tv Documentary RT January 14, 2014 4:30pm-5:01pm EST
hello there i'm marinating this is boom bust and these are the stories we're tracking for you today. it's coming from inside that house google that is they just acquired nest labs for a cool three billion dollars i'll tell you all about it coming right up and jim rickards is on today's show the self-proclaimed gold vigilante and author of the new book the death of money joins me to talk gold paper huey inflation you name it work over in it and in today's big deal at a harrison and i discuss the new millionaires club it's called congress actually the true story you won't want to miss a moment and it all starts right now. monday
google announced three point two billion dollars cash acquisition of nest labs the maker of smart thermostat smoke detectors and alarms now google says nest labs co-founded by a tony for dell the brains behind apple's i pod and matt roger will retain its own identity as a company but the partnership sets up some serious questions as to how far google powered smart devices will go to populate our lives and potentially even brains now the thermostat doesn't just turn itself on and off when you tell it to over time the nests learning technology uses it sensors to train itself according to your comings and goings and in time the network of nests in the homes across the country
become smarter all together now the computer systems embedded within these technologies all. in a way that makes them smarter the more that you use them so will nest eventually be capable of predicting its owner's mood with google at the helm anything is possible both good and bad as many of us know now if the nest detects a flood in the basement will you potentially get inundated with g. mail ads for some pumps i don't know maybe or or if the nest senses you're going for a break up will send you flowers and chocolate i mean only time will tell and we will be keeping an eye on it. elsewhere no government shutdown this time with only days left before federal agency funding was scheduled to lapse the house and senate agreed to a one trillion dollar bipartisan bill to fund the u.s. government through september thirtieth announced by republican house appropriations committee chairman howard roger roger and senate appropriations chair will manage
barbara mikulski the legislation will probably reach the house floor on january fifteenth now at a joint statement the lawmaker said quote not everyone will like everything in this bill but in this divided government a critical bill such as this simply can not reflect the wants of only one party we believe this is a good workable measure. lawmakers agreed to fund defense spending at five hundred seventy three billion dollars for the current fiscal year the bill also cuts funding for buying and developing new defense technologies and weapons systems. and finally jim rickards we apologize ahead of time the bad news for all you gold bugs out there according to goldman sachs head commodities research where there are now gold bullion and beginning of the year rally will not only lose steam but prices could drop sharply by the end of twenty fourteen potentially all the way down to one thousand dollars per ounce that's a sixteen percent drop from current prices of one thousand two hundred fifty one
dollars per ounce now goldman believes the economic recovery is the main culprit for the drop in price and they say short on gold is essentially just a bet on a substantial recovery in the u.s. economy. but there you have it as always we'll be tracking these stories and keeping you posted on all the latest. now you just heard the bad mouth old view goldman's predictions not mine of course goldman and now jim records an american lawyer economist investment banker and self-proclaimed gold vigilante joins me now to come to the defense of his favorite commodity he sees trouble for the current post bretton woods monetary system and we're eager to hear his views on where the economy and monetary system are headed so first and foremost welcome back jim we are so happy to have you here on on boom
bust and i want to start off by asking you you know this unconventional monetary policy it's a massive experiment for the u.s. it's never happened before and the fed has never relied on q.e. or forward guidance as it's also called as its principal its principal monetary tool i want to ask you how do you think this experiment is going so far. well it's been going on for five years and it's failed you know one of the things about q.e. three it's called q e three for a reason which is that we had q e one and q e two people got all spun up about the taper in december that was not the first time the fed tapered at the end of q e one that was one hundred percent taper they stopped the purchases at the end of q e two that was one hundred percent taper in june two thousand and seven they stopped asset purchases then they started q e three so this is failed twice before my view it will fail again so this is a failed experiment unfortunately where the guinea pigs are investors and savers and everyday americans are the guinea pigs in the laboratory so to speak but tapering q.e. has failed twice before q.e.
one q e two in my view it's failing again we start to see early signs of that in the december employment report which is quite weak now were you surprised that the fed tapered in december when it did. it was certainly on the table i was a little bit surprised and i'll tell you why i actually kind of take the fed at their word the fed said down some criteria for when tapering would begin they said they want to strong economic growth lower unemployment or basically job creation and higher inflation those are the three things they said well when you look at it you know we had a four point one percent growth in the third quarter but everyone knows that was largely through inventory accumulation so it's not clear how sustainable that is people expect that to step down significantly in the fourth quarter number one number two the employment report your unemployment is going down but we all know it's going down for the wrong reasons which is labor force participation is collapsing economists and albertsons very good work in this area he points out that if you if you take the labor force participation that namely how many people how
many adults are in the workforce as a percentage of the total population and put it at october two thousand and nine levels when unemployment was ten percent if you use that level unemployment would still be nine percent in other words most of the gain from nine percent to six point seven percent is not the result of job creation is the result of people getting discounts to giving up and dropping out of the labor force and inflation that's a joke or the places where one percent the fed says they wanted to privately they'll tell you three or higher so that's not even close so by the fed's own criteria they should have not they should not have tapered in december but they did taper that tells me they had another reason there was something else going on the something else is that they've come to realize that they're destroying the balance sheet the fed is insolvent on a mark to market basis they have about sixty billion of capital they have four trillion of assets a lot of those assets are very volatile they have what's called technically called long duration five year ten year treasury notes if you take those notes and mark them to market it would wipe out the fed's capital now they don't do that they hold
them out of storage costs but they they never thought they would be here when they started down this road or two thousand and nine they never thought they would be where they are today if you had said to them in two thousand and nine hey guys you know lazy. guys and girls you're going to have four trillion dollars on your balance sheet in two thousand and fourteen with no significant standley economic growth do you want to go there they would have said no but they did this in stages they kept hoping things would get better they haven't got better i don't think two thousand and fourteen will be any different so in my view the obviously they did taper in december they'll probably continue that because they set down that path but they do for a different reason than people expect it's not because the economy's strong it's because the balance sheet is weak but they're tapering into weakness we may have a recession in two thousand and fourteen ok now in our last interview together you said that you believe that if the fed tapers it would be tapering to witness you actually just said it again right now now what economic rout a point signal that economic weakness that you're talking about. well look at the
december jobs report and i said that before the december jobs report early january we get the report we created i think it was about seventy four thousand jobs which is pitiful i mean to that everyone gets you know they want to open the champagne corks when we get to two hundred thousand jobs but two hundred thousand jobs is not even enough or it's barely enough to his or her new entrance into the labor force level loan put a dent all the people who are unemployed going back to the beginning of the depression two thousand and seven so down then people said you know well you know the weather was cold well you know the forecast for for two hundred thousand i was the consensus forecast did they not and that was in early january did they not know it was called in december and if that was your reason why didn't you just your forecast hours and they didn't so obviously that's sort of an after the fact excuse the other thing that i think being overlooked in what little job creation there is these are low paying jobs now that there's dignity in all work i'm not denigrating any kind of work but people making you know ten dollars an hour make dolls or wal-mart or the bartender at applebee's least the bartender can get
a few tips but basically people have those jobs and they're part time maybe twenty thirty hours a week so you get twenty hours a week at ten dollars a an hour how do you support a family and obviously you dumb people are working two jobs three jobs but one thing they're not doing is going on spending a lot of money we have fifty million americans on food stamps twenty six million unemployed or underemployed eleven million are rising on disability a lot of the disability is just people who have their unemployment benefits of run out and they're claiming disability to get you know government checks that way and now the long term unemployment benefits being cut off because there's gridlock in the congress so these are all very significant headwinds the last thing i would mention erin is that the fed forecast a good economy that's the best leading indicator of a bad economy the fed has the worst forecasting record of any major party you know sell side by side a government that's doing forecasting the last four years their annual forecasts have been wrong by orders of magnitude so when the fed said things are. getting better that's
a pretty good sign of the getting worse ok now you've said that the central banks want inflation and that they've resorted to extreme measures now what type of inflation exactly are they looking for though a gossip price inflation consumer inflation or is it both. well a little bit of both what they really want is consumer price inflation of course they look at the p.c. a price to fighters their key metric there we're getting the asset price inflation no other word for that by the way as bubbles we're seeing the bubbles in housing and stocks is actually concerned about that there might have been another thing the fed into the tapering one of the governors member the federal open market committee germiston has warned about this i think is in the minority but i think is right you know when you get when you have interest rates this low for this long and the banks are desperate to make money they can't find ways to make money they start playing all kinds of off balance sheet games engaging in assets wops that's where you know on the i've got bad collateral i want to do a swap the counter party wants good collateral so i take my bad collateral i swap
it with an institutional besta for good collateral use the good cloud roll to pledge on the swap so all of a sudden a two party deal turns into a three party deal with short term funding against a long term asset that's a recipe for a financial meltdown for financial panic of the kind we had two thousand and eight stein is smart enough to see that he understands what's going on so we're kind of setting up for another liquidity financially driven panic in addition to a weak economy in addition to the fed's monetary experimentation so they it's kind of hard to see any of the silver lining in any of this jim we have to take a quick break but don't go anywhere viewers out there because jim rickards is sticking around and we'll have more with him when we return plus then in today's big deal ed harrison and i take a look at the average net worth of your your congressman and chances are here she is not struggling financially now and they're not and as we had here a quick break here is a look at some of today's numbers stick around. i.
to bring the concept of nominal g.d.p. targeting into the mainstream and he says that the trend of nominal g.d.p. is the best gauge of the long term long term economic growth what do you think about a nominal g.d.p. targeting. as a potential policy option. well i think it's what the feds are actually doing now what is nominal g.d.p. we know what g.d.p. is that's just you know it's consumption of us from government spending that exports so that's g.d.p. . nominal g.d.p. is the gross value of all the goods and services in the economy it has two parts one part is the real g.d.p. the other part is inflation so simple example let's say you have real growth of three percent and inflation of two percent so three plus two is five so nominal g.d.p. is five but here's the tricky part ideally the fed would like a low inflation and high real growth so the fed's nirvana if you will would be say one percent inflation four percent real growth that gives you a one plus four or five percent nominal g.d.p. that's fed nirvana but that's not what we're getting inflation is low but real
growth is very low as well so what the fed is saying the fed has to get nominal g.d.p. up around four or five percent the reason they have to do that is so that the debt to g.d.p. ratio doesn't go up that would put us on the path to greece now i like to think things are real terms about inflation but debt to g.d.p. is one of the things you have to think about in nominal terms the reason is that is nominal if i borrow a million dollars from you aaron i owe you a million dollars it's interesting whether it's actually worth a million monor nine hundred thousand that's inflation deflation but contractually i owe you a million so the government owes its creditors seventeen trillion dollars they have to pay off seventeen trillion dollars if you can get fifty percent inflation over twenty years then you're only paying off a half trillion dollars so so the fed has to get that nominal g.d.p. so the debt to g.d.p. ratio doesn't go up they would like real g.d.p. but they're not getting it which means they'll take inflation and the fed has more or less said that you know they said officially they have
a target of two percent inflation but the threshold for tightening is they said two and a half maybe more and it's a car putting the brakes on it's you know you don't stop right away you keep going for a long time so they could go way past two and a half percent and i've heard present evidence of this. fed said he wouldn't mind three three and a half so the fed is signaling they're telling you you know we've got to get nominal g.d.p. to five but we'll take three and a half percent inflation one percent real growth of that's what it takes so they're ready for the inflation now i want to mention your new book you have a new book coming out it's called the death of money and in the book you say that the present currency war will lead to a collapse of the bretton woods two dollar standard can you explain why a collapse is a global outcome of the currency war. well what i'm getting at is that really the collapse of confidence in the dollar you know the classic bretton woods standard which started in one thousand nine hundred four actually did collapse in stages between one nine hundred seventy one and one nine hundred seventy five ninety
seventy one was for nixon went off gold but it took those a couple years of turmoil took until nine hundred seventy five before the i.m.f. you know monetize gold on a global basis so that standard collapse since then we had a period of turmoil after seventy five eighty one that was when you know gold went from forty dollars announced eight hundred dollars an ounce that's when the dollar lost half its value we had fifty percent five zero fifty percent inflation between one hundred seventy seven one thousand nine hundred one the dollar was very close to collapse then it was only rescued by the combination of paul volcker high interest rates ronald reagan low taxes low regulation that combination made the us a very attractive place to invest got the dollar back on its feet since then for thirty years from one nine hundred eighty one to two thousand and ten we had the dollar standard king dollar it was in the gold standard it was the dollar standard but we said to the world will maintain the value of the dollar you compared to the dollar have confidence in us beginning two thousand and ten we started currency war three as i call it when we tore up the dollar standard said we want to cheap power
the rescue nations our trading partners you're on your us now we have no standard at all we have no tail or rule no gold standard no dollar standard is just jump ball and the fed's conducting monetary experiments and no one really knows what anything is worth that can go on for a while but at the end of the day what is the dollar you have to have confidence if you if you lose confidence that the value of the dollar theoretically goes to zero policymakers are taking confidence for granted what they don't understand is confidence is fragile if you take it for granted you can lose it and if the dollar goes to zero because people lose confidence in it which we're getting closer to the point that's where glow becomes infinite gold is just the inverse of the dollar what people say gold when i don't think of gold is going up i think of the dollar is going down but if you say go went down i don't think it. gold is changing i think of the dollar getting stronger so the dollar goes to zero go goes definite no that won't actually happen because something will intervene but that's the path we're on now that kind of leads me to my next question the two most recent global depressions occurred during gold standards one began in eight hundred seventy three
and not lasted two decades the second began in one thousand twenty nine and lasted until world war two now some monetarist they believe that the eight hundred seventy three depression that was caused by a shortage of gold which then undermined the gold standard how many previous gold standards kind of amplified deflationary episodes. well that's one of the core crudeness favorite arguments here and it's completely wrong here's here's the thing crewmen like to say you know when we were on the gold standard we had all these financial panics and he has a whole list eight hundred seventy three eight hundred ninety eight ninety nine and you know one nine hundred twenty nineteen twenty nine the great depression all that we did have in the gold standard but i point out we also have panics when we're not on the gold standard one nine hundred eighty seven the stock market crash twenty two percent in a single day one thousand nine hundred four we had a financial panic nineteen ninety seven ninety eight global markets were hours away from complete collapse before long term capital management was rescued i did that
but i was in the middle of that and i know how close markets came we were it was the middle of the night in new york we were hours away from the from the tokyo open and trying to get the deal done and peter fisher and others of the new york fed said the global markets will collapse we came very close two thousand the stock market collapsed two thousand and seven two thousand and eight so we've had panics within without gold so i don't blame gold i blame easy money which can be with or without a gold standard. much credit loose credit and financial panic you wrap it up nicely i know what you also schooled me in the process thank you so much as always for your time and energy that was economist and author daniel i've heard thanks so much jim time now for today's big deal. the handsome and harrison joining me now to talk money and politics things that are
very closely related now for the first time in history more than half of all members of congress are millionaires of the five hundred thirty four current members of congress at least two hundred sixty eight how to average net worth of one million dollars or more now it's only fair to point out that members of congress have along been far wealthier than the typical. but while today the us is faced with unprecedented issues surrounding unemployment food stamps social assistance and minimum wage rates just to name a few it begs the question are millionaires the best representatives at this moment in time especially when the majority of the nation's concerns couldn't be further from that of those that they're being represented by as we've seen this type of political establishment before one that calls itself a democracy but actually functions as a plutocracy and given this new data would you say that that's what the u.s. looks like today well you know i think the u.s. looks like you caught up to talk or see if you call it
a club talk or see some people call it a oligarchy and i think that all three of those words are potentially. you know you were talking about the founding fathers being rich yes they were rich but then america was going to agree revolution of growth i mean where is the growth right now where is the growth in wages where's the growth in the economy jim rickards was just talking about if you measure inflation with the measured unemployment including the people who have stopped looking for labor you look at nine percent unemployment rate at the same time you have all these millionaires in congress just doesn't it doesn't seem right right now according to a wealth analysis from the center for responsive politics democrats they had a net a median net worth of one point four million dollars while congressional republicans had a net worth of almost exactly one million dollars and the median net worth for all senators increase from two point five to two point seven million up to shabbes now many modern historians politicians and an economist they believe that the u.s.
was effectively a pathak or c. for at least part of the gilded age and the progressive era that was between the end of the civil war and the beginning of the great depression but i want to ask you do you think that this great recession which many you know would argue that we're still in right now would argue and i'm going to leave it at not it's a catalyst for this mirroring of what what political structure. we're seeing today that that happened before you know a lot of the things that people could get away with before in terms of inequality of wealth and so forth comes into greater view when you have economic downturn then people are asking themselves what am i getting out of this why are you a million there and i'm sitting here looking for a job the whole time so i think you know when stock prices were going up in the one nine hundred ninety s. people world k. when house prices were going up in the two thousand they were ok but all that's over that's gone now instead people are sitting there wondering what's what's in it for me and that's when the democracy sort of starts to falter now run out of time
but i want to get to this because it seems that real estate was the most popular investment on capitol hill but let's take a look at the ten most popular stocks held by congress a t.n.t. came in tenth with forty four members invested procter and gamble forthwith fifty seven members second was wells fargo and first another general electric with seventy four members invested and what do these particular investments tell us they seem fairly diverse but obviously congress is privy to information that the general public is not and members of the house and senate they can legally trade on this information which to me is bananas. can you explain this to me you know that how is that ok and martha stewart gets to be gets put the cat good question i'd like to hear you talk about the point. i think that these are the biggest companies these are the ones that have the biggest lobbyists and therefore you know obviously congress knows there are. organizations that they can put their money into maybe we should have a congressional. tracker we should yeah but we don't we rich. you
know if you're out is through a political thinkers like winston churchill tocqueville chomsky they have condemned little krauts for ignoring their social responsibilities and using their power to serve their own purposes they say this increases poverty and nurtures class conflict corrupting societies with greed which ultimately leads to revolutions now at. all great empires have fallen eventually do you believe that america is the next one to go. i don't know you know it is they only know that i would say no america's here today i mean i think that jim rickards is interesting in that he talks about you know the monetary system faltering but he says wait a minute you know we've already in the last hundred years we've had the re faltering of the monetary system so i think that you can have a lot of upheaval but it doesn't necessarily mean that you know the economy is going to collapse into a heap and the system going to be overthrown i think we are going to go through turmoil but at the end of the day america will continue on to see revolution on the
horizon none is still in the united states but potentially at other places greece in particular is one place that you might look for because they're locked into the euro zone system and there's no way out so basically you know internal devaluation you have unemployment and it's going to continue on and on until at some point they decide when to get out of the euro and no economic fear mongering here no not for me i like it well that's all the time for now but you can see all segments featured in today's show on you tube and you tube 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 t. tweet out us at erin aid at edward and h. and from all of us here thanks for watching the next time.
when you were followed around when you were being investigated because of the whim of someone this is the beginning of the end of your freedom. just. you know it's a new team only in except american citizens e-mails text messages you know. where the calls text messages so you just. see everything about my knowledge that i trade basically and that's all legal absolutely legal yes when you bareback with the internet you're back with being rather thank you.
you know sink estates mar the u.k. equivalent to american ghettos council states with high levels of economic disadvantage and often blighted by high crime rates but there's a new sort of sink estate in the u.k. and it's not in. charleston or gospel oak though this sink estate is right here in the city of london this moral sink estate is also nurtured by the government dole but rather than locking in the high levels of economic disadvantage this state is plagued by intergenerational economic advantage that instead of being impossible for the residents to succeed it is impossible for the residents of this banking
sink estate to fill. coming up on r.t.e. a white house appointed review board made its way to capitol hill to make a case for n.s.a. surveillance changes will want makers and the white house agree on any needing full reforms we'll have a report from capitol hill just ahead and in some parts of west virginia it's now safe to drink the tap water and not everyone can drink from the fountain after last week's chemical spill but the state judge has a warning for the company responsible for the leak details coming up. and an undercover drug deal exposed the da and justice department secretly met with members of a mexican drug cartel all mexican authorities were left in the dark find out how the u.s. was doing the cartels dirty work later in the show.