tv Breaking the Set RT January 17, 2014 11:30pm-12:01am EST
i would rather ask questions to people in positions of power instead of speaking on their behalf and that's why you can find my show larry king now right here on our t.v. question for. no and happy friday i'm aaron a this is boom bust these are the stories we're tracking for you today first up finally finally the day has come out peter a ship makes is a long awaited debut on boom bust today and today's show mr ship weighs in on the federal reserve present and future then we're taking a look back and highlighting some of the best hits from boom bust this past week it's a boom bust prius and you won't want to miss it plus the effervescent ed harrison
and i feel your questions comments and concerns in today's in the margins it's the part of the show where we put you the viewer in the driver's seat so please please drive safely it all starts now. unions to the six office confirmed thursday that euro zone inflation slowed in the month of december now the e.c.b. sees no immediate risk of deflation and wants to keep inflation below or close to two percent over the medium term they've expected a prolonged period of low inflation now the fall in inflation rates is linked to an
overall economic adjustment and restoring competitiveness of europe's southern periphery countries like spain portugal and greece were growth collapsed during the crisis and triggered a massive austerity push. elsewhere and initial claims for unemployment insurance in the us decreased by two thousand claims to a total. three hundred twenty six thousand now this is according to the u.s. department of labor now this figure is the lowest level of weekly jobless claims since november of two thousand and thirteen and the move and moves the recent average number of initial claims down to three hundred thirty five thousand now initial claims were also lower than estimated at this time just one year ago initial jobless claims averaged about three hundred sixty five thousand per week. and finally despite a modest economic recovery in the us big box stores are struggling to compete with online retailers as the internet increasingly becomes the prepared form of shopping
for consumers electronic retailers and specifically electronic retailer best buy saw an almost thirty percent loss in its market capitalization heavy discounting by rival retailers cut into best holiday sales which are crucial earnings period for the electronics giant chief executive hubert jolie who was hired in two thousand and twelve to revive the best buy chain said that the retailer would sacrifice profitability to match rivals discounts however the strategy came at a loss to hire him at a higher cost then expected in last numbers now the company projects the decline in its fourth quarter operating incomes. well there you have it as always we'll be tracking these stories and keeping you posted on all the latest.
our next guest peter schiff believes the u.s. is addicted to debt moving from one quick fix to the next now at the top of his list of entities and maybelline in this addiction the federal reserve peter schiff an investment manager who predicted the two thousand. chris joins me now to talk about debt to government debt and above all the fed now i have to say to you mr shift welcome to boom bust let's talk about the fed now to the surprise of many the fed went and tapered its large scale asset program otherwise known as q.e. i want to ask you why did they do that well first of all people were expecting the taper to start a lot sooner and they really haven't tapered much and we really are no don't know what they've done but i believe that they are not going to follow through with a tapering table what they're more likely going to do is increase the amount of
monetary stimulus that they jacked into the economy they're going to be doing a lot more than eighty five billion dollars not less and it's not good that they're doing is it's bad but it's what the fed's going to do because it's the only way to keep the bubble from imploding now will be economy we can so much with kiwi that the fed is forced to relent you know you never it's not the economy that strengthened by q.e. the economy is actually inhibited by q.e. quantitative easing is preventing a badly needed economic restructuring that would enable the u.s. economy to actually grow instead what we're doing is we're pretending that there's growth by inflating bubbles in assets we've got a stock market bubble we've got a real estate bubble and now we can take that phony wealth that we can turn it into consumption through debt and that's what's going on but it's not legitimate economic growth you can't confuse the two this is all phony and it is the result of this monetary allusion that's being created by the fed but it will end just like it
ended in two thousand and eight when the financial crisis that was the byproduct of the bad monetary policy of alan greenspan well that blew up on ben bernanke he's watch ben bernanke is monetary policy is even more reckless and irresponsible than was alan greenspan said it's all going to blow up on janet yellen. now one thing that's been said about here is that it's just a form of trickle down economics the banks get the money and prosperity it's supposed to supposed to turn it all down to everyone else do you agree with this well you know it's not it's not going to work i don't like maybe calling it trickle down government or something like that or trickle down inflation somehow if we create a lot of inflation and let wall street finance sears' get rich that it's going to benefit everybody else it's not what we need is legitimate capitalism we need real wealth creation we need production we need good paying jobs that might come from
a vibrant economy you don't get that when you just have cheap money sloshing around the banks you have some people getting rich based on this but it's basically at the expense of the broader economy and it prevents legitimate economic growth from taking place now speaking of real wealth creation let's talk about bonds for a second now where are treasury yields headed from here in your opinion will eventually they're going to go way up but the federal reserve is going to do everything it can to delay that because the only reason that we can pretend that we can afford all this debt is because the interest rates are so low now we can't pay any of the money back right it's impossible for america to repay what it's borrowed but we can pretend that we can afford the interest as long as the fed is got it so low but when interest rates go up that's when we have to admit that we're insolvent because we won't be able to service the debt let alone repay it but the fed is going to try to postpone that day of reckoning as long as it's can but the problem
is the only way the fed can keep interest rates artificially low is to print a lot of dollars and then use those dollars to buy up the bonds at some point the world is not going to want to absorb all those dollars the bottom will fall out of the dollar on the foreign exchange markets we will have a currency crisis and then the fed can't play this game anymore and now the fed is going to be forced to do their. right thing but it's going to take the discipline of the markets to do that because they have no integrity on their own to do it now your comment actually segue it's very well to my next question and not that well level do you think higher treasury rates become a problem for the u.s. economy and the fed well i mean i think anything higher i mean we're already having a hard time with the ten year near three percent you've already seen how that affects the housing market but if short term rates were to go up i mean the fed still has short term rates at zero but if we had short term rates at two or three
percent in longer term rates were maybe at four or five percent we can't afford those rates the government can't afford to pay that kind of a rate on the national debt homeowners can't afford it corporations can't afford it we're all so levered up that we need rock bottom interest rates just to survive but you know that's all we're doing if you look at the u.s. economy look at the numbers that have been coming out of the retailers horrible sales during the holiday season even with all these cheap money americans are still broke even though the fed is mitt has managed to get housing prices up a lot of americans don't own their homes anymore they lost into foreclosure they're renting out houses and rents are rising the people who have been buying houses or hedge funds and private equity funds that pay all cash because they get it from the fed these houses are sitting vacant because nobody actually lives there meanwhile stock prices are going up but most americans don't own stock all they have is rising food prices rising energy prices rising health care prices they're broke and
all these cheap money isn't helping them it's actually making it worse so you'd obviously not advise the fed to raise rates but my question is do you think that the fed would potentially use negative interest rates would we see that at all no i do think we need higher interest rate much higher interest rates but i. am not delusional i know that if we have higher interest rates we're going to have a stock. crash we're going to have a real estate market crash but unfortunately that has to happen the biggest problem with the u.s. economy is that interest rates are too low they have to go up and the economy has to restructure in response to that but right now we have this phony economy that we just borrow and spend we're not saving and we're not producing all of our resources are misallocated because of the fed now fixing that is going to be painful we're going to have to allow a restructuring and interest rates have to go up but the reason the fed will not let interest rates go up is because they don't want any of that short term pain
even if it means a lot of long term gain and of course the most pain is going to be felt at the federal government because when interest rates go up you're going to have to have massive spending cuts coming out of the federal government they may even have to restructure the debt where they admit that they can't pay but the federal reserve is trying to prevent the government from having to do that and so they keep interest rates at zero regardless of how much damage it is doing long term to the u.s. economy right now and then there's a lot of banks with a lot of bad debt on their books and it's not just here in the u.s. it's in europe and elsewhere how do these banks get rid of these bad debt especially especially if central banks are raising rates well you know the debts are going to default i mean that's how they're going to go away but the governments don't want that so they'd rather inflate the debts away by creating money and what they're also doing is trying to lay a foundation where they're creating the idea that inflation is good for us because
they're trying to scare us that somehow if central banks don't create inflation that we might have deflation as if falling consumer prices is actually bad news that's good news you know falling prices are good but they're trying to convince us that they're bad because you know prices went down during the great depression therefore fall. price is much the cause of the great depression that's nonsense that's like saying that red wet sidewalks cause rain the fact that prices went down during the depression was a good thing if they didn't go down that the pressure would have been even worse or they look at japan and they say well prices are going down in japan and there are commie has been bad but falling prices have nothing to do with that falling prices are a bright spot in the japanese economy if they were going up the situation would be worse but the central banks are trying to get everybody to irrationally fear a good seeing falling consumer prices so that they can create inflation and we
won't complain about it but the real reason they need inflation is to wipe out all of their debt and to sustain all of these you know phony bubble economies that they've inflated right peter thank you so much for your time and we finally tracked you down and got you on the show but i wish we had more time with you please come back soon and talk more but you're right here that was peter schiff money manager and economic pundit ok. coming up after the break we take a look back at some of the best moments here on boom bust from the past week we had some spectacular guests many worthy of the double takes to check that out then ed harrison and i tackle viewer feedback in today's in the margins but before we head to a quick break here's a look at some of the closing numbers at the bell today stick around.
this is one special week here on us and we focus a lot on debt and monetary policy and we're lucky enough to be graced with the presence of great minds like james gall birth jim rickards and cullen roche here's a look at what those who know the subject best had to say on the matter. is the u.s. government running out of money you hear that a lot is that true or false. well so what i like to refer to the u.s. government as a contingent currency issuer so that means that technically the actual government doesn't create most of the money the banks create most of the money through the lending process banks create deposits by making loans so the majority of our money
supply is created by the banking system but the government has the potential option to always create currency if it wants to so the government is sort of like the entity that's sitting on the you know the button there they have this potential mechanics where they can potentially create the money supply if they need to so you know i always like to point out that the u.s. government can't really run out of money as we all know the government has a printing press technically so you know the people who worry about the government potentially running out of money i think they're they're also forgetting that the government has a printing press so you know if we all had a printing press in our basements we wouldn't worry about being able to repay our debt so i think it's an unfounded concern now let's talk about you know long term u.s. budget constraints does the u.s. government have to pay back its national debt. yes so this is a really popular fallacy of composition that people tend to think of when they think of debt they think of debt at a very personal level and at
a personal level we all have to pay back our personal debts but in the aggregate the aggregate economy really doesn't pay back its debts ever and that doesn't mean that debt is always good or that you can't have big booms and busts through the debt cycle but it means that in the aggregate over the long term debt will actually tend to expand the size of the government will tend to expand due to you know the growing needs of the growing population and the private sectors debt will grow over time because the private sector will grow and expand and people will take out more loans to you know utilize the deposits to make investments and to you know pay their credit cards and what's you know so over the long term the debts grow the debts don't get paid back in this is a private sector and a public sector thing the debts never get paid back over the long term in fact if in a healthy situation the debts will basically always perpetually grow jim i'm going to start off with this question economist scott's or he's made it his mission 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 a long term long term economic growth what do you think about nominal g.d.p. targeting as a potential policy option for the. 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 shows its consumption of us from government spending in their 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 a 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 will grow so the fed's nirvana if you will. b. say one percent inflation four percent real growth that gives you one plus four 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'd 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 inflation i've heard present evidence of the chicago fed say 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 will take three and a half percent inflation one percent real growth of that's what it takes so get ready for the inflation welcome back we now continue our conversation with university of texas professor dr james ball for it i asked dr galbraith whether governments can be rendered in voluntarily insolvent. in their own currencies the risk that a government could run is that the rest of the world may not wish to hold their currency or their own nationals made a wish to hold it in which case you'll see depreciation and that means goods that report become more expensive that you run your experience that is inflation in the domestic economy so that's that's a risk that's
a risk which is much more serious for small countries which are vulnerable to being hit by runs by private investors that it is to a large country like the united states or britain or germany where fundamentally the players in the economy are going to continue to use the national currency and are going to continue to hold their wealth in assets denominated in that currency and so they stability of those currencies they may go up and down some but they are it's not deeply at risk from a widespread financial panic. there you have it a look back at this week's best of here on both of our guests and of my wardrobe it's time now for to hear from you in today's in the margin let's hit.
hello was there within the margin of your feedback good time of the day now every friday at harrison and i put you you the viewer into the driver seat that in use to the show with your comments questions and concerns all sent to us throughout the week via twitter you tube and facebook now let's dive right in our first comment comes in response to tuesday's show featuring jim rickards spoke about quantitative easing potentially tapering the u.s. into a recession now you tube you are viewer your e karma he writes the question should be how does the fed expect to create the wanted inflation when tapering and i turn to you this is a valid question and one i'm sure a lot of other viewers have as well how would you address this i had almost address the same way in terms of the question you were asking of one of our future. today you know what are the concrete steps that you're going to go through with the
transmission mechanism to get to inflation because the reality is that there's been no inflation in fact it's been the opposite you know that prices have been falling there's a lot of speculation in terms of what actually happens when the. buy and asset purchases because the reality is that the interest payments that used to go to people the private sector are now going to the third and so you're losing interesting so inflation that's going to happen is obviously going to happen as it was. salt. prices going up people buy other assets instead of buying the treasuries or the mortgage bonds of the feds take it out of the system and the question that he's talking about it we have an interview coming up with that word dave good stuff now and another market response to the same episode. three i like that name leo love rates this was
a good show today with jim rickards and sure was thanks leo how how about having missed. him also well we love hearing comments like this and in fact we're happy to report that we just booked pippa on the show so any questions or comments you might have for her we'd love to hear them ahead of the show so tweet at us or hit us up on facebook you know how to do it all the social media. people want to have some we should. let us know how we are getting there this show is for you. now we receive a lot of comments on our you tube page. or you tube page following monday's show with. colin roche they both had very opposing opinions they both talked about hyperinflation but from very different perspectives now docu freaky wrote in and he said the government may not run out of money but what's the value of the currency going to be ed i think this is a shared concern for many people in the idea that there is no solvency constraints but it still leaves a lot of people like myself myself included kind of scratching their heads asking
can you address this for us where where are we going to see these solvency constraints. you know in the way that i look at it is the currency value is the release of you know we're in the market and everyone has these currencies in which we have free floating exchange rates so we've slowed against the euro we've slowed a great japanese yad so for whatever reason the value of the currency is reduced because people don't value it anymore because the inflation whatever. then what happens is it depreciates a visa b. all these other currencies against the euro against the yen whatever it's not for you know interest rates go skyrocketing or anything like that it's rather that the value of the dollar goes down and when the value the dollar goes down things that you buy with the dollar go up and so they're going to be important inflation as a result and this is why you are so fabulous you explain these things that are
other resin example how on the same show a hidden off off he wrote in saying basically as i see it integrity and value have been replaced with power and profit public sector private sector financial sector how can a system operating on self-delusion bleep and word games be a model of success in the long run it can and i think i would agree with hayden as we spoke on monday about america becoming kind of a talker see however this would be a very good opportunity for us to address the please please please please no profanities rule that's a rule that we're going to win not only going out say these words on air but our line producer the wonderful john on a verbal tirade and we love john so we're trying to please no no none of that but and please address the question we only have thirty seconds left but you know what do you think he has to say about that and put talk or see we've been talking a lot about that in the past week not just but argue about the. you know government
the reins of government have been co-opted to a degree by special interests and the question is is how do you get it back i mean especially in the banking sector because the banks they caused. panic and there was and then we build about and there are record bonuses so where is that going to go right it's hard to say and it feels offensive on some level as well but as always thank you for absolutely everything that's all for now but you can see all segments featured in today's show on you tube you tube dot com boom bust our t. we also love to hear from you so again check out our facebook. page where does the line drop as the line tells you love us you hate us we might talk about it on the show you can also tweet at us after erin eight and at edward and h. from all of us here at the bus thank you for watching see you next time have a great weekend.
was. russian officials aventura behind the barbed wire at america's notorious guantanamo bay prison where more than a dozen detainees are reportedly being forced bad i made an ongoing hunger strike. one calles are turning syria into any merging drugs haven we report on how the country has become a major production side for one stimulant in the space of just a few yes. the massive data collection on american end up foreigners are on the globe will be kept in place indefinitely as president obama is a criticized for a lack of action following his speech on the practices.