Started while weve been here so its been a very fascinating busy time while weve been here but i want to turn to our 1st headline because this is a topic that you and i have been covering for and i know our guest coming up in the 2nd half this is his specialty negative Interest Rates are social political poison and this is from talk dot com and hes looking at a story out of germany from veldt Financial News and they say that the their articles called Interest RateBusiness 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 changed 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 old eat the little baby bear and the bear market and everybody gets in a. Theyve 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 ition a 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 its 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 and Deutsche 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 of Deutsche Bank since the financial crisis and this is partly because of e c bs intentional policy as you mentioned you know the its 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 buns 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 theyre losing money hand over fist theyre not able to pass it on to their clients right now theyre trying to pass the these costs on to their High Net Worth clients because those are the ones with a lot more money but heres a quote from the article that is exactly quoting from like kaiser what weve talked about and how radical the situation is at the moment people dont 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 right you know when i was working on wall street the banks job was 363 you pay a deposit or 3 percent you lend money out of 6 percent and youre on the golf course by 3 pm and that was the banking business so now without any kind of Interest Rate spread it all there is not banking business so banks but but but theyre going to go out of business completely and time has no value anymore so were entering a new post time this dont even post capitalism its post time were living in the Twilight Zone this is Twilight Zone of banking time doesnt exist its like the Bermuda Triangle of banking you know youre flying over all the banks are lending at negative rates and all the collateral is sinking into the ocean and youre up there in the sky and next thing you know youre youre on a wing of a plane with William Shatner dancing the want to see you wondering what the heck just happened its the Banking System 21st century this would happen well but remember so what weve done with the Financial System the system the all global fee system since were eradicated hard money in 1701 is weve only managed week weve weve gone further and further we have been time travelling ok thats been happening weve gone further and further out into the future weve gone 4050 years out into the future and pull all of that earnings today to today and thats why we have this mega debt load and you know i was talking to nick and youre 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 theres. There arent enough assets for all the liabilities so all of these debts are trying to find assets a safety. Even essentially and there arent enough there arent enough treasuries there arent enough of gold and there arent enough big quain even. Dropped heavily while we are here now everything has been securitized and turned into a commodity turned into financialization of everything has already taken place so the sport has become a securitized entertainment become securitized Agricultural Industries securitize Energy Industries security with the exception of hollywood thats another story but every single industry in america and the world been securitized and sold forward 102030 years all the consumption that would happen has been now consume so now were into a dead planet as like richard that burroughs Worst Nightmare is like right hi im richard up bro welcome to dead planet everything on planet earth is dead because bin securitized and weve confirmed it all well theres a teenager in the us. There heartbroken crying her eyes out because shes going to grow up on a dead planet we could have all been securitized and sold and resold and repackaged a real profit or 1000 times 10000 times were left with nothing except a dream of one who was one who wasnt and theres no more you know in 1071 when i was i was alive but i was very small didnt know but you know back then there were only like 33500000000 people on earth so that was a hard money age now since 1071 its been all easy money has been basically in all its going that you could print and leslie but the fact is time always did have value the problem is we cast 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 you rates were predicting essentially a population decline thats because weve already like if there are 8000000000 people on earth today its really like were living like its as if there were a 25000000000 in terms of how many lives weve lived already remembered or. In this subprime crisis everyones home had been securitized turned into tradable security and resold a dozen times amongst dozen banks and Pension Funds and then you had the Interest Rate crisis you had a collapse in all those homes one belly up and just as interesting side note of American History is the largest confiscation from the black community in a 100 years because they have 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 youre 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 thats been the theory all the trickle down economists and monetarist for the past 30 years have said all we need to do is just jam the economy with some money were going to get the Growth Engine started and that will generate the tax revenue we need to pay down all this debt while as ive been saying now for years and now its totally irrefutably true that lowering rates doesnt fight deflation of causes deflation and negative Interest Rates in the total collapse of the financial ecosystem so paul krugman and his guys they have responsible for the largest transfer of wealth medieval days i mean the point is that weve had weve pulled forward all this consumption from 40 years 50 years into the future so negative rates in that sort of situation might actually make sense in terms of. This article in mission talk dot com and there is some like wild birds and butterflies and animals than crack crickets crickets and grasshoppers here so if you hear noise dont 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 j. P. Morgan report about these negative Interest Rates and of course morgan is looking into their for their own future like were saying like were. And for the future weve consumed the next 4050 years j. P. Morgans looking at europe and seeing 0 race negative race coming to america and they see their own future so they say they quote in their report frank kohler c. E. O. Sparta 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 weve been covering and its 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 socio political poison that is negative rates that 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 black color still amongst us living zombies so when you go into negative rates they will go into your bank account and theyll 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 theyll say well your car is also securitize we have it on our books its on our computers and we know exactly what that law is all about we need to take that as well take your car then theyll take your kids because of this Financial Education system has been completely financial as ill say unless you give us your kids you know the schools will go bankrupt and theyre owned by j. P. Morgan we cant let them go bankrupt so we need to kids and theres a just continue basically unabated in this way and its a play centrally its like the black plague that wiped out half the global population as reisa biogas said negative Interest Rates porch and a decline in population are. Around the world the only thing i can compare it to would be the black plague which wiped out half the population so you know again youre speaking to the 2nd half and i think its important if you go online look up him and look at some of the data he has because its 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. People who are looking at the situation looking at negative rates looking at. What they dont understand is like the u. S. Dollar the currency the euro the actual dollar you know if you have a dollar in your pocket its actually debt its a liability its not an asset u. S. Treasuries are an asset a Treasury Bill is an asset so that is backed by the actual productive capacity of the United States that is an asset theres a shortage of assets actual real assets and you know i think ultimately we will see as. These sort of ruptures in the in the repo market stuff were 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 were seeing the same thing and i have us tweet here also from germany. He 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. Maturity transformation business is dead Commerce Banks shares a guy. With a 10 year treasury yield spread and those are the charts like Commerce Bank which used to be a big bank in germany thats 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. Middle corporations as the heart of german exports to me that those banks are starting to suffer as well. All the big banks will be on by amazon and we answer that because you know go buying and 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 were going to take a break and when we come back much more coming away dont go away. And the big pain years in the process started 10 years and i think its time to shake things up maybe change the branding maybe the format here is what ive been thinking about next season related episodes filmed on an island 10 experts cited out for a trophy what do you think ok a more affordable option 25. 00 text birds. And one red rose another suggestion. Jeopardy parody no political cookout where we will literally wrote the elite. Late night show its a rare form of these days and its cheap all you need is an old microphone in a printed banner. To leave me with i guess i can do this and laughter politics gone wild like music. Ok crosstalk is not about hype its about meaning 10 years of talk and still going strong. Peter if you want to change something why dont we get rid of the bow tie no that is too much. Lead. Welcome back to the kaiser report imax keyser time now to turn to nick but to yeah oh open note and tantra labs welcome thank you max this is fantastic because weve been talking for a long time number of years and were 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 thats thats where its really your specialty is and then you got the background of banking and the bond market so youre well placed to explain the turmoil and whats 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 theres i think its 18 primary dealers and theyre 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 its kind of like the inbetween layer of the stack if you will the financial stack the primary dealer 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 didnt 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. Its the most the shortest term piece of paper in the Financial System its a loan that secured by the treasury collateral itself and its short term and this is kind of the stuff and this is whats 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 its all pretty small you dont have these types of disruptions right so its shocking when the rate 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 somethings amiss here somethings bad is that what did it was it telling us something and if so whats it telling us right so its telling you that the its not the quality of the collateral thats 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 stop trusting the parties just stop trusting last week again like in 2008 right shut up because these banks dont trust the dealings with that theyve got the goods that they dont 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 were out that state again you know its funny its a game of Musical Chairs sometimes the music stops and somebody l