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9 Sep, 2009 08:02

“The wealthiest in America start to move their money out of the US”

The U.S. dollar-based post WWII phantasmagorical world of never having to pay your debts is coming to a close, states financial journalist Max Kaizer to RT.

RT: You predict America is on the slippery slope to economic collapse. What do you think of America’s national debt levels?

Max Kaiser: The American debt levels are outrageous, and the way America gets away with it is by maintaining the world reserve currency as a big part of the American hegemony, or the American empire. When America writes checks or creates bonds to other countries, when those bonds are due, America just creates more bonds. It’s what some call an extraordinary privilege.


And this is why countries like Russia, China and Iran are looking to diverse [sic] themselves, and divorce themselves, from the US dollar. They’re doing more deals amongst themselves, more bilateral deals in their local currencies, their regional currencies. Ultimately, America is a debt-a-holic.

RT: What will the consequences of America’s national debt be?

MK: I think it’s in the works right now, some kind of a gold bullion backed currency, and the implications for the US are not great, because they have this huge debt, so they will be forced to trade off their debt not by just inflating themselves out of the problem by creating more paper. If the rest of the world becomes more competitive, and the rest of the world starts adopting real sound currencies, the US would also be forced to be competitive to some degree, greater than they currently are. And in a real, fair, competitive race, the US has the weakest currency. If the global economic and business game is a game of poker, the US is holding a terrible hand.

RT: What do you think about the Federal Reserve getting more powers from the Obama administration when many blame Fed for the crisis?

MK: To use the alcoholic metaphor, it’s like giving an alcoholic more to drink. Hank Paulson and his successor Timothy Geithner are part of the financial oligarchy, a part of the banking oligarchy, their interests are not the same as the interests of American citizens; they have their own interests. They are part of a global banking cartel, the same group of bankers all over the world, who seek to keep interest rates as low as possible, to make it as easy for them to borrow as possible. Because when they make a bad bet, their respective governments bail them out with tax payer money. It’s really a war, there’s a global war going on between investors and speculators. Anyone who’s trying to invest money for a decent return, or work for a decent wage is being squeezed out or pushed out by speculators who have access to cheap money through political connections.

RT: Do you believe the American bailout is a form of protectionism?

MK: It’s not free market capitalism, it’s an industrial policy; it is a policy of the government wanting to get into every nook and cranny of the business sector, because the people who are in politics and in business want the cheapest possible access to money. They do not want to compete, and the easiest way not to compete is to do business with the government, who has the ability to raise taxes, to confiscate wealth, to wage wars. So, it’s not a coincidence that the primary GDP-boosting activities of America are war, which services the war councils that are on the board of directors of these banks and in Washington, and cheap consumerism, consuming foreign-made goods, slave-made goods in other countries.

And again, with the US, it is great if you have a world reserve currency and everyone needs to buy US dollars to conduct their business. This is why countries like Russia, China, Iran and Brazil are trying to divorce themselves away from the US because it is completely toxic currency. It supports an empire that is too lazy to compete, that makes money through cheap consumption and war. The rest of the world is saying: “We want to move away from that model. We want to do something more vibrant, more capitalistic and more dynamic”

RT: What is going to happen to this shadow banking system if it keeps on going unchecked?

MK: What will happen? There is going to be a currency re-valuation across the globe. The dollar would probably be cut in half versus made of the trading currencies. Gold in particular will have to be, as it was in the 30s, valued upward. Gold and precious metals and any currency that brings in to the basket of commodities or precious metals as the basis of the currency will in concert I believe move 50-60% in one day or one week or may move over 100% in a week. This means that all the currencies will be revalued against gold. And the currency which will lose the most would be the US dollar. So for people like in America, as it happened in other countries – like Iceland recently, or other bail-out countries from the IMF, or in Russia, or in the UK in the 70s – suddenly people wake up and the currency is devalued by 50%. Everything at the store costs double or triple or quadruple and there is nothing they can do about it. Because it’s not like these things happening according to a carefully coordinated plan by the banking establishment around the world that is setting this all up to go. It is going to be practically effortless on their part. I was impressed how Europe embraced the Euro. The logistics of converting all these currencies to the Euro was a pretty amazing job. So think about this new currency grade happening very quickly in all the currencies had a new relative value versus commodities. Of course the US won’t be happy about that but most of the major wealth in the US will be outside of the US by then.

RT: You say that people are pulling money out of America. Do you have any data to spot this?

MK: The data as you see is in the price of gold bullion for one thing, but all this talk about deflation and GDP is contracting and the economics are slowing down. You still have the price of gold doing very well. You also see the currencies outside the US start to break way from the US dollar. And they are doing pretty well, currencies like New Zealand and Australia start to come back in a huge way. They start to outperform the US right now. The US is standing back a bit, but there are some countries which are doing much better. The Russian Stock market is doing fantastically well. They’ve got resources, good infrastructure, great relationships with China, Iran, Brazil and some other countries. They are positioning themselves as hot assets.
The US dollar-based post WWII, IMF, World Bank – a phantasmagorical world of never having to pay your debts is coming to a close. And ones it happens – you want to be on the right side of that trade.

RT: Are you prepared to stick out your neck and say by this date will be doomsday for America as you call it?

MK: In the US the number that I would look at is the unemployment number, it is continuing to creep up, the wage number is continuing to go down on an hourly basis and even if you want to play with the numbers on employment and unemployment and there’s a lot of ways that these statistics are cooked and arranged, the basic hourly wage number is continuing to deteriorate, so at some point there will be a critical mass of unemployed people in America who will then I think spontaneously, as it happens in other countries, will suddenly have to decide that this is it, that we can’t take it anymore.

The honeymoon of Barack Obama seems to be entering a new phase where people are less excited by his program of change because they do not see any change in the banking system and the bankers are still very much pilfering and very much stealing and they want more power. So its tough to say exactly when that spark will hit that ignites the Hindenburg of social unrest in the US but I do not think that at this point you can reverse it, there’s nothing that can be done to reverse this inevitable collision and I think that also one of the amazing stories of 9/11 is how, when the 9/11 disaster hit, is really the beginning when the wealthiest in America start to move their money out of the US. That was what they learnt that the US isn’t really safe for my money anymore and they started to move their money out of US aggressively since 9/11 a lot of the complications and the reason why Alan Greenspan lowered interest rates down to 1 percent after 9/11 was in a large part to assist the wealthiest of America in moving all their capital out of America.

RT: Tell us more about the KarmaBanque that you've created.

MK: KarmaBanque is like what if Gandhi and George Soros had a love child, basically. What I did was I figured out which companies, if a large boycott were enacted, would have the greatest impact on their share price, which companies’ market capitalization is most weighted toward a consumer boycott that would cause major damage. So a company like Exxon is not particularly vulnerable to consumer boycott, ’cause they’re diversified in many ways, their stock doesn’t trade in the high multiple of retail sales. But a company like Coca-Cola is very vulnerable to boycott.

The second turbo-charged aspect to the KarmaBanque methodology, is that if people decide that they’re going to boycott a product like a Coca-Cola, it will have an effect on their revenues and profits.

In America, they’re used to the idea of if I like the company, I’ll buy the stock. So this is just the opposite: I don’t like the company, I’m going to boycott the stock to the point where hedge funds start selling short that stock.

RT: Some people call you a financial terrorist. How do you respond to that?

MK: That would be incorrect. What I am suggesting cannot be considered financial terrorism. It can be considered economics. Because what I’m saying is that a lot of these companies have unrealized risk that’s not reflected in their own balance sheet which is descent risk. I’m making that risk visible, and by making this risk visible and quantifying it should be reflected in the stocks price.

Hedge funds and other big institutions like pension funds looking for ways to increase returns to help those people who benefit from their accounts in these large institutes will benefit from this approach.