"Cash-burn Machines"
by Max Keiser and Stacy Herbert, The Keiser Report (November 5, 2019)

Cash-burn machines (E1458)

Max Keiser and Stacy Herbert, The Keiser Report (November 5, 2019)


Stacy Herbert: “We have the Tech Bubble 2.0, Uber and Lyft … and we have the Fracking one.

[shows screenshot]

How cash-burn machines power the real economy, and what happens to the economy when investors refuse to have more of their cash burned. – wolfstreet.com

“… Investors willing to throw money into ever-more-losing operations like WeWork and Uber, of course, they’ve been losing money for ten years, less in the case of WeWork, but they’re willing because there’s always someone to flip to. [Theory of the Greater Fool]

[shows screenshot]

They all share two things in common: • One, they’re fabulously efficient, finely tuned, and endlessly perfected cash-burn machines. • And two, investors in these companies count on new cash from new investors to bail out and remunerate the existing investors. – wolfstreet.com

“otherwise known as a Ponzi Scheme, or a “Pyramid Scheme.”

Max Keiser: “Essentially, what is driving the economy is burning cash. It’s a beautiful thing because it doesn’t cost anything. You can get all the cash you want from the Central Bank for free. They give you trillions and trillions of dollars if you’re a friend of theirs. You get to burn a trillion and keep a billion. That’s the deal. So let’s use Hillary Clinton’s foreign policy, for example. The government gives her a few trillion dollars. She burns countries down. But she gets a billion dollars in fees. That’s true of hedge funds. It’s true of private equity funds. They get trillions of dollars from the central bank; the burn everything down, they’re arsonists. But they get to keep a nice souvenier. Like a billion dollars. Like Mitt Romney. He’s someone who made a business out of this. Eventually, the free money runs out. …

Stacy Herbert: “Interest rates have been declining and declining and declining because they’re always able to roll it over and sell it to another chump. There’s always another chump at the end of a declining interest-rate curve. However, as we’ve seen from the financial crisis of 2008, not only have interest rates been declining, but the Fed keeps giving their friends the free money and hoping that it will trickle down. Well, it never trickles down because they’ve kept everything private. They’ve kept all those tech unicorns which on paper were worth billions and billions and billions of dollars. The chump said “We’re getting free money from the Fed so why should we let the ordinary chump get in on this because it’s free money for us. We can just keep throwing money at it and raising our own valuation on paper, so we get to leverage ourselves up and buy real assets, buy properties in New York City, buy land, buy gold, buy Bitcoin.” But now, as we hit zero and even negative in some places, it’s all falling apart because they aren’t able to find these willing investors who are so easily able to throw money away.” …

… Stacy Herbert: ““The Fed keeps looking around at the real economy and asking:Why aren’t wages rising? Why is the economy so weak? We just gave our friends 14 trillion dollars since the financial crisis. Where is all this going? … The guys they’re giving it to are just burning it. You’re giving them too much and just trashing it. They don’t respect it. Free money is not respected.

Max Keiser: “The beatings will continue until morale improves. Or, the money printing will continue until inflation improves. … the money printing has crowded out all the viable businesses and kept the unviable, or trash companies, afloat and becoming zombie companies and zombie banks. ”

“You don’t get any tax revenue from these people because they’re not part of the real economy. … workers and their taxes [from rising wages] unneeded. But they’re going to keep printing until there’s nothing left and we lose supremacy to China, I’m afraid to say.”

… Stacy Herbert: “Coal workers had to protest to get back wages paid. [11:46] Max Keiser: “Corporations will always abuse workers. That’s why there needs to be Organized Labor. … [as to free markets] You’d have to include the Central Bank. as long as the Central Bank is being manipulated by bankers and there’s not a free market in money, the price of money is fixed to encourage this kind of aberrant behavior, then there needs to be organized labor. That’s the flywheel, the counter balance to the Central Bank, is organized labor. The irony is that organized labor is the last group to understand this. They should get their act together and tie their wages tied to the percentage of money supply, i.e., printing.

[Second half of program interview David Morgan of the Morgan Report: ]

David Morgan: “Trump is the tip of the spear of re-nationalisation with a lot of countries moving to “me-first” or “let’s get our own house in order first before we move into this globalization situation, if at all. That’s probably the biggest shift that we’re seeing now in the world.” Max Keiser: “[fracking, etc.] fueled by a repudiation of the laws of supply and demand. It’s not capitalism or economics. It’s a kleptocracy driven by a politburo of interest-rate setters what [would] make the Soviet Union blush. The old guys are rolling in their graves. We’re trying to recreate the Soviet Union in America and it’s not working.

David Morgan: “How succinct.”

Max Keiser: “I said that years ago. Two ships passing in the night. Putin is like Eisenhower in that period maps. And the U.S. is rapidly falling into Sovietization.

David Morgan: “The bankers are at the top of the pyramid and they’re not going to give up their monopoly for nothing.