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tv   [untitled]    December 22, 2012 2:30pm-3:00pm EST

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and now money weak says that central banking might just work if it was genuinely independent if you had central bankers who are willing to do the whole counter cyclical thing we might have a more stable economy in other words the central banks were willing to raise interest rates to temper boo's rather than just slash them to it levy bust then they might do some good river their propaganda is that they can't predict they can't see booms they can't see bubbles they can only wipe them up but they say that they're fighting deflation so that lower rates but the truth is that they cost inflation by lowering rates and those you know and i think about the way monetary systems work at this point in the system and in the game by raising rates you would actually increase the amount of inflation in the system thus increasing the possibility for economic growth by getting rid of the deadwood and by making it profitable for banks to lend again right now it is not profitable for them to lend
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so they're just sucking the teeth of the central banks that are giving away the central banks the largest ferry. well you know you mentioned deflation and central bank and ferries and for over twenty years now japan has been in this state of deflationary collapse and now we have a new prime minister in voted in to really end this time to really really really stop it this time and japan's new government to get aggressive incoming prime minister i'll be a valid stimulus lower interest rates japanese voters max on sunday ousted the current government and set the stage for a new prime minister who is valued to adopt a large stimulus cut interest rates and take more measures to revive growth in the world's third biggest economy right i mean look you might want to thank you going on here something to vent by cutting. right they benefited homeowners and mortgage
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owners by seventy billion pounds at the same time they took from pensioners and savers one hundred forty billion pounds so it's not like they are you know people say oh the pentagon money out of thin air they're printing money at it it's not coming from anywhere that's also false because actually what they're doing is they're transferring money from savers and from the pension industry and from the insurance industry which is now screaming bloody hell because these low interest rates are making it impossible for the insurance industry to operate as an ongoing business here in the japanese voter has voted for what they call an aggressive policy not only militaristically against china but they say they want more aggressive currency war and yet if you look at the last twenty years they've been violently aggressive in the currency war look at iceland iceland has collapsed their economy collapsed their banking system collapsed why because of the carry trade because of zero percent interest rates in japan i remember when we made
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that film money guys or we cover glenn stevens of the reserve bank of australia who said that there was something very strange about a g three country have giving away free money banking kamikazes so instead of pilots crashing planes into ships we've got japanese bankers crashing the economy on the the shoals of monetary currency debasement but it'll end up with a lot of dead people because as has been pointed out the casualties from this financial war going on around the world are in the millions and the death count is going up every day now and it's interesting when you look at central banking policy when they give away free money it's not terribly it sounds like here's a free gift for you it's actually a very hostile and aggressive act and it causes destruction not only well of the financial system primarily. it causes the entire eradication of economies and
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banking systems around the world it's like nerve gas you know you don't really notice it but then you're paralyzed oh my god and then you're dead and that's the effect of cheap money from the central bankers i like this quote from the article max a reduction in the value of the yen which is what the prime minister wants. would require the japanese central bank to aggressively lower interest rates a policy the bank of japan has been reluctant to adopt abhi could force the confrontation and try to chip away at the bank's independence unless it relents they're going to force the yen lower to try to boost their exports because their economies are not self-sufficient at the same time europe is going to lower their rates jack their rates lower us is going to the rates are going to go lower stand the global currency wars going on global currency debasement and so make up for the shortfall that shadow banking system continues seventy eighty ninety one hundred trillion and shadow banking claims and as long as interest rates are zero or less
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than zero the shadow banking system is invisible once interest rates tick up which will come with a bond crash because bonds are at multi hundred your eyes then the shadow banking system will eclipse the real banking system and everyone is thought they had something to nickels to rub together will be flat out broke remember it japan is about to enter the global bond market they've been financing their own debt from domestic savings so as they approach you know the day when we have to enter the global bond market i think what you'll see before then is some sort of hot war with china because everybody has made the comparison to what we're going through to the great depression and we all know what central bankers believe and that is that world war two got us out of the great depression so it's no coincidence i think that you see the same sort of alignments the same sort of geopolitical tensions going on yeah we're definitely headed for a war which might be good for the u.s.
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because instead of shooting each other they're going to shoot somebody else part of this banking revolution the central banking revolution as the first headline calls it which i don't think a central banking revolution i just think it's outright war on an armed people around the world moody's gets no respect. bonds fifty six percent of country ratings so the global bond market max disagreed with moody's investor service and standard and poor more often than not this year when the companies told investors that governments were becoming safer or more risky yields on solving securities moved in the opposite direction from what they said fifty three percent of the time a fifty six percent of the time in the case of moody's so you know experts analysts interviewed in this piece for bloomberg said well governments should stop listening to the bond market because when they introduce a stary they say it's because we don't want to downgrade from moody's. well there
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you know getting back to the dance of the money fairies and you know the movies in the rain again you see nobody believes them because they were caught cooking the books for these banks and taking bribes for ratings so they're completely discredited meanwhile the bond market the bond vigilantes as they were called in the clinton administration have been neutralized due to the government's buying back their own debt their monetizing their own debt although they don't call it that because they know that would be scary so they call quantitative easing so they're no longer in the picture and the ability for any price signals to get through the noise of the corruption is now completely zero so we have an economy entirely based on false signals where people can be buying and selling twinkies on e bay for eight thousand dollars while having their pensions eviscerated by chinese housewives speculating in the forex market for national debt max following decisions of the arbiters of credit risk is less reliable than flipping a quote for determining borrowing costs so what's the point what's the point of any
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of these animals any of these bankers any of these brokers any of the rating agencies yes but here's the here's the grim truth of it all all our analysts reports on wall street have not done better than flipping a coin for fifty years all of the hedge funds performance on it i would say in a five to ten to fifteen year basis not a one quarter basis have not done enough better than flipping a coin for in their performance all of the pundits on t.v. everyone it comes on sandy say their track record for predicting results other than fifty fifty coin flips is exactly zero so they're that's what an economy is all about capitalism is about uncertainty that's what makes it dynamic because the losers end up funding the winners it's different than in a centrally planned system where you have no mystery whatsoever and you just have a slow burning prism but unfortunately you've got the worst of both worlds in the u.s. you've got the price fixing of the fed what the slaughter of the general population
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so it's kind of like a casino galactic where the only hope to get out of it is to win on lotto meanwhile you're playing video games and eating twinkies all day. well moody's has downgraded six point four government ratings for every upgrade in the u.s. and europe even so max european bonds are having their best year since one thousand nine hundred ninety eight returning eleven point five percent through december fourteenth well in this case i must say that for the past four years i've gone on record many many many times that the euro crisis was completely fake now i just based my analysis on one very important issue and that is that germany is a global superpower and that there was no way that this euro project was going to go down no matter what nigel thanks however you read into the next paragraph in this article and they do point out once again why are the. bonds moving to the
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opposite of what the rating agencies say well that central bank revolution max central banks buying unprecedented amounts of government securities to pump money into their financial systems and keep interest rates low is also driving the divergence between ratings and bond performance the e.c.b. for example has bought nine hundred twenty four billion dollars worth of bonds and they say they've just said that they'll buy spanish and italian debt if if that becomes an issue yet and behind all that debt purchase is the one area in the world of the biggest gold court in the world twelve thousand tons in toto which is bigger than anyone else except for the general population of india but they're not terribly well organized. all right stacy ever thanks so much for being on the kaiser report. stating if it's not going to be speaking to peter shift.
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your language. fully recover though if you're going to feel some of the. treatments that the consensus. to the opinions that you have a great tool. to use to stories get him to. choose access to your office.
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cut. you know how sometimes you see a story and it seems so you think you understand it and then you glimpse something else you hear or see some other part of it and realize everything you thought you knew you don't know i'm tom hardy welcome to the big picture.
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welcome back to the kaiser report i'm max kaiser we're nearly five years into the global financial crisis back in two thousand and seven two thousand and eight when the crisis began there were very few voices out there warning about and then explaining the collapse five years into this crisis let's go to one of them the man who needs no introduction peter schiff radio dot com peter welcome back to the kaiser report thanks for having me on max all right peter schiff first of all i want to get into a simple question what is the exit strategy for these central banks that have taken on hundreds of billions of dollars of bad debt they have no exit strategy that's been my point from the very beginning when the fed first started talking about an exit strategy back in two thousand and nine i wrote a commentary and i said there was no exit strategy to the fed and checked into the
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roach motel of monetary policy meaning they could get in but there was no way to get out because the fed is the big buyer in the bond market they are pretty all this money they're buying bonds they're buying mortgages they have trillions now they're going to grow now by a trillion dollars a year how can they possibly withdraw that liquidity how can a cell wall those bonds and all those mortgages who's going to buy them right now peter were saying the same thing all over the world the central banks keep going down this suicidal path bank of japan just announced they have a new leader going back quadrillion and bad debt they want to lower their current. say they want to lower their interest rates again this is been going on for years now you correctly called it book and crash proof and this will and it seems to me there is a dead certainty a one hundred percent guarantee that the the end result of this will be a currency collapse yes or no well the currencies will go down dramatically relative to gold and some currencies will go down quite
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a bit relative to other currencies but at some point central banks are going to face a choice between destroying the currency and destroying the phony economy is that there are cheap money policies have helped to inflate but but either way it's going to be extremely painful course the worst possible outcome is that if we destroy the currency because then we'll have an economic crisis even worse than the one that we're going to get if we save the currency but sacrifice the bubble economies ok so yeah this we can see the end is is i don't see how we're going to avoid a currency collapse but day in terms of years between two thousand and seven two thousand and eight and that currency collapse there's this debate going on is that inflation is deflation but these terms seem misplaced because they are only valid within the context of a central bank and economy that is functioning and along the rules of law
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and logic but you can't even use those terms can you because this is what you can't . have to look at prices if you want to measure that in terms of real money and what economies need is deflation deflation is a big part of the cure you know prices need to come down particularly acid prices that are too high look americans can't afford to buy houses because they're just too expensive prices have to come down the prices have to adjust but the government won't let it happen and so they create inflation to fight off the deflationary forces that naturally. developing the economy but the problem for people who are looking at deflation they go back and they look at periods of time where we had on this money where we were on a gold standard and they see what happened they don't understand the difference between real money that you can create out of thin air and currency that you can create at zero cost an infinite amounts and when you have central banks and
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governments with the power they are going to use it and so they will continue to create inflation intil ultimately the deflationary forces are overwhelmed and you potentially andries unleash hyper inflation and you destroy the currency i mean people forget look at countries that have got into trouble with printing press money it always ends the same they destroy their currency and you don't see the currency gaining value and prices falling but if you look at any of these hyper inflation and you measure prices in gold there was deflation going on beneath the surface but you couldn't see it if you were looking through the prism of a currency and the same thing is happening or will happen in the united states if you're going to measure prices against the dollar prices are going to rise because they could rise dramatically but if you measure them in terms of goal they're going to fall right now they get back to a point there is a natural slow you could call deflation as economies become more productive prices
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tend to go down we see this an electronics industry and the banks will offset this by printing money but what we've seen something here which is a breakdown in the i guess you could call it the transmission mechanism because the central banks are printing money but it's not really circulating in the general economy it's it's going right into asset price inflation so you're seeing things speculative bubbles you're seeing a lot of bubbles right now there's a bubble in london real estate there's a there's a bubble in the bond market the bond market the u.s. treasury bond market and the u.k. guilt market they're trading it two hundred to three hundred ear highs these are in bubbles right. well absolutely in fact part of the dynamic that is feeding this is the federal reserve prints money to buy u.s. treasuries and now the u.s. government takes that money and it spends it into circulation what it sends out so security checks what it sends out plumbing checks what it pays the soldiers and now everybody takes this money and they go to wal-mart and they buy imported products
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or they go to the gas station they buy imported oil and now the money flows out and now china gets it or saudi arabia gets it and what do they do with it did their citizens take that money and spend it on american products you know they take the money and they buy u.s. treasuries with it so even though we're printing all this money it's not bidding up prices in america it's bidding up bond prices because the money we create gets sent to china or saudi arabia we're choose to buy treasuries that's where the inflation is showing up you have inflated bond prices but eventually that bubble has to burst because nobody wants bonds for the sake of owning bonds bonds represent a claim on on well a claim on on purchasing power on consumption and at some point the people holding our bonds are going to cash them in and actually buy something with the money and that's when all the inflation comes back to america america's shores like a tsunami coming in for of asia and it's going to overwhelm us because now all the
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paper money is going to come in and it's going to bid up the price of everything that's not nailed down right date the buns in america are trading at a two hundred and forty year high and they're in this massive bubble and when this bubble pops and the bonds crash that's ten that's the same thing as a currency crash how do you how do you avoid that and when people say well the bond market will never crash because the fed could just print infinite amounts of money to buy up all the bonds to prevent the prices from crashing but if they do that then the dollar will crash and the bonds are worthless anyway i mean i don't know if you want. you know how do we avoid a currency collapse this is what i'm saying there is no avoiding and you know i will be listing even one day last week that was completely felonious that the government stopped buying treasury bonds the somehow interest rates would go a lower i mean that's just it doesn't irresponsible statement to make when the government is buying all of these trends ninety percent of the bonds being issued is massive asset bubble collapse but the problem is my point is that the bond
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bubble a collapses either way either either the fed stops buying or they destroy the dollar but the only way to avoid a complete currency collapse would be for the fed to do what it's been resisting all these years and that is to say stocks stop buying treasuries allow interest rates to skyrocket which of course is what they're going to do and then let the chips fall where they may let the banks fail and don't bail them out don't even bail out the depositors when they went when when the banks fail and forced the government to restructure instead meaning the government cannot repay what it is borrowed the government has to acknowledge that it's borrowed more money than the taxpayers can legitimately repay and we need to restructure we need to go through a structured bankruptcy where our creditors take a haircut bondholders people who are planning on getting so security benefits government pensions medicare everybody's got to be leveled with and everybody's got
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to take a haircut otherwise the whole country is going to get a crew cut. peter your analysis is spot on because it's a simple mathematics but you know stuff that twenty pounds into a five pound bag you know that's what it boils down to so but your timing has not been perfect but let's look at twenty thirteen peter is that is a paper apocalypse upon us or are they going to fudge this for another you know twelve months or so what do you think. well look you know nobody's timing could be perfect especially when you have giant governments all around the world you know in this game doing whatever they can to postpone the pain and then you have cooperation of the private banks and investors and a lot of them just don't even understand what's going on and so they continue to buy you know to buy this nonsense and you know the longer it goes on people like me and i'm not the only one who's been pointing this out but as we point out the problems and then there's no armageddon immediately all the sudden people start to
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say you see there's no reason to be worried all the naysayers and doom and gloom words were wrong look there's no inflation and they just keep on you know whistling past the graveyard how can we get out of two thousand and thirteen without a a major crisis i suppose we suppose we can we might not but the problem is the longer the bankers and politicians succeed in delaying it the worse it's going to be because the only way to delay the consequences is to exacerbate the underlying problem right so they the point of timing is israeli a poison chalice because the longer we wait for the inevitable the worse it gets now imagine governments of course the governments i've been caught rigging these bond markets the bank of england was caught working with barclays and wrecking live board so now the central banks are not only engaged in faulty ideological money buying and money printing but they're engaged in outright fraud as we now know with
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bank of england and of course they are in concert with other central banks i want to ask you though a question because you have often pointed to governments and saying governments are the culprit in all of this and we've had this discussion going on really going back years where i have said we know the banks certainly should share some of this blame now recently we've had a situation where the bank here in the u.k. h.s.b.c. that was caught. financing terrorism laundering money for now. drug cartels and they're involved in the library scandal with all the other banks so isn't it about time peter schiff that you know we start to look specifically at these individual banks and say they're running a criminal enterprise that they're they're very much a part of this problem peter well i think the problem though emanates from the government and the power and protection it can extend to these banks and it's like no one to set out this entity that is corrupt and that can peddle its influence to the highest bidder once you start that game then it's like well can i blame the
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bankers for playing that regain to their advantage you know it's like if you want to kill the steak you got to cut off the head and the head of the snake is the government and the federal reserve and their power to create money out of thin air and the regulations and the taxes that they impose on the economy to benefit their friends and punish everybody else so it starts at the top and if we take away the power from government then the bad banks will fail and competition you know will be allowed to work and we'll have you know free market capitalism but yes there is a lot of corruption in the banks but you've got to look at the source it's emanating from washington and from the central bank all right peter schiff time thanks so much for being on the kaiser report and that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert i want to thank my guest peter schiff if you want to send me an e-mail please do so at times the reported r t t v are you the next i'm asked has a value. of
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