tv Prime Interest RT July 6, 2013 5:29am-6:01am EDT
dollars monthly liquidity injections we're going to talk about all of this with austin peterson in the bed and also dig into the fine print of that audit with perry and boring meanwhile in europe are two central bankers there mario draghi at the e.c.b. and the newly installed mark carney at the bank of england they're distancing themselves from bernanke eight because when ben sneezes the entire world convulses not only has a cost of borrowing in the us exploded over the last month but european rates have actually screamed higher at a faster rate and china one of the most important commodity markets in the world and they're in quite the pickle just today the state council announced a major shift in policy after over a decade of building not only potemkin villages but entire potemkin industries they recognize their goose is cooked so that ten percent magical g.d.p. at any cost it's unsustainable think general motors dealer channel stuff being written large oh and by the way i'll be talking tesla with justin underhill on today's daily duel so we're going to walk you through it all today so stay tuned
for what's in your prime interest. i. we just celebrated us independent state so let's talk about central bank independence the fed just celebrated its one hundredth birthday it was set up to be a lender of last resort during financial panics over time congress gave it three mandates maximum employment price stability and moderate long term interest rates now you might be scratching your head and saying i thought there were only two but here's why the fed can sit considers stable prices and moderate long term interest rates to go hand in hand. they count these two mandates as one we're going to tell
you why the fed is dead wrong about all of this on monday but today we're turning to austin peterson who is chief executive of stone gate l.l.c. and editor of the libertarian republic dot com and we're going to talk about the jobs report and bubbles specifically how the fed both creates ben deflates them austin thank you so much for joining me thanks for having me on let's talk about these jobs numbers today i have a couple of quotes i want to read these are two headlines and then we're going to compare them and see what's going on so the first one is economists react good enough for the fed to hold back and then the second one is economy adds one hundred ninety five thousand jobs but experts say the fed should not curb stimulus yet how do we reconcile this well the problem is the markets are way too dependent on what the federal reserve's actions are i mean if you look at the unemployment numbers when the unemployment numbers went down a bit and we had it we added more jobs the market was really was reacting naturally and all of a sudden the stock market boom last month when ben bernanke hinted that he might be pulling back this eighty five billion dollars and bond purchases then all of
a sudden the market was crashing so what is happening is that the central banking chair is artificially creating all of these asset bubbles and the markets are reacting negatively to this so i think the problem is not natural market activity it's the unnatural market activity the fed and i do think it's going to have to talk these markets back up again given the situation is that well i don't think he should because unfortunately i don't think he should or is oh yeah well he probably will and he probably made a mistake when he said that he might be pulling back the eighty five billion a bond purchases but right straight seems as if they're way too dependent on what the federal reserve chair says rather than the what the economy actually does and if you look at the unemployment we have long term unemployment people who've been long term unemployed out of this statistic they're out of the statistics seven point six percent what is it exactly my marginally attached individuals are out of work and they want to accept well but they haven't even been looking for work for four weeks those people aren't counted and then there are some people just giving up completely i think it's like going twenty three million people in the united states yes i mean that gets into you six and you three i got i want to play something from bernanke and get your reaction reaction from it so here it is and
it's a clip about him likening the economy to a car. margin growing holdings will continue to put downward pressure on longer term interest rates to use the analogy of driving an automobile any slowing in the face of purchases would be akin to letting up a bit on the gas pedal as the car fix up speed not to be getting to apply the brakes this is the failure of central economic planning right there this is keynesianism laid bare was you have a car the economy is not a truck ok austrian economists when they teach about economics they explain how the economy is organic it's not like you just put gasoline in a car and then turn an engine on and that's how it works there are always organic bits and pieces of the economy that are fluctuating that no central banking share could possibly imagine could could come into the economy could come into play the problem here is that ben bernanke he thinks that if you just put money into one end of the economy that jobs come out the other end you know this is the failure of stimulus and keynesian economics certainly and we saw in two thousand and eight he was actually taking billions of dollars hundreds of billions of dollars from one
sector of the economy he was blowing the money into the primary dealers in other mergence the facilities and then he realized that commodity prices were exploding and then he had to pull it out of another so he started actually selling t. bills during the summer of two thousand and eight and i think that's something that some of the austrian economists saw as a precipitated precipitating factor to the lehman meltdown when the short term funding markets i mean we've seen a lot of bubbles in the last ten years are they accelerated you know you would say so absolutely if you take a look at china for example they've seen enormous growth in the last three decades and now their central banks are starting to say we need to start pulling back on this economic growth and i think that's a major story it's ridiculous too because if you think about it when an economy is naturally growing why in the world would you ever want to slow it down only if your central planning and economy and stimulating could you say well we may be making some mistakes we may have overinflated this sector and then all of a sudden we're also matters exactly and so the problem is that when you understand how markets work in a natural floating economy when the assets start to increase that's a good thing overall no one would say necessarily that you might have you know
hyper activity in this sector or that you know there may be you know irrational exuberance and sal. greenspan had said they would say no this is natural growth and you saw that in the gilded age united states when we had a gold standard we had a natural monetary base that floated the interest rates rise and fall with unemployment that's what you want to have you want to have a natural economy that works in a way that's not artificial because the federal reserve creates the boom and bust cycle you see can you explain that a little bit actually does exactly what the federal reserve does is if we have a problem with unemployment they say well since this is part of our mandate we want to keep inflation low we're going to go ahead inflate right now a certain sector of the economy because we think this economy might be a growth industry you saw this with the tech bubble in the two thousand you saw it with the housing industry so what the fed is doing is it's picking winners and losers and saying we know what economies should grow and work we're stimulating investment in that area the congress does this too by passing things like you know mortgage lending to people who are you know low income and it stimulates the
housing economy but then what you've done is you create this huge bubble so the fed stimulates that by stepping in saying we're going to go ahead and offer very low interest rates artificially low interest rates to the sectors and it blows up the asset bubble and it creates malinvestment and i think a lot of people need to understand that even before q.e. the fed was manipulating interest rates and in order to do that it had to print money and it did that in two thousand and five and two thousand and six for an unnaturally long period of time and that's what gave us the housing boom so i mean what do you think the implications are of quantitative easing what's what's different about this than the system that we had before i was reading this morning moody's chief economist mark zandi was saying that the jobs markets really remained unchanged since the fed has been stimulating the economy you know we're good they say we're growing at one hundred seventy five thousand jobs a month but we've been doing that for two years and that's where we started when we were at q.e. three so we haven't really seen the fed able to pull off their mandate their end of the bargain which is you know keeping unemployment low even when they started q e three so i think the fed is if anything they've had a deleterious effect on the economy not overall and where do you think the fed is
going to go jawboning about. taking their foot off the brake pedal but can they really do it are they going to have to reverse at some future point even if they do they absolutely will have to reverse at some point i think ben bernanke he does not want to reverse i think they're right now they're going to have to hedge their bets they're going to keep their going to keep inflation as low as they can while they try and keep the stimulus programs going that they have right now i expect the federal reserve to sit on interest rates as they are right now but in the in the future we're going to see a paul volcker style policy we're going to see a rise of interest rates you know why in the world do we have these central economic planning is telling us exactly how much we can make interest wise on our money market accounts you're cheating the people who are saving money and you're bailing out wall street with these interest rates it's just absolute of course this is the economics of disaster and it's really sowing the seeds for another financial crisis such as the one we had in two thousand and eight which could be worse potentially absolutely because we have one point seven trillion dollars in excess reserve this is a topic we like to cover you know can bernanke keep all that money quote unquote at the fed out of the economy when interest rates rise i'm not sure if the interest
rate starts to rise and i do so expect that we will see some inflation in the c.p.i. numbers that we're looking at right now they're going to have to come out and say hey listen if you even believe them where i exactly we're going to have we're going to start including some of the necessity in the sense that he is the commodities that people actually purchase on a daily basis like food and food. good stuff yeah exactly ok so the future the fed can you lay out where we're going to be maybe in a few years is it possible that we might end up with a nationalized banking system specifically a central reserve since the system that's actually controlled by congress i would hope not good lord i know that would be worse than what i do believe so the congress who wants nancy pelosi running monetary policy no really i think that the best way to go forward as it is to move towards a decentralized monetary policy we used to have a monetary policy that was set by state run regional banks right now we have a central authority that says that you know united we stand divided we fall basically that if california inflates excuse me of california's economy is doing bad and we have to bail out the the region of the of california and then everybody
sort of has to suffer for that but in a decent. well as economy and more free banking system as the austrians talk about if one region decided to blow all of their money on schools public education and it didn't work out for them then they would have to suffer the consequences of that well this is interesting so would we have fifty central banks or how would how would this decentralized monetary system work well basically anyone could start up their own bank print their own currency to have voluntary transactions i would like to see the federal reserve ended but not by force but through competition to the marketplace and what would we would do basically is abolish laws of legal tender so when you pull out your dollar it says this bill is legal tender that's by law basically saying you are forced to accept this and i think in a free society or the law is a fair economy where you want real growth stable prices then you want to have a decentralized currency so that no one bank can say well you know we're going to force you to put up with these inflation numbers so ok let's say we get a little we get rid of legal tender laws i mean how do people going to pay their taxes we still have a government infrastructure that has
a lot of control over the economy and absolutely well if you start buying laws of legal tender what you do is you're legalizing competition so for example there was a man who created a liberty dollar and he was a private moment and people were exchanging gold and silver coins and this man was called an economic terrorist and put in prison because he was more of voluntarily trading gold and silver coins that he had made himself so what would happen is that some people may invest in bitcoins some people may invest in liberty dollars maybe will end up paying taxes and declines. thank you so much for joining me this is an oscar peterson thank you very much well up next stick around because here again we'll dig into the fine print of federal reserve audits you did know that the fed is audited annually right well it's not quite what you would suspect or maybe you would then just underhill and i will do all over the automaker tesla and about the dreaded in combat.
the civilized world produces more foods in. other countries. millions of victims every year. where a meal is the most of the treasure. is flood or droughts to blame. it was a bad year without a train. we couldn't see anything but that. there was great hunger. is a good help comes too late and with good intentions. charity diplomacy and business .
with all this fed speak i'm going to dig into the fine print of a debatable issue at the fed that is fed audits if you're asking yourself why should i care about these issues you might be interested to know that the fed has total control of the fed's monetary policy that is the supply of the us dollar and since the fed's inception and nineteen thirteen at the purchasing power of the dollar has declined over ninety five percent having full transparency into how and why the value of the dollar has declined it is at the interest of everyone expects those living on fixed incomes so is the federal reserve audited well if you visit their website at www dot federal reserve dot gov on the very front page of the website and pretty big letters it says yes they do get audited according to their website the government accountability office conducts numerous reviews of the
federal reserve's activities and the board's financial statements are on it annually by an outside auditor despite what the fed claims over three hundred members of congress called on the fed to be thoroughly audited last year and senator rand paul was quoted saying the fed operates under a cloak of secrecy here's what his father congressman ron paul says is not available to the public. the secrecy is to protect individuals who deal in trillions of dollars much bigger than what the congress does and these trillions of dollars bail out all the ralph the rich people the the the banks and the big corporations international overseas bank bailing out europe dealing with central banks around the europe around europe and different places that we should know what kind of transactions are we should know about the deals that they made when they were fixing the price of libel or these are the kind of things that have gone on for years and we have no access to. the current on
a process is not include the fed most crucial activities including the fed's discount window where banks like j.p. morgan borrow at the cheapest rate nor does the audit cover agreements with foreign central banks the federal reserve transparency act calls for a full audit of the federal reserve including a closer look into the fed's will interview files this would include the overview of homeowners and foreclosure another piece that's not included in the audits was the primary dealer credit facility as well as an overnight loan facility that was created in response to the subprime mortgage crisis or for the first time in history the fed lent directly to investment banks and the first three days of opening this facility an average of thirteen billion dollars was borrowed daily from the fed this program explained the fed's balance sheet expanded is balance sheet over eight hundred billion dollars part of this included toxic mortgage
backed securities the fed would not disclose of which firms received funds from the fed or how much and response bloomberg under the direction of markets where it meant mark pittman filed a freedom of information act disclosure on the federal reserve's discount window the fed refutes that so bloomberg food the case went all the way to the supreme court bloomberg won and these documents are now available on their website three years after the facility closed there is also a lack of transparency into the fed's quantitative easing program we know that the fed is purchasing eighty five billion dollars a budget balance of months what we don't know is exactly what price the fed is purchasing these securities act the fed rounds the numbers which conceals the amount of subsidies the primary dealers are getting from the fed when the federal reserve chairman bernanke he was asked by congress why so secret you said that the fed needs and dependence from congress to keep political and fluence out of there
paula. the making process the nightmare scenario that he envisions would be a lawmaker selling the process by asking the g.a.o. to evaluate a decision before implementing it he things lawmakers could have a chilling effect on the system and decrease its ability to guide the economy congressman ron paul was a very close to getting his audit the fed bill passed into law last year the bill passed the house with bipartisan support and had a good chance of passing the senate to however the senate majority leader would not bring the bill to the senate floor for a vote just simply enough that senator harry reid had a history of supporting. sponsored legislation that would call for a lot of the federal reserve system. for that amendment. every year every year the legislation that's nowhere. i think it would be interesting to know. about the federal reserve i think we should on the side research. so why did harry
reid flip flop when he was finally given the chance to move this legislation some speculate about fame and dependence from congress that chairman bernanke was asking for did not go the other way around and that's what's in the fine print of auditing the fed. well it's time for the daily dool and for the first time ever i have a prime interest producer justin underhill joining me thank you well let's get straight into a couple of stories that we're tracking here the first one deals with the automakers they're the ones that make electric cars and this is a federally subsidized industry in certain ways and they want to cut out the
middleman that would be the dealers and sell directly to the public just in time to give you the floor your take tesla actually recently petition the white house and they got over one hundred thousand signatures which means that the white house is going to have to address this issue i didn't know about this the fact that tesla can't actually directly sell its cars and most states you have to go through a dealer so this isn't states like virginia and texas and this actually reminded me of the fact that in new jersey you can't pump your own gas new jersey in or going to believe you can pump your own gas which is crazy to me but the argument why shouldn't these dealers be able to sell i'm sorry why shouldn't we be able to sell his cars however the argument is that the dealers you know this this creates more jobs it's good for the economy and other back to that but i'm indifferent to that if if test. gets through and is able to directly sell their cars to customers then this opens the door for g.m. and all sorts of other places to directly felt their cars and that totally cut so i think g.m. should be able to directly sold its cars to the public to i mean the dealers are in
a little bit of trouble because right now we don't really need all the salesman in them you can go on edmunds dot com and find the car that you want to call the fleet manager and just pick it up well it's actually interesting north carolina is so tough that was trying to sell online in north carolina and north carolina just cut that out so that's not actually allowable anymore so there is precedent that's being said here but i think the bigger issue is that there's all sorts of subsidies to these car companies as you mentioned to translate but also to g.m. and you know if they're now directly selling to customers or is that unfair i don't think so but i'm going to i'm going to leave it but we're going to move on to the next story here for our second story is something i know you care about it's called income inequality certainly something that has increased over the years but why recent harvard paper by harvard economist i would have preferred the textbook author greg mankiw to defends the earnings of the top one percent and the paper claims that the top one percent had enough value to the economy to justify the earnings so i'll give you the first shot again i want to also mention that manchu
is also a romney economic advisor i find this amusing that he's also defending the one percent you know it's a loaded term it is a loaded term but honestly in this in this day and age where we have one percent one percent controlling about forty percent of the wealth and the bottom eighty percent what's your ideal percentage is that there is no way necessarily to determine a correct percentage and i'm not saying that we need to but you can see that there is massive problems here once a lot of money goes into the control of the very few that's when we get problems with democracy or any i don't think the concentration of wealth in it's in and of itself is a bad thing but where we see the problems is when that wealth is concentrated by people who have deals with the government we see that especially in the financial sector but it's all over the place in almost all sectors corporations are the. running the show and they they get favors from the government that's how these people make their money and i see the sort of lopsided policy where where there's so much given out so whether it's through fed policy and dealing with primary dealers where there's favoritism for certain banks for dealers or anything else
that the government does in terms of stimulus there's certain and or subsidies given to oil companies there's certain things that are done for specific you but then there's nothing taken back there's nothing on the other side well let's let's get into the tech sector is it wrong for somebody like tim cook or even steve jobs to make billions of dollars if they're actually making products that people use and they're not using the government itself to make that wealth is that a bad thing i mean i wouldn't say that they're completely not even by the government there's all sorts of things that i learned well it's just so called to completely remove yourself but the tech sector overall is the least removed from government control and power so far i would disagree i think that there is a huge amount that they gain from government whether it's through programs or research or anything else that the government sponsors and there's the thing is is that the government isn't taking back anything from from these companies they're taking taxes but taxes have been reduced and there's all sorts of loopholes over the years i think any time we implement
a policy where we reduce taxes or do anything like that we also need to concentrate on. our subsidy ok let me let me pose this to you because let's say we have a truly free market economy some people believe there should be no government and if there were no government protecting these industries would you be necessarily against the income inequality that we have i would think that you being a free market advocate would be for reducing income inequality because once this power gets in the control of the few and a few companies there is they want to maintain power and so then that's a cycle that feeds on itself and we're going to have to continue this part because we do want to get to some viewer feedback so we have this item by feudal five the do you know who said the fed is not printing money it's paying the banks to park their money with the fed when the banks pull their true trillion dollars for the fed and start. we will be out of the stagflation what he said about that i do want to address the first part of that which is the fed is not printing money that is an accurate statement because that is the bureau of printing and engraving and also
the fed is digitally creating money but i want to do that you know the fed does do that but digitally so they don't print they digitally credit the accounts of primary dealers or at the fed ok so what i'm going to say is we're going to cover this topic in depth about next week exactly why is it that we and we have to cover the monetary base versus money supply these are two different things and it is correct to say that we're not seeing lending in the banks and that's why we don't have an inflated money supply going to get to the next viewer feedback item right no and this is let me be who is this guy bob english this is a question that we've been wondering about for a while so we scoured the english family photo album and here are some theories that we've come up with so apparently you're a long lost all of us when i reached out there was a striking resemblance and that also gives a reason to why they were the bitcoin fund that they started sure and there are theories that you were the inspiration for johnny bravo which explains your love of sunglasses and hair product although i will say that the ratio of your legs to your
top is a bit off a little bit there and i are last theory will explain your disdain for bringing that into that when there. is a different one we believe you have me a long time and maybe you were neglected at birth ok so i think we have one more question here that we're going to get to who is this just in underhill will he get to the next. well justin thank you for joining me if you want to win in today's show be sure to like us that facebook at facebook dot com slash prime interest and you can follow me on twitter at english.
it was a schizophrenia day here in prime interest we saw how the b.l.s. jobs number of might just amount to a load of b.s. since no one seems to be able to read bernanke he's tealeaves certainly not due to any so-called fed audit and sorry the book sorry about that one to lloyd austin peterson schooled us on bubble theory in the serial nature of fed large jets as the unemployment rate a wave or a particle i'm sorry we're going to have to go no thank you so much for watching i will see you next time. a little older. little. lift hill. that speed.
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