Banks, Bailouts and Manufactured Market Crashes
Max Keiser on Guns & Butter
This is a transcript of the interview by Bonnie Faulkner at Guns & Butter on KPFK, recorded in Paris in December of 2010, and broadcast September 26, 2011 on NoLiesRadio. Because of the extreme importance of the information and insight it contains, I have decided to transcribe it in its entirety. Feel free to use and copy it at your pleasure, and please study it carefully. We are throwing our lives and our civilization away for lack of only a moderate level of study of these really quite simple facts.
The program begins with a choice sample of the interview, followed by Bonnie's introductory remarks. You may download the MP3 at this link.
MAX KEISER: Remember 2008 Hank Paulson wanted three quarters of a trillion dollars to give to foreign banks and Goldman Sachs, and Congress said "no" based on his one-page memo, so they crashed the market, the next day they said "yes". Uh, then in May, the Flash Crash of 2010 similarly, they were gonna pass a reform bill, they wanted to pass a reform bill, they crashed the market, then it gets watered down. Uh, just this past week, um, Congress, the new Republican congress said "look, if you don't preserve these tax cuts for the rich, we're gonna crash the market. Those are the words that they used: "The market will crash." So they've got a loaded gun here, that's pointed at peoples' heads, and they keep using it over and over again. "If you don't give us more money, we're gonna crash the market." The market is being held hostage. They know that they can crash the market, because the computers are set up to crash the market when at the push of a button, and the idea of markets functioning on their in their own, in their own defined prices and to go through this thing called free-market capitalism is just finished. Now it's just being used as a weapon.
BONNIE FAULKNER: I'm Bonnie Faulkner. Today on Guns & Butter, Max Keiser. Today's show: Banks, Bailouts, and Manufactured Market Crashes. Max Keiser is a financial analyst, television and radio host, journalist and entrepreneur. He is host of the bi-weekly Max Keiser Report on Russia Today, is co-host of the radio talk show The Truth About Markets on Resonance 104.4 FM in London, and is host of the weekly On The Edge with Max on PressTV. He produces documentary films covering markets for Al Jazeera's People and Power series, and is a frequent guest on Al Jazeera English and France24. He blogs for the Huffington Post.
Max Keiser, welcome!
MAX KEISER: Yes, great to be here. Fantastic. You've got a great spot here in Paris, in this room. The snow is falling. A rare treat.
BONNIE FAULKNER: Well, Max, yes, here we are in Paris. You live in Paris. You've lived in France for how long, and why did you move here from the United States?
MAX KEISER: Well, I came here originally in 1990 for a Christmas party, and I loved it so much, I phoned in my resignation to my Wall Street stockbroker job, and I ended up staying here for five years, then I sold a treatment for a film to Miramax that took me to LA, then I started a company in LA, then I sold the company and I came back to France, so, over the past 20 years I've been here a total of 15 years.
BONNIE FAULKNER: So you initially moved here because you loved it here.
MAX KEISER: Mm-hmm.
BONNIE FAULKNER: Now, would you ever consider moving back to the United States?
MAX KEISER: Well well, not really. The US is becoming less and less interesting. The rest of the world is breaking away from the US in a lot of different ways, both culturally and financially, and so you want to be where there's growth and interest. The US is a dying country, and other countries around the world are growing. So you d y'know, it's not fun to be in a it's like being in a morgue being at a wake, when you're at the US. It's like saying your last farewell to a dying friend. It's y'know, there's only so much of that I can take.
BONNIE FAULKNER: Now, with regard to your background, Max, you have a patent on software for stock trading. What about electronic high-speed trading? What are the capabilities that computer program trading give the banks, for instance?
MAX KEISER: It's the capability to steal. So, high-frequency trading, as it's called, for example, a bank like Goldman Sachs, they park their computer server next to the New York Stock Exchange, and it siphons cash away from the exchange by flooding the exchange with bogus orders, or, "quote stuffing" as it's called. This is meant to manipulate the price, and to offset the manipulation with orders in different markets in ways that allow them to simply siphon off cash, a hundred million dollars a day, which again, could be used to create jobs, and do something dynamic with that money. It doesn't need to just be stolen by Goldman Sachs and other banks, and awarded to themselves at the end of the year as part of their record Christmas bonus. It's too bad. That money could be used to educate people, and create jobs. But instead it's being stolen, and is used to just feather the nest of this oligarchy.
BONNIE FAULKNER: Well, that's right. And I'd like you to explain a little bit in more detail to listeners exactly how this is done. Now, you have some quotes that I've read about what went on in the stock market in May of 2010, and September in 2008. These were some dramatic drops, uh, in the exchange, and those were very easily manipulated by high frequency trades. Could you because it's really not as complicated as it sounds. Could you sort of break it down and tell people exactly how this is done?
MAX KEISER: Sure. Well, normally prices on exchanges occur as a result of supply and demand. If there's a lot of demand, prices go up, and if there's a lot of supply, prices go down. And the market is a neutral intermediating force that allows this "price discovery", as it's called, to occur. So you don't know what the prices are gonna be minute by minute because, according to Adam Smith's "invisible hand" theory, buyers and sellers arrive in the market anonymously, and the market, the invisible hand, gives everyone a mutually beneficial price, based on, um, this characteristic of clearing prices at a mutually beneficial price that satisfies both the buyer and the seller.
Now in high-frequency trading, it's the opposite. You pick the price first, and then you fill in the orders to match the price. So when Goldman Sachs or J.P. Morgan, they look at the market and say, "we want IBM to trade at this price", or "we want this, uh, cotton futures contract to trade at this price", or "we want the S&P futures to trade at this price". They pick a price first. And then they program the computers to fill in all the orders to get them to that price. So, clearly that's not a market functioning in a way that's democratic, or egalitarian in any way. That's a market that's broken, that's a market that's being abused, that's a market manipulation scheme. And if you know what the price is gonna be before the prices occur, you can trade around that, and make money illicitly as they do. So basically, it's just turning the whole market-making function inside out. My technology, the Virtual Specialist Technology, patent #5950176 in the US Patent Office, that referenced over 132 times, by various other trading algorithmic trading technologies, is one of the core technologies for making markets in this new environment of computer trading. And I originally designed it to prevent this very thing from happening. That was my original intent. When I was creating the Hollywood Stock Exchange, for example, I created this technology so that our traders could not manipulate prices. I needed to be able to improve upon all the existing technologies that were around. But that technology fell into the hands of the enemy! Unfortunately that technology fell into the hands of Cantor Fitzgerald, and they moved the whole company as part of an acquisition to the top floor of the World Trade Center, uh, just a few months before 9/11.
So, you could call that karmic justice, or poetic justice, or whatever, but they their deal which took control of this technology which was a questionble deal to begin with, it's not as if they got away with it. They had to pay a price. But, was that price high enough? I think that's a question people have to ask themselves. The bankers are still free to commit these crimes. There's no rule of law. There's no reform movement. There's nothing stopping them from continuing to ransack the economy, to steal the critical capital needed to have a functioning economy, and there's very little between them and a totalitarian oligarchy state, which is forming right now, and it's on a global basis.
BONNIE FAULKNER: Well, that's right. You mentioned Cantor Fitzgerald. That's absolutely right. They lost a lotta people in those towers on 9/11. Um
MAX KEISER: And a lot of them were betting on the rumor that planes were gonna be involved in a massive terror attack, which was information that was circulating before the event. And you saw this, y'know, when I was working on Wall Street. I was mostly an options trader. And the options market is a very sensitive market. It can it picks up on information quickly, and discounts that information; you see that in the prices very quickly. The prices for the airline stocks that were affected by that, uh, event, were already moving two weeks before the event. The company that was clearing the trades, Alex. Brown & Sons. In Baltimore, their former CEO was working with George Tenet at the CIA, in the White House as the deputy CIA director, so clearly there's a channel of information from the White House to Alex Brown. They're trading on these options at ten times normal volume. The prices are highly erratic. It's a tell-tale sign. Anytime you this is what happens wh after airlines blow up you see this type of price action. This is the first time you saw it before the airlines blew up. It should have been a red flag to regulators. There should have been an investigation. My point is not that Buzzy Krongard, who was the involved in all this and who was a former Alex Brown guy, and George Tenet, it's not that they were the architects of the, uh, 9/11 disaster, but there was enough information floating around soon enough that they could have probably prevented it. But they voted with their pocketbook instead. They realized that there was easy money to be made. Millions of dollars were made. Two million dollars was left unclaimed at Alex Brown, as mentioned in the 9/11 Report. So these guys put their own interest ahead of those people who died on that day's interest. And that's kind of the American story these days. Individuals are willing to take the money and let millions of people in this case now with the economy breaking down, uh, die. And there's no cohesion at all politically, socially, economically in the US, and that's why it's, uh, a wounded, dying animal at this point, and it's not fun being there. I'd rather be in a country that's dynamic, that's growing, that's full of interesting people, interesting ideas there you have it.
BONNIE FAULKNER: Well, that's right, y'know, the first show I ever did on Guns & Butter, which was conceived of as an economic show, because of the timing was on the massive put-options on United and United and American Airlines. And in fact I have a friend who worked at the, uh, San Francisco Stock Exchange at the time, and he said everybody was talking about those puts. So that was very obvious. Now, hasn't the SEC claimed that they either don't know who did the trading or they're not gonna reveal that?
MAX KEISER: Well, they refuse to take a close look at it. Because it would open up they'd have to take a close look at a lot more that's going on, in terms of the insider trading and market manipulation that's going on. I mean, one of the biggest scams today would be the investigation into HSBC and JP Morgan into their manipulation of the silver market. And, this involves JP Morgan in a very interesting way, and once the SEC or the CFTC or any of the regulators, once they start to look under the hood, and really start to look at what's going on here, the whole thing unravels. So they're afraid, again, they're afraid of free-market capitalism. They're afraid to look at who's actually buying and selling what. They're afraid to see how the money is circulatng, because they're afraid of what they're gonna find. They're gonna find that there's a lot of people in the US who are ambivalent about 9/11, who profited from 9/11, who are setting up the next 9/11, because it's e a s y m o n e y . When stocks crash, you make money in a compressed amount of time. Y'know, if you look at the history of markets, bull markets, the big moves, you might see one or two or three years, like we saw in the 1980's is a good example we had a huge move for five years, and then on the, uh, crash of October of 1987 you had a 20-22 market correction, 22% correction in a day. Now, the amount of money that was made on that day eclipsed all the money, y'know, on an individual trading basis; you had enormous amounts of cash being made on that day. So the catastrophes are a lot more profitable in a lot compressed period of time than the growth period. And unfortunately, the people in the banking system in the US now are so greedy, that they don't care about the bull markets anymore. They just want to make a lot of money quickly by setting up these crashes. And they crash the market all the time for that reason. And it's destabilizing the country, it's destabilizing the economy, and the rest of the world realizes this, and they are taking actions to get out of the dollar, China and Russia now doing deals outside of the dollar, Brazil doing deals outside of the dollar. The growth economies of the world are trying to get out of the dollar. They realize that it's a currency that's highly problematic.
BONNIE FAULKNER: What was occurring in May of 2010 that led the banks to manufacture a stock drop? What was the point of that?
MAX KEISER: Um. Instant profits. It just the Flash Crash of that period was just part of the ongoing market manipulation scheme. And the computers are basically running themselves. And they realize that they can crash a market quickly, pocket lots of cash, and move on. It it it's the the computers are set up to be to steal. That's what an algorithmic trading is set up to do. Humans don't steal: the computers steal. Humans can program the computers to steal, then the computers go in there, and they they steal, they rape the system, they pull out as much capital as possible. And this is undermining the economy. The economy needs capital to function. But if the capital is constantly being stolen by these computers, it can't function, and as a result it's not functioning. It's not generating jobs, it's not generating growth, and to replace that income the government is resorting to nickel and diming people to death, surveilling upon them and harassing them, and stopping them at the on the air- anywhere they can. I'm sure that the current TSA scandal will result in a system where, "Yes! For $9.99 a month you can get a pass key that allows you to go through the airport without being molested." That'll go right to the government. So it's just about trying to constantly put people into debt, because people in debt are not free people. They're gonna vote in a way that is not in their interst, and that it's an indentured servitude model. It's back to the Middle Ages in a lotta way [sic] . Y'know, we Forget the Enlightenment we're back to the Middle Ages. You've got lords and serfs.
BONNIE FAULKNER: Well, that's right. And when I brought up May of 2010, what I was trying to get at was, what was happening then politically in Congress that would have motivated a stock market crash?
MAX KEISER: Oh, well, yeah, well, right, exactly, I mean, they were trying to pass the reform bill. So they basically crashed the market. Now, just this past week you have a couple examples of that. Remember 2008 Hank Paulson wanted three quarters of a trillion dollars to give to foreign banks and Goldman Sachs, and Congress said "no" based on his one-page memo, so they crashed the market, the next day they said "yes". Uh, then in May, the Flash Crash of 2010 similarly, they were gonna pass a reform bill, they wanted to pass a reform bill, they crashed the market, then it gets watered down. Uh, just this past week, um, Congress, the new Republican congress said "look, if you don't preserve these tax cuts for the rich, we're gonna crash the market. Those are the words that they used: "The market will crash." So they've got a loaded gun here, that's pointed at peoples' heads, and they keep using it over and over again. "If you don't give us more money, we're gonna crash the market." The market is being held hostage. They know that they can crash the market, because the computers are set up to crash the market when they at the push of a button, and the idea of markets functioning on their in their own and their own defined prices and to go through this thing called free-market capitalism is finished. Now it's just being used as a weapon.
17:50 [theme music]
BONNIE FAULKNER: Well, so you're essentially saying, the banks tell the government what to do. That's the bottom line, right?
MAX KEISER: Well, the bankers run everything, and they run the government, pretty much, and there's nothing that the government does now that doesn't serve the banks in some way. Even healthcare reform. Y'know, would that serve the banks and the corporations? It gave the pharmaceuticals millions more customers by mandate. Prices are going up anyway. Because people are going to have to go into debt to afford to buy the mandatory health insurance, it'll help the banks, 'cause they're gonna loan the money to people to buy these products and put them into debt.
So debt is the goal, and they're doing a great job doing it, by just putting people into greater and greater amounts of debt.
BONNIE FAULKNER: So how do you view your role in the world of finance and media. You're a financial analyst with a definite twist. Where are you coming from ideologically or experientially ?
MAX KEISER: Well, my point, my ideology or philosophy is that markets are plastic: that they can be shaped in any way you want to shape them. And the Left or the Liberals or Progressives never understand, never taken on board the fact that the markets can reflect their agenda just as easily as they reflect the hard right's agenda. For some reason, people on the Left think that the markets are immutable, that they're cast in stone and nothing they can do to change it, and they're gonna try to reform the system by doing everything but reforming the markets, which is like going to, y'know, a gunfight with a knife. Unless you're willing to reform the markets themselves, you will never, ever, ever win.
And markets, and the whole pricing, and the way is completely malleable. Ever since 1971 since the US went off the gold standard, and we went into a fiat currency system, the prices are just basically the result of propaganda. So, if the Left had the right mix of propaganda, they could just as easily move markets in their direction as the Right does. But it's funny and when I speak to Green groups, y'know, like the Green GreenPeace, for example. I was working with them for about a year, trying to get them to take an approach that was more based on banking than anything else, because the banks are the root of all the corporations' ability to do things that GreenPeace is protesting against. And when I explained to GreenPeace, and said, "Look, you got a hundred million euros in cash sitting in a bank; the bank lends that money to corporations that you're fighting against to do the very things you're trying to fight against. That's a problem."
Or when you go into EXXON and you say, "Here are the ten things you're doing bad", EXXON just buys insurance against those ten things, and to pay for that insurance, they lower their operating standards and cause more problems. Had you not said anything, the net result would have been a much cleaner environment. So unless you take on the economics and the finance of this in this equation, you're just making it worse. So my mission, I guess, is to try to get people to understand how this all works, so that people who are interested in social justice, economic justice, can at least go into their reform battles with the right tools, with the right mindset, with they they understand what's happening.
And currently, the campaign to crash JP Morgan and buy silver fits into this, because it is now well understood that you have a group of financial terrorists led by JP Morgan and Goldman Sachs, and the soft underbelly for JP Morgan is that they have sold about three billion ounces of silver that they don't own, so that they're naked this position; they don't have this silver in stock to deliver. Now, by people around the world buying silver, taking physical delivery of silver, and forcing JP Morgan to cover that position in the market, JP Morgan's stock will go will, uh, go to zero. It will crash it will be blown apart. And, this is a very worthwhile, uh, goal, because you would thus be decapitalizing probably the worst of the financial terrorists. And this campaign has caught on around the world, you've got it's gone viral, it's being covered by the press internationally, and people around the world now are buying silver, silver coins, putting up a few bucks as a global insurrection against the banking occupation, as a global effort to decapitalize the the worst terrorist of them all, worse than al Qaeda by many thousands of percentage points. There's nobody worse than JP Morgan. They are literally the devil incarnate on planet Earth. And so by buying silver you can put them out of business, which is something that has to be done.
The formal NGOs, of course, once again, they don't want to do anything that has to do with banking, because they think it's beneath them, that it's dirty. They want to win on the moral agenda. But unfortunately morality doesn't trade on any markets, so you can't really quote it, therefore it has no meaning. But the rest of the world who is not part of any NGO is saying, "OK, we're just gonna take this effort on ourselves, we're gonna use our collective buying power and take hundreds of million ounces of silver off the market, and we're gonna crash this sucker." And, uh, the price of silver just hit another new 30-year high [transcriber's note: this was Recorded December 2010], JP Morgan stock is, uh, y'know, listless in the water and looks very fragile, and so this is a campaign that is working.
BONNIE FAULKNER: So, Max, you are encouraging everyone to buy silver in order to crash JP Morgan, right?
MAX KEISER: Exactly.
BONNIE FAULKNER: Their naked shorts.
MAX KEISER: That's right.
BONNIE FAULKNER: Well, with regard to your remarks about the Left, the so-called Left, anyway, is not dealing with the markets. But there are always markets, right? Regardless of what system you're living under. I mean, what about Socialism?
MAX KEISER: Yeah, that's the Capitalism is not the problem, because Capitalism is simply the attempt to match up risks and rewards in the economy, so that you don't have any imbalances, and you have a shot at some kind of economic justice and social justice. And what we have in the US today is not Capitalism. This is what, for example, Michael Moore's film was glaringly missing the point because it was Capitalism, A Love Story, and he was talking about Capitalism. But America doesn't have Capitalism: America has corporate welfare; America has a system that's . Capitalism means, for example, that there would be the risks and the rewards in the economy would be roughly equal. But we don't y'don't have that in the United States. If a bank makes an error, the government bails them out. That's not they're not taking any risks. If you're making money without taking any risks, if you're borrowing money at close to zero, you're making highly leveraged bets, and then you're manipulating the market to make those bets pay off, and when your manipulations occasionally go awry, then the government bails you out, that's not Capitalism. That's not a risk and reward balanced system. That is, uh, a kleptocracy. And so Michael Moore's film really aimed much too low, y'know. He didn't really get into the fact that the actual weapons of mass financial destruction that are being used by banks to commit economic terror, which I think would have been more of a, y'know, precise look at what's going on. Even Warren Buffett, by the way, coined that term, weapons of mass financial destruction, when he was describing the derivatives that are on the books of these banks, and they're used to, purely to cause, uh, the same they're suicide bankers as I call them, Lloyd Blankfein, Jamie Dimon, they're willing to blow themselves up and their friends and their family and their community to make a quick buck. That's their ideology. They're no different than a suicide bomber in Tel Aviv: you've got suicide bombers on Wall Street. They cut from the same cloth, their mission is the same, they believe they're doing God's work, they misquote some text, in this case the suicide bombers on Wall Street, they misquote Adam Smith, just like the extremists in Islamic culture would misquote the Qur'an, and they're financed by the same guys. Remember Osama bin-Laden is a yuppie punk, y'know, equivalent to Jamie Dimon, he is the Jamie Dimon of Islamic extremism. Jamie Dimon is the Osama bin-Laden of Market Fundamentalism. These guys are two sides of the same coin, except Jamie Dimon's a lot worse. He's a lot more dangerous. He does a lot more damage. And therefore, crushing the stock of JP Morgan by buying silver is really a great way to restore some kind of economic balance in the system.
And y'know, I'm not on the Left; I'm not on the Right. I'm in the middle. I'm just a market maker myself, kind of an ideological market maker. And what I've observed is that the Left refuses to fight on a level playing field. They're constantly selling themselves short. They're constantly uh, just uh, think that by being a mamby-pamby, wishy-washy, "hope", y'know, and "change" is gonna do anything, they need to understand the fight before they can enter the fight. They understand they have to understand who they're fighting against.
So Michael Moore does not do a good description describing who people are fighting against. He's, again, just taking kind of laxidaisical [sic] potshots from the sidelines. He's not actually in the fight. What I'm trying to do is just bring together these two opponents to see who's gonna really win this battle, but both have to be in the same weight class. You can't have a Flyweight Left Liberal go to battle against Mike Tyson. It's not a fair fight. It's not an interesting fight. And it's, I think at least before we all disappear prematurely, due to other imbalances in the economy that show up in terms of environmental problems, at least we should have at least one good fight before the end.
BONNIE FAULKNER: Now economist Michel Chossudovsky said on my show that poverty was the result of macro-economic policy. Would you agree with that? And what do you think it's gonna take uh, it looks like the bankers are gonna take this to ashes. I mean, what is it gonna take to turn things around? What kind of a system do we need?
MAX KEISER: Well, I would agree in that macro-economics would be the pushing down from above of some scheme economically that puts the advantage for the small group of very wealthy, and disadvantage the poor. Now you see a good example of this all the time. All you need to do is read any newspaper, and you'll see a headline that will say something like, "Bernanke is concerned about joblessness, and will not raise interest rates any time soon. He fears" (quote-unquote) "deflation".
Now let's break that down for a second, and you'll understand, and what that quote about macro-economics was all about, which I agree with. Bernanke always sees deflation, because that's his role in the economy as an academic, Ivy League-trained academic in an Ivy-League school endowed by that top 1%. He always sees deflation, and his response would always be to create more money and ease monetary policy. That money never goes into the real economy. It goes through the banking system directly into the pockets of the bank's top 1% clients, who buy assets stocks, bonds and commodities. And those people, the top 1%, always see inflation. So while Bernanke talks about deflation, and responds with a policy initiative, what he does is he's creating inflation for the top 1%, who are the beneficiaries of all the monetary policy money that's entering the system, which has the effect of a twofold effect: #1, it debases the currency in a way that constantly keeps the interest rates on that money low, keeps the value of the money low so that wages are continuously debased and the purchasing power is debased, so the wage class and the bottom 99% is constantly being attacked by this currency that is constantly debasing their purchasing power, and constantly as a result interest rates are always kept artificially low. This way the savers never get more than half a percent on their savings, pensioners never get more than a half a percent on their pensions, so again this puts enormous pressure on anyone who's trying to save money or work for a living, while simultaneously putting enormous profits into the pockets of those who are buying assets, um, stocks, bonds, and commodities. Now because stocks, bonds and commodities are going up due to the misperception that is talked about by Bernanke, of deflation, it also drags up with it agricultural and energy prices, so that same group of people that is caught in the middle, the bottom 99% not only are they not getting any return on their savings, and not only are they not getting any wage increases, but their price of their food and energy is going up simultaneously. So they experience stagflation. So you have the three "-flations" operating simultaneously. You've got Bernanke who sees deflation, you've got the top 1% that is experiencing inflation and wealth aggregation, and the bottom 99% who are experiencing stagflation. And it's set up this way, on purpose, to make the top 1% increasingly wealthy, and it's a macroeconomic policy as the quote suggests. And it's done on purpose, and it's done on a global basis. And the results are clear: the wealth and income gaps in the US have never been wider, uh, and, and this is happening all over the world, in these economies that have embraced this style of doing business, central banks pursuing this line, and the results are the same, and the results are also the similar in that you've got now social unrest in many countries of the world. It's growing every single day, and the anger and the violence is growing as a result of this institutionalized macroeconomic policy that is designed to bankrupt the bottom 99% and to reinstitute Neo-Feudalism so that the top 1% controls 60, 70, 80, 90% of the global wealth.
[theme music] [33:00]
BONNIE FAULKNER: Yes, exactly, and the growing social unrest that you referred to, of course, we see massive demonstrations here in Europe. But now you are quoted as having said that, coming unrest in the United States, assuming that that's going to happen, an insurrection I believe was the word you used, you see this as much more volatile and violent. Could you explain what your view of the US is with what's happening there with regard to the impoverishment of most of the people there?
MAX KEISER: Well, for example, compared to France, in France there's an infrastructure of protest and manifestation. People are protesting and manifesting their demonstrations all the time. Y'know, every month somebody's on the street, trying to negotiate for better conditions or better wages. So, the infrastructure is in place, and so they, there's a routine, y'know? The cops come out, they stand along the road, the people protest, they strike, the Metro stops working, and as a result, y'know, the workers, the average folks here in France have been able to maintain a very high quality of life, a very high standard of life, and the government live in fear of the people, and the people like that, since going back to the days of the French Revolution and the Reign of Terror, which was a very potent demonstration of what the people feel when the potentates get a little bit too high and mighty they simply cut their heads off. And it's very much alive on the streets here. If you take a taxi and you start to talk about the Reign of Terror, everyone is conversant in this and will tell you, "Yes, if they get out of hand, we will cut their heads off." So it's very much in the minds of the average person, their power, ultimately they have the power. Now in the States, the people live in fear of the government so its the complete opposite that you have in the States. There's no infrastructure of protest, there's no infrastructure of manifestation, the entire union system has been gutted, wages are destroyed, people who actually fight for a decent living are mocked, and and by the mainstream media which of course is owned by the same corporations, and so therefore, when it's time to push back, as, it always is there's always a dynamism between the power and the powerless, the powerful and the powerless, there's always gonna be conflict. And in Europe this dynamic is understood, and so the potential for really dangerous violent confrontations is minimized, because both sides understand their role. In the US, the powerful don't understand what they're doing, and the poor don't understand how to push back. So when the cyclical nature of this confrontation rears its head, the result will be a lot messier, a lot uglier, and, and so there'll be a lot more violence, 'cause simply 'cause they don't know how to do it. Y'know, the poor people don't know how to protest, and the rich people don't know how to be rich, and to shut up when they should shut up.
Y'know? The rich in America should SHUT UP. Because going on television and talking about the glories of free-market Capitalism when all they are are part of the corrupt oligarchic kleptocracy is only putting a big fat target on their back. And they should just shut up, because you're only angering the people that you're abusing, and, you know, it's not gonna end well. If you just y'know, you have to learn how to be rich. I mean, that's the thing about Americans. It's a very young country, it's a very young aristocracy, the aristocracy in America is very new to the world, and they really don't know how to handle their wealth. So, I say, and I predict, that it, much of it will be taken away.
BONNIE FAULKNER: What about the current financial crisis in Ireland, and the coming crisis in Spain, Portugal, &c., where the governments are under incredible pressure to slash budgets and hand over assets like pension funds to foreign banks? For instance, you've described the IMF bailout of Ireland as "Ireland bailing out the IMF". How do you mean that?
MAX KEISER: Well, the IMF is bankrupt. It was gonna go belly up three or four years ago. They needed some crisises [sic] to remain viable. And they are stealing money from Ireland. Ireland has 20 billion in cash on the books that they've they don't need a bailout. They could go fine for a couple of years without any problem at all. They have a big pension system and the IMF is coming in there, and they're stealing their money. It's very similar to back in the 80's during the period of the corporate raiders, when guys like Carl Icahn, or Ivan Boesky, y'know, you remember these names, they would do these corporate raids, where they would borrow lots of money, take over a company, seize the pension assets, fire everybody, and cut themselves a big fat paycheck. Well this is exactly what the IMF is doing to Ireland. They see pension funds, they see cash, they're borrowing lots of money the IMF HAS NO MONEY! They're bankrupt! They're using borrowed money! Because the IMF is mostly the US, and US banks, and these banks are all bankrupt, y'know, to say that they can bail out anybody is is [laughs] is ridiculous! They're simply using borrowed money to do a leveraged buyout of a country to steal the wealth and then the population will be left footing the bill.
Same thing in Greece. And Greece is really a tragic story, because of course they should have never been in the Euro to begin with. Had it not been for Goldman Sachs cooking the books of Greece to make it look like they had a better cash position than they did, and then they were let into the Euro. And then a few years later, because they don't really have the cash, they can't keep up with the rest of the Eurozone, and they fall behind, so the jackals swoop in, and now they're turning Greece into a vassal state. A great place to park your yacht, but don't try to get any kind of civil rights or human rights in Greece. Same thing for, uh, now with Portugal and Spain, Latvia was totally decimated, the same kind of things the IMF was active doing in South America, Latin America for years, during the period where a lot of the leaders of those countries would fall out of airplanes, and the IMF would come in. Argentina's a great example. I mean, Citigroup totally decimated that country as they convinced the government to put Citigroup's liabilities onto the government's balance sheet, and they forced the people to pay off Citibank's loans. What a genius operation that was! So they're using this technique of the leveraged buyout to go into these countries that, um, are sitting ducks, basically, and they're stealing all their wealth, and they're being successful, again because people are not able to articulate the problem well enough to fight against it. Again, the Left, as it's called, is completely bamboozled by markets and finance. Y'know, you can ask your left-wing friends today, a simple question: you say to them ask ten of your left-wing friends today, say "what is the relationship between interest rate and bond prices". Now this is the most academic piece of financial knowledge that even a first-year, high school economics person would know the answer to. But I guarantee you, if you ask a hundred of your left-wing friends, not a single one will know the answer. That is a problem, because they don't have any idea what they're fighting against. All they know is they're upset about something, and then, that's all they know. And it's not enough. And they're getting killed.
BONNIE FAULKNER: What are the prospects for a collapse of the Euro and a breakup of the Eurozone. We are now beginning to hear this yet again.
MF: I call it Germany 4.0, which is a new-tech way of saying, the Fourth Reich. This crisis is playing into Germany's hands. Remember after WWII, Germany was split up, and, uh, never to be raised again. Then under the creation of the Euro, they said, "Well, you can reunify East and West Germany again, but it'll be diffused under the rubric of the Euro. Well, now that the Euro is breaking apart, and Germany will break away, it'll have a reunified country, its own central bank, the Bundesbank, which is essentially the same as the European central bank, and it'll be the second biggest exporter in the world, second only to China, and China and Germany will be battling for world superpower status within ten years. So it's German is lovin' it, this whole crisis, because as long as it continues, the Euro's cheap, which helps their export market. When they do finally break apart, they'll be a superpower.
BONNIE FAULKNER: So you do see the Eurozone as breaking apart eventually.
MAX KEISER: Well, yeah, because Germany wants it that way, because Germany is always an imperial always has imperial ambitions. It's the Fourth Reich. It's the "Germany is back again". Germany is before WWII, 75% of all the technical texts in the world were written in German. Germans have a notion of the certain, divine right, which they will try again to be the world superpower. They're gonna try again. And the United States gave 'em the way to do it. And the rest of the world simply opened the door.
If you open the door to Germany, they're not gonna sit back, and think, y'know, contemplate their navel. They're gonna go for it.
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BONNIE FAULKNER: What about the incredible bailouts of US and foreign banks by the Fed, secretly amounting to over $20 trillion. What can you tell us about the Fed`elf? I mean, they're the ones that do, what? Manufacture the money, right? Or the credit
MAX KEISER: Well, the Fed, you know, it's, uh as Ben Franklin said, one of the reasons why America broke away from the British Empire was the Bank of England. The Bank of England is a usurous [sic], co-opting organization that was undermining the colonies' ability to economically grow, and the Constitution expressly forbade the use of any money that wasn't gold and silver, and put a lot of firewalls to prevent anything like a Central Bank from coming into existence. Because it's a menacing force to the economy. You want to be able to coin your own money for your own people. You don't want to you don't want to outsource your money creation to a third party, especially when that third party is aligned with foreign interests.
That doesn't make any sense. I mean, America doesn't outsource its nuclear weapons program to the Chinese or the Iranians. Why would America outsource its money creation program to the Europeans and the Russians and the Japanese and everyone else around the world vis-ΰ-vis the Federal Reserve Bank? It's not an American bank. Federal does not refer to American. Federal Reserve is as American as it's like Federal Express. It's just a brand. It's not a federal organization. It's a third party, internationally owned, uh, lending facility meant to undermine the dollar in ways that help only the constituents of the Fed. So the fact that the Fed engineered a bailout of its foreign interests was a mandate, of course, by the foreign interests, who still look at America as a colony.
America is still a colony. That's what this crisis has revealed. The Revolutionary War of 1776 was a a washout. It did not produce independence, as some imagine. Obviously. If the Fed is bailing out foreign banks with Americans' money, what do you call that? It's called a colony. America is still a colony . You've got 50 colonies under the American-slash-Global Banking flag, instead of 13, but it's a colony. Therefore, we need to restage the independence movement, and restage the Revolutionary War For Independence, because it didn't work the first time. That was a big washout. When's the real revolution coming? Because the first one was a damp squib!
BONNIE FAULKNER: Right. And when you say constituents of the Fed, you're talking about all the other banks, right?
MAX KEISER: That's right. They're they - are - in - the - business - of loaning money in ways that put people into onerous amounts of debt, as is the case with any feudal lord over his indentured servants. It's a model from the Middle Ages that made a lot of people rich. And if it weren't for some of the changes back in the last millenium, we would still be under that the yoke of a feudal system. But because of, the uh, what what, you know, the history of, for example, the Black Plague, &c., which wiped out much of the workforce in Europe and forced the lords to actually pay people money to keep care of their estates. This is the beginning of the Middle Class. Which, and which, the beginning of the French, American, Russian revolutions.
But that force of aristocracy and monarchy didn't go away, they're they want to go back to the way it was a thousand years ago. They want to go back to peasants and lords. They don't want the they hate the Middle Class. They hate the idea that people can get on an airplane and fly around the world for twenty bucks. And, and because it doesn't make them special. Y'know? If I can do the same thing that David Geffen can do, what makes David Geffen special? Not much. Y'know, these people want to be able to do things that nobody else can do. Flying around cheaply and doing these types of things is something they want to remove that privilege. Because it's not fun being an aristocratic monarch if everybody can do the same thing. What's the fun in that?
BONNIE FAULKNER: Exactly. And debt is a system of control, basically.
MAX KEISER: Always has been. Always has been. And this is, again, the American Revolution, they didn't want a central bank, to get back to the central bank, there wasn't a central bank in the US until 1913, then during a lame duck end of the year session they brought in a central bank in 1913. Shortly thereafter they started having financial calamities. They had a big one in 1929, the collapse of the stock market as a direct result of the creation of the central bank in 1913, and it's been a systematic picking away at the underlying strength of the Constitution ever since. 1971, Nixon, who could no longer afford to bomb the Vietnamese closed the gold window so as to reneg on his international debts. This brought in the hyper-inflation of the late 70's and early 80's, which of course was another period of massive wealth creation, substituting the petro-dollar for the gold-backed dollar, but the integrity of the system continued to degenerate. Then you had the listing of formalized options trading in the 70's and gaining strength in the 80's and 90's, the Options Volatility Formula which was created by Nobel Prize winning economists, which is like the equivalent of the E=mc² formula for matter and energy, is the options pricing volatility formula separating risk from reward. So with options you can trade risks separately from reward just like you could uh, the nuclear bomb you can separate energy from matter, and this armed with this technology is the basis of all algorithmic trading so that any computer can go into the system, figure out the reward, take it and leave the risk.
The risk then becomes socialized or it becomes distributed over the masses who can't afford it, have to go into debt to pay for it. And this is how through using computer programs there's been this wealth confiscation period resulting in the reemergence of an entrenched kleptocratic aristocracy which knows only one deterrent, and it was played out in France here in 1889 [sic MK means 1789]: it's called the guillotine.
BONNIE FAULKNER: Can you explain the foreclosure scandal or mortgage-gate? For instance what was Bank of America up to. I mean how deep does the fraud go?
MAX KEISER: Well the foreclosure the foreclosure fraud is an interesting one because it's it's fraud taken to the point of an assembly line. Remember Henry Ford famously created the assembly line and the masses could afford cars.
Bank of America, Wells Fargo and these other banks created an assembly line of fraud. It wasn't just a one-off, it wasn't just a few forged documents and a few, y'know, bribes here and there. They created an assembly line where tens of thousands of documents were forged, tens of thousands of mortgages were illicitly and fraudulently induced into the population. And as a result by some estimates Bank of America is now attached to a six trillion dollar liability which is even bigger than the Fannie Mae/Freddie Mac liability of five trillion dollars.
Remember the U.S. has fourteen trillion in debt but if you add the Fannie Mae and Freddie Mac liability which is off the balance sheet, but, why, I mean they still owe this money, that's five plus fourteen. So you got nineteen trillion in debt plus six trillion in this Bank of America foreclosure debt. So that's twenty five trillion actually in debt that the U.S. has, not including the unfunded liabilities of social security and medicaid which is another fifty trillion in debt. So the U.S. has seventy five trillion in debt the economy is eleven or twelve trillion in size. Clearly it's insolvent. The U.S. is insolvent.
But getting back to the foreclosure fraud, I mean, in the case of Goldman Sachs, for example, they committed fraud in a number of different ways. The mortgages were fraudulently sold. The people who bought them were fraudulently induced to buy a mortgage. When you buy a so-called "liar's loan", there is no such thing as a "liar's loan". The seller of the mortgage has a fiduciary responsibility that they, the mortgage acquirer has some expectation of paying it back. To be involved in a transaction like this is malfeasance on the part of the financial institution, it has nothing to do with the person taking on the mortgage. That's not the problem here. The problem is fraudulent inducement, OK?
It's like going into court after a woman's been raped and saying "she asked for it". That's not a defense. If somebody ties somebody down and rapes them, the defense can't be that she asked for it. If somebody like Goldman rapes a homeowner with a fraudulently induced mortgage their defense can't be, well they asked for it. No, that doesn't work. So that was a fraud. Then, they took this fraudulent paper and they bundled it up into mortgaged backed security and sold it to banks around the world, that's another piece of fraud.
Then knowing that the banks who bought that paper were going to go out of business, they took out bets in the credit default swap market against the performance of those banks. So they made negative bets against the customers that they sold these to to begin with based on the fraudulent inducement that started the whole chain to begin with. So that's three layers of blatant, heinous fraud.
Any piece of that would put every single one of those guys in jail, and they did it not on a one-off, but, on tens of thousands of examples. It it y'know, this is a plague of fraud. It is so enormous that, that's the problem is that it's hard to prosecute. It's like trying to, you know, outlaw gravity. it's just it, it's so enormous it's hard to know even where to begin.
And of course it gets back to, you know, what is it Goldman Sachs' modus operandi, if the fraud is big enough there's no way you can prosecute us because it's like cancer, isn't it? I mean it's incurable, it's eating all of your organs, there's nothing you can do about it, you're the host, we're the predator, shut up and die.
BONNIE FAULKNER: Exactly, and nothing is being done about it, right?
MAX KEISER: No.
BONNIE FAULKNER: Do you think that control of the media is just, or more than important than military control of society?
MAX KEISER: Well, yeah, certainly in the US. The media is extremely narrow, and it controls the the agenda. It's not for nothing that my shows appear on RT which is Russian, PressTV which is Iranian, France24, and UK radio station Resonance 104.4. I don't do any US media. Because, for example I'll give you a good example, here, on your network, WBAI in New York, five years ago I came to them with a story about why the dollar was at risk, and laid out the entire risk to the banking system, as it's currently been now understood. I laid it out for them. And they said, "This is much too, uh, inflammatory for our audience. You can't say that about the banking system. This the message I got from WBAI in New York. So, therefore, that information, which ended up on Al Jazeera English in a series of documentary films was understood by a very wide audience outside of the United States. Because even the Left Liberal media in the US refuses to tackle banking because they, uh, they fear the banks! And this is a concrete example of exactly that!
BONNIE FAULKNER: Max Keiser, thank you very much.
MAX KEISER: My pleasure.