tv Keiser Report RT December 20, 2018 10:30am-11:01am EST
i am max kaiser this is the kaiser report you know i'm often asked max what is the . pin that's going to pop the global bubble back in two thousand and eight it was the two thousand and eight subprime crisis today i think we can safely say that the bubble will be popped with the collapse. deutsche bank. well certainly the e.u. projects could ultimately be that it might not even be bragg said and all that sort of crazy stuff going on in the u.k. but and it might not even be italy or greece or spain or of france falling apart it could be germany and going to bank good morning from germany where the leading bank in europe's largest economy has shrunk to that of a small lender deutsche bank is worth only fifteen billion euros less than other
banks in europe even smaller than credit suisse and new credit deutsche bank's market capitalization is only a quarter of santander's and that little white line down at the very very bottom there compared to the green line which is santander. you know it's much smaller than those banks smaller than harlem savings bank on one hundred forty fifth street this thing is puny this thing is teeny this thing is shrinking it's incredible shrinking bank why well it's run by a profit it's charlatans like to make incredible loans out to folks that can never pay back and watch their entire bank disappear into the ether one has to ask a question of like if it's only worth fifteen billion euros why aren't you know activists hedge funds and people looking to break it up like if they're truly in the actually one and a half trillion dollar derivatives book is worth anything. wouldn't that be worth more than fifteen billion euros shouldn't it like isn't it trading above book value
if the derivatives are worth anything shouldn't somebody want to grab this and and sell off all those derivatives and yeah that's an excellent point i mean so you know activist investors hedge funds they look for stuff all day long that they take positions and they try to get on the board they like to break things up because a company the stock is trading at a discount to break a value that's a whole leveraged buyout revolution going back to mike milken and transform the stock markets forever and we've seen that now for decades why don't the activist hedge funds look at deutsche bank and say oh that derivatives book out there that you carry it a value that's. that is based on your internal calculations giving this derivatives book one hundred cents on the dollar value oh you know what if you did an actual counting of the derivatives book at deutsche bank you would find that that trillion dollar derivatives book because there's no aftermarket there's no one to buy it is worth exactly zero therefore fifteen billion dollars is about fourteen point nine billion dollars over valued for the other piece of garbage you know it's worth
basically just ten percent of what jeff bezos is worth so he could literally just buy it with the stocks go up and easily if he felt like if it was genuinely any value there to be extracted i saw some signs as well in the last week or two that germany wants me to maybe merge it with commerce bank which i think has some more legitimate business they have some more like you know investments in actual german manufacturers like deutsche bank which has just basically investments and fraud and and presidents in the united states and and some bad derivatives but i also want to look at you know all the bank shares are down they're basically in a bear market because the overall market is still not yet in a bear market everybody hasn't really been paying too much attention to it but all the stocks in the the big banks are down significantly and here's a very funny quote fake and bad news is depressing markets j.p. morgan's collage of excess as biased news outlets political opportunists and
publicity hungry analysts are whipping the stock market into a frenzy that goes beyond anything justified by economic or earnings fundamentals according to j.p. morgan chase strategist led by mark o'connor vic he blames domestic political opposition may have an interest to paint a negative economic picture individual market analysts gain more visibility in coverage with negative calls and foreign adversaries amplify and negative news cycle in order to foster divisions and erode confidence in financial markets and the economy clueless. anime is worth roughly sixty trillion dollars the global debt pile is roughly four times that so that's two hundred forty trillion dollars and the banking industry is the fulcrum upon which this ponzi scheme is balanced and when the ability to pay debt hits a brick wall as it is now the road gena tours of this debt will collapse and in the case of apple computer they have a deep pocketed friend in warren buffett who when the stocks down they simply
borrow money and buy back their own stock to manufacture gains and to manufacture a bit of cushion on this way down to oblivion but even the swiss national bank remember they were geniuses last year because they were buying stocks they now are down hugely billions and billions of dollars because they live by the sword they die by the sword they have totally lost track of their role as a backstop to the banking system to become this enormous hedge fund and now they're going the way of most hedge funds into irrelevancy and under-performance while the other way you might look at it as well is that for the past ten years markets have continued to go up and up thanks to the fed and the bank of japan and the swiss national bank and others buying up you know basically making sure that these guys never have any losses so the financial markets are as just as gerrymandered as the political markets so ninety seven percent of incumbents win in the politics because it's so gerrymandered to be that way the same with markets is the j.p.
morgan chase this is the wall they expect to win all the time because the markets the algorithms are gerrymandered to make them win all the time during the crash of the one nine hundred twenty nine period you had what were called the flyers these are bankers who were jumping out the window and what happened was that suddenly they looked at their balance sheet and they saw that no matter how much of the propaganda that they spewed and believed their net worth were still zero and the same thing i think will happen here markets crash and these people still be saying it can't possibly be true word of god we print money we buy. your own shares the world is not right do you know versus wrong. splatter time because you can't deal with the reality but this one was banker so how the gerrymandering goes together of course is that politicians the likes of donald trump will applaud companies for taking out huge debts to buy back shares but eventually those debts unless the government takes them on and puts them on the federal reserve's balance sheet those bank those debts must be paid at some point
and if those rollover then it's all good bye he also blames algorithms and that takes me to the next headline as well sell offs could be down to machines that control eighty percent of the u.s. stock market fund manager says eighty percent of the daily moves in u.s. stocks are machine led a fund manager told sam b c the phenomenon also called algorithm or algo trading refers to market transactions that use advanced mathematical models to make high speed trading decisions many believe that the different selloff episodes seen throughout twenty eighteen were caused by these machines as they act on immediate data release is without taking in time to digest them as a human would look at this story as kind of old because that's true in one nine hundred eighty seven stock market crash it was algorithmically generated crash the computers in chicago new york went into contention with each other and they were battling each other and the result was the biggest percentage stock crash in history this phenomenon of algorithmic trading and program trading and computer
training has a new dimension to it because the financial press that reports on markets is also written by robots and algorithms forbes magazine and look it up they say a lot of the stories that they print are written by machines so one machine looks at the stock market prices and writes a story about the stock market prices and then the stock market reacts to that story by prices being adjusted and then the algorithmically generated journalist writes another story about the new prices now you've got algorithmically. generated journalists in the financial press so it's really affecting the algos are buying and selling stock and now these two are. joining into it dystopian nightmare where the underlying economy of jobs wages pensions and savings is being superseded by a video game of algorithm really generated forbes journalist no humans involved same thing with the stock exchange they come together and they create this
phenomenon of no humans involved in the market and that's not new it's been going on since one thousand nine hundred seven well let me again compare it to the gerrymandered political markets one thing that disrupted it that was not within the plans that the elite had in mind was donald trump like and what did they do they blamed the people that deplorable all those people in social media bernie mean like these sort of things they they look for mysterious you know they blamed the market essentially they blamed the voter in the financial markets the voter is the guy who pulls his shares and invest in something else like gold or silver here back to that j.p. morgan guy he said if we add to this an increased number of algorithms that trade based on posts and headlines the impact on price action and investor psychology can be significant so you already see them laying the groundwork for max kaiser tweeting like max keiser tweeted something about j.p. morgan that's why our shares fell apart it had nothing to do with our bogus
derivatives book it had nothing to do with our short position that they used to have on silver for example like these things like it's nothing to do with reality. in their gerrymandered markets where the likes of the financial times and wall street journal and certainly bloomberg and c. and b. c. visit the offices and go on christmas parties and flights with the heads of j.p. morgan goldman sachs they were able that's the that's how they gerrymander. information that gets out to the voting public of the financial markets are you best or. so they control information but they're no longer able to control what people say on twitter about them they're no longer able to control who shows up at these. annual meetings i mean they have to control it the same way you would control an avalanche on a mountain which you cannot really control and you don't know which snowflake is going to set that avalanche in motion if max keiser tweets a tweet mongst a billions and trillions of tweets and he say that was the stuff like the start of
the avalanche of j.p. morgan going bankrupt so be it but if you want to prevent that bankruptcy from happening you want to prevent do it your bank's bankruptcy from happening if you want to vent algorithmic trading from undermining the economy from happening you need to restore integrity to the money and the only way to do that in this monetarist environment is to raise interest rates to four or five percent the natural rate that would encourage both savings and productivity. but of course if you did that jamie dimon would have to find a real job warren buffett have to find a real job the people who don't you've got to find real jobs they could just sit there print money buy asters for themselves watch the price of the assets go up because they keep printing money they have to be join the community they have to become the join us the society instead of being these jim jones of jonestown meets mussolini which is jamie dimon to a t. well of course the other thing i again comparing it to the political thing is trump was an amateur and here they're also basically j.p. morgan is essentially arguing and these big banks and the guys who control the
algorithmic trading that's how the they've been able to use this algorithm trading to basically front run and basically defraud other investors and the slow money your pension fund they front line all of that they scalp that they scout the ordinary trader on robin hood app and things like that and here basically they sound like eighty percent of daily volume in the u.s. is done by machines so what you get is a lack of focus on earnings a lack of focus on outlooks and you just get short term movements based on very specific data that is released every day in creates noise says. fund manager friend if you're going to make money algorithmically training by having a robot straight for you don't be surprised when a drone appears that's being written by and driven by its artificial intelligence algorithm and bust a cap and you're the guy you can't have cake and not eat it too and something along those lines. we got more coming away after practically.
i see the i. phone i. i i i i. i i i i i miss it all. i've been saying the numbers mean something they matter to us is over one trillion dollars and. more than ten white collar crimes happen each day. eighty five percent of global wealth to be held for bridge eight point six percent market saw thirty
percent last year some with four hundred to five hundred three per second per second and when he rose to twenty thousand dollars. china's building two point one billion dollars ai industrial park but don't let the numbers overwhelm. the only numbers you need to remember is one this will show you can't afford to miss the one and only. well you know the fires they were kind of adopted because we were called pirates for so long. i mean they're in this small boat sniffs it a hard pull of ships and it's standing. up and. the limo self did big cold fish already ninety percent of the dot and it won't be calmer and. you conduct fifteen scoops
seventy five tons to not do it several times a day with a big fleets of power you get an idea of the ocean which. we have to understand we could not stay still and just. be within this the deal because or. i'm doing this because i want the future world to the future can generations to have and enjoy the ocean we have. a clue. welcome back to the kaiser report i'm max kaiser time now to continue our conversation with dr michael hudson his new book is coaled and forgive them their debts and the financial times is already damed it one of the books of the year so
congratulations it looks like you know i've been reading all of your books for years now and this one looks like it's going to really stand out and be a runaway success and it's about time people started learning of some of these economics and one of the comments there from paul craig roberts former undersecretary of u.s. treasury in the reagan said basically that readers often ask how they can learn economics my answer is to spend many hours with hudson's books you'll understand economics better than any nobel prize when it caught economists so let's talk about those nobel prize winning economist for a second like paul krugman nouriel roubini and others they seem like they are bad man they seem like they're house. economists they perform a function for that neo liberal elite those bankers elite they push forward the debt is ok for them they never seen a debt they didn't like you know. that you know the broken window theory burn
everything down so we can rebuild it go deeper into debt that's great and how come there's no room for an economist like yourself in the national discussion who could put things in historic contacts who is on the side of the worker or the farmer the the average joe who doesn't want to become a debt slavery why did they get the new york times columnist what's wrong well there's a reason for all of this. when i went to school every graduate economists wouldn't have to learn economic history that's out of the curriculum now you had to learn the history of economic thought that's dropped from the curriculum. in terms of pure mathematics the nobel prize is really the nobel prize for neoliberal economics and what they do define as economic science is having a mathematical solution where everything ends up in balance and stability the stability that they envision is everybody. essential for fitting all of their
proper date to the creditor is an ending up in feudalism and that is the only kind of stability that you can have under the current economic trends but none of these people who get nobel prizes have talked about money or economic history or about the history of economic thought in fact paul krugman said that one of the things he was taught when he went to mit was don't discuss money its controversy will and he stayed away from it and there's a reason why he. writes these relatively silly ideas about money and the reason is you had steve keen on this show a number of times who had a wonderful a a debate with paul krugman about do banks create money or not and crewmen said no banks only lend out people savings and steve kean said banks a loan straight deposit bank of banks create their money and what they create is debt and what people call money is really debt because every money is
a form of debt even gold even gold in greece all the gold coin age that was coined for the wars and the fourth fifth and third century b.c. was borrowed from the temples and had to be repaid by the palace to the temples. at the end of the war so all early money was credit and all credit basically in mesopotamia began with basically debts owed to the palace it was very much like china which is why china doesn't have a problem anymore than babylonia did because in china if your company and you go. go bankrupt or you go you're not able to pay like sears or toys r us or the other recent companies you're not carved up and sold off to new buyers and the chinese government says ok it's not worth driving a bankrupt in letting an american company take you over it we're just going to
forgive you the debt and so even though china has high debts the government continues creates the money to finance it and basically china is creating the money to finance its industry. as money and it's called debt but china cancels the debt rather than destroying the industry america believes that you should destroy the industry if wall street can benefit from carving it up and that the whole vocabulary of corporate takeovers corporate raiders carve ups break up value reflects the whole idea get a company into debt and do with that you know what the many financial managers do today pay a huge amount of money to the creditors pay it to you for management fees give yourself stock options and then leave it a shell with no money to meet the commitments of the labor force sears ends up not paying severance pay to the employees that have worked there for many decades that
there i'm sorry there's no money in the pension fund we had to pay the creditors and the creditor is the bank that own that basically as part of the conglomerate all of the assets are pushed onto the bank side leaving an empty shell and that's essentially why america is unable to compete in manufacturing going forward with china and china is well aware of this somehow the trumpet ministration is trying to blame china as if it's playing unfair and the new. nafta agreement with canada and mexico says you cannot trade. with a company a country that isn't free market you cannot trade with a country that is a mixed economy that finances its own education for nothing that subsidizes education that subsidizes transport you can only trade with countries that are thatcher arised and reagan and the effect is that no privatized economy can compete
with a mixed economy because the role of a mixed economy which is how america got rich is for the government to support infrastructure to support basic needs at a low price to keep the cost of production luckily for enough so again you know these nobel prize winning economist the other phrases like to throw around equilibrium and they use mathematical equations and they say see the mathematical equation is it works because x. equals why we can prove that mathematically but the as i say the forest they stick can't see the forest for the trees because the actual all economy works by credit creation kind of distorting the power structure and then you have what you describe in your book and historical reference going back thousands of years and how debt is used by the powerful to subjugate to the less powerful and it destroys society in around one of those inflection points not a mesopotamian rulers wrote down the debt as a wealthy families in order to prevent those wealthy families from gaining enough power to challenge the ruler rights today our rulers and forced us because the
oligarchs are more powerful then the elected leaders so again a bit of a reversal there your thoughts your first point was equilibrium any mathematical model assumes the environment remains unchanged and yet the environment is always changing what economists should be looking at is how is the political structure changing the social structure in the legal structure changing but if you make an economic model assuming that there's not going to be any change at all you're missing the whole idea of how the world economy is developing developing you're taking everything out of context. and if you say we're only looking at market relations what people earn and pay you're not looking at well wait a min. where is the regulatory capture where is the fact that the the almost every industry in the united states has taken over the government regulatory agency that's supposed to regulate it whether it's coal companies and oil companies taking over the environmental protection agency whether it's the criminal class taking
over the justice department whether it's the banks taking over the deposit insurance agencies and regulatory agencies and federal reserve you had regulatory capture and when you have every government agency captured by the. right regulates you know if the government captured some let's talk of debt write downs on an international scale for a moment in seventy one when the u.s. went off the gold standard because they did not have the three hundred million dollars of gold to pay the united kingdom was a not a debt write down and we paid them in cast and we owe them in gold right so that right i mean that that was our debt write down i there they they would call it a junk for equity swap it so the federal reserve build out the banking system after two thousand and eight. cents a credit for credit for junk swap and of course the u.s. also did force many european nations to forgive germany's debt after world war two
how did that go down and what were the arguments for against it at that time that's a wonderful example to look at because that's that was germany's economic miracle and people think the economic miracle was a free market but what was freed was all of the debts the internal debts were all cancelled except for what employers owed their employees and minimum working balances and it was easy to cancel the debts because most of the debts in germany were owed to the nazis they were the creditors so emerged from world war two and so the allies said we don't want the nazis repaid so we're going to cancel the debts now and i move on because there's another interesting case study here john maynard keynes had argued at versailles that saddling germany with unforgettable debts after world war one would result in a horrible thing. now today we see the rise of fascism across the western world burdened by debt made whole in two thousand and eight ok so is there a connection there well yes in. germany couldn't pay nor could the allies pay for
their word debts to the united states and the world economy broke down in one thousand thirty one and there was a depression this is exactly what happened in the one nine hundred seventy s. and eighty's under the i.m.f. when the i.m.f. insisted on being repaid is what happened when the i.m.f. finally began after two thousand and eight was a godsend to the i.m.f. because finally countries had to borrow again and the i.m.f. could impose neoliberal austerity and you have countries like greece and the i.m.f. promise that if you get poor and have austerity and pay your wages lower the wages you'll be able to pay the debt more right green wasn't able to live on germany today will not allow any of the debts of greece and presumably coming up next only to be written down so the euro will it crumble i don't see how it can go it won't grow it will be a slow crash if the government cannot create money to pump into the economy like keynesian policy did like the united states does and like britain does if the government can't create money than all of them just by. building infrastructure and
paying people then banks will create the money at interest and more and more european income corporate income personal income will go for debt service for the money that it needs to to live and then they don't spend any money left the guy doesn't services and europe will end up looking like greece greece is the model for the european future and it may be for the american future if we have balanced budgets in this country and want to follow the i.m.f. austerity model for which nobel prizes are given right and we have about thirty seconds let's talk about the student debts i mean as a one point something trillion dollar bob all these debts according to the way that they're struck. you can forgive the debts how does that end it ends with a large number of students not being able to pay or if they do pay and keep current on their student loans they will not be able to have enough money to qualify for a mortgage to buy a house not enough money to get married and have children they'll have to continue
to live with the parents unless they have a trust fund so you'll have a bifurcation of the american economy between young people with trust funds who don't have student debt and people that have to borrow to get an education and their living standards are going to be very deep like near feudalism that's the idea all right perfect all the book is and forgive their debts available on amazon right now you can preorder it makes a great christmas gift by twenty or thirty copies of this in india friends you'll be the most loved next christmas thanks for being on the kaiser report good to be here may and that's going to do it for this edition of the kaiser report with me max kaiser states you never like to thank our guest dr michael hudson author of and forgive them their debts if you like to reach us on twitter as kaiser reports and i stand by. china much bigger economic power much or long term.
i think. you have to live with. it and there's lots of advantages that the europeans as well as america. doing drugs my nephews was still in drugs my sister just with drugs it was like in the drug of. america's public enemy number one in the united states is drug abuse sort of the users in the prison population so we started treating sick people people who are addicted to these drugs like from. while i was on the hill i increasingly became convinced that the war on drugs. there are countless numbers of people who are in prison for inconceivable. for minor minor offenders in the drug trade it's
a lot watching your children grow up and miss you in waves and say by day as you're walking out of this is just it doesn't get easy. dropping all the presidential questions. on the twentieth dean's biggest events gives some the threats of a nuclear war the ukraine crisis breaks it among which. many western politicians experts and even ordinary people see russia as a threat they even think that you want to rule the world of course i do international journalist southam are think you're in a get a little worried by put in response to a global take also coming up on the program this hour. fighting for a long time in syria now we want it's time to come back. takes credit for defeating islamic state in syria and blindsides his allies and his.