tv Keiser Report RT September 28, 2019 3:30pm-4:00pm EDT
but you and i have been covering report and i know our guest coming up in the 2nd half this is his specialty negative interest rates or social political poison and this is from misha talk dot com and he's looking at a story out of germany from veldt financial news and they say that the their articles called interest rate business model is dead the e.c.b. will restart its bond purchase program in november this time without a time limit thus the monetary authorities have permanently chained the long term interest rate at a low level and cut the profit opportunities of the financial sector to a level that is not sustainable for a long time institutions have made good money from the difference between long term and short term interest rates that time is now over bankers eat their young you know just like daddy bear will eat their little baby bear and the bear market
and everybody gets eaten you know they've destroyed the economy in so many ways there was only one place to go and that was to destroy themselves and now these banks are imploding the interest rate model is dead as talked about as referenced you can make any difference between the difference between different time values of money and so now this is the end game of monitor there is asian and neo liberalism we get to watch it now life time the social fallout will be spectacular we already see uprisings all over the world get ready for the global insurrection against banker occupation so break up fireworks maybe it's time to go big yes so in particular these are the european banks we see the european banks suffering the most we see their stock prices has have collapsed we see their bonds collapsing we see like for example j.p. morgan enjoys a bank at the beginning of this financial crisis in 2008 they were roughly the same size now. j.p.
morgan is about 10 times the size of deutsche bank since the financial crisis and this is partly because of e c b's intentional policy as you mentioned you know the it's a simple easy game right of banking do you borrow short term from the fed or the treasury or the e.c.b. and you lend long to mortgage holders and stuff like that the 10 year bonds yield are around $1.00 percentage points more than 2 year issues in historical terms currently the difference is just under a 0.2 percent so they're losing money hand over fist they're not able to pass it on to their clients right now they're trying to pass these costs on to their high net worth clients because those are the ones with a lot more money but here's a quote from the article that is exactly quoting from like what we've talked about and how radical the situation is at the moment people don't understand like how radical central bank policy has been since the financial crisis and they say
historically banks need money out of time if time no longer has a price because there is no more interest nothing can be earned so time no longer has value max you know when i was working on wall street the banks was 363 you pay a deposit or 3 percent you lend money out of 6 percent and you're on the golf course by 3 pm and that was the banking business so now without any kind of interest rate spread all there is no banking business so banks. but they're going to go out of business completely and time has no value anymore so we're entering a new post time this not even post capitalism and post time we're living in the twilight zone this is twilight zone of banking time doesn't exist it's like the bermuda triangle of bank and you know you're flying over all the banks are lending at negative rates. and all the collateral is sinking into the ocean and you're up
there in the sky and next thing you know you're you're on a wing of a plane with william shatner dancing the want to see you wondering what the heck just happened it's the banking system 21st century this would happen well but remember so what we've done with the financial system the system the all global feed system since we're eradicated hard money in 1701 is we've only managed to we we've gone further and further we haven't time travelling ok that's been happening we've gone further and further out into the future we've gone 4050 years out into the future and hold all of that earnings today to today and that's why we have this mega debt load and you know i was talking to nick and you're going to talk to him in the 2nd half but one thing we were talking about in terms of this and why these negative raids is that in fact basically there's. there aren't enough assets for all the liabilities so all of these debts are trying to find assets
a safe haven essentially and there aren't enough there aren't enough treasuries there aren't enough. gold and there aren't enough to even. drop heavily while you're here now everything has been spent securitized and turned into a commodity turned into financialization of everything has already taken place the sport has become a securitized the same it's become securitized agricultural industry securitize energy industry security with the exception of hollywood that's another story but every single industry in america and in the world been securitized and sold forward 102030 years all the consumption that would happen has been now been so so now we're in a dead planet as like richard that burroughs worst nightmare is like great hi i'm richard up bar welcome to dead planet everything on planet earth is dead because been securitized and we've consumed it all well there's a teenager in the us. there heartbroken crying her eyes out because she's going to grow up on a dead. planet we could have all been securitized and sold and resold and repacking
as a real papa canada 1000 times 10000 times we're left with nothing except a dream of one who was one who wasn't it is no more you know in 1071 when i was i was alive but i was very small didn't know but you know back then there were only like 33500000000 people on earth so that was a hard money age now since 9071 it's been all easy money has been basically in all its coin that you could print and leslie but the fact is time always did have value the problem is we cashed it all in for the next 4050 years so there is a sort of you know with the when voice of god was saying that that the markets the bond rates negative rates were predicting essentially a population decline that's because we've already like if there are 8000000000 people on earth today it's really like we're living like it's as if there were a 25000000000 in terms of how many lives we've lived already right remember during
this subprime crisis everyone's home had been securitized turn into tradable security and resold a dozen times that amongst dozen banks and pension funds and then you have the interest rate crisis you had a collapse and all those homes one belly up and just as interesting side note of american history was the largest confiscation from the black community you know 100 years because they had been sucked into this predatory lending by all of the major banks on wall street but you can apply that not only to housing but just about every single facet aspect of the economy has been packaged securitize and resold a 100 times and so the reason is that you have no way to extricate yourself down at that rate you're going negative because the only way you could possibly get out of that mess is if it somehow encourage growth that would encourage tax revenue that would allow you to pay down debt that's been the theory all the trickle down economists and monetarist for the past 30 years have said all we need to do is just j. the economy has some money we're going to get the growth engine started and that
will generate the tax revenue we need to pay down all this debt while as i've been saying now for years and now it's totally irrefutably true that lowering rates doesn't fly deflation a cause deflation and negative interest rates in the collapse of the financial system so paul krugman and his guys they have responsible for the largest transfer of wealth medieval days i mean the point is. we've had we've pulled forward all this consumption from 40 years 50 years into the future so negative rates and that sort of situation might actually make sense in terms of. this article in mission talk dot com and there are some wild birds and butterflies and animals and crack crickets and grasshopper serious so if you hear noise don't be alarmed we always have to tell our audience that they they get alarmed when they hear noises and we are out in the wilds of palm springs and they report they look at the j.p. morgan report about these negative interest rates and of course morgan is looking into their for their own future like we're saying like we're bringing forward the
future we've consumed the next 4050 years j.p. morgan is looking at europe and seeing 0 rates negative rates coming to america and they see their own future so they say they quote in their report franco their c.e.o. is part of bank berlin and he says that the negative interest rate policy of the e.c.b. is ruining the financial system and is a socio political poison says frank kohler c.e.o. of sparta bank berlin the financial system is absurd if we have to explain to the children that money has a negative value and thus debt is good because you may not have to repay anything again this is one of the things we've been covering and it's an important thing to look at since 2016 because everybody is looking for like some sort of mythical reason for all the stuff happening around us the populism the the socio political poison that is negative rates. is the fact that we have in deed genuinely
consumed the next 3040 years of of 5 productivity and assets right at the behavior of the debt blackball are still amongst us living zombies so when you go into negative rates they will go into your bank and they'll say we need to take some money from your bank account and that will become 2 percent a year then 10 percent a year then 100 percent then they'll say well your car is also securitize we have it on our books it's on our computers and we know exactly what that law is all about we need to take that as well don't take your car then they'll take your kids because of this financial education system has been completely financial and also unless you give us your kids you know the schools are going bankrupt and they're owned by j.p. morgan we can't let them go bankrupt so we need to kids and there's just continue basically unabated in this way and it's a leg thankfully it's like the black plague that wiped out half the global population as a right to bargain said negative interest rates for 10 and
a decline in population around the world like the only thing i can compare it to be the black plague which wiped out half the population so you know i again you're speaking to make policy on the 2nd half and i think it's important if you go online look up him and look at some of this data he has because it's too long to go into in this short segment here of the kaiser report but he talks about the triumph of liquidity and the fact that bitcoin errors and people who are looking at the situation looking at negative rates looking at the debt pile what they don't understand is like the u.s. dollar the currency the euro the actual dollar you know if you have a dollar in your pocket it's actually debt it's a liability it's not an asset u.s. treasuries are an asset a treasury bill is an asset that is backed by the actual productive capacity of the united states that is an asset there's a shortage of those of assets actual real assets and you know i think ultimately we will see as. these sort of rupture. in the repo market
this stuff we're starting to see those are the same sort of warning signs we saw in 2007 that we saw in 2008 about the financial crisis that was about to hit and i think we're seeing the same thing and i have us tweet here also from germany holger says he has room to business model of german banks which borrow money short term and lend long term banks can no longer earn money with flat yield curve maturity transformation business is dead commerce banks shares and die in tandem with a 2 year 10 year treasury yield spread and those are the charts like commerce bank which used to be a big bank in germany that's declined their share prices decline deutsche bank is down like 95 percent since the financial crisis even the landis bank and which are the foundation of the middle east like those middle corporations as the heart of german export economy that those banks are starting to suffer as well right now by
the way all the big banks will be on by amazon and we answer that because seemed like when you make a purchase on amazon you either get a big shock or a little shock depending on your credit rating or you get shocked and the population declines anyway we're going to take a break and when we come back much more coming away don't go away. from the big pain years and cross-talk sort of 10 years i think it's time to shake things up maybe change the branding the format is what i've been thinking about next season's brigs related episodes filmed on an island 10 experts cited out for a stroll through what do you think of a more affordable option 25 text birds. and one red rose another suggestion. geopolitical jeopardy parity no political cookout where we will
literally wrote the elites. late night show it's a rare format these days and it's chief all you need is an old microphone in a printed banner but actually meet with one of my guess i can do this campbell after politics gone wild like music. ok crosstalk is not about hype it's about meaning 10 years of talk and still going strong. peter if you want to change something why don't we get rid of the bow tie you know that is to. say. that he threw our need to play just one game so sudden this somebody comes on the other day and they don't know what to do with it you know their best hope is to temporize and
i'm continuing on to their next american election if trump is our to this side over at least because the democrats are bitter disposed towards these islamic republic and so you know maybe we can go back to the old james. quietly give me your concession as i quietly you believe the impression that i'm lost. in 2040 you know bloody revolution here to correct the demonstrations going from being relatively peaceful political protests to be creasing the violent revolution is always spontaneous or is it just always here i mean your list put me in the. school in the middle of the former ukrainian president recalls the events of 2040 and. those who took part in this today over 5000000000 dollars to assist ukraine in
these and other goals that will ensure a secure and prosperous and democratic. welcome back to the kaiser report i'm max keyser time now to turn to nick but to yeah open note and tantra labs welcome thank you max this is fantastic because we've been talking for a long time number of years and we're going to get into some really interesting topics right now you are really a guy who understands the internal plumbing of these markets these bond markets these money markets and that's that's where it's really your specialty is and then you got the background of banking and the bond market so you're well placed to explain the turmoil and what's called the repos market a lot of people been talking about over the past week or so what you know what happened sure so. the treasury market is one that needs to be
funded at the primary dealer balance all right so there's i think 18 primary dealers and they're the people that interface with the federal reserve bank right and the way that the economy is managed in terms of the cash is there they have a certain relationship with they have to buy stuff from the fed and they get a guaranteed revenue stream and then they market essentially to wall street so it's kind of like the in-between layer of the stack if you will the financial stack the primary dealers stack right so so the primary dealers in this case they were what was going on there so the primary dealers are obligated legally to take down excess treasury supply at the auctions and what happens is every time they take down treasuries they fund those treasuries through the repo market that is coming from money market funds cash balances from across the country so that money ends up in
the repo market and funds the treasury. for some reason the treasuries that settled last week didn't really go well in the funding market and the fed had to step in and do an emergency. 75000000000 repo facility on an overnight basis for these treasury securities repos a repurchase agreement. it's the most the shortest term piece of paper in the financial system it's a loan that secured by the treasury collateral itself and its short term and this is kind of the stuff and this is what's used back and forth to finance the transactions back and forth you need a lot of actually a loan to just cover the transaction and in this layer of the economy it's all pretty small you don't have these types of disruptions right so it's shocking when the raid on the repo market so it shows that there is some trust as of operating in that market has shot up and that would imply as we saw in 2008 when short rates and the rates shot up that was telegraphing as
a big signal like something's amiss here something's bad is that what did it was it telling us something and if so what's it telling us right so it's telling you that the it's not the quality of the collateral that's the problem the treasury market is still very well bid and you know rates are still quite low because the treasury prices are high what happened is that this treasury collateral was at a counterparty or multiple counter parties that other banks just stopped trusting people kind of parties just stop trusting last week again like in 2008 right shut up because these banks don't trust the dealings with that they've got the goods that they don't want to go out there and do business because they think that banks actually insolvent and the fed came in and all these banks community 1000 if they were looking for everybody now it seems like we're out that state again you know it's funny it's a game of musical chairs sometimes the music stops and somebody loses last time lehman brothers was taken out bear stearns taken out sounds like the music's about
the stop again and which is which bank is the unlucky bank this time that will be caught without a chair i really don't know it's hard to speculate my guess is that it's a european bank we've seen a lot of trouble. over there over the last several years in the banking system. but it's really hard to guess i would guess somewhere in germany france or switzerland somewhere in germany france or switzerland now sit down you can do a little work yourself there at home and come up with 2 or 3 names that's right you want to germany we've mentioned many many times that's my favorite the new lehman brothers said would be your bank and so now we're getting some market action then became one of these big banks about to go under that i 1st heard of you when you began writing about the time value of money and how the lightning network in particular makes this relevant to big claim so explain time value and why bitcoin matters in this regard sure so the lighting network does something novel for it
allows you to earn income without taking explicit counterparty risk because when you stake into a lightning node and open payment channels those are all still real big transactions and you're not actually giving over any control that pick one so this idea that we can earn income we can earn an interest rate without counterparty risk is pretty special my idea was that we can use these rates from across the network to establish a time value of big client and perhaps a reference rate for big capital markets where we can have lending activity that's actually referencing this lightning network reference rate and not just an absolute rate versus 0 right so in the credit markets you know you have the bond market and other markets they are paying interest rate and sceptic of the 10 year treasury bond is used as a benchmark to come up with packaging of securities and what the mortgage rate is going to be and what the matrix rates are from the longest to the shortest term the
yield curve as it's called so now this can be introduced a big point with the lightning network because you're getting an income you're getting in revenue and so you can start to do some real applied mathematics as a financial analyst. at the same time we've got wall street kind of entering into the big point space with their products and futures products what do they use to establish the value of those products sure so the lighting network reference rate is something that is just conceptual at this point there's not actually a lot of return to be made and it's very difficult to allocate lightning network capital to in order to make money with it the way that the wall street types are valuing the time value of big coin are these lending contracts and these exchange lending sort of situations where in the traditional markets we have securities lending that's where a holder of the security will actually lend that security out into the market so that somebody else can go short that's where we're getting the highest volume
bitcoin time value right now is this exchange lending activity people that hold bitcoin lending into the market so that the other side can go short write some pick winners stuff like paul doesn't pay in advance but we're also in an environment where these treasury yields are going negative so i would think that would be a big bonus and a big plus for breakpoint right yes you know the as interest rates go lower it's most likely because of all the central bank stimulus that we have it's money that's being created that's looking for a home and. there's no reason for it not to end up in highly liquid assets and so these liquid assets include government bonds and that's why we see rates continuing to go lower cost the world right so now this brings us to an interesting part of our discussion here about essentially what bitcoin is need to understand about the u.s. dollar versus the u.s. treasury market and so go into this a little bit because you believe that we should look at big. dollar instead of
maybe less than we do when we look at it versus gold but it requires kind of a deep dive into dollars and so work us through the church so. let's start by talking about bitcoin as digital gold i still i still think that this is one of the best ways to explain bit quine is that it's a commodity it's like gold it's scarce and it people believe it to be money and so i think that big point as additional goal is a very important thing now when we talk about big point trying to take on the dollar as the world's reserve currency i think it makes mischaracterizes it a little bit the dollar is a liability based money it's debt money. what i think we should be focusing on are u.s. treasuries u.s. treasuries are assets big point is an asset gold is an asset and so u.s. treasuries is the way to think of what is the demand or what is the current available supply of the most liquid highest quality collateral in the u.s.
dollar system it's not physical dollars because those are federal reserve liabilities and it's not digital dollar deposits because those are commercial banks liabilities it's actually the treasury because the united states government has the lowest perceived counterparty risk in the system so big coin holders should be thinking about taking out the u.s. treasury as the risk free asset of the world not necessarily thinking about replacing the dollar right and how big is the market so the u.s. treasury market is currently approximately 20 trolling the supply for the u.s. dollar market onshore plus off plus offshore we don't really know right and so roughly more than 2 time football market yes more than the treasury market is more than 2 times the size the gold market price on people put pencil to paper and i say well because should be a 2 $20000.00 per coin if it's going to equal ball if we used the treasury market
then to get to that well we're talking $5600000.00 a coin well if you think $21.00 trillion divided by $21000000.00 coins that's about $1000000.00 back when so eventually i think that it's it's realistic for that to be the goal for big point as a market value surpassing that gold market cap right and that would make every said toshi worth one penny the same trail again almost by design a very great tell us about open node what is it and what are you doing there for them in this new job open notice a big point payment processor lightning enabled as well so both on chain and lightning network payments and. our goal is to bring big point adoption to the world so merchants can sign up we have great a.p.r.'s that are really easy to use and implement and you can start accepting backwind right away so does do you change because it is but climate change you. want is definitely changed me. so you
know a few years ago i was working in the traditional finance world and i really saw that big point was an opportunity to start over with money and the financial system and is just an opportunity that's worth pursuing to see how many big pointers around the world are so passionate. it really helped draw me out all right nick thanks for being on the kaiser report thank you so much matt oh right well that's going to do it for this edition of the world with me max. herbert like to think. of open note and. going to catch us on twitter it's kind of the report or report dot com until next time.
in $24.00 to you know bloody revolution to the demonstrations going from being relatively peaceful political protests to be creasing the violent revolution is always spontaneous or is it still with. the former ukrainian president recalls the events of 2040. 8 invested over $5000000000.00 to assist ukraine in these and other goals that will ensure a secure and prosperous and democratic. it's so many people because a cop became. such a bad ending. i'm not anybody. i'm
100 gandhi a new normal i'm going to. seize the ignore you mock you join you. h. offer us democrat provokes the ire of trump by offering a deeply misleading summary of the president's controversial phone call with the leader of ukraine. also coming off as an investigation reveals. transporting its plastic waste to malaysia we get reaction from a climate change only in montreal. but. if you wish take your whole new dishes i'm sorry to hear that type going on alt.