent greece has undergone a serious radicalization of its political landscape then he sells himself is calling this the last generation in greece. something absolutely unacceptable because. maine so she and your could be used to avoid life and momentum of the most generation. a sixty percent. younger generation. is something. acceptable not only for greece but the show for the european community for the good for your group. of democracy. and social cohesion you.
know that is the us is a member of the center right new democracy party in greece which has been criticised for a soft pedaling the threats posed by golden dawn in an effort to lure back some of their traditional voting base but if social cohesion is your goal you definitely want to avoid stuff like this on daytime television check this out. that it was. ok. wow yeah now that was an actual golden dawn spokesman smacking two left wing female female on your deputies that's just bonkers to me but aside from social unrest in greece there's also unrest in the eurozone and i spoke with many sellers about the recent reelection of german chancellor angela merkel. hardball she obviously has kind of been portrayed as the proverbial puppet cheer behind these
austerity measures that greece has suffered she's obviously been reelected third term how do you feel about this and what do you think it means for greece first before. i must express my relationship to chancellor of american forces. and that's going to victory. not only greece but the eurozone needs a new german government capable to understand that. for the utopian society but we need a utopian germany and the month when you could see something very very important. now we have some pictures here that i want to bring up for you this is a greek protesters burning the german flag and telling merkel to get out now it's important to note these were over a year ago there you're all these photos but obviously not everyone agrees shares the enthusiasm venizelos has for merkel's reelection as always will be keeping
a close eye on greece and bringing you all the latest developments from his own now coming up where did all those trillions and freshly minted digital fed money go where where could they be well justin underhill charts the surprising answer then david stockman weighs in on the end game for the fed finally it might be football season but we're not covering the bears so much as to be there and a record diamon auction at the other views in today's big deal you know want to miss the. bus but. it was like those doing the job did you know the price is the only industry specifically mentioned in the constitution. that's because a free and open press is critical to our democracy but there's. in fact the single biggest threat that you see in our nation today is the corporate takeover of our government and i was proud to mco we've been
a hydrogen right hand full of transnational corporations that will profit by destroying what our founding fathers would still just my job mark get on this show we reveal the big picture of what's actually going on we go beyond identifying. rational debate real discussion political issues these. are ready to join the movement and welcome. i am the president and i think that's the side that. i know that soon too. bankers. it's all about money and i'm the special effects are politicians writing the laws and regulations that corporations and bankers public has. to. craft in
today's society. about. now each time the federal reserve engages in quantitative easing or q.e. it expands the monetary base and this is one of the few things that the central bank directly directly controls however over the past five years it has expanded the monetary base by an unknown president to reach trillion trillion with a t trillion dollars here to fall the money is just in underhill just seen where exactly is all that q.e. money going please tell us well aaron about two thirds of it never left the building that's because the fed pays banks to keep it there now for a little background banks that are members of the fed are required to keep a certain amount of cash on reserve to ensure solvency and we have a graph here that goes from two thousand all the way to today and we have the
amount of reserves in billions of dollars ranging from zero up to two trillion currently required reserves are below and that's required reserves are below one hundred twenty billion dollars just seeing how much our banks are required to keep relative to their deposits well that would be roughly ten percent so that's the line down there but in two thousand and eight during the crisis the fed started paying interest on these reserves and no surprise bank started keeping reserves well above the minimum amount required these are called excess reserves now here we have two thousand and eight when the fed instituted this this policy and they began paying interest you can see the immediate dramatic response and they continued to climb into today when they total about two trillion dollars. the toes whoa does all of this of the fed's profits all two thousand and twelve said profits were about eighty eight billion dollars the fed remits all of its profits to the treasury so
the more the fed pays out and interest on these reserves to banks the less. it gives back to the treasury or the u.s. taxpayer there was a trick question there. are question i love it now the real question is why is the fed paying interest on answers on reserves and second question more importantly can i keep my money if. you cannot keep your money at the vet only member banks now i did find a two thousand and eight fed press release which stated quote the payment of interest on excess reserves will permit the federal reserve to expand its balance sheet so basically the fed has pumped three trillion dollars into the economy through q.e. and it's now pulled two trillion back out by paying interest on reserves well there you have it thank you just in and bob actually you recently sat down with the stockman to discuss this very subject now yes i did i spoke with david sparkman and he is the director of the office of management and budget under reagan and i asked
him about how the fed will keep reining in what is no over two trillion dollars in excess reserves but first i asked about the fed's exit strategy from its post lehman brothers q e intervention here's what he said. the issue is a willingness on the part of the fed to understand there will be a hissy fit in the market once they start tapering once they start removing what i call this monetary heroin and the longer they wait the worse the reaction is going to be and yet what they're doing today is on sustainable the decision they made i thought was a business in september to defer yet once again the taper unfortunately it was easy to make things up as they slid by the seat of their pants after the lehman crisis in two zero eight now they have no clue as to how they're really going to get out of this in terms of managing a market when everything is mis priced when bonds are way over value when stocks
are floating on a sea of speculation then it is hard to on wind or taper and yet this is exactly the corner that painted itself into and should have been obvious for a long time now yes it is hard to think that anybody expected ben bernanke to keep lows at near zero for five years now but the fed is actually facing another item in its painted corner here and that is that it has been really remitting to the treasury so-called profits last year it was eighty eight billion dollars and it's been doing this to the tune of i think two hundred ninety billion dollars over the last three or four years and this can't last forever and it's a circular game where the treasury pays interest to the fed and then the fed just has its operating expenses and it gives it right back to the treasury along with its other income could you talk a bit about the accounting scheme and its relevance in terms of the fed's exit strategy yes i mean that you've hit the nail on the head the heart of that is
a complete fiscal scam we might as well just have the tracery issue greenbacks to pay its bills because you know issue. greenbacks was that which was thought to be a reckless and radical thing in the one thousand nine hundred forty is not much different than having the fed issue debt t. bills especially that are immediately bought in by the fed based on newly minted deposits that are created created out of thin air and credited to the bank accounts of the twenty one wall street dealers so this is a circular ponzi scheme if you will it can't last if it were true that you can print money to pay all the government's bills or a large share of them thirty percent or more like we're doing today then we shouldn't even bother with taxes at all just drop the money from a helicopter and let you know america live happily ever after everybody knows
better than that and yet it. would be a peel back all the sophisticated talk that you get out of the fed it really amounts to a little more than dropping money from a helicopter just like bernanke he said he would do it that way way back in two zero two during his first year on the fed that was my interview with david. defamation. if you love me do a gang. marilyn just said diamonds are a girl's best friend and if that is in fact true then ladies get ready to meet the newbie at this one hundred eighteen carat egg size white diamond broke
a world record last week fetching more than thirty million dollars during an auction at sotheby's in hong kong now the dazzling stone was sold to an unnamed known better and has been described as the finest of its kind ever ever to appear at auction now hong kong has become a center for jewelry auctions thanks to growing wealth within china and other parts of the region as well and this particular sales signal is a moving trend first for the southern chinese city that is to host more major global auctions and over the last five years five years it's been the chinese diamond market has doubled second only in size to the u.s. and has more than tripled in china twenty two point eight billion dollars triple in china double the size of the u.s. joining me now to discuss all things sparkly the one the only bob english hello good hello again now what do you think this says about you know the chinese spending power and the wealth in china now that now that hong kong is actually one of the three major diamond auction it along with new york in geneva and apparently
they were saying that this diamond couldn't sell they didn't think they'd get thirty million for it well let's remember there was the final bid was put in by a mysterious phone auction person so we don't know whether i have a collector i love those or is that the auction took place overseas and yes it's developing just as quickly as china itself has developed over the last ten years they have a lot of money to spend and they're historically great savers what are they going to keep their money in treasury bills. we love seven four rounds of a fun time now the chinese diamond market is literally has got hold of the gold market in terms of the jewelry sector of the industry what do you think this means for everyone else's other favorite precious metal ok well the gold market is a little bit different. the gold market has buyers in india because of a religious holiday and in china i think that like i said not everybody can see even gold a lot of people there the poor people are sleeping in copper the central bank or
you have to look at what the central banks are doing with the two you're delayed notice they're saying well we're accumulating gold and despite this despite this latest price drop in the price of gold as reflected in spot in futures markets i don't doubt that the central banks are also hoarding it and you know piling up their reserves so people are just following what the smart money is doing so central banks they have growth not done just the central bank smart money ok what hoover that's a that's a never for now you know if for a long time diamonds have been linked with basically more europe and america they have a direct connection to forever and blissed successor etc from the p.r. capital of the world. that is to be as we'll get to that you acknowledge but but actually you know it seems like it's quite a trend in china now it's no more dowry it's more of a gold base but it's it's not a dowry for the way for the husband's family for them taking the wife which is despicable to me but everybody is talking about the current account deficit and so
we exported michael jackson the eighty's what are we exporting no we're exporting waiting ceremonial gifts so i think that the east has bought into this western p.r. campaign that's been burgeoning over the last hundred years and made very successful by de beers and to be here is the largest producer by value you know. and marketed if you will get so that will get them are going to asia i know to get there now they actually they say that their entire premise of where they're going to sell their driving growth over the next four years they see it in china and they're going to attack china why do you think this is a comparison to other countries like say india and the us well like i said india is culturally different they already are into brawled for various reasons and in the west maybe the market is saturated here. i think if you look at the history of the beers itself nobody expected at the time africa to be the center of this great mineral deposits we have been all deposits springing up all over the world and you
can only hold back so much supply so you have to find new and emerging markets and that's exactly what we're seeing here and i would say that the diamond high in diamond market just like the high end art market is a safe haven and store of value especially during terms of market turmoil now these are not liquid envelop investments per se like gold or silver is but at the same time you can hold value especially over what people might see as the next financial crisis and that actually brings up the next question i'm going to i'm going to jump in my questions here but it's kind of like diamonds have so many applications you use them for cutting they're great for cutting they're using i know gold is used as well but i mean what makes what makes one better than the other seems kind of a very easy using if you know it's just that it's the best conductor but gold has very limited industrial uses and i think the dummies that you're talking about and this is a little bit apples and oranges perhaps but the smaller ones are ground up and then they're used to cut things are used in industrial applications talking about and i
go a little pebbles. you know i'm not going to talk is anybody except the villain in a james bond movie going to use that thirty million dollars. now i hear about gold is actually very good for money because it's precisely not a commodity item or it doesn't behave like it it's the fact that it can retain its monetary value it can act as money that's one of the reasons why it's been money for several thousand years now over the last century has been super duper successful at increasing consumer demand for diamonds were one of the most effective marketing strategies ever used and that is bob can you do it. as a symbol of that for me and a diamond is forever i mean is that brilliant or despicable in the sense that they are all going to be leading the market keeping diamonds off. market so some schmoe goes out to buy an engagement ring has to save up for three months to buy a ring that's overpriced all thanks to the beers what do you think i believe the p.r. was invented as we know today in the west it was perfected and appears jumped on
the wagon early on and this was in the one nine hundred forty s. and in the post world war two market when consumption jumped up again because everything was pent up during the war it was natural that people would want to buy houses and cement there was something a little bit more concrete than i don't know the typical bit freight and let's go back to the beer is as you know one of the things that throughout the twentieth century they've been accused of price fixing you know obviously do this by died nine percent of the market now they only have forty but who knows with the way their conglomerates are not the holdings of the not what do you think it appears as a company i think that they're very clever you know and that's all i can say about the viewers that's it they're very clever there and you heard it first that's all for now but you can see all of the segments featured in today's show on you tube at youtube dot com slash boom bust r t we also love hearing from you so please check out our facebook page at facebook dot com slash boom bust our team from all of us here boom bust thank you for watching and for you tomorrow but i've.
videos for your media project free media r t v dot com. coming up on our t.v. on the verge of a self-inflicted economic disaster it appears washington has finally decided to act the senate has reached a deal that will reopen the government and avoid a default of u.s. debt but will the house act updates from capitol hill i head and inside give we'll take you inside the detention facility for a look at what conditions are like there it's a series of special reports that begins today here on r.t. . and more revelations about the growing surveillance state here in the u.s. to n.s.a. leaker edward snowden the agency is collecting and storing americans personal e-mail address books and instant messaging buddy us more details on this later in the show.