• Podcast

    Janet Tavakoli: Life And Death On Wall Street

    History shows systemic corruption can be overcome
    by Adam Taggart

    Sunday, October 30, 2016, 9:06 PM

Financial markets and derivatives authority Janet Tavakoli returns to the podcast to discuss a number of the themes contained in her new book Decisions: Life And Death On Wall Street.

She paints a particularly informative timeline of the greed and rot that has come to dominate the modern financial system, and how its tentacles have fully penetrated and subjugated the halls of power in Washington DC.

We're in precarious times for sure. What we have done is unprecedented in the history of the United States. We got rid of the benchmark, the gold standard. We don’t have any any stable benchmark anymore. Instead, we have currencies that are being benchmarked off of each other.

If you're measuring your weight you want a scale, right? You want an actual measurement of weight, not a relative one. You don’t want to be comparing yourself a bunch of obese guys in the gym. You need a standard benchmark. So once you get rid of the benchmark, then you can eat whatever you want and exercise as little as you choose that's okay. Well it is not okay. We all know that. But that's exactly what we've done in finance. We're printing money like mad. We've created a huge distortion where, for years, savers have gotten negative real interest rates. Negative real interest rates in the Untied States for a long, long period of time, and in Europe we now have sovereigns of course who are paying both negative nominal and negative real interest rates.

This is unprecedented in the history of finance. I talked to a retired head of the Chicago Fed (so I've probably narrowed the field because I don’t know how many of them are still living) and he said None of us knows what is going on. We've never done anything like this before. They don’t know what the end game is. They're totally at sea and it's their own fault because they got rid of our scale. They got rid of our own benchmarks, and they're trying to muddle through without having any way of measuring what we are doing. 

But not all of her message is gloom. She explains how the battle between corruption and fairness is cyclical; and that history has plenty of examples where a just band of concerned agents can (over time) "kick the bums out":

Henry Kluz was somebody who saw communists in his time try the same kind of ideological subversion that we are seeing right now in the United States and they failed because there were a lot of people to push back. But he also saw people try to crash the markets when Grant was running against Horace Greeley. And he formed a group of 70 men that he got together to oppose Tammany Hall. Tammany Hall controlled New York. They – they were very corrupt. They had a lock on it. They paid off hired sons, daughters, relative of other politicians. They were getting the votes. And Henry Kluz was a financier. He was born in Britain. And he observed these people and he said, you know, none of these people really like each other. They're not bound together by blood. They're not bound together by friendship or even by a common ideology. All these people care about is making money and paying off their friends in power. That's all. Other than that, none of these people had each other’s back. And he said We can defeat them. And so his group of 70 overthrew the Tweed Ring. One by one, they knocked the pillars out from under these guys. It took a while, but they did it.

It was just people who were fed up with the corruption. Kluz did it in his time. It can be done. It's not easy, but people who really have an idea of what the country should look like can defeat people who have inveigled themselves into the system and corrupted it. Now we see the same thing in finance. I have a group of friends who are appalled at what has happened in the financial system. But their voices have been pretty well silenced. They didn’t use garrotes or daggers to the throat or shoot them in the chest (at least not in most cases), but they have silenced them by squelching them from the public view – at least for now.

So I do encourage people to read the histories of finance and to see that nothing has really changed. But things can change and this isn’t the first time we've had to fight this battle. 

Click the play button below to listen to Chris' interview with Janet Tavakoli (72m:22s).


Chris Martenson: Welcome to this Peak Prosperity podcast. I am your host, Chris Martenson and today is October 25th, 2016 we are just a few weeks away from a presidential election which is having a few influences on the markets but not too much as of yet. Now you live in a world awash with money or liquidity as the central bankers call it. In fact, there is so much money being printed out of thin air and injected into capital markets that the world now has over $12 trillion worth of bonds that yield a negative rate of interest. I had to say that slowly, because it is a very bizarre concept and I have been studying it for a while and I still don’t get it. The markets would never deliver something like that in a million years left to their own devices. And corporate debt never been higher. And why not? Companies can borrow and buy back their stock and really boost their performance packages of their C suite.

So what are we to make of all this? Is there really a new normal out there? And most importantly, has financial risk finally been banished to outer space as the bulletproof global equity markets seem to be saying. Right – nothing can dent them. Well today we are extremely fortunate to have back with us one of the world’s leading experts on credit, risk, derivatives and the inner workings of the financial markets. Janet Tavakoli is the president of Tavakoli Structured Finance, a Chicago based firm providing consulting services to financial institutions and institutional investors and she is an expert on derivatives and the author of several related books including the titles – Credit Derivatives and Synthetic Structures and a second book, Collateralized Debt Obligations and Structured Finance as well as the brand new book Decisions: Life and Death on Wall Street – which really reveals the extent of her career and depth of what she knows. Janet, thank you so much for joining us today.

Janet Tavakoli: Chris, it is great to be back with you. I think it has been several years, and a lot has happened in those intervening years.

Chris Martenson: It has and it was 2014 so we got just a million things to catch up on. So, let’s start right on the outside – what are your views here on the global financial markets post 2008? Are they safer, or does the possibility of another financial accident loom in the distance?

Janet Tavakoli: Well, of course the financial markets are not safer. What we have done is create a huge distortion that has been to the detriment of the average saver, and very much to the benefit of DC politicians and of bankers. We have seen a money flow in that direction that is unprecedented in the history of the United States. And of course, we have seen our debt accumulate to the extent that, as many of our financiers and politicians keep pointing out, that under the Obama administration we have accumulated more debt than we did in our previous years of our republic. It is a pretty serious situation. I think on the ground you are seeing people getting hidden taxes in the form of Affordable Health Care where their premiums are going up and up and they have gotten much less medical service for their dollar and people are even afraid to use their insurance or go to the doctor, because their deductibles are so high. We have been lied to in very profound ways, and the mainstream media has given us narrative that is akin to what you might call transfinance – just like we have now transgenders, right? I’m sorry, you can stick Bruce Jenner on the cover of a magazine and give him fake apparatus, but down below he is still a guy and not a young chanteuse. But, this is what we are asked to believe, not only in the public narrative, but also in finance.

Chris Martenson: Now, this is interesting this idea that finance has really captivated our society as much as the cult worship of a celebrity, right? So, I love the way you have – I love how you have tied this together. Now this is something – I know when I talk with people at big wealth conferences I am sure you do and these are captains of industry, and people really look up to them and people are managing billions sometimes even trillions of dollars. But in many cases, these people who are engaged in finance they don’t produce anything, really.

Janet Tavakoli: Well, I think that is right. What they do do at their best is they facilitate the money flow to make their capital markets work. Trading bonds, providing market, making a market. And if you look at how much money can you make making a market in an honest market it is nowhere near the percent of GDP that financial services has grown to in the past few years. I mean, in an honest market what can you really take out of a deal or a trade? It should be in the order of 2% right of honest transactions? But what we have flooded the market with is a lot of speculation and a lot of fake finance so that people are taking enormous sums out of the market in extraordinary dividends, in you know IPOs at inflated share prices and so on. But it is only as good as the bid in the marketplace, and so people are worried – people that I know who have money who have savings; they are extremely worried because in the past even if you look at the investment advisor’s exam. The investment advisor’s exam is almost not even relevant anymore because they would have told you to put money for widows and orphans into bonds to get a safe income stream. Today, you can’t do that.

So, you have forced people into riskier markets. And in some cases, people have gotten the idea that a bubble will always expand and hasn’t been very careful about the kinds of stocks they are investing in. Again, I keep cautioning people make sure there are real assets underneath it, and that there are real products that are being bought and sold, so that they at least have a chance of an ongoing revenue stream if the market corrects in a big way.

Chris Martenson: Well, fascinating concepts there because much of what has happened in the markets lately that I have seen has been the distortive affects of having this much money thrown into it. Of course it is a party; not a party unlike I think in the roaring 20s. Of course you throw a few trillion into a punch bowl you are going to get a party; but you made an interesting comment back there I’d love to go further into which is that my experience, Janet, is that the more experience somebody has so if I am talking to a hedge fund manager that has 20, 30 years under his or her belt the more scared they are, the more nervous they are. People who actively are, what I would call, close to panic defense mode – they are very worried – because they have a sense that the market structure itself is broken in some fundamental way or they can’t trust it and that it has really shifted. On the one hand I hear people saying well, yes we got this market structure that has all of these high frequency trading algorithms and of course we got rid of all the gold and blue jackets on the Chicago Mercantile Exchange. A bunch of blinking server lights. This is a good thing. These computers are fine. And on the other side you have people with decades of experience saying no it is not fine. It is a little weird and they are worried. They feel that when this party ends it is going to end pretty badly, but they can’t really predict how or why that is the sense they get from them.

Janet Tavakoli: That is the thing – nobody can time the market and as you know some very smart people like Jeremy Grantham has said, it is great to be in the middle of a bubble but it is also very worrying, right? Everyone wants to participate in a fake bubble, but it is very worrying. When do you get out? What we have been asked to believe is to change our perception of reality. We have been asked to believe that the fundamentals of finance have changed, and they haven’t any more than the fundamentals of being able to trust other human beings has changed. One of the reasons that I have tied this into social issues and, as you may have seen have become a little bit more political in my public views, is that what I’ve seen in finance is something that we are seeing in society and it is what we know as ideological subversion. I would encourage all of your fans to look up the YouTube video that features Yuri Besmenov. Besmenov was a Soviet spy that came to the United States, and one of his jobs was ideological subversion. So there is a short YouTube video, but I will cut to the chase. Here is where he talks about. What his mission was and what his KGB mission was. And that was and I am quoting him now, “To change the perception of reality of every American to such an extent that, despite the abundance of information, no one is able to come to sensible conclusions in the interest of defending themselves, their families, their community and their country.” And he was shocked at how quickly ideological subversion worked in the United States. How idiots just embraced this so that up is down, boys are girls that kind of BS that confuses people other than the resolute truth seekers. I think you fall into the category of resolute truth seeker. We don’t have all of the answers. Certainly can’t do things like time the market, but you still know that up is up and down is down.

Chris Martenson: Well, thank you for that. I try to, but I tell you this – I don’t always know what the truth is, but I can always spot bullshit.

Janet Tavakoli: That’s right. You don’t always know what the truth is because MSN is lying to you in such profound ways – mainstream media is lying to you in such profound ways as is our public officials in many cases.

Chris Martenson: Oh, absolutely and it is done in ways both overt and covert. I was reading front page Wall Street Journal yesterday, and they were actually talking about the fact that this democratic governor funneled a whole bunch of money to the wife of one of the FBI agents who was investigating Hillary for the confidential email servers scandal. And they had no alternative opinion on this front page article. All they had were a couple of experts who said, well it is not clear that any laws were broken, right? They could have easily found somebody else who said I think that looks pretty fishy, you know? But they didn’t. And I’m going to quote here now from the first chapter from a book by Edward Bernays back in 1928 chapter one, first paragraph says “the conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government, which is the true ruling power of our country.” This is 1928. Janet, what are the chances that people who have studied and made a science of manipulating and organizing the thoughts of people have gotten better at it since 1928?

Janet Tavakoli: Well, they have gotten more power since 1928, and you know I will see you and go back even further. I recently annotated a couple of books that are in the public domain, so your fans don’t have to buy my version of it. I only did it to make it more convenient for people. They can actually go to archive.org and download the PDF. They are happy to read it that way. Twenty years of inside life in Wall Street, which talks about speculation. And you know he – it is a very lighthearted thing at the time that he wrote this book -- insider trading was actually legal. It was not illegal at that time. But he talks about in the end, you know, speculators committed suicide. The market manipulations that went on, and a little bit of government manipulation as well. It goes through the principles of finance. It is a much better book than Reminisces of a Stock Operator, in my opinion. It is the best and most entertaining finance book I have ever read. So, for people who aren’t that familiar with finance, it is a way to get familiar. And it’s free – unless you buy my version, which isn’t free because I had to Kindleize it and put it into print edition. But there is another author, Henry Kluz, who wrote a book called Fifty years inside Wall Street. And the one that I annotated is the Wall Street Point of View.

Now, Henry Kluz was somebody who saw Communists in his time try the same kind of ideological subversion that we are seeing right now in the United States, and they failed at that time because there were a lot of people to push back. But he also saw people try to crash the markets when Grant was running against Horace Greeley. And he formed a group of 70 men that he got together to oppose Tammany Hall. Tammany Hall controlled New York. They – they were very corrupt. They had a lock on it. They paid off -- hired sons, daughters, relative of other politicians. They were getting the votes. And Henry Kluz was a financier. He was born in Britain. And he observed these people and he said, you know, none of these people really like each other. They are not bound together by blood. They are not bound together by friendship to friendship, or even a common ideology. All these people care about is making money and paying off their friends in power. That was all. Other than that, none of these people had each other’s back and he said we can defeat them. And so his group of 70 overthrew the Tweed Ring. One by one they knocked the pillars out from under these guys. It took awhile, but they did it.

And it was just people who were fed up with the corruption. He did it in his time. It can be done. It is not easy, but, you know, people who really have an idea of what the country should look like can defeat people who have inveigled themselves into the system and corrupted it. Now, we see the same thing in finance. I have a group of friends who are appalled at what has happened in the financial system. But their voices have been pretty well silenced. They didn’t use karate or daggers to the throat or shoot them in the chest, at least not in most cases, but they have silenced them by squelching them from the public view – at least for now.

So, I do encourage people to read the histories of finance and to see that nothing has really changed. But things can change, and this isn’t the first time we had to fight this battle. It is an ongoing push/pull of people who want to grab power and money who have no substance underneath them, if they didn’t have their political jobs, as Peggy Numan said, one woman who is running for a high office, would be watching reruns of Bravo. She wouldn’t have you know friends lined up around her door seeking out her company, even.

I think the truth seekers and the people fight against corrupt people trying to change your perception of reality will, you know, stay the course and come out better than people who don’t. It is precarious times, for sure. What we have done is unprecedented in the history of the United States, where we have first of all gotten rid of the benchmark, the gold standard. We don’t have any benchmark. We don’t have any stable benchmark. Instead, we have currencies that are being benchmarked off of each other. So, that is not a good place to be. It is kind of like as you are gaining wait you want a scale, right? You want sort of an ideal weight. You don’t want to be comparing yourself a bunch of obese guys in the gym. You do need a benchmark. So, once you get rid of the benchmark then the idea of you know there is no standard -- you can eat whatever you want and exercise as little as you choose that is okay. Well, it is not okay. We all know that. That is what we have actually done in finance. We are printing money like mad. We have created a huge distortion where for years savers have gotten negative real interest rates. Negative real interest rates in the United States for a long, long period of time and in Europe we now have sovereigns, of course, who are paying negative nominal and negative real interest rates. So, it is not just negative real rates it is negative nominal rates.

And this is unprecedented in the history of finance. I talked to a retired head of a Chicago Fed. So, I have probably narrowed the field because I don’t know how many of them are still living and he said none of us knows what is going on. We have never done anything like this before and that was as the result of my basically painting him into a corner in our conversation, because this is something no one has seen before. They don’t know what the endgame is. They are totally at sea and it is their own fault because they got rid of your scale. They got rid of your own benchmarks, and they tried to say that you know we can muddle through without having any way of measuring what we are doing.

Chris Martenson: Or driving by looking in the rearview mirror. It is insane. I love the way you started this, which is that there is nothing new under the sun. So if you really want to understand what is happening today you would be well served to just study what happened before because we have been through this before and it is that push pull where I think the seesaw gets a little overloaded at one point. We clearly have people driving who are – I think they are dangerous because they don’t even recognize the degree to which they are actually radical and radicalized in their views. They think they are the center normal. I think that is largely what this political debate is about, at least on one level that is happening in the US, but it is happening in Europe. It is happening other places in the world, which is that when – when power gets over concentrated like this especially financially it does a lot to disenfranchise a lot of people. And you mentioned suffering under negative real interest rates for a while. And they are only as negative as they say they are because we believe our inflation statistics which I think are off by at least 200 basis points, but somewhere in that zone, and so it is just getting harder and harder and harder and for certain elements of the political apparatus to just ignore that, and minimize that and say we are just going to preserve the status quo, because it is the best thing we have got going – it is not. It is not the best thing going for most people.

Janet Tavakoli: They are trying to normalize the abnormal, and you know, you see it in finance, you see it in our society, where they are trying to tell you abnormal is normal. Where both Bush and Obama, as another example, said Islam means peace. That is what Obama said. I am here to tell you that is a lie. It does not mean peace. Islam means submission. I say this as an American woman of Northern European extraction. My last name is Iranian. It is Iranian because my ex-husband was Iranian and I lived in Iran during the Islamic revolution. I lived in Iran at a time when women wore western clothing, did their hair, wore makeup, went out, had fun – were in every level of society. And then the Islamic revolution came, where Hamani lied to his female supporters and told them that nothing would change for them – everything changed. Women took to the streets in March of 2009 to protest the new rule that said that they all had to wear the Hijab. These women were violently suppressed. There is nothing about Islam that is going to be healthy for the American society if fundamentalists are allowed to take over our government.

When we have fundamentalists coming into the country who have these views that to me are extremely anti-female – one of the other things they did in Iran is they rolled the marriage age back from, you know 18, 16 with parental consent under the Sha, to nine years old because Shari law allows it because Mohammed married a six year old and consummated the marriage when the child was nine. So, that is their perfect man and Shari law allows marriage at the age of nine. Now, since then, Iran has become enlightened and raised that marriage age to 13. You can adopt a child and marry her as her stepfather when she is 13. That is legal in Iran. At least they tried to make it legal. I don’t know if they succeeded in doing that but they did make the marriage age back to 13 and of course a girl can marry at 13 with parental consent. So, you know, you can trade her to an uncle. It is that kind of thing that we are not hearing about daily in the public domain. Instead you hear Islam means peace. Well, I’m sorry. You know, this is not a fringe view in Islam. This is a view – a fundamentalist view shared according to peer research by 10s of millions of fundamentalists. And of those 10s of millions hundreds of thousands are Jihadis who will actively engage in violence.

I recently wrote an article for the Gatestone Institute, which is about to be published. Hasn’t been published yet, talking about this subject. And the reason I have become more vocal is because I see this common thread of our leaders, and they work for us by the way, so they are abusing their bosses, of our leaders trying to change our perception of reality even though there is an abundance of information just like Yuri Besmenov warned. As much as he might have been a scumbag in his past, he was speaking the truth here – despite an abundance of information, they are trying to confuse and distort the American’s perception of reality so that you can’t think straight. I think it behooves people who do have information to be more public and more vocal about it, despite that other people won’t like it.

Chris Martenson: I agree, and let me expand a little bit what you are saying because I am actually an equal opportunity kind of guy and I believe that fundamentalists and extremists of all stripes are not people I actively want to be hanging out with or try to form a society with. And this comes from all religious angles for me. But there is a strong current of this idea for me, which is that ideology is important, but another thing that really matters here in this story for me, Janet, is that when you take away when people have no hope anymore, they become radicalized, they become extremist and I think that the path we are on where the world is not recognizing that our printing our way to prosperity thing is enriching a tiny, tiny slice at the expense of everybody else. With the Federal Reserve failing to recognize that their policies are distributive, not prosperity making, but redistributive it is the ultimate in social welfare, but happening at sort of a corporate elite level. So, as they siphon the oxygen away from whole swaths of the population, they are leaving people without hope. I think that ends badly. I think that is third worldization. I think that you know you find yourself in a situation where you go far enough, you end up with Venezuela.

But yes, there are discreet efforts to not just shape public opinion right now, but to badly mislead people. I am thinking particularly right now about the demonization of Putin. A lot of people are like oh my God. Putin. He just hacked the servers. I am like well first of all, no evidence has been presented. Shame on you because –

Janet Tavakoli: Now just a second - -hang on, Chris because North Korean hackers and Chinese hackers and US hackers and Romanian hackers, they are so last year. It has to get on board with the latest distortion of reality.

Chris Martenson: Right? But, I am tracking this as one of these truth seekers. I am like no, no, no the demonization of Putin began even before the Ukrainian air quotes here “Revolution” which was a western backed and sort of inspired movement, right? This annexation of Crimea, which is his cardinal sin was probably the most democratic thing that has happened this century, where 95% plus of the people in Crimea voted to go that direction. We can disagree that whether they made a good vote or not, but they voted, right? I have been watching this demonization of Putin all the way along, and the same thing happened with MH 17 Malaysian airline shoot down over Ukraine where again, full demonization of Russia but no evidence was presented from the US intelligence apparatus, which would have included satellite photos, telemetry readings and other hard evidence to say this is where the missile came from. That data is still missing even from the most recent Dutch report that came out, and that makes me very suspicious overall. So, when you stack all of that together and then they say oh it was Putin that hacked the DNC servers. Trust us. No data. I see the pattern here.

This is one of the patterns that concerns me a lot of late, because I am very worried that it is one thing to rush into war and demonize, I don’t know, you know, the Panamanian president at the time or whatever happened in Grenada or maybe even further we go into taking out Saddam Hussein and Iraq but it is quite another to be doing this against somebody like Putin and Russia at this juncture. And I am very worried. I am very worried because I don’t --

Janet Tavakoli: Somebody who has nuclear weapons. I don’t want to argue the merits or faults of Putin, but I will say this – it is very similar to Project Fear. I call it Project Fear 2.0. They are trying to create a boogieman of Russia. Hey, whoever heard of Chinese or North Korean hackers. It is only Russian hackers, right? And they are trying to somehow link Donald Trump to that as if it is some sort of conspiracy between Donald Trump or Putin or that Donald Trump can you know signal him in speeches so that Putin does his bidding; whatever. And then they try to turn that around and say Trump is Putin’s puppet or Putin is Trump’s puppet. Can’t keep it straight because it is all BS. It is Project Fear, and it is trying to tell the public there is no alternative. If you vote for this other party then it is going to lead to you know a marriage with Putin, and it is going to undermine our society. But the reality is it is the other way around. We now know, and this happened in my district by the way – I was in Illinois in the 7th Congressional District and prior to a Trump rally in my District, you may have read, the rally was canceled. It was canceled because of riots. Well, it turns out that those riots were the result of Hillary Clinton’s campaign hiring thugs to cause violence at a Trump rally, which they first tried to blame on Trump and when that didn’t seem to be working, they blamed it on Bernie Sanders.

Again, this is Hillary Clinton’s playbook. She wrote her thesis on Saul Alinsky, who wrote a book called, Rules for Radicals, on how to undermine a society. So, she is very friendly with that. Now Obama was on a board of institution with Bill Heirs. You remember Bill Heirs was with The Weatherman who engaged in bombings on terrorism on US soil. And Obama when he was on that board with Alinsky he was – he was on a Chicago not for profit and he served as a paid director, and they provided start-up capital for something called Midwest Academy. Now, the Midwest Academy was an activist organization described as – and just wait for it – teaching tactics of direct action, confrontation and intimidation. Now, guess who else was one of the board members of the Midwest Academy? And let me just look this up to make sure I am not giving you incorrect information. I believe it was the fellow Robert Creamer, who is the guy who is linked to – who is caught on the Project Veritas video and, as you know, Creamer was at the White House more than 300 times and 42 or 45 visits directly with Obama. At least, that is what was on the visitor’s log.

Chris Martenson: Now, Josh Earnest, the spokesman, says that Obama doesn’t have any recollection of meeting with this guy. So I guess you have to meet with somebody probably 50 times before you remember them, I think.

Janet Tavakoli: Creamer is a Chicago guy. He is the husband of an Illinois Representative. They know each other. This is not – he wants to deny that he met with the guy, but you see these links for this kind of activity and now we know that Creamer was involved in hiring thugs to disrupt Trump conventions. And yet they are trying to say that Trump supporters are violent. Trump is Hitler. Way overused term if you actually know what Hitler to falsinality. And yet who is using those tactics? It has been the Democratic Party. So you know talk about ideological subversion – they are the ones who are doing it, and they are trying to blame it on everybody but them. And I think what Hillary Clinton’s campaign has done is illegal and now it has tentacles all the way to the White House. This is worse than Watergate and yet mainstream media is not reporting on it. And I think that is why people are fed up and disgusted with organizations like MSNBC and CNN and so on. Rachel Maddow at MSNBC tried to say these were Trump supporters who created violence here in Chicago. I do resent this very deeply, because I had two friends who were frightened to death in that riot. I did not go to that rally, but they wanted to go to that rally and as they were exiting they felt physically threatened. They blocked traffic here in a major artery – this is all in my neighborhood – so, I look at that and I say okay Hillary Clinton you hired people who actually injured people in that crowd and actually injured policemen.

Chris Martenson: Well, if only there were a law against inciting a riot –

Janet Tavakoli: There is, but now the problem that we have, and this is what I saw in Iran; there weren’t three branches of government even under the Sha there were not three branches of government because the judiciary was cooped by the Sha. But one of the things I love about the United States is our Constitution which calls for three branches of government. But today, it seems as if our three branches of government are conjoined triplets because the DOJ seems to be corrupted. You just have to look at the FBI investigation into Hillary’s server where she corrupted national security and has not been held accountable for it. Then you look at our supreme court, where the Obama administration was crowing about intimidating Justice John Roberts over Obamacare. This is an appalling situation, and we are the people that these people work for and they act as if they are overlords. It is insulting in so many ways.

Chris Martenson: It is. Sometimes these things tend to elevate a little more sharply during a campaign cycle and then they drift back down again. Here is why I want to have this conversation with you, because you are paying attention to this and it matters. And here is why it matters – maybe this anecdote helps – A couple of years ago I was in Charleston, South Carolina giving a talk and I got picked up by an Uber driver – nice 60 year old guy. Turns out I’m a chatty guy, so I am talking with him. He is from Sudan. And so you know I asked him he is just all so grateful. This America is great. It is wonderful. I really love it here. I kept digging I was like you know, but tell me – tell me do you have any concerns at all? And finally he let his guard down he said, “Yea, I’m scared. I came here 20 years ago. I left as a doctor from Sudan. I left under political asylum and I left for the same reasons I am seeing happening here now.” He said, “It is early, but I am watching the same things happen.” And it was basically that breakdown of the rule of law, where it suddenly becomes revealed to the common person that there is a set of laws that are harsh and draconian that apply to them, and another set that don’t seem to apply at all to the other class, and they become more and more brazen. He was really worried about the rule of law and also to the degree to which this begins to polarize the country into separate camps and ideologies and what not.

So that is a very serious thing and we should be talking about it and you’re right – the mainstream media is actively colluding or I’ll use this word – conspiring to hold back what I think is probably far more explosive information than Watergate in its scope, in its breadth and overall what it says. And if we don’t expunge that, if we don’t expose that – it is just like a hairball -- we won’t be able to swallow it. It will be stuck in the nation’s throat for a long time.

Janet Tavakoli: Just to keep everyone’s bearings – I think you should absolutely be jacked anyone trying to label you as a radical, because you point out that things are being done that violate our Constitution and the rights that were explained in the Constitution. The Constitution didn’t give us rights. The Constitution simply recorded our rights.

I think that today when you bring up that people are violating the Constitution you are labeled a radical they are trying to turn the tables around. Well, don’t accept that. One thing – one of the reasons I wrote Decisions: Life and Death on Wall Street – it is a brief memoire about my time on Wall Street – it was partially spurred by the suicide of my former boss – I worked at Merrill Lynch. We took different paths in our careers. He wasn’t the only suicide that I talk about in this book. But the common theme there was that people who did understand the fundamentals of principals of finance either went along with things they should not have gone along with in some cases or when they were asked to go along with things that they knew was incorrect, the pressure was so unbearable they opted out in the most final way possible.

That kind of pressure, that kind of confusion, can at first cause you to take the wrong path. You got everyone around you shouting the wrong thing. You are extremely well rewarded for doing the wrong thing. And there are no punishments. But in the end, they get caught out, too. Either they get caught out because they realize it is going to be a big scandal and they see everything they identify – and the other danger is just your whole personality just being identified with your business card, is a very dangerous place to be, when you are in an environment like that. If you think that is the most important thing about you when it crumbles underneath you you might opt out with suicide. You just don’t see the path of your life ahead of you.

But if you have done the wrong thing... In the case of my former boss; he realized that he was going to be dragged into Senate investigations. Possibly dragged into court and, since he was edged out of Deutsche Bank, he would be the fall guy and he was a very senior guy at Deutsche Bank, Anju Jane, whom I also knew from Merrill Lynch days and his – his Co-CEO had put Bill Brooks’ name forward to be the chief risk officer, ?, at Deutsche Bank and rejected that. They – for a lot of reasons that I explain in the book. And a month after being forced out of Deutsche Bank, Brooks had committed suicide and Deutsche tried to say it had nothing to do with this job. The other common pattern here is when these men have committed suicide then management has quickly closed ranks and said it had nothing to do with their job.

Here is something that is kind of an incredible fact – I met Youssef Akerman, the former CEO of Deutsche Bank in Israel at an Israeli business conference in Tel Aviv. He was very pleasant. Very charming and all of that, but I knew quite a bit of his history. He had been the CEO of Deutsche Bank when a lot of the problematic trades were put on. Then he was edged out of Deutsche Bank and became the head of Zurich Insurance. And one of the suicides I talk about is the CFO at Zurich Insurance, who worked under him. These are now two guys who worked under him who were pressured to cook numbers and, in some cases – in one case went along more willingly than the other. And Youssef Akerman, when Pierre Voilter his CFO committed suicide he – his wife said it was because of the pressure he was under at work. It wasn’t ambiguous at all. And Zurich Insurance tried to say it had nothing to do with his job. He had other problems, whatever it had nothing to do with what he was being asked to do at work and Youssef Akerman took responsibility, because the finger was pointed at him due to a note that Altier left. And his wife, Fabian, came to the shareholder’s meeting to confront management because they were basically trying to say oh he is crazy, nothing to see here. She wasn’t having it. She had his back. She said she just thought that the love of his family and love that he had for his family would carry him through, and I overestimated the strength that would give him. She was not having it. That it had nothing to do with his job.

So Youssef Akerman resigned. And if you look at it – he is part of the Bilderberg Group and all of that, and if you look at it his Wikipedia profile you see none of this on his Wikipedia profile. That is how good these people are from scrubbing bad news from the past.

Chris Martenson: Well there is a larger thing there from everybody listening which is that if you over identify with your job, if you become the person on the business card you really have nothing to fall back on. Your identity is external and I think that the crisis that we are going to face because I don’t believe you can print your way into prosperity and I don’t think you can shoot risk to the outer space never to see it again. So when we have this crisis it is going to be pretty hard for people. It is why you know one of the things we counsel at Peak Prosperity is that emotional resilience is perhaps the most important form of resilience you can garner. It is good to have a nice bank account and some material assets and other things, but gosh, if you can’t handle the crisis when it comes none of that will matter.

I’m wondering, because I have got you here, and this has been a hot topic for a lot of people is Deutsche Bank, because you mentioned the term what has been going on with Deutsche Bank and it is out of the new s right at het moment or it was all in the news about a month ago. I am wondering there was a set of transactions that caught my eye last January, maybe February, 2016 where I noted that a bunch of credit default swaps, almost a trillion maybe a little more than a trillion got offloaded and quietly picked up by Citi, JPM, Goldman I think were the trio. Did you notice that transaction, and is it normal for a big soon to be struggling financial institution to, you know, ship a trillion in derivatives across the pond or what is really going on with Deutsche Bank, too, more generally?

Janet Tavakoli: When I wrote Decisions, I wrote it in 2014 and people who read it shorted Deutsche, because I was pretty clear that there were huge problems, and it had a weak balance sheet, even though at that time they were lying about it.

Chris Martenson: Here is another interesting anecdote that is not in Decisions, and it pertains to Bill Bruschman and that is that after when it was finally reported – I tried to stick to things that were in the public domain and not private things because you need references for the things that I was saying, which are very extraordinary. I needed to back up everything that I said with things that are in the public domain, although people don’t normally find them. But that said the month before he committed suicide, Bill had been pressured to give a presentation to the board about stress tests that painted a rosier picture of the bank’s situation than Bill wanted to project. So, what you keep hearing about Deutsche is level three assets. Level three assets are assets that are not easily mark to mark, and have very subjective valuations and there may be issues with level three assets. Well, I am here to tell you it is not just a level three assets, it is also the level one and the level two assets. The level two assets are mark to market, mark to model assets – rather mark to model assets and just is a shorthand of a way to think about it. The level one are mark to market. And I talk about this in more detail for people who are interested in like risk professionals and banks and their managers in a book called Risk that I put out this year – Risk: Your Global Guide. It is a short book, right? But people keep asking me how is it you know that these banks are in trouble? How did you know that Merrill was in trouble? I even quite the treasurer of the DNC about Merrill. He had asked me in 2007 where will Merrill be in six months. Now I don’t give direct investment advice to people, but what I said to him which was what I could say in an email, I said I can tell you this, Andy, it will – Andrew Tobias, it will not be in my portfolio and it will not be in Warren Buffett's portfolio.

And at that time, Merrill was lying about their accounting and saying everything was fine. None of those people were held accountable for those lies. I explained how I look at risk, how I look at derivatives and how I know that things are in trouble and how much better you can do in a portfolio simply by doing one thing – scrubbing the fraud out. And you will out perform most portfolios just for that one act, because, by far, fraud has been the biggest problem in value destruction. And when you create money out of thin air with no benchmark, and you don’t have the productivity behind it, that is fraud. I’m sorry, what the Fed is doing is a form of fraud, and they are not doing the public service and not getting their hands around the scope of what our current problems are.

So, that is a long way of answering your question that it is not just about Deutsche, although Deutsche is a huge big symptom of it because Europe has not recapitalized their banks. But I don’t just talk about Deutsche. We have other large banks in Europe that often have similar problems. And one of the hilarious things that I just can't’ believe financial reporters don’t talk about more is the Fed in New York has cited things like Deutsche, like Banco Santander and more for not even having their paperwork in order. It would be as if you didn’t balance your checkbook, and you are trying to tell your wife that everything is fine and you are just writing checks without having any idea whether you can cover it. But in their New York offices, they haven’t even tracked their trades. Well I am here to tell you you can't’ actually manage the risk of an institution when your basic paperwork is in such a disarray and disorder.

In one instance, one large bank was recording the buys and sells of swaps the wrong way, and they didn’t catch it for a couple of years. How can you be so demented that your operations are in such disarray? And this is now, don’t forget, years and years after the financial crisis, when they told us that they were investing in risk management, and that they had their systems in order.

Another example is the London Whale Trade. That trade happened years after the financial crisis, and what you found is that JP Morgan was the poster child for bad risk management in that area. That was a unit that reported directly to Jaime Diamond, and they were using crappy Excel models with no document control. They had a risk manager in who wasn’t qualified and who was the brother-in-law or something. There was nepotism or something involved in his appointment. I go into that in Risk in more detail. And they put on a huge position that busted their VAR limits. I mean, it goes on and on. There were several red flags for bad risk management years after the financial crisis. And they destroyed, in that one unit in that silo, if you looked at it, years of profits. So, you know the previous years were really fake profits because they weren’t risk adjusted. And you have these persistent problems on and on and on in our banks. So, when I look at the balance sheets I look at the large positions that people are telling you are just hunky dory. I start there, because when you start there if you find a problem, it is game over. That was like the AAA rated CEOs that were really junk rated, which is my sweet spot obviously because I wrote Collateralized Debt Obligations in Structured Finance.

The other interesting thing is if you look on Amazon at the reviews of the first book in 2003, Collateralized Debt Obligations in Structured Finance, you see little jerks who wrote things like, “Oh she’s paranoid. She’s blah, blah, blah.” There was one guy in Europe who wrote a bunch of funny reviews on Amazon that were revealed because Amazon had a glitch so I discovered his identity. When I met him in public butter wouldn’t melt in the guy’s mouth. I just wanted to sock him. He never knew that I knew this. He runs a bank in Europe. But, you know, that is how much people are willing to lie. When people tell the truth and put information in the public domain their first mission is to try to discredit them, and it is very different than when I worked as a chemical engineer. There, if you found a problem like a valve was undersized or there was another issue people were grateful because you identified what doesn’t work and basically you are helping. In finance, when you identify what doesn’t work people want to kill you, because they know that they can cover it up for several bonus cycles. But if you bring it to the fore it is going to destroy their narrative that they are making a lot of money risk free. So, then they want to kill you.

Chris Martenson: Now, I don’t know how you bust the fraud out. I look and see a bank balance sheet and I see what they have recorded as tier one, tier two, tier three assets and as you say they are mark to market, mark to model and mark to fantasy. I don’t know how to tease that apart. I just assume that anything that gets mark to model and then especially mark to fantasy that there is fibbing involved. So I just automatically conclude they are all full of lies, but I don’t have any more sophistication than that to be able to really dig under and know exactly what I am looking at. So I did. I dug into Deutsche Bank’s you know financial statements to say can I detect what is going on here. It is such a morass of craziness that one paragraph footnote on page 200 of the annual report sort of says yea, we are doing some stuff with derivatives, but trust us. We got it. Like, I don’t even know where to begin with that except to say there is no way to analyze this properly.

Janet Tavakoli: Well, they don’t know where to begin with it either, because now you have people -- I call it mapped salad -- when you look at the models because you have people in different areas doing their own thing. So when you do a stress test some of them are internally inconsistent. They don’t know what they are doing, either. So, don’t feel bad or put more time and effort into it in that way. Now the question is how do you fix it? And that is the theme of Risk and the theme of Decisions: Life and Death on Wall Street. The whole point of Life and Death on Wall Street was to persuade you that the only way to fix this is to really break up the banks again into depository institutions and into the speculative risk institutions where partnership capital is at risk and not taxpayer money. And you absolutely have to divorce taxpayer money from funding that activity. It should not be allowed. It never should have been allowed that Goldman became a bank holding company when Goldman had a hand in creating the financial crisis. You know, there is one conspiracy theory that part of the financial crisis was regime change in the United States. Well, I don’t know about that. But I do know, if you look back at Henry Kluz’ work that when Horace Greeley was running against Grant, that Tammany Hall did try to manufacture a financial crisis in order to get Greeley elected. But that was thwarted by Kluz and his group, and they took the evidence to President Grant at the time who was the incumbent. So, they actually did plot a financial crisis to frighten people into voting for Greeley.

So, it is not unprecedented in the United States, I just haven’t looked at that angle of the financial crisis to see whether or not I agree with people who have speculated about that. I don’t know. But, here is what I do know is that one of the most profound lies of the financial crisis was that Goldman did not need a government bail out, because it did. And yet these people have punked us by even, after we bailed them out, claiming they are the best and the brightest and Congress put no restrictions on the bailouts of any meaning. And that money flowed back to Congress, so that now Congress is richer than ever. Their families are richer than ever because you know their extended family is hired in direct and indirect ways by the financial industry. We have a bought Congress that is more bought than it ever has been in the past. Good luck trying to get term limits on that nice bunch of kids.

Chris Martenson: Yea, that’s – that there is plenty to be angry about. I loved the amount of peak that I got into my life when I really understood what happened with the AIG bailouts where AIG had underwritten a bunch of credit default swaps that went belly up. Of course they were totally under capitalized in the division involved and they needed that $186 billion bail out, of which $13 billion went straight to Goldman Sachs for 100 cents on the dollar.

Janet Tavakoli: Well, I can tell you a little story about that. You may – you may not know this but I wrote about it in Dear Mr. Buffett – I also mention it in Decisions I believe and I may mention it in Risk. In August of 2007, the Wall Street Journal quoted me saying that AIG had mismarked its books. And they didn’t just mismark – this is August of 2007, more than a year before that bail out. And I told Dave Riley at the Wall Street Journal that it was material. The way this came about is Riley called me up, I believe, that day and said hey, do you have a story for me? I said boy, I have a hell of a story for you. AIG mismarked its books. You may recall that you know AIG had just gone through this lawsuit with Hank Greenberg about another accounting issue. And I said here we go again. This is material. Well, the Wall Street Journal didn’t report the word material, and they initially were nervous about reporting what I said because they called AIG and AIG denied it. And Riley came back to me and said, “Are you sure?” And I said, yes I’m positive. There is just no doubt about it. I said, let’s take for example and I was just looking at it as a large position one that everyone said was okay and it wasn’t. They were super seniors. So called super AAA tranches of a CDO but they were – it was collateralized by BBB tranches of other CDOs that were impaired. And of course people weren’t admitting they were impaired but when I rolled up the loan losses I said they already – they are going to experience principal loss here. And they are saying there was zero chance they would experience any loss on their position. I said wow, that is a whopper of a lie.

And they were already getting margin calls, and Goldman behind the scenes was asking them for much bigger margin and giving them lower markdowns than AIG wanted. I didn’t know that at the time. All I knew was AIG lied about their accounting, and they lied about it materially. So, AIG said no, no she doesn’t know what she is talking about. And Riley said, “Are you willing to stand behind this?” I said absolutely, I am. But when I originally talked to Riley I had agreed to talk to him on background, because here I am taking on a huge institution. Right? And then basically saying that they committed a crime. They materially mismarked their books. So, one of the senior editors there, Mike Stignalfi called me. He has known me for years. He said, “Janet, you know we can run with this article, but we feel it is much stronger and much more comfortable if we can actually name you.” And I said, alright, Mike. I stand behind this. Yes, you may name me. Of course AIG’s PR flack called me afterwards and said – and I said, I am willing to talk to your CFO, but I am not willing to talk to you about it, and if you would like me to walk through this with your CFO, I am happy to do that, but do not call me up and try to intimidate me to retract what I said, because I am not going to do that.

So the CFO never called me, of course. But a few months later they were cited for material issues with their accounting.

Chris Martenson: And material around the exact thing that you had called them out on?

Janet Tavakoli: Yes. Yes. And it was those tranches by the way were the ones that ended up in Maiden Lane, the ones that I was looking at.

Chris Martenson: Which ended up on the Fed balance sheet.

Janet Tavakoli: That Goldman made a huge margin call against AIG and Goldman’s trading partners made the huge margin call against AIG, which caused the bail out so they were exactly those. So for people to say that we didn’t know this in advance, when Hank Paulson said we didn’t know we had these huge issues in advance no one knew – that is a lie. People did know. People like me knew. I knew. You know, and there were articles in the public domain so you can go back and look at those articles and say, How is it that the treasury wasn’t better prepared? And I think they timed when they wanted the crisis to occur because it was an ongoing crisis. This is horrible, right? I mean, in 2007 Andy was happy to go on the record about our email exchange where I warned him off Merrill. This is, you know, for our financiers to claim and get away with claiming that they didn’t know they were lying about their accounting is just ludicrous.

Chris Martenson: Gosh, honest I didn’t know that giving $600,000 to the wife of an FBI agent investigating one of my principal benefactors was going to have any influence whatsoever. I’m shocked. Shocked to discover any influence was going on here.

Janet Tavakoli: Look at John Corzine. John Corzine was the CEO of MF Global that went bankrupt, and John Corzine was one of the Chief bundlers for Obama’s re-election campaign. So Corzine was not indicted after his trades were the cause of a huge margin call that MF Global could not meet and instead diverted – diverted customer money to meet John Corzine’s trades margin call.

Chris Martenson: Yea, I don’t manage money, but Janet, I’m pretty sure that if I co-mingled client funds the SEC would have something to say to me by 1:00 this afternoon. It would be very rapid.

Janet Tavakoli: Chris, co-mingled is such a nice word when theft of customer money is more appropriate. Theft. In fact, Marcy Captor, who was at the time in the House the Head of the Banking Committee the House Banking Committee, she is Democrat for Michigan she was – wanted to confront Corzine in the Congressional Investigations and the New Jersey delegation came to her – Marcy Captor told me this when I met with her in DC, they came to her and told her prior to the Congressional hearings no criminality pertains to John Corzine. And she resisted and they told her she wasn’t being a good Democrat. She read a special order into the Congressional record, and she told Corzine in the hearing that most of us would call this theft. So, she did go that far and she was punished for it where the Democrats didn’t support her very well in her re-election campaign. Her district was re-districted. She was running in the primary against Dennis Kucinich and she used almost all of her funds having to run against Kucinich. She prevailed, and then in the run off she – on the Republican side, she was running against John McPlumer and she did win. She did win re-election, but you know they took their pound of flesh out of Marcy Captor.

Chris Martenson: Yea – yea now so here is how I connect these dots, right? We see that Goldman Sachs played fast and loose, took some risks, should have lost a bundle, but was made completely whole by the Federal Reserve riding in and saying gosh, gosh Goldman so sorry for your losses. Here is 100 cents back on the dollar for your busted trades. And just last week there was an article came out in the LA times about how servicemen and women in California who were given signing bonuses a decade ago to sign up for another tour of duty in Afghanistan and/or Iraq, put their lives on the line, they have now determined that maybe they shouldn’t have given those bonuses because there was a little bit of fraud going on at the higher levels in the military and they said, “Rules are rules. We have to get this money back from these people.” Right? So for the little people, they are going to come after you and say you know, laws are important. We have to follow the rules. We are going to claw back $20,000 from you even if you can’t afford it. Even after you fulfilled your end of the bargain on the contract, we get to rewrite the contract post facto because we are the government. Then you wander to the other side and you see how the game is played sort of at the uber bail out level and it is just maddening. And this is the larger context that I think is beginning to drive the politics in this country and it is only going to get worse if we don’t confront this and begin to level that playing field in some way.

Janet Tavakoli: I agree with that, and I think that is why you are seeing so many people supporting Donald Trump. And I don’t know if your viewers are interested in this – I normally don’t get that political, but I have this year. I have always been a left leaning independent. Obviously, I just mentioned I have friends at high levels in the Democratic Party. But this year I am a Trump supporter and I ran on the ticket in my district as an alternate Trump delegate to the RNC. I got the most votes for an alternate delegate, but I didn’t win because just a couple of days prior there was that riot before the Trump rally. So, Kasetch prevailed in our District. But I did manage to still save a lot of votes which matters in Illinois because you need the votes at the state level, as well. By the way, people should not be deterred from voting even if they are living in a state that is a different color because you want to vote for your candidate in the popular election to – so that people can’t try to delegitimize their election. Definitely vote, because the popular vote does matter from that aspect. But, that said, you know we don’t have perfect candidates running but I like Trump’s policies of reform and I like his trade policy. I like his idea of a progressive tariff, which he doesn’t talk about much publicly. I think a lot of people’s eyes glaze over when you talk about something like this. But we have done this before and it works. The principles of finance don’t change. Under the McKinley administration, this is before we had personal income taxes on the books. We had personal income tax during the civil war and then we had it in – we passed the 16th amendment in 1913. Part of that – we didn’t take personal income taxes. So how did we pay our bills? Well, we did it through tariff. But revenue tariff don’t work well. Progressive – protective tariffs, where you tax things that we have the capability of making in the United States will work.

Now, at the time when McKinley was passing that act the other side was claiming that that won’t work. Our trading partners will cut us off. Project Fear, right? Well they didn’t know what they were talking about because it worked like a charm and it worked, actually pretty quickly. This came back to the United States it started manufacturing here even though our labor costs were higher and yet our exports increased. People wanted American goods. So, you got more – more than enough at that time in taxes to cover our bills and we had an embarrassing surplus. They called it literally an embarrassing surplus. In our case, we have so many entitlements that we have a personal income tax as well, right? We can’t support ourselves just on something like that. We sort of protective tariffs. Well, Trump is proposing protective tariffs and he is also proposing letting people repatriate their money to the United States to invest here. So, that combination will again revitalize you know the internal demand in our market and we will also perhaps increase payroll taxes.

The other interesting thing is people keep saying Trump will pay taxes. Well, I don’t know what his recent tax returns look like, but obviously he is paying a hell of a lot in payroll taxes, so you still pay that. And I think if you have never run a business then Hillary Clinton may not be aware that payroll taxes actually are a tax. But, you know, that said, I have taken a firm stand on one candidate versus another because the deep corruption in the Democratic Party that has infiltrated all branches of government and of course the Republican Party, too they are not absolved here in any way, but Trump will be a disruptor of that. And you know I don’t know whether he will use this opportunity to advantage himself the way the others have. But I don’t think if he does that it will be in the way the others have. In other words, I don’t think that he will trade national security for money, which I think all of us should find deeply offensive, because I do believe that the Clinton Foundation should be indicted, just as Rudy Giuliani believes it. And I believe it for the same reasons he does.

Chris Martenson: I’m a big believer in rule of law. It turns out I am a single issue voter this time, and my issue is nuclear war. I’d like to avoid it. I do not like the war stance of Hillary Clinton. That said, I am also not saying who I am voting for, because it doesn’t seem to help me get my broader message out.

Now, as we close this up I have to ask this which is about given everything you know and knowing that you can’t say buy this, sell that and all of that – if you were an average investor – I think we have a lot of people who would qualify under that term who are listening right now, what would you be just generally from an educational standpoint, however you need to frame it how should people be thinking about protecting, preserving or even growing their financial wealth at this point in time?

Janet Tavakoli: Well, it is difficult for everyone but I would focus on companies that make things that people want and need. You know, which wouldn’t be buggy whips. You know that actually have assets or have a factory, or something underneath them that have low debt that you know, are trading at reasonable PE ratios that are maybe out of favor, but that are actually businesses that produce something. I would focus on that. And also if there comes a future inflationary environment you might find that the underlying asset actually will appreciate in value, because it will cost more money to replace equipment and things. So those things will have intrinsic value.

I would just again focus on the fundamental principles of finance and not get dazzled by IPOs. I kid you not, I had lunch on Saturday with a woman that I’ve known for years who worked in finance. She told me she is day trading leveraged ETFs. I thought gee, nothing could go wrong with that, right? But it is her money to gamble if she chooses to. And by the way, I am not in the business of regulating consensual adult behavior if people want to speculate. They are free to do that. But you are asking me for the long run again, I would try not to get distracted by the public narrative that everything is different about finance. Transfinance. Don’t be fooled by the cosmetics.

Chris Martenson: Transfinance. Don’t be fooled by the cosmetics. I love it. So, well with that honestly we can keep talking for hours and hours. I got much more to talk to you about. But this is the time we have for this podcast today. So, Janet thank you very much for your time. I know you got some events coming up and I want people to be able to follow your excellent work and of course –

Janet Tavakoli: I would say, Chris for your viewers, they can – if they are members of Amazon Prime then they can download Decisions: Life and Death on Wall Street for free. They can read it for free if they are members of Amazon Prime.

Chris Martenson: That is what I did and so yea, Decisions. Great book. Just love how you just really put the – you put the story in what is actually happening there. And I think people really should read up on the history and how we got here. Just -- we didn’t just as George Carlin said we didn’t just pass through a membrane and get here in this strange moment in time. We got here because of the decisions that were made, and boy those are going to ripple and reflect for a long, long time. So, there is that and then of course there is your website.

Janet Tavakoli: Yea.

Chris Martenson: Yes. Direct people to your website.

Janet Tavakoli: It’s a long one. It is probably easier to Google my name than the website. It is www.tavakolistructuredfinance.com. And also – and also as I mentioned I will be publishing a couple of articles at the Gatestone Institute, which is, in my view perhaps the only forum that is available on the web that criticizes Islam in a sourced and reasonable way, you know without any over exaggeration because the truth is horrific enough. And I’m not criticizing Islam, fundamentalist Islam let me be clear there.

Chris Martenson: Great and yea, I notice on your website as well the books you mentioned Wall Street Point of View by Henry Kluz another one 20 Years of Inside Life on Wall Street by Fowler, also just linked through handily on your website. Those other references you made, people can get there.

Janet Tavakoli: They can also get them for free at archive.org on the web if they want to read it in that format. It is more difficult to read it in that format, but it is possible.

Chris Martenson: Great. For people who for a few bucks make a difference that is a great piece of advice, there. So Janet, again, thank you so much for your time today and I hope to do this again soon.

Janet Tavakoli: Great. Thank you, Chris.

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  • Mon, Oct 31, 2016 - 3:05am


    Arthur Robey

    Status: Member

    Joined: Feb 03 2010

    Posts: 1410


    As Clear as Mud

    Thank you for a substantial discussion.

    Some thoughts

    • The art of the genius is to make the obtuse lucid. (Einstein,  I think). The gift of genius is clarity. 

    I used to beat myself up for not understanding, for instance, eye glazing financial statements. Not anymore. If I don't understand what's written I assume that I am not supposed to.  It is no oddity that a prospectus is clear with bright, glossy pictures of smiling, beautiful women when they're asking for money. And as clear as mud when accounting for where your money went. Therefore,

    • Arthur's first rule. Handle your own money. This lesson cost me many years in the mines.

    The second observation is that Men are much more sensitive to potential physical violence. For obvious reason. This is why both Dr. Martenson and every man in the room is focused on the threat of nuclear war. I can only appeal to the rational side of our females. 

    "Ladies be aware that nuclear war is not like the old wars. You won't get to breed with the fitter survivors."

    This much must be eye-rollingly obvious, but I refer you back to my first point.

    Login or Register to post comments

  • Mon, Oct 31, 2016 - 4:42am

    Kim L. Law

    Kim L. Law

    Status: Member

    Joined: Dec 05 2014

    Posts: 34


    Fantastic interview

    Another fantastic interview. I especially enjoy the story-like presentation of the inner workings of the corrupted financial system.

    While trying to put our financial system in perspective, I like to see it through the lens of the third permaculture ethic - Fair Share. I personally believe the goal of any economic system should be to return surplus (equitably) back to the people and Earth.

    The current debt driven, growth addicted, exploitative and selfish financial system we have in place, is simply so far from a "Fair Share" ideal. This has to be one of the major reason that has driven a majority of our population mad.

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  • Mon, Oct 31, 2016 - 7:14am



    Status: Bronze Member

    Joined: May 03 2014

    Posts: 534


    Just do your homework!

    Whether you're AIG, Deutsche Bank, Jewish, Moslem, Christian, a home owner, Democrat, Republican or whatever, make sure you examine what "your people" are telling you. History is replete with examples:


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  • Mon, Oct 31, 2016 - 3:43pm



    Status: Bronze Member

    Joined: Dec 10 2013

    Posts: 319


    What a mess, and such a good mess it is.

    Great interviews are the ones that raise more questions than they answer and Chris is a master questionier.

    1) Is there not a paradox in that she denounces fundamentalism while in the end promotes fundamentalist Capitalism. Invest in companies that are "Good" [sic]. Am I understanding that correctly?

    2) As to her political confession, I must point out that in Germany in the early 1930's with a corrupt establishment imposing austerity and constrained by foreign banking interests with Leftist and other opposition activists militating in the streets for change and poverty starving masses, Hitler was the disrupter for change who built a military industrial complex (also known as Fascism under the banner of the Notme party).

    In Mx Tavakoli's language I hear the wounds of displaced personhood (DP, refugee, migrants, etc) and this is because I am one of those. Also of northern European extraction, first born in United States of America and first to graduate collage since my grand father who was pro-rector of Vilna University and a professor of economics. Cooperative agricultural economics to be precise.

    I mention this to say that I've grown up full of stories of bad times. (EX. Surviving the Dresden bombing through stark luck or "fierce grace" as Baba Ram Das would say) 

    "be careful what you ask for"

    This far and no further, Hail __________.

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  • Mon, Oct 31, 2016 - 6:23pm



    Status: Bronze Member

    Joined: Aug 16 2009

    Posts: 116


    Gatestone Institute!!??

    Well, that was a very good interview except for the references to the Gatestone Institute, a notorious neo-con/islamophic cess-pool whose chairman is John Bolton (yes, that John Bolton).

    I thought CM did well directing the interview back into more germane territory.

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  • Mon, Oct 31, 2016 - 10:49pm



    Status: Silver Member

    Joined: Apr 30 2009

    Posts: 709


    Shell Game

    Radical Muslims, Marxists/Leninists, Neocons, the DNC, National Banks, bankers, the 1/2 percent, the Russians, ISIS, greedy capitalists... the list of bad guys to keep an eye on is growing long.

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  • Tue, Nov 01, 2016 - 1:42am

    Arthur Robey

    Status: Member

    Joined: Feb 03 2010

    Posts: 1410



    My own historical paradigms have taken a severe battering since the Internet. In my dotage I realise too late that I was marinated in Propaganda. Some necessary propaganda. We had an Empire to build.

    Here is how you distil the truth. Look out of your window. Do you see violence and barbarism? Or do you see people going along to get along? Then apply that measure to say, the Germans. Suddenly it strikes you. It's all balderdash.

    It takes a lot of perceived injustice for us to present the other face of Janus. And that statement includes the Germans. It includes everyone. 

    Injustice, like for instance, a population starving. Even then we tend to cooperation.  I have in mind the horrors of poverty in Victorian England or France. But it is inevitable that these unfortunates have nothing left to lose and everything to gain by Violence. 

    And then violence it is. Let us hope that no one floridly insane gets near the Big Red Button. 

    The solution to the population bomb is not arithmetic subtraction.  It is a geometric, exponential problem that requires an Exponential Solution. A small but exponentially significant decrease in fecundity. 

    Therefore I am in favour of Eugenetics.

    Fair? What is fair about Nuclear warfare? Or even traditional drown-them-in-mud trench warfare. Mr. Darwin never sleeps and those who got to breed after the war were those who were too unfit to be sent off to be killed. And it shows.

    And he doesn't sleep now. Either we wrest control from Mr. Darwin or we continue our random and cruel evolutionary walk.

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  • Tue, Nov 01, 2016 - 1:21pm



    Status: Gold Member

    Joined: Jun 25 2014

    Posts: 881


    Related... could you all watch Netflix' "13th" ?

    You say systemic corruption can be overcome.  In the case of civil rights and african-americans, it appears that the FBI managed to stop that by slaughtering the peaceful activists. 
    From the story of Malcolm X's entourage being 1/2 undercover cops, it appears that the FBI was big into planting traitors. 

    From the fact that news came out showing evidence that it was Louis Farrakhan who ordered Malcolm X's death, and nothing was done even then, it appears that Louis Farrakhan may have been among them.  He got high office.  From the fact that MLK was considered more of a threat than Malcolm X, it would be surprising if one of his right hand men didn't get high office, too.

    But there's a bigger point to this:

    Chris, could I ask for you and Adam to watch Netflix' "13th"?  Pay special attention to ALEC at the end.  Now consider that Bobby Scott's "SAFE" act, which is supposed to address that,


    *IS* the ALEC supported bill.

    Here's the short of it:  The companies that run prison profits want to move to a rent model:  they can put ankle bracelets on more people, and rent them down to 50 cents and hour, while making them just figure out how they'll survive, than they can hold in prisons.  It's "prison at home/slave at home". 

    Please watch it, and then start talking about it.  If, for the sake of holiness, you need to close your eyes, then do so.  But listening and hearing is enough.

    It appears that our government has figured out how they'll keep their growth model.

    It's just that YOU won't be in it.  Sacrifices have to be made, and that means you.


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  • Tue, Nov 01, 2016 - 2:36pm



    Status: Gold Member

    Joined: Jul 22 2008

    Posts: 574


    Michael_Rudmin wrote:You say


    You say systemic corruption can be overcome.  In the case of civil rights and african-americans, it appears that the FBI managed to stop that by slaughtering the peaceful activists. 

    From the story of Malcolm X's entourage being 1/2 undercover cops, it appears that the FBI was big into planting traitors. 

    From the fact that news came out showing evidence that it was Louis Farrakhan who ordered Malcolm X's death, and nothing was done even then, it appears that Louis Farrakhan may have been among them.  He got high office.  From the fact that MLK was considered more of a threat than Malcolm X, it would be surprising if one of his right hand men didn't get high office, too.

    But there's a bigger point to this:

    Chris, could I ask for you and Adam to watch Netflix' "13th"?  Pay special attention to ALEC at the end.  Now consider that Bobby Scott's "SAFE" act, which is supposed to address that,


    *IS* the ALEC supported bill.

    Here's the short of it:  The companies that run prison profits want to move to a rent model:  they can put ankle bracelets on more people, and rent them down to 50 cents and hour, while making them just figure out how they'll survive, than they can hold in prisons.  It's "prison at home/slave at home". 

    Please watch it, and then start talking about it.  If, for the sake of holiness, you need to close your eyes, then do so.  But listening and hearing is enough.

    It appears that our government has figured out how they'll keep their growth model.

    It's just that YOU won't be in it.  Sacrifices have to be made, and that means you.



    Never underestimate the depths that the government will travel.


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  • Tue, Nov 01, 2016 - 7:12pm



    Status: Member

    Joined: Dec 03 2011

    Posts: 31


    Poor interview

    Surprised to hear such a boring, rambling conversation on FV.  Totally unconvinced by this guest's 'expertise'. This guest presented increasingly long non-sequitors and anecdotes (of questionable relevance) to Chris' clear and concise questions and comments). 

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  • Wed, Nov 02, 2016 - 5:42am



    Status: Member

    Joined: Nov 26 2009

    Posts: 23


    Good interview .. makes one think!!

    • The interview had loads of information. Very insightful & straight forward. Please bring her backyes
    • Going forward, it also goes to show that merely calculating the negatives of capitalism based on economic indicators caused by rampant financial engineering by a handful of unrealistic economists alone may not be the best way to gauge the efficacy or "down-time" of a system as is being witnessed today.
    • The 'consensus capitalism' has several relatable elements of unfair policies & inequalities being created out of politics, religion and culture as well. Afterall the military industrial complex thrives on disrupting these three elements which in turn fuels the economy, don't it??
    • And this is what Ms. Janet Tavakoli deliberately factored in so as to have a more hollistic point of view.
    • Despite the odd segways away from discussing 'just derivatives', which some comments here suggest they were unwarranted do make sense of the hard facts + realities of politics, religion & culture influencing world economy as opposed to merely basing it on mathematical misappropriations.
    • She made her case too and she made it well. Thank you, Chris!

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  • Mon, Nov 07, 2016 - 7:12am

    B CD

    B CD

    Status: Member

    Joined: Apr 19 2015

    Posts: 8


    Tamany Hall comparison a planet off scale

    Americans remain focused on Wall Street* by design.

                                                                              *and its Washington DC puppets

    The syndicate(s) that dominate nowadays are global, transnational, ultra-max top-secret, only a few window dressing traces visible, e.g, Davos, Bilderberg…

    A key camouflage is Bank of International Settlements where monetary policies and banking are coordinated globally via ultra-top-secret meetings Treasury Secretary and Fed Chair attend at least each season or so, and no major media dare mention.

    Ms. Tavakoli may be a plant directed to spread propaganda camouflage, ultra-max false hope, if not flush out potential threats.

    God only knows how many millions if not billions of participants it would take to overthrow the first-ever global Tamany psycopath imperius maximus horrificus.

    Rather hard to coordinate under radar of global surveillance systems.

    True Future is learning to remain as untouched by global Crooks in Charge as possible. A few examples on above link.

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  • Mon, Nov 07, 2016 - 6:59pm


    Mark Harvey

    Status: Member

    Joined: Nov 06 2016

    Posts: 6


    Why Trump?

    Blatant fear mongering paranoia from this woman, Islamic goat herders, Caitlyn Jenner and Hillary Clinton are going to destroy the USA.  Give me a break.  Why on Earth would Chris entertain this person?    

    From Georgette Boele, ABN Amro...

     ‘If Trump were to become president, gold prices will likely perform well, because we expect that his policies will be inward looking and will weaken the fundamentals of the U.S. economy.’

    From Bloomberg:

    “If Donald Trump is elected next week, we think gold can go anywhere shy of $1,400,” Wayne Gordon, executive director for commodities and foreign exchange at UBS Group AG’s wealth-management unit, said in a Bloomberg Television interview. “If Hillary Clinton is elected, we think gold can probably fall by $20, $30. So the clear skew in this trade is to the upside.”




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  • Thu, Nov 17, 2016 - 4:50am



    Status: Bronze Member

    Joined: Dec 23 2012

    Posts: 351


    Artificial Intelligence and Election Outcomes:

    Among the top tier the outcome was known 2 weeks prior to the election,How?Sanjiv Rai founder of Genicai.His program is Mogia.He has correctly predicted the last 4 presidential outcomes,plus the last 2 primaries.Election night fortunes were made.The times knew at 5pm election day.Carl Icahn,took a position and bought a billion dollar position after 12 knowing the market was going to crash,Some say druck sold into the panic on the jacked up gold panic.So,when you can buy the best tech that money can buy (plus hooking up your family)profits happen...And this is how life works.... 

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