Chris Hedges | Our BROKEN State

A Multipolar Reserve Currrency: US Dollar Alternatives

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if you’re looking ahead of the elections
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do you think that the outcome of the
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elections either way
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would influence foreign policy going
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forward and as a result
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foreign countries decisions to hold more
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or less gold
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absolutely i mean we’re working on a
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report right now
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on the implications of the election for
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for gold and precious metals
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uh and you have like four different
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scenarios on how things
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shake out but definitely i mean you know
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this
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administration has um
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excelled in its ability to reduce the us
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stature around the world
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and to create hostile relationships with
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countries around the world
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it’s had a negative effect on cpm group
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because
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there are people who don’t want to deal
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with u.s companies
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and and so i think a change in the
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administration
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while it wouldn’t be a 180 degrees turn
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because
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there are people in the democratic party
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including joe biden
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who will probably retake retain would
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retain
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some sort of hostile posture toward
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china
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it may be less hostile than the current
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one and it may be less hostile toward
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canada
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and and other countries around the world
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so you should see
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if you saw a change in the
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administration and a change in the
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senate
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you should see some improvement in the
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u.s relations with
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the rest of the world but there’s been a
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tremendous amount of damage
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done to the u.s stature globally
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and it’s probably not going to get
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changed by one
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by a change of government for four years
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do you think the us dollar then going
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forward could lose its status as a de
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facto reserve currency of the world
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because you see another currency
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challenging that status
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as i said the part of the problem is
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that the u.s owes the world so much
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it owns it we have 62 percent of
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monetary reserves
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the u.s dollar will lose its stature
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as the reserve currency in the future
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the future may be 50 years from now and
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it is it not it is reversible
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this could not happen if the u.s
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government got its act together but i
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have
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no hopes for that well if the u.s if the
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u.s loses that status
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who’s what’s going to take over who or
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what well i was getting to that
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as i said earlier most central banks in
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the world
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see as an ideal a multi-polar
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international currency regime they
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understand that it will take
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decades to get there because of the
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imbalance and liquidity between the
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dollar and
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all of the other currencies in the world
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yeah
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62 percent of their money of their forex
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is in dollars that means that there’s
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only 38 percent and everything else
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they have to slowly make that transition
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away
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no government wants to see
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its currency replace the dollar as the
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reserve currency
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what they’d like to see is a multi-polar
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international currency regime
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where people are free and companies and
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governments are free
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and there’s sufficient liquidity in
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non-dollar currencies
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that you can own and hold a portion of
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your wealth
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in those other currencies a greater
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proportion of it
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no one like if you talk to the chinese
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central bankers if you talk to
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other central bankers in around the
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world
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no one expects the dollar to disappear
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as a
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quote de facto reserve currency
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but they‘d like to see it disappear as
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the de facto current
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reserve currency but they’re fully aware
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that this is something that’s going to
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take decades to execute
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if it can be done okay you brought up
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china i’m surprised to see that china
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was relatively low on the list
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when you’re talking about their
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percentage of foreign reserves
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in gold holdings it’s only four percent
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of the foreign reserves in gold
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are you surprised at how low that number
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is
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no um i’m not surprised i
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i should ask you why you’re surprised
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that it’s high
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but you know china that should the
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people’s bank of china for
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decades had a view that gold was a small
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and insignificant portion of its
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monetary reserves
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it changed that view in 2015 at a time
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when it rolled out
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a massive acceleration of
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its efforts to make the rmb
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more of an international currency it’s
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still not you know fully convertible
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but they expanded the daily trading
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ranges and they expanded the longer term
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trading ranges that they found
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acceptable on the rmb
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they started encouraging rmb
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bonds offshore being issued offshore
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and they said okay we’re adding some
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gold to our reserves and we’re going to
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continue to buy gold because
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we see gold as a small but significant
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part of our monetary reserve policy
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going forward
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now this was in 2015 and it’s very
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important to understand that that was
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after 2008 and 2009 when the u.s
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treasury
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basically stuffed everybody else and
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protected
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the bankers or the executives at the
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banks uh
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in the us and and so this was a direct
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reaction
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to the inappropriate behavior that the
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us
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treasury had during the financial the
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global financial crisis
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uh and and the chinese central bank
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basically said we have to accelerate our
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effort
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to help move toward that multi-polar
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currency
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regime that we all would like to see in
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the long run
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uh and so they started adding their goal
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if you go back to 2015
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they probably had about 1.1 1.3 percent
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of their reserves in gold so the fact
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that it’s up to four percent
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and the fact that they have like three
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trillion dollars of dollar reserve
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of of foreign exchange reserves means
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that it’s going to be a slow transition
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as they add gold to it and as i said
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they’re very price sensitive
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they pulled out of buying gold for about
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15 months a few years ago
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then they came back and they were buying
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but then they pulled back at the end of
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2019
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and they haven’t reappeared they said
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you know in the past they said
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we’ll buy gold below a thousand when
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gold went over a thousand they
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didn’t buy any gold for several years
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then they increased their threshold
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and they knew they were buying uh and
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then when the price started rising this
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year they said no
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you know we’re going to wait finally
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jeff with everything that’s happened
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this year and in particular with the um
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central bank activity or slowdown of
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central bank buying activity
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do you think the run-up of gold prices
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to two thousand dollars
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all-time highs has made sense to you do
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you think valuations are
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correct as they should be right now yeah
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i think they are
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uh you know obviously the trend of the
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next year or two is going to depend on
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several things the outcome of the us
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elections for the senate as well as the
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presidency
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brexit is coming up the pandemic which
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is getting worse in europe now and is
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expected to get much worse in the united
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states
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there are a lot of negative factors
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there uh that fully support the idea of
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a two thousand dollar
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gold price now i wouldn’t be surprised
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to see the price of gold
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spike up higher on a short-term basis uh
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then maybe plateau depending on what
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happens politically
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uh but we expect higher prices later
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like
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2023 2025 because
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none of these things are being solved
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would you have a long-term price target
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in mind
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we’re looking at a gold price that is
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very significantly higher than it is
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today
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all right perfect jeff jeff i want to
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thank you so much for uh speaking with
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me today that was a fascinating talk
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thank you for your time thank you for
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your time
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and thank you for watching kiko news
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we’ll have much more coverage for you
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at the denver gold form stay tuned
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you

Steve Eisman | Wall Street Debate | Opposition (4/8)

The Motion: This House Regrets Blaming Wall Street For The Global Financial Crisis.

Steve Eisman continues the case for the opposition, as the fourth speaker of eight in the debate.

Motion Defeated.

Transcript:

[Music] you know to Steve Eisman to continue the case the opposition it’s been my experience that most people even extremely educated people don’t fully understand what the financial why the financial crisis happened so rather than throw Thunderbolts let me spend most of my time trying to explain what happened because I think in the explanation the answer to the question will be fairly clear the financial crisis is due really to four major interlocking factors too much leverage a large asset class known as subprime mortgages that blew up systemically important banks owning the asset class and derivatives tying balance sheets all over the world let me start with the leverage between 1997 and 2007 leveraging the large banks in both Europe and the United States tripled that’s only the stated leverage if you add on top of it the shadow banking system and all the off balance sheets stuff that was really on balance sheet the amount of leverage went up four to five times it’s a lot of leverage now there are a lot of reasons for why this happened I could probably spend the next two hours discussing why let me discuss just one aspect of it that most people don’t have never really read about and that is psychological there is an entire generation of Wall Street executives my age and up who had a very strange experience in the 1990s in the early aughts they made more money every single year now the reason why they made more money every single year was that their firms made more money every single year but their firms made more money every single year because the leverage of their firms was going up every single year and really what was happening was they mistook leverage for genius and the problem that will emerge was that if you had gone to any of the executives of these firms and I did and said to them listen the entire paradigm of your career is wrong the response would have been listen kid I made fifty million dollars last year what did you make it’s very hard to tell someone who thinks he’s God that he’s wrong subprime mortgages you know people today not even remember really what a subprime mortgage was all about it was a mortgage that had a two or three year teaser rate and then was Reese price up for it for the next 27 or 28 years and most mortgages originated between 2002 and August of 2007 had a teaser rate of 3% and a go to rate of 9% 3 % 9% the industry and Wall Street under wrote the loans to the teaser rate which is a fancy term that means that the underwriters knew that the consumer could only afford to pay the 3% for the two to three years he or she could not afford to pay the 9% now why would anyone write a loan a 30-year loan where the customer can only afford to pay the teaser rate for the first two to three years and here’s the second great lesson of the financial crisis incentives Trump ethics almost every time the reason why this happened was that the consumer would take out a loan and would pay three to four points upfront for the privilege of getting the loan and because he or she could not afford to go to rates after two to three years the consumer had to refinance and would pay three to four points for the privilege of doing so which meant that the consumer could not afford the loan and would have to refinance and would never be able to pay off his or her principal from a societal perspective this was a disaster but from an economic perspective for the people who were writing the loans the subprime mortgage companies and for the Wall Street securitization departments that were buying them packaging him and securitizing him and selling him all over planet Earth it was a boondoggle because it meant they got to make they got to redo the loans and re-securitizing every two to three to four years and make their bonuses over and over again as the underwriting deteriorated and the credits began to get worse as was became very obvious in 2006 no one neither the underwriters or Wall Street said there’s something wrong here our underwriting is bad let’s do less securitize less and tighten our standards and the reason for that is no one has ever begun a sentence in the English language where they say I think this year I’ll make less money because it would have meant they would make less money and they didn’t want to make less money they wanted to make more money so they let the underwriting standards deteriorate with full knowledge that they were deteriorating and that’s the story of subprime third systemically important firms owned the asset class this is a bit of an irony the model of Wall Street is to buy it and sell it not buy it and hold it and here Wall Street bought it sold some of it and kept some of it something they never ever did why well over the years between 2002 and 2007 it did become more difficult to find investors to buy all of the product because so much was being generated now if we lived in a rational ethical world and we don’t but if we did then what would have happened is Wall Street and the underwriters would have tightened standards and underwritten less because there was if there was not enough end-users but instead they convinced their firms to hold the paper and invest in it with the rationale of how bad can it be it’s rated triple-a and now derivatives this is one of the more important parts of the story if I own debt and GE and I want to mitigate my risk I can buy a credit default swap from goldman sachs pay a certain fee for that and if GE goes bankrupt goldman sachs pays me so I have now mitigated my risk by owning a credit default swap credit default swaps reduce risk for individual transactions but the problem is that the only works in this example when GE goes bankrupt if Goldman Sachs is not is not not bankrupt and essentially what has happened is my balance sheet has been tied to Goldman Sachs is balance sheet multiply that transaction by trillions and you can see balance sheets all over the world were tied together and that’s the crisis Wall Street created the leverage it securitized and sold subprime mortgages all over the world and it created the derivatives that tied balance sheets together who should be blamed is there anyone else well there are two alternatives that people like to propogate first we should blame the regulators and there there is some blame from the early 1990s the regulatory apparatus of the United States adopted a position that was different from the position that had adopted before which is we were gonna let the large banks manage their own risks because we trust them essentially in the 1990s of the 2000s the US and European financial systems had the trappings of regulation but in reality they were completely unregulated institutions you know there are many good books about the financial crisis but there’s one that I think has the best title that captures the essence of the crisis which is a book by Judge Richard Posner the title of which is a failure of capitalism and that’s what happened in the financial crisis it shouldn’t be a surprise unregulated banking systems fail all the time they go boom and bust the difference this time was the fact that the sheer size of the global banking system and its interconnectedness because of derivatives created a bust that had planet earth burned and the last thesis and is sometimes propagated it’s not Wall Street’s fault it’s not the regulator’s fault its Fannie Mae’s fault Fannie Mae and Freddie Mac you know I have a little history with Fannie Mae and Freddie Mac I began analyzing him in 1994 I think I was probably on the next 55 conference calls quarterly conference calls I analyzed them extensively I didn’t like them I thought they took too much risk I thought they manipulated the the political system but I like to blame people for what they actually did Fannie Mae and Freddie Mac did not cause the financial crisis this is a Shibboleth that is propagated by ideologues who were unwilling to admit that the financial system crashed because of the people who ran it Fannie Mae did buy some subprime mortgages it did cause a partially caused the demise of Fannie Mae but trust me on one thing if Fannie Mae and Freddie back had bought zero subprime mortgages the exact same thing would have happened because there were people lined up all over planet earth to buy them I thank you for your time and there’s a pleasure you